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As filed with the Securities and Exchange Commission on June 3, 1998
REGISTRATION NO. 333-51239
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 2 TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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ONYX ACCEPTANCE AUTO LOAN TRUSTS
(Issuer with respect to the Securities)
ONYX ACCEPTANCE FINANCIAL CORPORATION
(Originator of the Trusts described herein)
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 9999 33-0639768
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
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8001 IRVINE CENTER DRIVE, 6TH FLOOR
IRVINE, CALIFORNIA 92618
(949) 450-5500
(Address, including zip code, and telephone number,
including area code, of Originator's principal executive offices)
REGAN E. KELLY
EXECUTIVE VICE PRESIDENT
8001 IRVINE CENTER DRIVE, 5TH FLOOR
IRVINE, CALIFORNIA 92618
(949) 450-5509
(Name, address, including zip code, and telephone number,
including area code, of agent for service with respect to
the Registrant)
COPIES TO:
DAVID A. ALLEN, ESQ.
ANDREWS & KURTH L.L.P.
1717 MAIN STREET, SUITE 3700
DALLAS, TEXAS 75201
(214) 659-4433
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box.[X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ] __________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering. [ ] ________________
If delivery of the Prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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Proposed Maximum Proposed Amount of
Proposed Title of Securities to Offering Price Per Maximum Aggregate Registration
be Registered Amount to Be Registered Unit(1) Offering Price(1) Fee(2)
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<S> <C> <C> <C> <C>
Auto Loan Backed Notes and
Auto Loan Backed Certificates $1,000,000,000 100% $1,000,000,000 $295,000
=====================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee on the
basis of the proposed maximum offering price per unit.
(2) $295 of which was previously paid to the Commission on April 28, 1998 in
connection with the filing of the Registration Statement.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
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Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This Prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any jurisdiction in which such offer, solicitation or sale would be unlawful
prior to the registration or qualification under the securities laws of any such
jurisdiction.
SUBJECT TO COMPLETION, DATED JUNE 3, 1998
PROSPECTUS
ONYX ACCEPTANCE AUTO LOAN TRUSTS
AUTO LOAN BACKED NOTES
AUTO LOAN BACKED CERTIFICATES
ONYX ACCEPTANCE FINANCIAL CORPORATION,
SELLER
ONYX ACCEPTANCE CORPORATION,
SERVICER
The Auto Loan Backed Notes (the "NOTES") and the Auto Loan
Backed Certificates (the "CERTIFICATES" and, together with the Notes, the
"SECURITIES") described herein may be sold from time to time in one or more
series, in amounts, at prices and on terms to be determined at the time of sale
and to be set forth in a supplement to this Prospectus (a "PROSPECTUS
SUPPLEMENT"). Each series of Securities, which may include one or more classes
of Notes and/or one or more classes of Certificates, will be issued by a trust
to be formed with respect to such series (each, a "TRUST"). Each Trust will be
formed pursuant to either a Trust Agreement to be entered into among Onyx
Acceptance Financial Corporation, as Seller (the "SELLER") and the Trustee
specified in the related Prospectus Supplement (the "TRUSTEE") or a Pooling and
Servicing Agreement to be entered into among the Trustee, the Seller and Onyx
Acceptance Corporation ("ONYX"), as Servicer (the "SERVICER"). If a series of
Securities includes Notes, such Notes will be issued and secured pursuant to an
Indenture between the applicable Trust and the Indenture Trustee specified in
the related Prospectus Supplement (the "INDENTURE TRUSTEE") and will represent
indebtedness of the related Trust. If a series of Securities includes
Certificates, such Certificates will represent undivided ownership interests in
the related Trust. The related Prospectus Supplement will specify which class or
classes of Notes, if any, and which class or classes of Certificates, if any, of
the related series are being offered thereby. The property of each Trust will
include a pool of motor vehicle retail installment sales contracts (the
"CONTRACTS") secured by new and/or used automobiles and/or light-duty trucks
(the "FINANCED VEHICLES"), certain monies due under the related Contracts on or
after the applicable Cut-Off Date specified in the related Prospectus
Supplement, security interests in the related Financed Vehicles and certain
other property, all as described herein and in the related Prospectus
Supplement.
(Continued on next page)
PROSPECTIVE INVESTORS SHOULD CONSIDER THE FACTORS SET FORTH UNDER
"RISK FACTORS" COMMENCING ON PAGE 6 HEREIN AND IN THE RELATED PROSPECTUS
SUPPLEMENT.
EXCEPT AS OTHERWISE SPECIFIED IN THE RELATED PROSPECTUS SUPPLEMENT, ANY NOTES OF
A SERIES WILL REPRESENT NON-RECOURSE OBLIGATIONS OF, AND THE CERTIFICATES OF A
SERIES WILL REPRESENT BENEFICIAL INTERESTS IN, THE RELATED TRUST ONLY AND WILL
NOT REPRESENT OBLIGATIONS OF OR INTERESTS IN, AND WILL NOT BE GUARANTEED OR
INSURED BY, THE SELLER, ONYX ACCEPTANCE CORPORATION OR ANY OF THEIR RESPECTIVE
AFFILIATES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
Retain this Prospectus for future reference. This Prospectus may not
be used to consummate sales of Securities offered hereby unless accompanied by a
Prospectus Supplement.
The date of this Prospectus is _____________, 199__
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(Continued from prior page)
Except as otherwise provided in the related Prospectus Supplement,
each class of Securities of any series will represent the right to receive
specified payments or distributions in respect of collections of principal and
interest on the related Contracts, at the rates, on the dates (each, a
"DISTRIBUTION DATE") and in the manner described herein and in the related
Prospectus Supplement. To the extent specified in the related Prospectus
Supplement (i) distributions of interest and principal on one or more classes of
Certificates of a series may be subordinated in priority of payment to interest
and principal due on one or more classes of the Notes, if any, of such series or
on one or more other classes of Certificates of such series and (ii) payments of
interest and principal on one or more classes of Notes of a series may be
subordinated in priority of payment to interest and principal due on one or more
of the other classes of Notes of such Series. A series may include one or more
classes of Notes and/or Certificates which differ as to the timing and priority
of payment, interest rate or amount of payments or distributions in respect of
principal or interest or both. A series may include one or more classes of Notes
or Certificates entitled to payments or distributions in respect of principal
with disproportionate, nominal or no interest payments or distributions, or to
interest payments or distributions with disproportionate, nominal or no payments
or distributions in respect of principal. The rate of payments in respect of
principal of any class of Notes and the rate of distributions in respect of
principal of any class of Certificates will depend on the priority of payment of
such class and the rate and timing of payments (including prepayments, defaults,
liquidations and repurchases of Contracts) on the related Contracts. A rate of
payment lower or higher than that anticipated may affect the weighted average
life of each class of Securities in the manner described herein and in the
related Prospectus Supplement.
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AVAILABLE INFORMATION
The Seller, as originator of each Trust, has filed with the
Securities and Exchange Commission (the "COMMISSION") a Registration Statement
(together with all amendments and exhibits thereto, referred to herein as the
"REGISTRATION STATEMENT") under the Securities Act of 1933, as amended (the
"SECURITIES ACT"), with respect to the Notes and the Certificates offered
pursuant to this Prospectus. This Prospectus, which forms a part of the
Registration Statement, does not contain all of the information included in the
Registration Statement and the exhibits thereto. For further information,
reference is made to the Registration Statement which may be inspected and
copied at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's regional
offices at 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and
Seven World Trade Center, Suite 1300, New York, New York 10048. Copies of the
Registration Statement may also be obtained at prescribed rates from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549. The Commission also maintains a web site that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission, including the Servicer and each Trust, and
the address is http://www.sec.gov. The Servicer, on behalf of each Trust, will
also file or cause to be filed with the Commission such periodic reports as are
required under the Securities Exchange Act of 1934, as amended (the "EXCHANGE
ACT") and the rules and regulations of the Commission thereunder, and such
reports can be obtained as described above. Such reports will include Current
Reports on Form 8-K filed after each Distribution Date, and an Annual Report on
Form 10-K. Such reports will contain certain financial information regarding
such Trust, including the Distribution Date Statement which will be furnished
monthly to Securityholders as described under "Reports to Securityholders"
below. Reports on Form 8-K and Form 10-K with respect to a Trust and the
Securities issued by such Trust will not be filed for any period which ends
after December 31 of the year in which the Securities are issued; however, the
related Securityholders will continue to receive the Distribution Date Statement
monthly, as described below.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All documents filed by the Seller, as originator of any Trust,
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of
1934, as amended, subsequent to the date of this Prospectus and prior to the
termination of the offering of the Securities, shall be deemed to be
incorporated by reference in this Prospectus. Any statement contained herein or
in a document incorporated or deemed to be incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Prospectus to
the extent that a statement contained herein or in any subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
The Seller will provide without charge to each person, including any
beneficial owner of Securities, to whom a copy of this Prospectus is delivered,
on the written or oral request of any such person, a copy of any or all of the
documents incorporated herein or in any related Prospectus Supplement by
reference, except the exhibits to such documents (unless such exhibits are
specifically incorporated by reference in such documents). Requests for such
copies should be directed to the Seller at 8001 Irvine Center Drive, 6th Floor,
Irvine, California 92618 (Telephone: (949) 450-5500).
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SUMMARY OF TERMS
The following summary is qualified in its entirety by reference to
the detailed information appearing elsewhere in this Prospectus and by reference
to the information with respect to the Securities of any series contained in the
related Prospectus Supplement to be prepared and delivered in connection with
the offering of such Securities. See the Index of Terms for the location herein
of the definitions of certain capitalized terms. An investment in the Securities
of any series involves various risks, and potential purchasers should carefully
consider the matters discussed under "Risk Factors" herein and in the related
Prospectus Supplement in considering an investment in the Securities of any
series.
ISSUER..................... With respect to each series of Securities, the
Trust to be formed (the "TRUST" or the "ISSUER")
pursuant to either a Trust Agreement (as amended
and supplemented from time to time, a "TRUST
AGREEMENT") among the Seller and the Trustee for
such Trust or a Pooling and Servicing Agreement
(as amended and supplemented from time to time,
the "POOLING AND SERVICING AGREEMENT") among the
Seller, the Servicer and the Trustee for such
Trust.
SELLER..................... Onyx Acceptance Financial Corporation (the
"SELLER"), a wholly-owned, limited purpose
subsidiary of Onyx Acceptance Corporation
("ONYX"). The Seller's principal executive
offices are located at 8001 Irvine Center Drive,
6th Floor, Irvine, California 92618 and its
telephone number is (949) 450-5500. See "The
Seller".
SERVICER................... Onyx. Onyx's principal executive offices are
located at 8001 Irvine Center Drive, 5th Floor,
Irvine, California 92618 and its telephone number
is (949) 790-5400. See "The Servicer".
TRUSTEE.................... With respect to each series of Securities, the
Trustee specified in the related Prospectus
Supplement.
INDENTURE TRUSTEE ......... With respect to any series of Securities that
includes one or more classes of Notes, the
Indenture Trustee specified in the related
Prospectus Supplement.
THE NOTES ................. A series of Securities may include one or more
classes of Notes which will be issued pursuant to
an Indenture between the applicable Trust and the
related Indenture Trustee (as amended and
supplemented from time to time, an "INDENTURE"),
and may not include any Certificates. The related
Prospectus Supplement will specify which class or
classes, if any, of Notes of a series are being
offered thereby.
Unless otherwise specified in the related
Prospectus Supplement, Notes will be available
for purchase in denominations of $1,000 and
integral multiples thereof and will be available
in book-entry form only. Except as otherwise
specified in the related Prospectus Supplement,
Noteholders will be able to receive Definitive
Securities only in the limited circumstances
described herein. See "Description of the
Securities--Definitive Securities".
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Unless otherwise specified in the related
Prospectus Supplement, each class of Notes will
have a stated Note Principal Balance specified in
the related Prospectus Supplement ("NOTE
PRINCIPAL BALANCE") and will accrue interest on
such Note Principal Balance at a specified rate
(with respect to each class of Notes, the
"INTEREST RATE"). Each class of Notes may have a
different Interest Rate, which may be a fixed,
variable or adjustable Interest Rate, or any
combination of the foregoing. The related
Prospectus Supplement will specify the Interest
Rate for each class of Notes, or the method for
determining such Interest Rate.
With respect to a series that includes two or
more classes of Notes, as specified in the
related Prospectus Supplement, each class may
differ as to the timing and priority of payments,
seniority, allocations of losses, Interest Rate
or amount of payments of principal or interest,
and payments of principal or interest in respect
of any such class or classes may or may not be
made upon the occurrence of specified events or
on the basis of collections from certain
designated Contracts. In addition, a series may
include one or more classes of Notes ("STRIP
NOTES") entitled to (i) principal payments with
disproportionate, nominal or no interest payments
or (ii) interest payments with disproportionate,
nominal or no principal payments.
If the Seller, the Servicer or a successor
thereto exercises its option to purchase the
Contracts of a Trust in the manner and on the
respective terms and conditions described under
"Description of the Transfer and Servicing
Agreements--Termination", the outstanding Notes
will be redeemed as set forth in the related
Prospectus Supplement.
THE CERTIFICATES .......... A series may include one or more classes of
Certificates and may not include any Notes. The
related Prospectus Supplement will specify which
class or classes, if any, of Certificates of a
series are being offered thereby.
Unless otherwise specified in the related
Prospectus Supplement, Certificates will be
available for purchase in a minimum denomination
of $1,000 and in integral multiples thereof and
will be available in book-entry form only. Except
as otherwise specified in the related Prospectus
Supplement, Certificateholders will be able to
receive Definitive Securities only in the limited
circumstances described herein. See "Description
of the Securities--Definitive Securities".
Unless otherwise specified in the related
Prospectus Supplement, each class of Certificates
will have a stated Certificate Principal Balance
specified in the related Prospectus Supplement
(the "CERTIFICATE PRINCIPAL BALANCE") and will
accrue interest on such Certificate Principal
Balance at a specified rate (with respect to each
class of Certificates, the "CERTIFICATE RATE").
Each class of Certificates may have a different
Certificate Rate, which may be a fixed, variable
or adjustable Certificate Rate, or any
combination of the foregoing. The related
Prospectus Supplement will specify the
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Certificate Rate for each class of Certificates
or the method for determining such Certificate
Rate.
With respect to a series that includes two or
more classes of Certificates, as specified in the
related Prospectus Supplement, each class may
differ as to timing and priority of
distributions, seniority, allocations of losses,
Certificate Rate or amount of distributions in
respect of principal or interest, and
distributions in respect of principal or interest
in respect of any such class or classes may or
may not be made upon the occurrence of specified
events or on the basis of collections from
certain designated Contracts. In addition, a
series may include one or more classes of
Certificates ("STRIP CERTIFICATES") entitled to
(i) distributions in respect of principal with
disproportionate, nominal or no interest
distributions or (ii) interest distributions with
disproportionate, nominal or no distributions in
respect of principal.
If a series of securities includes classes of
Notes, distributions in respect of the
Certificates may be subordinated in priority of
payment to payments on the Notes to the extent
specified in the related Prospectus Supplement.
If the Seller, the Servicer or a successor
thereto exercises its option to purchase the
Contracts of a Trust in the manner and on the
respective terms and conditions described under
"Description of the Transfer and Servicing
Agreements--Termination", the outstanding
Certificates will be redeemed as set forth in the
related Prospectus Supplement.
THE TRUST PROPERTY......... Unless otherwise specified in the related
Prospectus Supplement, the property of each Trust
(the "TRUST PROPERTY") will include: (i) a pool
of motor vehicle retail installment sales
contracts (the "CONTRACTS"), all of which are
secured by new and/or used automobiles and/or
light-duty trucks (the "FINANCED VEHICLES"), (ii)
certain documents relating to the Contracts,
(iii) certain monies due under the Contracts on
or after the Cut-Off Date specified in the
related Prospectus Supplement, (iv) security
interests in the related Financed Vehicles, and
the rights to receive proceeds from claims or
certain related insurance policies covering the
Financed Vehicles or the obligors, (v) all
amounts on deposit in certain trust accounts,
including the related Collection Account and any
other account identified in the applicable
Prospectus Supplement, including all Eligible
Investments credited thereto (but excluding any
investment income from Eligible Investments to be
paid to the Servicer), (vi) the benefits of any
form of credit enhancement identified in the
applicable Prospectus Supplement, (vii) the right
of the Seller to cause Onyx to repurchase certain
Contracts under certain circumstances, and (viii)
all proceeds of the foregoing. See "The Trusts".
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On or before the date of initial issuance of a
series of Securities (the related "CLOSING DATE")
as specified in the related Prospectus
Supplement, the Seller will sell or transfer
Contracts having an aggregate principal balance
specified in the related Prospectus
Supplement as of the date specified therein (the
"CUT-OFF DATE") to the applicable Trust pursuant
to, if such Trust is to be treated as an owner
trust for federal income tax purposes, the
related Sale and Servicing Agreement among the
Seller, the Servicer and the Trust (as amended
and supplemented from time to time, the "SALE AND
SERVICING AGREEMENT") or, if the Trust is to be
treated as a grantor trust for federal income tax
purposes, the related Pooling and Servicing
Agreement.
CONTRACTS.................. Unless otherwise specified in the related
Prospectus Supplement, all of the Contracts
included in the Trust Property of each Trust will
have been (i) originated by automobile
dealerships ("DEALERS") assigned to Onyx or
purchased or originated by subsidiaries of Onyx,
(ii) purchased by the Seller from Onyx or from a
subsidiary of Onyx (each such subsidiary, a
"SELLING SUBSIDIARY") and (iii) purchased by the
Trust from the Seller. See "The Onyx Portfolio of
Motor Vehicle Contracts". All of the Contracts
included in the Trust Property of each Trust will
have been selected based upon the criteria
specified in the Sale and Servicing Agreement or
Pooling and Servicing Agreement, as applicable,
as described herein and in the related Prospectus
Supplement.
PREFUNDING ARRANGEMENTS.... If and to the extent provided in the related
Prospectus Supplement with respect to a series of
Securities, the related Sale and Servicing
Agreement or Pooling and Servicing Agreement may
provide for a commitment by the related Trust to
subsequently purchase additional Contracts
("SUBSEQUENT CONTRACTS") from the Seller
following the date on which the Trust is
established and the related Securities are issued
(a "PREFUNDING ARRANGEMENT"). See "Prefunding
Arrangements".
CREDIT AND CASH FLOW
ENHANCEMENT .............. If and to the extent specified in the related
Prospectus Supplement, credit enhancement with
respect to a Trust or any class or classes of
Securities may include any one or more of the
following: a surety bond or financial guarantee
insurance policy (a "SECURITY INSURANCE POLICY")
provided by a third-party insurer (a "SECURITY
INSURER"), subordination of one or more classes
of Securities to one or more other classes of
securities, a reserve fund, a yield maintenance
account, over-collateralization, letters of
credit, credit or liquidity facilities,
guaranteed investment contracts, swaps or other
interest rate protection agreements, repurchase
obligations, cash deposits, other agreements or
arrangements with respect to third party
payments, or other support. Unless otherwise
specified in the related Prospectus Supplement,
any form of credit enhancement will have certain
limitations and exclusions from coverage
thereunder, which will be described in the
related Prospectus Supplement. See "Description
of the Transfer and Security Agreements--Credit
and Cash Flow Enhancement".
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TAX STATUS ................ Unless the Prospectus Supplement specifies that
the related Trust will be treated as a grantor
trust and except as otherwise provided in such
Prospectus Supplement, upon the issuance of the
related series of Securities, Tax Counsel to such
Trust will deliver an opinion to the effect that
for federal income tax purposes (a) any Notes of
such series will be characterized as debt and (b)
such Trust will not be characterized as an
association (or a publicly traded partnership)
taxable as a corporation. In respect of any such
series, each Noteholder, if any, by the
acceptance of a Note of such series, will agree
to treat such Note as indebtedness, and each
Certificateholder, by the acceptance of a
Certificate of such series, will agree to treat
such Trust as a partnership in which such
Certificateholder is a partner for federal income
tax purposes. Alternative characterizations of
such Trust and such Certificates are possible,
but would not result in materially adverse tax
consequences to Certificateholders.
If the Prospectus Supplement specifies that the
related Trust will be treated as a grantor trust
and except as otherwise provided in such
Prospectus Supplement, upon the issuance of the
related series of Certificates, Tax Counsel to
such Trust will deliver an opinion to the effect
that such Trust will be treated as a grantor
trust for federal income tax purposes and will
not be subject to federal income tax.
See "Certain Federal Income Tax Consequences" and
"Certain State Tax Consequences With Respect To
Trusts For Which A Partnership Election Is Made"
for additional information concerning the
application of federal and California tax laws.
ERISA CONSIDERATIONS ...... Subject to the considerations discussed under
"ERISA Considerations" herein and in the related
Prospectus Supplement, and unless otherwise
specified therein, any Notes of a series and any
Certificates that are issued by a Trust that is a
grantor trust and are not subordinated to any
other class of Certificates are eligible for
purchase by employee benefit plans. Unless
otherwise specified in the related Prospectus
Supplement, the Certificates of any series that
are subordinated to any other Security of that
series may not be acquired by any employee
benefit plan subject to the Employee Retirement
Income Security Act of 1974, as amended
("ERISA"), or by any individual retirement
account. See "ERISA Considerations" herein and in
the related Prospectus Supplement.
RATING..................... It will be a condition to the issuance of each
class of Securities specified as being offered by
the related Prospectus Supplement that such class
of Securities be rated in one of the four highest
generic rating categories established for such
Securities by at least one nationally recognized
statistical rating agency (each such rating
agency that rates a class of Securities being
referred to herein as a "RATING AGENCY").
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RISK FACTORS
CERTAIN LEGAL ASPECTS -- THE CONTRACTS; SECURITY INTERESTS IN FINANCED VEHICLES
Each transfer of Contracts to a Trust will be subject to the
perfection requirements of the Uniform Commercial Code ("UCC"), as in effect in
California. The Seller will take or cause to be taken such action as is required
to perfect such Trust's rights in the applicable Contracts and will warrant that
the Trust has good title, free and clear of liens and encumbrances, to each
Contract on the date such Contract is transferred to the Trust. Except as
otherwise specified in the related Prospectus Supplement, the related Sale and
Servicing Agreement or Pooling and Servicing Agreement, as applicable, will,
subject to the satisfaction of any conditions specified in the applicable
agreement, permit the Servicer to hold the Contracts on behalf of the Trustee
after the filing of UCC-1 financing statements relating to the perfection of
such Trust's security interest in the Contracts. Accordingly, if Onyx or the
Seller sell and deliver a Contract to another purchaser, there is a risk that
the purchaser could acquire an interest in the Contract superior to the interest
of such Trust and the Securityholders. Onyx will agree in the Sale and Servicing
Agreement or Pooling and Servicing Agreement, as applicable, to take all
necessary action to preserve and protect such Trust's ownership interest in the
Contracts.
The Seller will represent that each Contract is secured by a Financed
Vehicle. After a Contract is purchased by Onyx, or purchased or originated by a
subsidiary of Onyx, and the appropriate application is processed by the
department of motor vehicles or similar state agency responsible for vehicle
records in the state in which the Contract was originated, the certificate of
title (or computerized title record in the case of certain of the Contracts
originated in California, for which there will be no paper certificates of
title) to the Financed Vehicle securing the Contract will show Onyx or such
subsidiary as the secured party holding a lien in the Financed Vehicle. When the
Contracts are sold to the Seller and then to a Trust, Onyx or such subsidiary
will remain the secured party named on the related certificates of title (or
computerized title records in the case of certain Contracts originated in
California), and such certificates (or electronic records) will not be endorsed
or otherwise marked to identify the related Trustee (or, if applicable, the
related Indenture Trustee) as secured party, due to the administrative burden
and expense of applying to the department of motor vehicles or similar state
agency in each of the states of Contract origination to identify the Trustee
(or, if applicable, the related Indenture Trustee) as secured party, and because
retaining Onyx's or such subsidiary's name as secured party enables Onyx to more
efficiently service the Contracts. Even though a Trust will not be identified as
secured party with respect to the Financed Vehicles relating to the Contracts
transferred to it, because such Trust will have a security interest in such
Contracts, it will be the beneficial owner of the security interests in the
related Financed Vehicles (which security interests, in the case of a series of
Securities including one or more classes of Notes, will be pledged to the
related Indenture Trustee). There exists a risk, however, in not identifying
such Trust (or, if applicable, the related Indenture Trustee) as the new secured
party on the certificate of title (or computerized title record) that, through
fraud or negligence, the security interest of such Trust could be released.
Moreover, statutory liens for repairs or unpaid taxes may have priority even
over perfected security interests in the Financed Vehicles. See "Certain Legal
Aspects of the Contracts".
CERTAIN LEGAL ASPECTS -- BANKRUPTCY CONSIDERATIONS
It is intended by Onyx, each Selling Subsidiary and the Seller that
each transfer of Contracts by Onyx or a Selling Subsidiary to the Seller
constitute a "true sale" of the applicable Contracts to the Seller. If such a
transfer constitutes a "true sale," the applicable Contracts and the proceeds
thereof would not be part of Onyx's or such Selling Subsidiary's bankruptcy
estate should it become the subject of a bankruptcy case subsequent to the
transfer of such Contracts to the Seller.
Onyx and the Seller have taken and will take steps in structuring the
transactions contemplated hereby that are intended to ensure that the voluntary
or involuntary application for relief by Onyx under the United States Bankruptcy
Code or similar state laws ("INSOLVENCY LAWS") will not result in consolidation
of the assets and liabilities of the Seller with those of Onyx. These steps
include the creation of the Seller as a separate, limited purpose subsidiary
pursuant to a certificate of incorporation containing certain limitations
(including restrictions on the nature of the Seller's business and a restriction
on the Seller's ability to commence a voluntary case or proceeding under any
Insolvency Law without the prior unanimous affirmative vote of all of its
directors). However, there can be no assurance that the activities of the
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Seller would not result in a court concluding that the assets and liabilities of
the Seller should be consolidated with those of Onyx in a proceeding under any
Insolvency Law. If a court were to reach such a conclusion, then delays in
payments or distributions in respect of the Securities could occur or reductions
in the amounts of such payments or distributions could result. See "The Seller".
Unless otherwise provided in the related Prospectus Supplement, notwithstanding
the holding by a court that the assets and liabilities of the Seller should be
consolidated with those of Onyx in a proceeding under any insolvency law, any
related Security Insurer will remain unconditionally and irrevocably obligated
under the applicable Security Insurance Policy to guarantee principal and
interest payments and distributions on each Distribution Date.
PREPAYMENT CONSIDERATIONS
The weighted average life of the Securities of any series will
generally be influenced by the rate at which the principal balances of the
related Contracts are paid, which payment may be in the form of scheduled
amortization or prepayments. Prepayments on Simple Interest Contracts will
shorten the average life of such Contract and, therefore, of the series of
Securities related to such Contracts, because they will be paid or distributed
to the related Securityholders on the Distribution Date immediately following
the Collection Period in which such prepayments are received. Partial
prepayments on Rule of 78's Contracts will be treated as Payaheads and
accordingly will not affect the average life of such Contracts because such
payments will be held in the name of the related Trustee (or, if applicable, the
related Indenture Trustee), acting on behalf of the related obligors and
Securityholders, as their interest may appear, until paid or distributed in
accordance with the original schedule of payments for such Contracts.
Onyx has limited historical experience with respect to prepayments,
and is not aware of publicly available industry statistics that set forth
principal prepayment experience for retail installment sales contracts similar
to the Contracts. Onyx can make no prediction as to the actual prepayment rates
that will be experienced on the Contracts in either stable or changing interest
rate environments. See "Maturity and Prepayment Considerations".
SUBORDINATION; LIMITED ASSETS
To the extent specified in the related Prospectus Supplement (i)
distributions of interest and principal on one or more classes of Certificates
of a series may be subordinated in priority of payment to interest and principal
due on one or more classes of the Notes, if any, of such series or on one or
more other classes of Certificates of such series and (ii) payments of interest
and principal on one or more classes of Notes of a series may be subordinated in
priority of payment to interest and principal due on one or more of the other
classes of Notes of such Series. Moreover, each Trust will not have, nor is it
permitted or expected to have, any significant assets or sources of funds other
than the related Contracts and the other assets described in the related
Prospectus Supplement. The Notes of any series will represent obligations solely
of, and the Certificates of any series will represent interests solely in, the
related Trust and neither the Notes nor the Certificates of any series will be
insured or guaranteed by the Seller or the Servicer or any of their respective
affiliates, the applicable Trustee, any Indenture Trustee or, except as
specified in the related Prospectus Supplement, any other person or entity.
Consequently, holders of the Securities of any series must rely for repayment
upon payments on the related Contracts and, if and to the extent available,
amounts available from the other assets specified in the related Prospectus
Supplement.
CONSUMER PROTECTION LAWS
The Contracts will be subject to federal and state consumer
protection laws which impose requirements with respect to the making, transfer,
acquisition, enforcement and collection of consumer loans. Such laws, as well as
any new laws or rules which may be adopted, may adversely affect the Servicer's
ability to collect on the Contracts. Any failure by the originator thereof to
have complied, or the Servicer to comply, with such requirements could adversely
affect the enforceability of the Contracts. With respect to each series of
Securities, the Seller will make representations and warranties relating to the
validity and enforceability of the related Contracts and its compliance with
applicable law in connection with its performance of the transactions
contemplated by the related Sale and Servicing Agreement or Pooling and
Servicing Agreement, as applicable. Pursuant thereto, if the applicable Trust's
interest in a Contract is materially and adversely affected by the failure of
such Contract to comply with the applicable requirements of any consumer
protection law, the Seller will be obligated to repurchase such Contract. The
sole remedy if any such representation or
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warranty is not complied with and such noncompliance continues beyond the
applicable cure period will be that the Contracts affected thereby will be
required to be repurchased by the Seller. See "Description of the Transfer and
Servicing Agreements -- Repurchase of Contracts" and "Certain Legal Aspects of
the Contracts -- Repurchase Obligation".
BOOK-ENTRY REGISTRATION
Unless otherwise specified in the related Prospectus Supplement,
Security Owners will hold their Certificates or Notes, as applicable, through
the Depository Trust Company ("DTC"). Transfers within DTC will be in accordance
with DTC's usual rules and operating procedures So long as the Securities are
book-entry Securities ("BOOK-ENTRY SECURITIES"), such Securities will be
evidenced by one or more certificates registered in the name of a Participant of
DTC as the nominee of DTC. No Security Owner will be entitled to receive a
definitive certificate representing such person's interest, except in the event
that Definitive Securities are issued under the limited circumstances described
herein. Unless and until Definitive Securities for such series are issued,
holders of such Securities will not be recognized by the related Trustee (or, if
applicable, the related Indenture Trustee) as "CERTIFICATEHOLDERS",
"NOTEHOLDERS" or "SECURITYHOLDERS", as the case may be (as such terms are used
herein or in the related Pooling and Servicing Agreement or related Indenture
and Trust Agreement, as applicable). Hence, until Definitive Securities are
issued, holders of such Securities will only be able to exercise the rights of
Securityholders indirectly through DTC and its Participants. See "Description of
the Securities--Book-Entry Registration".
Since transactions in the Securities can be effected only through
DTC, Participants, Indirect Participants and certain banks, the ability of the
beneficial owner thereof to pledge such Securities to persons or entities that
do not participate in DTC, or otherwise to take actions in respect of such
Securities, may be limited due to lack of a physical certificate representing
such Securities.
Beneficial owners of Securities may experience some delay in their
receipt of payments or distributions of interest and principal since such
payments or distributions will be provided by the related Trustee (or, if
applicable, the related Indenture Trustee) to DTC and DTC will credit such
payments or distributions to the accounts of its Participants, which will
thereafter credit them to the accounts of the beneficial owners thereof either
directly or indirectly through Indirect Participants.
THE TRUSTS
With respect to each series of Securities, the Seller will establish
a separate Trust pursuant to the respective Trust Agreement or Pooling and
Servicing Agreement, as applicable, for the transactions described herein and in
the related Prospectus Supplement. Unless otherwise specified in the related
Prospectus Supplement, the property of each Trust (the "TRUST PROPERTY") will
include: (i) the related Contracts, (ii) certain documents relating to such
Contracts, (iii) certain monies due under such Contracts on or after the related
Cut-Off Date, (iv) security interests in the related Financed Vehicles and the
rights to receive certain proceeds from claims on certain related insurance
policies covering such Financed Vehicles or the related obligors, (v) all
amounts on deposit in certain trust accounts, including the related Collection
Account and any other account identified in the related Prospectus Supplement,
including all Eligible Investments credited thereto (but excluding any
investment income from Eligible Investments to be paid to the Servicer or as
otherwise specified in the related Prospectus Supplement), (vi) the right of the
Seller to cause Onyx to repurchase certain Contracts under certain
circumstances, and (vii) all proceeds of the foregoing. To the extent specified
in the related Prospectus Supplement, a Security Insurance Policy, reserve fund
or other form of credit enhancement may be a part of the property of any given
Trust or may be held by the Trustee or an Indenture Trustee for the benefit of
holders of the related Securities.
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Prior to formation, each Trust will have had no assets or
obligations. After formation, each Trust will not engage in any activity other
than acquiring and holding the related Contracts, issuing the related
Securities, distributing payments in respect thereof and as otherwise described
herein, in the related Prospectus Supplement and in the Trust Agreement or
Pooling and Servicing Agreement, as applicable. Each Trust will not acquire any
Motor Vehicle Contracts or assets other than the Trust Property.
The principal offices of each Trust that is not a grantor trust and
the related Trustee will be specified in the applicable Prospectus Supplement.
THE TRUSTEE
The Trustee for each Trust and, if applicable, the Indenture Trustee,
will be specified in the related Prospectus Supplement. The Trustee's and, if
applicable, the Indenture Trustee's liability in connection with the issuance
and sale of the related Securities will be limited solely to the express
obligations of such Trustee or Indenture Trustee set forth in the related Trust
Agreement, Sale and Servicing Agreement, and Indenture or the related Pooling
and Servicing Agreement, as applicable. A Trustee or Indenture Trustee with
respect to a series of Securities may resign or be removed under the
circumstances specified in the related Prospectus Supplement. Any resignation or
removal of a Trustee or Indenture Trustee and appointment of a successor trustee
will not become effective until acceptance of the appointment by such successor.
THE ONYX PORTFOLIO OF MOTOR VEHICLE CONTRACTS
PURCHASE AND ORIGINATION OF MOTOR VEHICLE CONTRACTS
Onyx's portfolio of retail installment sales contracts and
installment loan agreements are secured by new and used automobiles and
light-duty trucks ("MOTOR VEHICLE CONTRACTS"). Onyx targets the prime auto
lending market because it believes that prime lending produces greater
origination and operating efficiency than does sub-prime lending. Onyx focuses
on late model used, rather than new, vehicles, as management believes the risk
of loss on used vehicles is lower due to lower depreciation rates, while
interest rates are typically higher. In addition, Onyx believes that the late
model used motor vehicle finance market is growing at a faster rate than is the
finance market for new motor vehicles. Onyx has three prime auto lending
programs: the "Premier", the "Preferred" and the "Standard" Programs. The
Premier Program allows Onyx to market lower interest rates in order to capture
customers of superior credit quality. The Preferred Program allows Onyx to
offer Motor Vehicle Contracts at higher interest rates to borrowers with proven
credit quality. The Standard Program allows Onyx to assist qualified borrowers,
who may have experienced previous credit problems or have not yet established a
significant credit history, at interest rates higher than the Premier and
Preferred Programs.
Motor Vehicle Contracts in Onyx's portfolio are purchased by Onyx
from Dealers that originate such contracts, purchased by a subsidiary of Onyx
from credit unions that originate such contracts, or originated by Onyx or a
subsidiary of Onyx. Unless otherwise specified in the related Prospectus
Supplement (i) substantially all of the Contracts included in the Trust Property
of a Trust will have been purchased by Onyx from new and used car Dealers
unaffiliated with Onyx and the Seller, and a limited number of Contracts will
have been purchased or originated by subsidiaries of Onyx and (ii) all of such
Contracts will have been sold to the Seller and then to such Trust. Onyx
currently has agreements with over 3,738 Dealers, of which approximately 90.08%
are franchised new car dealerships and approximately 9.92% are independent used
car dealerships. The Dealers are located in metropolitan areas in over 18 states
in which the Motor Vehicle Contracts are or will be originated. Each Dealer or
credit union from which Onyx or a subsidiary of Onyx purchases Motor Vehicle
Contracts has entered into an agreement with Onyx or such subsidiary whereby the
applicable seller represents that it will comply with federal and state laws
regarding motor vehicle financing, that such seller will obtain the requisite
financial information required of the obligor in order to extend credit, and
that such seller will truthfully disclose to Onyx or such subsidiary such
financial information, the identity of the obligor and other information in
connection with the loan transaction. The Dealers with whom Onyx has agreements
and Dealers with whom Onyx would like to have agreements are regularly contacted
by Onyx account managers by telephone and in person in an effort to obtain a
continued supply of Motor Vehicle Contracts for Onyx to purchase. Before
purchasing Motor Vehicle Contracts from independent used car Dealers, Onyx
completes a credit review of the Dealer's financial condition (including a
review of financial information provided by the Dealer and a Dun & Bradstreet
report on the Dealer) and a review of the underwriting criteria used by the
Dealer. The payment obligations of the obligor under each Motor Vehicle Contract
are secured by the vehicle purchased with the loan proceeds provided under that
Motor Vehicle Contract.
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Onyx services all of the Motor Vehicle Contracts and initially will
serve as the primary servicer of the Contracts included in the Trust Property of
a Trust after such Contracts are sold by the Seller to such Trust. The servicing
functions performed by Onyx include customer service, document filekeeping,
computerized account record keeping, vehicle title processing and collections.
UNDERWRITING OF MOTOR VEHICLE CONTRACTS
Onyx underwrites Motor Vehicle Contracts purchased from Dealers
through its twelve regional contract purchasing offices ("AUTO FINANCE
CENTERS"), five of which are in California and one in each of Arizona, Florida,
Georgia, Illinois, Michigan, Nevada and Washington. Motor Vehicle Contracts
purchased from Dealers in other states are generally purchased by the Auto
Finance Center that is geographically most proximate to the state of
origination. In the case of Motor Vehicle Contracts originated by a subsidiary
of Onyx, such Motor Vehicle Contracts are underwritten at the Irvine, California
Auto Finance Center location. Each Motor Vehicle Contract is fully amortizing
and provides for level payments over its term with the portion of principal and
interest of each level payment determined in most cases either on the basis of
the Rule of 78's or the Simple Interest Method. See "The Contracts".
To evaluate the potential purchase of a Motor Vehicle Contract
originated by a Dealer, Onyx reviews the application package received from such
Dealer, or in the case of Motor Vehicle Contracts purchased or originated by a
subsidiary of Onyx, such subsidiary reviews the application package received
from the originating credit union or the obligor, that in any case sets forth
the obligor's income, liabilities, credit and employment history, and other
personal information, as well as a description of the financed vehicle that
secures the Motor Vehicle Contract. Most credit applications are not made on
forms provided by Onyx or a subsidiary of Onyx. However, Onyx or a subsidiary of
Onyx reviews the related application for completeness and for compliance with
Onyx's underwriting guidelines and applicable federal and state consumer
statutes and regulations. To evaluate credit applications, Onyx or a subsidiary
of Onyx reviews information in the application and from credit bureau reports
obtained by Onyx or such subsidiary.
Each proposed Motor Vehicle Contract is evaluated using uniform
underwriting standards developed by Onyx. These underwriting standards are
intended to assess the obligor's ability to repay all amounts due under the
Motor Vehicle Contract and the adequacy of the related financed vehicle as
collateral, based upon a review of the information contained in the Motor
Vehicle Contract application. Among the criteria considered by credit managers
of Onyx and its subsidiaries in evaluating the individual applications are (i)
stability of the obligor with specific regard to the obligor's occupation,
length of employment and length of residency, (ii) the obligor's payment history
based on information known directly or as provided by various credit reporting
agencies with respect to present and past debt, (iii) a debt service-to-gross
monthly income ratio test, and (iv) the principal amount of the Motor Vehicle
Contract taking into account the age, type and market value of the related
financed vehicle. The general policy of Onyx and its subsidiaries has been not
to allow an obligor's debt service-to-gross monthly income ratio to exceed 45%.
After review of an application, a credit manager, via an electronic
system, communicates an appropriate decision to the applicable Dealer or credit
union, or by telephone or otherwise to the obligor in the case of Motor Vehicle
Contracts originated by a subsidiary of Onyx, specifying approval (subject to
the receipt of the required documentation), denial or a counter-offer on the
proposed Motor Vehicle Contract. If the response to the Dealer, credit union or
obligor requires stipulations to the approval (including an additional
downpayment, reduction in the term of the financing, or the addition of a
co-signer to the Motor Vehicle Contract), these are communicated concurrently to
the Dealer, credit union or obligor, and become a condition of the approval.
Subsequent to approval, if Onyx or a subsidiary of Onyx is the chosen source of
financing, Onyx or such subsidiary will obtain the necessary documentation for
processing, which consists of the following: (i) a signed application; (ii) the
only original and a copy of the executed Motor Vehicle Contract; (iii) an
agreement by the obligor to provide insurance; (iv) a report of sale or
guarantee of title; (v) an application for registration; (vi) a co-signer
notification (if applicable); (vii) a copy of any supplemental warranty
purchased with respect to the financed vehicle; (viii) acceptable vehicle
valuation documentation; and (ix) any other required documentation.
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Once the appropriate documentation is in hand for funding, the file
relating to the Motor Vehicle Contract is ready to forward to a contract
processor for a pre-funding audit. The contract processor (who is employed by
Onyx or one of its subsidiaries) then audits such documents for completeness and
consistency with the application, providing final approval for purchase of the
Motor Vehicle Contract once these requirements have been satisfied (subject to
the receipt of the required documentation).
The amount advanced by Onyx or a subsidiary of Onyx under any Motor
Vehicle Contract does not exceed (i) for a new financed vehicle, the
manufacturer's suggested retail price plus taxes, title and license fees,
extended warranty (if any) and credit insurance, or (ii) for a used financed
vehicle, the value assigned by a nationally recognized used car value guide,
plus taxes, title and license fees and extended warranty (if any). However, the
actual amount advanced for a Motor Vehicle Contract is often less than the
maximum permissible amount depending on a number of factors, including the
length of the Motor Vehicle Contract term and the model and year of the related
financed vehicle. These adjustments are made to assure that the related financed
vehicle constitutes adequate collateral to secure the Motor Vehicle Contract.
Under no circumstances is the amount advanced for a Motor Vehicle Contract
greater than the amount payable by the obligor with respect to the purchase of
the related financed vehicle.
Periodically, Onyx makes a detailed analysis of its portfolio of
Motor Vehicle Contracts (including Motor Vehicle Contracts purchased or
originated by its subsidiaries) to evaluate the effectiveness of Onyx's credit
guidelines. If external economic factors, credit delinquencies or credit losses
change, Onyx adjusts its credit guidelines to maintain the asset quality deemed
acceptable by Onyx's management. Onyx reviews, on a daily basis, the quality of
its Motor Vehicle Contracts by conducting audits of certain randomly selected
Motor Vehicle Contracts to ensure compliance with established policies and
procedures.
INSURANCE
Each related Motor Vehicle Contract requires the obligor to obtain
comprehensive and collision insurance with respect to the related financed
vehicle with Onyx or a subsidiary of Onyx as a loss payee. Onyx tracks whether
obligors maintain the required insurance.
COLLECTION PROCEDURES
Collection activities with respect to delinquent Motor Vehicle
Contracts are performed by Onyx at its Irvine Collection Center. Collection
activities include prompt investigation and evaluation of the causes of any
delinquency. An obligor is considered delinquent when he or she has failed to
make at least 90% of a scheduled payment under the Motor Vehicle Contract within
30 days of the related due date (each a "DUE DATE").
To automate its collection procedures, Onyx uses features of the
computer system of its third party service bureau, Online Computer Systems, Inc.
("OCS") to provide tracking and notification of delinquencies. The collection
system provides relevant obligor information (for example, current addresses,
phone numbers and loan information) and records of all Motor Vehicle Contracts.
The system also records an obligor's promise to pay and affords supervisors the
ability to review collection personnel activity and to modify collection
priorities with respect to Contracts. Onyx utilizes a predictive dialing system
located at the Irvine Collection Center to make phone calls to obligors whose
payments are past due by more than eight days but less than 30 days. The
predictive dialer is a computer-controlled telephone dialing system which dials
phone numbers of obligors from a file of records extracted from Onyx's database.
By eliminating time wasted on attempting to reach obligors, the system gives a
single collector, on average, the ability to speak with and work 200 to 250
accounts per day. Once a live voice responds to the automated dialer's call, the
system automatically transfers the call to a collector and the relevant account
information to the collector's computer screen. The system also tracks and
notifies collections management of phone numbers that the system has been unable
to reach within a specified number of days, thereby promptly identifying for
management all obligors who cannot be reached by telephone.
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Once an Obligor is 20 days or more delinquent, the account is
assigned to a specific collector at the Irvine Collection Center who will have
primary responsibility for such delinquent account until it is resolved. To
expedite collections from late paying obligors, Onyx uses Western Union "Quick
Collect," which allows an obligor to pay at numerous locations any late payments
which are in turn wired daily to Onyx's lockbox account by Western Union. Onyx
also uses an automatic payment system that allows an obligor to authorize Onyx
to present a draft on the obligor's bank account directly to the obligor's bank
for payment to Onyx.
Generally, after a scheduled payment under a Motor Vehicle Contract
continues to be past due for between 45 and 60 days, Onyx will initiate
repossession of the financed vehicle. However, if the applicable Motor Vehicle
Contract is deemed uncollectible, if the related financed vehicle is deemed by
collection personnel to be in danger of being damaged, destroyed or made
unavailable for repossession, or if the related obligor voluntarily surrenders
the related financed vehicle, Onyx may repossess the related Financed Vehicle
without regard to the length or existence of payment delinquency. Repossessions
are conducted by third parties who are engaged in the business of repossessing
vehicles for secured parties. Under the laws of California and most other states
in which Motor Vehicle Contracts are originated, after repossession, the obligor
generally has an additional period of 10 to 15 days to redeem a financed vehicle
before it may be resold by Onyx in an effort to recover the balance due under
the Motor Vehicle Contract.
Losses may occur in connection with delinquent Motor Vehicle
Contracts and can arise in several ways, including inability to locate the
related financed vehicle or the obligor, or because of a discharge of the
obligor in a bankruptcy proceeding. The current policy of Onyx is to recognize
losses at the time a Motor Vehicle Contract is deemed uncollectible or during
the month a scheduled payment under a Motor Vehicle Contract becomes 120 days or
more past due, whichever occurs first.
Upon repossession and sale of a financed vehicle, any deficiency
remaining is pursued against the Obligor to the extent deemed practical by Onyx
and to the extent permitted by law. The loss recognition and collection policies
and practices of Onyx may change over time in accordance with Onyx's business
judgment. However, the Sale and Servicing Agreement or Pooling and Servicing
Agreement, as applicable, will require that Onyx service the Contracts and
collect all amounts due using reasonable care and in at least the same manner as
it services and collects amounts due with respect to Motor Vehicle Contracts
serviced by it for its own account.
MODIFICATIONS AND EXTENSIONS
Onyx offers certain credit-related extensions to obligors. Generally,
these extensions are offered only when (i) Onyx believes that the obligor's
financial difficulty has been resolved or will no longer impair the Obligor's
ability to make future payments, (ii) the extension will result in the Obligor's
payments being brought current, (iii) the total number of credit-related
extensions granted on the Motor Vehicle Contract will not exceed three and the
total credit-related extensions granted on the Motor Vehicle Contract will not
exceed three months in the aggregate, (iv) there has been no more than one
credit-related extension granted on the Motor Vehicle Contract in the
immediately preceding twelve months, and (v) Onyx (or its assignee) had held the
Motor Vehicle Contract for at least six months. Any deviation from this policy
requires the concurrence of a collection supervisor and Onyx's collection
manager and the Executive Vice President, Collections.
DELINQUENCY AND LOAN LOSS INFORMATION
Certain information concerning the experience of Onyx pertaining to
delinquencies, loan losses and recoveries with respect to its portfolio of Motor
Vehicle Contracts (including receivables previously sold which Onyx continues to
service) will be set forth in each Prospectus Supplement. There can be no
assurance that the delinquency, loan loss and recovery experience on any
Contracts related to a series of Securities will be comparable to prior
experience or to such information.
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THE CONTRACTS
Unless otherwise specified in the related Prospectus Supplement (i)
all of the Contracts will have been purchased by the Seller from Onyx or a
Selling Subsidiary and (ii) substantially all of the Contracts will have been
purchased by Onyx from new and used car Dealers unaffiliated with Onyx or the
Seller, and a limited number of Contracts will have been purchased or originated
by subsidiaries of Onyx. See "The Onyx Portfolio of Motor Vehicle Contracts".
Unless otherwise specified in the related Prospectus Supplement, each of the
Contracts included in the Trust Property of a Trust will be a fixed rate
contract where the allocation of each payment between interest and principal is
calculated using the Rule of 78's (the "RULE OF 78'S CONTRACTS") or the Simple
Interest Method (the "SIMPLE INTEREST CONTRACTS"). Rule of 78's Contracts
provide for the payment by the obligor of a specified total amount of payments,
payable in equal monthly installments, which total represents the principal
amount financed plus add-on interest in an amount calculated as if such Contract
were a self-amortizing, level-yield Contract bearing interest at a per annum
rate equal to the stated annual percentage rate as set forth in the Contract
("APR"). Under the Rule of 78's, the amount of each payment allocable to
interest on a Contract is determined by multiplying the total amount of add-on
interest payable over the term of the Contract by a fraction derived as
described below. The fraction used in the calculation of add-on interest earned
each month under a Rule of 78's Contract has as its denominator a number equal
to the sum of a series of numbers representing the total number of monthly
payments due under such Contract. For example, with a Rule of 78's Contract
providing for 12 payments, the denominator of each month's fraction will be 78,
the sum of the series of numbers from 1 to 12. The numerator of the fraction for
a given month is the number of payments remaining before giving effect to the
payment to which the fraction is being applied. Accordingly, in the example of a
twelve-payment Rule of 78's Contract, the fraction for the first payment is
12/78, for the second payment 11/78, for the third payment 10/78, and so on
through the final payment, for which the fraction is 1/78. The applicable
fraction is then multiplied by the total add-on interest payment over the entire
term of such Contract, and the resulting amount is the amount of add-on interest
earned that month. The difference between the amount of the monthly payment by
the obligor and the amount of earned add-on interest calculated for the month is
applied to principal reduction.
For Simple Interest Contracts, interest due is calculated on the Due
Date based on the actual principal balance of the Contract on that date (the
"SIMPLE INTEREST METHOD"). For such Contracts, interest accrued as of the Due
Date is paid first, and then the remaining payment is applied to the unpaid
principal balance. Accordingly, if an obligor pays the fixed monthly installment
in advance of the Due Date, the portion of the payment allocable to interest for
the period since the preceding payment will be less than it would be if the
payment were made on the Due Date, and the portion of the payment allocable to
reduce the principal balance will be correspondingly greater. Conversely, if an
obligor pays the fixed monthly installment after its Due Date, the portion of
the payment allocable to interest for the period since the preceding payment
will be greater than it would be if the payment were made on the Due Date, and
the portion of the payment allocable to reduce the principal balance will be
correspondingly smaller. When necessary, an adjustment is made at the maturity
of the Contract to the scheduled final payment to reflect the larger or smaller,
as the case may be, allocations of payments to the amount financed under the
Contract as a result of early or late payments, as the case may be.
Unless otherwise specified in the related Prospectus Supplement, the
purchase price paid by each Trust for each Contract included in the Trust
Property of such Trust will reflect the principal balance of such Contract as of
the Cut-Off Date, calculated either under the Rule of 78's or the Simple
Interest Method. For each of the Contracts the term "CUT-OFF DATE SCHEDULED
BALANCE" means the principal balance of such Contract as of the Cut-Off Date.
For Rule of 78's Contracts a greater portion of the early payments under a
Contract is allocated to interest than would be the case using the actuarial
method. Therefore, the Cut-Off Date Scheduled Balance of each Rule of 78's
Contract will exceed the amount that would have been its principal balance as of
the Cut-Off Date if each such Rule of 78's Contract had been amortized from
origination under the actuarial method. The related Trustee (or, if applicable,
Indenture Trustee) and the Servicer will account for interest and principal on
the Rule of 78's Contracts using the actuarial method, but based on the Cut-Off
Date Scheduled Balance. The remaining payments due on a Rule of 78's Contract
will not be sufficient to amortize the Cut-Off Date Scheduled Balance of such
Contract at a yield equal to its APR. Accordingly, in order to amortize the
Cut-Off Date Scheduled Balance over the remaining term of the Rule of 78's
Contract using the actuarial method of accounting, the Servicer will recompute
the effective yield of such Contract based on the remaining payments due and the
Cut-Off Date Scheduled Balance (such yield, stated as a per annum rate, the
"RECOMPUTED YIELD") and will
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allocate each scheduled payment of principal and interest ("MONTHLY P&I")
between principal and interest on each Rule of 78's Contract based on the
Cut-Off Date Scheduled Balance and the Recomputed Yield for such Contract (such
method, the "RECOMPUTED ACTUARIAL METHOD").
Additional information with respect to the Contracts relates to any
series of Securities will be set forth in the related Prospectus Supplement,
including, to the extent appropriate, the composition, the distribution by APR
and by the states of origination, the portion of such Contracts consisting of
Simple Interest Contracts and Rule of 78's Contracts, and the portion of such
Contracts secured by new vehicles and by used vehicles.
PREFUNDING ARRANGEMENTS
To the extent provided in the related Prospectus Supplement for a
series of Securities, the related Trust Agreement, Sale and Servicing Agreement
and Indenture or the related Pooling and Servicing Agreement, as applicable, may
provide for a commitment by the related Trust to subsequently purchase
additional Contracts ("SUBSEQUENT CONTRACTS") from the Seller following the date
on which the Trust is established and the related Securities are issued (a
"PREFUNDING ARRANGEMENT"). With respect to a series of Securities, the
Prefunding Arrangement will require that any Subsequent Contracts transferred to
the Trust conform to the requirements and conditions provided in the related
Sale and Servicing Agreement or Pooling and Servicing Agreement, as applicable.
If a Prefunding Arrangement is utilized in connection with the issuance of a
series of Securities, the Servicer will establish an account in the name of the
related Trustee or Indenture Trustee, as applicable, for the benefit of the
Securityholders into which all or a portion of the net proceeds received from
the sale of the Securities (the "PREFUNDED AMOUNT") will be deposited and from
which monies will be released during a specified period to purchase subsequent
Contracts from the Seller (the "PREFUNDING ACCOUNT"). Upon each conveyance of
Subsequent Contracts to the applicable Trust, an amount equal to the purchase
price paid by the Seller to Onyx, or a Selling Subsidiary, for such Subsequent
Contracts will be released from the Prefunding Account and paid to the Seller.
The utilization of a Prefunding Arrangement for a series of
Securities is intended to improve the efficiency of the issuance of such
Securities and the sale of the Contracts to the related Trust through the
incremental delivery of the applicable Contracts on the Closing Date and during
a specified period following the Closing Date for such series of Securities,
which allows for a more even accumulation of the Contracts by the Seller and by
Onyx and the Selling Subsidiary and the issuance of a larger principal amount of
Securities than would be the case without a Prefunding Arrangement.
MATURITY AND PREPAYMENT CONSIDERATIONS
The Contracts will be prepayable in full by the obligors at any time
without penalty. Prepayments on Simple Interest Contracts included in the Trust
Property of a Trust will be paid or distributed to the related Securityholders
on the Distribution Date following the Collection Period in which they are
received. Partial prepayments on Rule of 78's Contracts however will be treated
as Payaheads and will not be paid or distributed until the Collection Period in
which such payments are due or until the amount of such partial prepayment
equals the amount the obligor would be required to pay in order to prepay the
Contract in full. See "Description of the Transfer and Servicing Agreements --
Payahead Account". To the extent that any Contract included in the Trust
Property of a Trust is prepaid in full ("FULL PREPAYMENT"), whether by the
obligor, or as the result of a purchase by the Servicer or a repurchase by the
Seller or otherwise, the actual weighted average life of the Contracts included
in the Trust Property of such Trust will be shorter than a weighted average life
calculation based on the assumptions that payments will be made on schedule and
that no prepayments will be made. Weighted average life means the average amount
of time in which each dollar of principal on a Contract is repaid. Full
Prepayments may also result from liquidations due to default, receipt of
proceeds from theft, physical damage, credit life and credit disability
insurance policies, repurchases by the Seller as a result of the failure of a
Contract to meet certain criteria set forth in the related Sale and Servicing
Agreement or Pooling and Servicing Agreement, as
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applicable, or purchases by the Servicer as a result of a breach of certain of
its covenants with respect to the Contracts made by it in the related Sale and
Servicing Agreement or Pooling and Servicing Agreement, as applicable. In
addition, early retirement of the Securities may be effected by the option of
the Servicer to purchase the remaining Contracts included in the Trust Property
of the Trust on any Distribution Date as of which the related Pool Balance
(after giving effect to the principal payments and distributions otherwise to be
made on such Distribution Date) has declined to the percentage of the Original
Pool Balance specified in the related Prospectus Supplement. See "Description of
the Transfer and Servicing Agreements -- Repurchase of Contracts".
The rate of Full Prepayments by obligors on the Contracts may be
influenced by a variety of economic, social and other factors, including the
fact that an obligor may not sell or transfer the Financed Vehicle securing a
Contract without the consent of the Servicer. These factors may also include
unemployment, servicing decisions, seasoning of loans, destruction of vehicles
by accident, sales of vehicles and market interest rates.
California law, and the law of some other states, require that retail
installment sales contracts such as the Contracts permit full prepayment without
penalty. Any Full Prepayments reduce the average life of the Contracts. The
Servicer will permit the sale or other transfer of a Financed Vehicle without
accelerating the maturity of the related Contract if such Contract is assumed by
a person satisfying Onyx's then current underwriting standards. See "The Onyx
Portfolio of Motor Vehicle Contracts -- Underwriting of Motor Vehicle
Contracts".
Onyx has limited historical experience with respect to prepayments
and is not aware of publicly available industry statistics that set forth
principal prepayment experience for retail installment sales contracts similar
to the Contracts. Onyx can make no prediction as to the actual prepayment rates
that will be experienced on the Contracts included in the Trust Property of any
Trust in either stable or changing interest rate environments. Securityholders
of each series will bear all reinvestment risk resulting from the rate of
prepayment of the Contracts included in the Trust Property of the related Trust.
POOL FACTOR AND POOL INFORMATION
The "Pool Factor" will be a six-digit decimal which the Servicer will
compute each month indicating the Pool Balance at the end of the month as a
fraction of the aggregate principal balance of the Contracts as of the Cut-Off
Date (the "ORIGINAL POOL BALANCE"). The Pool Factor will be 1.000000 as of the
Closing Date; thereafter, the Pool Factor will decline to reflect reductions in
the aggregate principal balance of the related Contracts (the "POOL BALANCE").
The amount of a Noteholder's or Certificateholder's pro rata share of the Pool
Balance for a given month can be determined by multiplying the original
denomination of such holder's Security by the Pool Factor for that month.
With respect to each Trust, unless otherwise provided in the related
Prospectus Supplement, the related Securityholders will receive monthly reports
from the Trustee concerning payments received on the Contracts, the Pool
Balance, the Pool Factor, and various other items of information.
Securityholders of record during any calendar year will be furnished information
for tax reporting purposes not later than the latest date permitted by law. See
"Description of the Securities--Statements to Securityholders".
USE OF PROCEEDS
Unless otherwise provided in the related Prospectus Supplement, the
net proceeds to be received by the Seller from the sale of Securities of a given
series will be used to repay certain indebtedness incurred in connection with
its acquisition of the Contracts and to pay certain other expenses in connection
with the pooling of the Contracts and the issuance of such Securities.
THE SELLER
The Seller is a wholly-owned, limited purpose finance subsidiary of
Onyx which was incorporated under the laws of the State of Delaware on July 28,
1994 and has a limited operating history. The principal office of the Seller is
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located at 8001 Irvine Center Drive, 6th Floor, Irvine, CA 92618. The telephone
number of such office is (949) 450-5500.
The Seller was organized principally for the purpose of purchasing
retail installment sales contracts from Onyx in connection with its activities
as a finance subsidiary of Onyx. The Seller was organized for limited purposes,
and its certificate of incorporation limits its activities to purchasing Motor
Vehicle Contracts from Onyx and transferring such Motor Vehicle Contracts to
third parties and any activities incidental to and necessary or convenient for
the accomplishment of such purposes.
Onyx and the Seller have taken and will take steps in structuring the
transactions contemplated hereby that are intended to ensure that the voluntary
or involuntary application for relief by Onyx under any Insolvency Law will not
result in consolidation of the assets and liabilities of the Seller with those
of Onyx. These steps include the creation of the Seller as a separate, limited
purpose subsidiary pursuant to a certificate of incorporation containing certain
limitations (including restrictions on the nature of the Seller's business and a
restriction on the Seller's ability to commence a voluntary case or proceeding
under any Insolvency Law without the unanimous affirmative vote of all of its
directors). However, there can be no assurance that the activities of the Seller
would not result in a court concluding that the assets and liabilities of the
Seller should be consolidated with those of Onyx in a proceeding under any
Insolvency Law.
The Seller has received the advice of counsel to the effect that,
subject to certain facts, assumptions and qualifications, it would not be a
proper exercise by a court of its equitable discretion to disregard the separate
corporate existence of the Seller and to require the consolidation of the assets
and liabilities of the Seller with the assets and liabilities of Onyx in the
event of the application of any Insolvency Law to Onyx. However, there can be no
assurance that a court would not conclude that the assets and liabilities of the
Seller should be consolidated with those of Onyx. If a court were to reach such
a conclusion, or a filing were made under any Insolvency Law by or against the
Seller, or if an attempt were made to litigate any of the foregoing issues,
delays in payments or distributions on any outstanding series of Securities
could occur or reductions in the amounts of such payments or distributions could
result.
Unless otherwise specified in the related Prospectus Supplement, the
Contracts included in the Trust Property of each Trust will have been sold by
Onyx and/or a Selling Subsidiary to the Seller pursuant to a purchase agreement
between Onyx or such Selling Subsidiary and the Seller (each, a "PURCHASE
AGREEMENT"). The Contracts included in the Trust Property of each Trust will be
sold by the Seller to such Trust pursuant to a Sale and Servicing Agreement or
Pooling and Servicing Agreement, as applicable. Onyx, each Selling Subsidiary
and the Seller intend that each transfer of Contracts by Onyx or such Selling
Subsidiary to the Seller under the applicable Purchase Agreement or otherwise
will constitute a "true sale" of the Contracts to the Seller. If a transfer of
Contracts constitutes such a "true sale," such Contracts and the proceeds
thereof would not be part of the bankruptcy estate of Onyx or such Selling
Subsidiary under Section 541 of the United States Bankruptcy Code (the
"BANKRUPTCY CODE") should Onyx or such Selling Subsidiary become the subject of
a bankruptcy case subsequent to the transfer of such Contracts to the Seller.
The Seller has received the advice of counsel to the effect that,
subject to certain facts, assumptions and qualifications, in the event Onyx were
to become the subject of a voluntary or involuntary case under the Bankruptcy
Code subsequent to the transfer of Contracts to the Seller, the transfer of such
Contracts by Onyx to the Seller would be characterized as a "true sale" of the
Contracts from Onyx to the Seller and the Contracts and the proceeds thereof
would not form part of Onyx's bankruptcy estate pursuant to Section 541 of the
Bankruptcy Code.
THE SERVICER
The Contracts included in the Trust Property of each Trust initially
will be serviced by Onyx. Onyx was incorporated in California in 1993 and
reincorporated in Delaware in 1996 in connection with its initial public
offering of Common Stock, which was successfully completed in March 1996. Onyx
is engaged principally in the business of providing indirect automobile
financing to new car dealerships and selected used car dealerships in California
and in other states across the country. Onyx is headed by a management team with
extensive experience in the origination and
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servicing of indirect and direct automobile loans, and who, from 1985 to
present, have actively participated in a number of public securitizations of
Motor Vehicle Contracts. The Common Stock of Onyx is listed on the NASDAQ.
Onyx's principal executive offices are located at 8001 Irvine Center Drive, 5th
Floor, Irvine, California 92618.
Onyx acquires individual Motor Vehicle Contracts from Dealers, and to
a lesser extent subsidiaries of Onyx purchase such contracts from credit unions
or directly originate such contracts, after reviewing and approving the
customer's credit application in accordance with its underwriting policies and
procedures. See "The Contracts". Onyx, together with its subsidiaries, had
acquired or originated Motor Vehicle Contracts totaling approximately $1.4
billion from commencement of operations through March 31, 1998. As of March 31,
1998, Onyx had amassed a servicing portfolio of approximately $885 million. As
of March 31, 1998, approximately 79% of Onyx's servicing portfolio consisted of
motor vehicle installment contracts secured by used motor vehicles, and 21%
secured by new motor vehicles. As of March 31, 1998, Onyx had total assets of
approximately $182.1 million and stockholders' equity of $41.4 million.
Onyx finances acquisitions and originations of Motor Vehicle
Contracts on a short term basis through two separate warehouse facilities and
has previously financed acquisitions and originations of motor vehicle
installment contracts on a long term basis through sales of Motor Vehicle
Contracts to grantor trusts and periodically through whole loan sales.
DESCRIPTION OF THE SECURITIES
GENERAL
With respect to each Trust that issues Notes, one or more classes of
Notes of the related series will be issued pursuant to the terms of an
Indenture, a form of which has been filed as an exhibit to the Registration
Statement of which this Prospectus forms a part. With respect to each Trust that
issues Certificates, one or more classes of Certificates of the related series
will be issued pursuant to the terms of a Trust Agreement or a Pooling and
Servicing Agreement, a form of each of which has been filed as an exhibit to the
Registration Statement of which this Prospectus forms a part. The following
summary does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, all the provisions of the Notes, Certificates,
Indenture, Trust Agreement and Pooling and Servicing Agreement, as applicable,
and the related Prospectus Supplement.
The Securities of each series will be issued in the denominations
specified in the related Prospectus Supplement. Unless otherwise specified in
the related Prospectus Supplement, the Securities of each series will be issued
in book-entry form. See "--Book-Entry Registration" and "--Definitive
Securities". All Securities offered pursuant to this Prospectus and the related
Prospectus Supplement will be rated in one of the four highest rating categories
by one or more nationally recognized statistical rating agencies.
PRINCIPAL AND INTEREST ON THE SECURITIES
The timing and priority of payment, seniority, allocations of losses,
Interest Rate or Certificate Rate, as applicable, and amount of or method of
determining payments or distributions of principal and interest on each class of
Securities of a given series will be described in the related Prospectus
Supplement. The right of holders of any class of Securities to receive payments
or distributions of principal and interest may be senior or subordinate to the
rights of holders of any other class or classes of Securities of such series, as
described in the related Prospectus Supplement. Unless otherwise provided in the
related Prospectus Supplement, payments of interest on the Securities of such
series will be made prior to payments of principal thereon. To the extent
provided in the related Prospectus Supplement, a series may include one or more
classes of Strip Notes or Strip Certificates entitled to (i) principal payments
or distributions with disproportionate, nominal or no interest payments or
distributions or (ii) interest payments or distributions with disproportionate,
nominal or no principal payments or distributions. Each class of Securities may
have a different Interest Rate or Certificate Rate, as applicable, which may be
a fixed, variable or adjustable Interest Rate or Certificate Rate, as applicable
(and which may be zero for certain classes of Strip Notes or Strip
Certificates), or
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any combination of the foregoing. The related Prospectus Supplement will specify
the Interest Rate or Certificate Rate, as applicable, for each class of
Securities of a given series or the method for determining such Interest Rate or
Certificate Rate, as applicable. One or more classes of Securities of a series
may be redeemable in whole or in part under the circumstances specified in the
related Prospectus Supplement, including as a result of the Servicer's
exercising its option to purchase the remaining related Contracts.
In the case of a series of Securities which includes two or more
classes of Securities, the sequential order and priority of payments or
distributions in respect of principal and interest, and any schedule or formula
or other provisions applicable to the determination thereof, of each such class
will be set forth in the related Prospectus Supplement. Payments or
distributions in respect of principal and interest of any class of Securities
will be made on a pro rata basis among all the Securityholders of such class.
BOOK-ENTRY REGISTRATION
Unless otherwise specified in the related Prospectus Supplement, each
class of Securities offered hereby will be represented by one or more
certificates registered in the name of Cede, as nominee of DTC. Unless otherwise
specified in the related Prospectus Supplement, Securityholders may hold
beneficial interests in Securities through DTC directly if they are participants
in DTC ("PARTICIPANTS") or indirectly through Participants.
Cede, as nominee for DTC, will hold the global Securities of each
series. Transfers between Participants will occur in the ordinary way in
accordance with DTC rules.
DTC is a limited purpose trust company organized under the laws of
the State of New York, a "banking organization" within the meaning of the New
York Banking Law, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code and a
"clearing agency" registered pursuant to Section 17A of the Exchange Act. DTC
was created to hold securities for its Participants and to facilitate the
clearance and settlement of securities transactions between Participants through
electronic book-entry changes in accounts of its Participants, thereby
eliminating the need for physical movement of notes or certificates.
Participants include securities brokers and dealers, banks, trust companies and
clearing corporations which may include underwriters, agents or dealers with
respect to the Securities of any class or series. Indirect access to the DTC
system also is available to others such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly (the "INDIRECT PARTICIPANTS").
Unless otherwise specified in the related Prospectus Supplement,
owners of beneficial interests in Securities that are in book-entry form
("SECURITY OWNERS") that are not Participants or Indirect Participants but
desire to purchase, sell or otherwise transfer ownership of, or other interests
in, Securities may do so only through Participants and Indirect Participants. In
addition, Securityholders of a given series will receive all distributions of
principal and interest in respect of the Securities from the Indenture Trustee
or Trustee through the Participants who in turn will receive them from DTC.
Under a book-entry format, Security Owners of a given series may experience some
delay in their receipt of payments, since such payments will be forwarded by the
Indenture Trustee or Trustee, as applicable, to Cede, as nominee of DTC. DTC
will forward such payments to its Participants which thereafter will forward
them to Indirect Participants or such Security Owners, it is anticipated that
the only "Securityholder" in respect of any series will be Cede, as nominee of
DTC. Security Owners of a given series will not be recognized as Securityholders
of such Series, and such Security Owners will be permitted to exercise the
rights of Securityholders only indirectly through DTC and its Participants.
Under the rules, regulations and procedures creating and affecting
DTC and its operations (the "DTC RULES"), DTC is required to make book-entry
transfers of Securities of a given series among Participants on whose behalf it
acts with respect to such Securities and is required to receive and transmit
distributions of principal of, and interest on, such Securities. Participants
and Indirect Participants with which Security Owners of a given series have
accounts with respect to the Securities of such series similarly are required to
make book-entry transfers and receive and transmit such payments on behalf of
their respective Security Owners of such series. Accordingly, although Security
Owners will not possess Securities, Security Owners will receive payments and
will be able to transfer their interests.
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Because DTC can only act on behalf of Participants, who in turn act
on behalf of Indirect Participants and certain banks, the ability of a Security
Owner of a given series to pledge Securities of such series to persons or
entities that do not participate in the DTC system, or otherwise take actions in
respect of such Securities, may be limited due to the lack of a physical
certificate for such Securities.
DTC will advise the Trustee in respect of each Series that it will
take any action permitted to be taken by a Securityholder of such series only at
the direction of one or more Participants to whose account with DTC the
Securities of such series are credited. Additionally, DTC has advised the Seller
that it will take such actions with respect to specified percentages of the
Securityholder's interest only at the direction of and on behalf of Participants
whose holdings include undivided interests that satisfy such percentages. DTC
may take conflicting actions with respect to other undivided interests to the
extent that such actions are taken on behalf of Participants whose holdings
include such undivided interests.
Although DTC has agreed to the foregoing procedures in order to
facilitate transfers of Securities among participants of DTC, they are under no
obligation to perform or continue to perform such procedures and such procedures
may be discontinued at any time.
DEFINITIVE SECURITIES
Unless otherwise specified in the related Prospectus Supplement, the
Securities of a given series will be issued in fully registered, certificated
form ("DEFINITIVE SECURITIES") to Security Owners or their nominees rather than
to DTC or its nominee, only if (i) the Seller, the related Trustee or the
Administrator, as applicable, advises the Trustee in writing that DTC is no
longer willing or able to discharge properly its responsibilities as depositary
with respect to the Certificates, and the Seller, the related Trustee or the
Administrator are unable to locate a qualified successor, or (ii) after the
occurrence of an Indenture Event of Default under the related Indenture, if
applicable, or an Event of Default under the related Sale and Servicing
Agreement or Pooling and Servicing Agreement, as applicable, Security Owners
representing in the aggregate more than 50% of the outstanding principal balance
of such Securities advise the applicable Trustee through Participants in writing
that the continuation of a book-entry system with respect to the Securities
through depositary is no longer in the best interest of the Security Owners.
Upon the occurrence of any of the events described in the immediately
preceding paragraph, the applicable Trustee and/or the related Indenture Trustee
will be required to notify all Security Owners, through Participants, of the
availability through DTC of Definitive Securities. Upon surrender by DTC of the
definitive Securities representing the Securities and instructions for
re-registration, the applicable Trustee and, if applicable, the related
Indenture Trustee will reissue the Securities as Definitive Securities, and
thereafter the applicable Trustee will recognize the holders of such Definitive
Securities as Securityholders (collectively, "HOLDERS").
Payments or distributions of principal of and interest on the
Securities will be made by the Paying Agent directly to Holders of Definitive
Securities in accordance with the procedures set forth herein and in the related
Indenture or the related Trust Agreement or Pooling and Servicing Agreement, as
applicable. Such payments or distributions on each Distribution Date and on the
final Distribution Date (as specified in the related Prospectus Supplement) will
be made to Holders in whose names the Definitive Securities were registered at
the close of business on the related Record Date. Payments or distributions will
be made by check mailed to the address of such Holder as it appears on the
register maintained by the applicable Trustee or Indenture Trustee. The final
payment or distribution on any Security (whether Definitive Securities or the
Security registered in the name of DTC's nominee), however, will be made only
upon presentation and surrender of such Security at the office or agency
specified in the notice of final payment or distribution to Securityholders.
Definitive Securities will be transferable and exchangeable at the
offices of the applicable Trustee or Indenture Trustee, or at the offices of a
transfer agent or registrar named in a notice delivered to holders of such
Definitive Securities, which shall initially be the applicable Trustee or
Indenture Trustee. No service charge will be imposed for any registration of
transfer or exchange, but the applicable Trustee, Indenture Trustee, transfer
agent or registrar may require payment of a sum sufficient to cover any tax or
other governmental charge imposed in connection therewith.
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LIST OF SECURITYHOLDERS
Unless otherwise specified in the related Prospectus Supplement with
respect to the Notes of any series, upon written request of the Servicer, the
related Indenture Trustee will provide to the Servicer within 15 days after
receipt of such request a list of the names and addresses of all Noteholders of
record as of the most recent Record Date. Upon written request by three or more
holders of the Notes of such series or by Holders of such Notes evidencing not
less than 25% of the aggregate outstanding principal balance of such Notes, the
Indenture Trustee will afford such Noteholders access during business hours to
the current list of Noteholders for purposes of communicating with other
Noteholders with respect to their rights under the Indenture or under such
Notes.
Unless otherwise specified in the related Prospectus Supplement with
respect to the Certificates of any series upon written request of the Servicer,
the related Trustee will provide to the Servicer within 15 days after receipt of
such request a list of the names and addresses of all Certificateholders of
record as of the most recent Record Date. Upon written request by three or more
holders of the Certificates of such series or by Holders of such Certificates
evidencing not less than 25% of the aggregate outstanding principal balance of
such Certificates, the related Trustee will afford such Certificateholders
access during business hours to the current list of Certificateholders for
purposes of communicating with other Certificateholders with respect to their
rights under the related Trust Agreement or Pooling and Servicing Agreement or
under such Certificates.
The Pooling and Servicing Agreement, Trust Agreement and Indenture
will not provide for the holding of annual or other meetings of Securityholders.
STATEMENTS TO SECURITYHOLDERS
Unless otherwise specified in the related Prospectus Supplement, with
respect to each series of Securities, on each Distribution Date, the applicable
Trustee or Indenture Trustee will include with each payment or distribution to
each Securityholder a Distribution Date Statement setting forth for such
Distribution Date the following information (and any other information so
specified in the related Prospectus Supplement):
(i) the amount of the distribution on or with respect to
each class of such Securities allocable to principal;
(ii) the amount of the distribution on or with respect to
each class of such Securities allocable to interest;
(iii) the aggregate distribution amount for such Distribution
Date;
(iv) the premiums payable to the related Security Insurer, if
any, the balance of any fund or account with respect to
any credit or liquidity enhancement on such date, after
giving effect to changes thereto on such date and the
amount to be deposited in the spread account, if any;
(v) the aggregate Servicing Fee paid to the Servicer with
respect to the related Contracts for the related
Collection Period;
(vi) the number of, and aggregate amount of monthly principal
and interest payments due on, the related Contracts
which are delinquent as of the end of the related
collection period (as defined in the related Prospectus
Supplement, the "COLLECTION PERIOD") presented on a
30-day, 60-day and 90-day basis;
(vii) the amount available in the Collection Account for
payment of the aggregate amount payable or distributable
on such Securities, the amount of the Servicing Fee, the
amount of any principal or interest shortfall with
respect to each class of Securities and the amount
required from any applicable Security Insurer pursuant
to the related Security Insurance Policy to pay any
shortfall;
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(viii) the aggregate amount of proceeds received by the
Servicer, net of recoverable out-of-pocket expenses,
received for a Contract which is a "DEFAULTED CONTRACT"
(as such term is defined in the related Prospectus
Supplement).
(ix) the net credit losses for the Collection Period;
(x) the number and net outstanding balance of Contracts for
which the Financed Vehicle has been repossessed;
(xi) the Pool Balance; and
(xii) the amount in the Collection Account available for such
Distribution Date.
Within a reasonable period of time after the end of each calendar
year during the term of each Trust, but not later than the latest date permitted
by law, the applicable Trustee or Indenture Trustee and the Paying Agent shall
furnish to each person who on any Record Date during such calendar year shall
have been a registered Securityholder a statement containing certain information
for the purposes of such Securityholder's preparation of federal income tax
returns. See "Certain Federal Income Tax Consequences".
DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENTS
The following summary describes certain terms of each Sale and
Servicing Agreement or Pooling and Servicing Agreement pursuant to which a Trust
will purchase Contracts from the Seller and the Servicer will agree to service
such Contracts, each Trust Agreement (in the case of a grantor trust, the
Pooling and Servicing Agreement) pursuant to which a Trust will be created and
Certificates will be issued and each Administration Agreement pursuant to which
Onyx will undertake certain administrative duties with respect to a Trust that
issues Notes (collectively, the "TRANSFER AND SERVICING AGREEMENTS"). Forms of
the Transfer and Servicing Agreements have been filed as exhibits to the
Registration Statement of which this Prospectus forms a part. This summary does
not purport to be complete and is subject to, and qualified in its entirety by
reference to, all the provisions of each applicable Transfer and Servicing
Agreement and the related Prospectus Supplement.
SALE AND ASSIGNMENT OF THE CONTRACTS
At the time of issuance of a series of Securities, the Seller will
sell and assign to the applicable Trustee, without recourse, pursuant to a Sale
and Servicing Agreement or a Pooling and Servicing Agreement, as applicable, the
Seller's entire interest in the Contracts and the proceeds thereof, including
its security interests in the related Financed Vehicles. Each Contract will be
identified in a schedule appearing as an exhibit to such Sale and Servicing
Agreement or Pooling and Servicing Agreement. The applicable Trustee will,
concurrently with such sale and assignment, execute, authenticate and deliver
the definitive certificates representing the related Securities. Unless
otherwise provided in the related Prospectus Supplement, the net proceeds
received from the sale of the Securities of a given series will be applied to
the purchase of the related Contracts from the Seller and, to the extent
specified in the related Prospectus Supplement, to make the required initial
deposit into any reserve fund, spread account or with respect to any other
credit or liquidity enhancement. Unless otherwise specified in the related
Prospectus Supplement, pursuant to the applicable Purchase Agreement, prior to
sale of the Contracts to the Trustee and the issuance of the Securities, Onyx
and each Selling Subsidiary will sell and assign to the Seller Onyx's and such
Selling Subsidiaries' entire interest in the Contracts.
Pursuant to each Sale and Servicing Agreement or Pooling and
Servicing Agreement, the Seller will represent to the applicable Trustee and the
Trust for the benefit of holders of the Securities and any applicable Security
Insurer that: (i) each Contract to be included in the Trust Property of such
Trust contains customary and enforceable provisions such that the rights and
remedies of the holder thereof shall be adequate for realization against the
collateral of the benefits of the security; (ii) each such Contract and the sale
of the related Financed Vehicle complied at the time it was made in all material
respects with all requirements of applicable federal, state, and local laws, and
regulations
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thereunder, including usury laws, the Federal Truth-in-Lending Act, the Equal
Credit Opportunity Act, the Fair Credit Reporting Act, the Federal Trade
Commission Act, the Fair Debt Collection Practices Act, the Fair Credit Billing
Act, the Magnuson-Moss Warranty Act, the Federal Reserve Board's Regulations B
and Z, the Soldiers' and Sailors' Civil Relief Act of 1940, state adaptations of
the National Consumer Act and of the Uniform Consumer Credit Code, and any other
consumer credit, equal opportunity and disclosure laws applicable to such
Contract and sale; (iii) each such Contract constitutes the legal, valid, and
binding payment obligation in writing of the obligor, enforceable by the holder
thereof in all respects in accordance with its terms, subject, as to
enforcement, to applicable bankruptcy, insolvency, reorganization, liquidation
and other similar laws and equitable principles relating to or affecting the
enforcement of creditors' rights; (iv) as of the Closing Date, each such
Contract was secured by a validly perfected first priority security interest in
the Financed Vehicle in favor of the Seller as secured party or all necessary
action with respect to such Contract has been taken to perfect a first priority
security interest in the related Financed Vehicle in favor of the Seller as
secured party, which security interest is assignable and has been so assigned by
the Seller to the Trust; (v) as of the Closing Date, the Seller had good and
marketable title to and was the sole owner of each such Contract, free of liens,
claims, encumbrances and rights of others; (vi) as of the Closing Date, there
are no rights of rescission, offset, counterclaim, or defense, and the Seller
has no knowledge of the same being asserted or threatened, with respect to any
such Contract; (vii) as of the Closing Date, the Seller had no knowledge of any
liens or claims that have been filed, including liens for work, labor, materials
or unpaid taxes relating to a Financed Vehicle, that would be liens prior to, or
equal or coordinate with, the lien granted by such Contract; (viii) except for
payment defaults continuing for a period of not more than 30 days as of the
Cut-Off Date, the Seller has no knowledge that a default, breach, violation, or
event permitting acceleration under the terms of any such Contract exists, and
the Seller has no knowledge that a continuing condition that with notice or
lapse of time would constitute a default, breach, violation or event permitting
acceleration under the terms of any such Contract exists, and the Seller has not
waived any of the foregoing; (ix) each such Contract requires that the obligor
thereunder obtain comprehensive and collision insurance covering the Financed
Vehicle; (x) each such Contract was acquired from a dealer with whom Onyx
ordinarily does business (except for Contracts purchased or originated by a
subsidiary of Onyx); (xi) no adverse selection procedures were utilized in
selecting such Contracts; (xii) scheduled payments under each such Contract have
been applied in accordance with the method for allocating principal and interest
set forth in such Contract (either the Rule of 78's or the Simple Interest
Method); and (xiii) there is only one original of each such Contract and such
original is being held by the applicable Trustee as custodian on behalf of the
Trust and any applicable Security Insurer. As of the last day of the Collection
Period following the Collection Period (or, if the Seller elects, the last day
of such Collection Period) during which the Seller becomes aware or receives
written notice from the applicable Trustee or the Servicer that a Contract does
not meet any of the criteria in the Sale and Servicing Agreement or Pooling and
Servicing Agreement, as applicable, and such failure materially and adversely
affects the interests of the Securityholders or any applicable Security Insurer
in a Contract, the Seller, unless it cures the failed criterion, will repurchase
the Contract from the applicable Trustee at the price specified in the related
Prospectus Supplement and, if applicable, all amounts due to any applicable
Security Insurer (the "REPURCHASE AMOUNT"). The repurchase obligation will
constitute the sole remedy available to the Securityholders or the applicable
Trustee for the failure of a Contract to meet any of the criteria set forth in
the Sale and Servicing Agreement or Pooling and Servicing Agreement, as
applicable.
THE COLLECTION ACCOUNT AND ELIGIBLE INVESTMENTS
Unless otherwise specified in the related Prospectus Supplement, with
respect to each Trust, the Servicer will establish and maintain an account (the
"COLLECTION ACCOUNT") in the name of the related Trustee (or, in the case of a
series of Securities that includes Notes, with the related Indenture Trustee),
into which all collections made on the related Contracts will be deposited.
Funds in the Collection Account will be invested in Eligible Investments by the
applicable Trustee or Indenture Trustee, acting at the direction of any
applicable Security Insurer. "ELIGIBLE INVESTMENTS" are generally limited to
investments acceptable to each Rating Agency rating the applicable Securities as
being consistent with the rating of such Securities. Except as otherwise
described in the related Prospectus Supplement, Eligible Investments made with
respect to the Collection Account will mature no later than the next following
Distribution Date and income from amounts on deposit in the Collection Account
which are invested in Eligible Investments will be paid to the Servicer monthly
unless earlier directed by the Servicer.
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PAYAHEAD ACCOUNT
Unless otherwise provided in the related Prospectus Supplement,
payments made by an obligor in excess of the Monthly P&I due on the current Due
Date and any other amount currently due on a Rule of 78's Contract (other than
Full Prepayments) ("PAYAHEADS") will be initially deposited in the Collection
Account and subsequently transferred from the Collection Account, as of a
specified periodic date set forth in the related Prospectus Supplement (the
"SERVICER REPORT DATE") (as defined with respect to each series of Securities in
the related Prospectus Supplement), to an account established in the name of the
related Trustee or Indenture Trustee for the benefit of the obligors and the
Securityholders as their interests may appear (the "PAYAHEAD ACCOUNT") and shall
be held in such account until distributed in accordance with the original
schedule of payments for the related Contract or until the amount of such
partial prepayment equals the amount the obligor would be required to pay in
order to prepay the Contract in full. Unless otherwise provided in the related
Prospectus Supplement, amounts on deposit in the Payahead Account will be
invested in Eligible Investments with maturity dates such that on each
Distribution Date Monthly P&I for each Rule of 78's Contract with respect to
which a partial prepayment had been made will be available to be paid or
distributed to Securityholders. Unless otherwise specified in the related
Prospectus Supplement, the Payahead Account will not be part of the applicable
Trust and the related Trustee and, if applicable, the related Indenture Trustee
will not have a security interest in the Payahead Account. Unless otherwise
provided in the related Prospectus Supplement, earnings on Eligible Investments
credited to the Payahead Account will be paid to the Servicer.
OTHER ACCOUNTS
Any other accounts to be established with respect to a Trust,
including any reserve fund, will be described in the related Prospectus
Supplement (together with the Collection Account and the Payahead Account, the
"TRUST ACCOUNTS"). For any series of Securities, funds in any related reserve
fund and such other Trust Account as may be identified in the related Prospectus
Supplement will be invested as provided in the related Sale and Servicing
Agreement, Pooling and Servicing Agreement or Indenture in Eligible Investments.
PAYMENTS ON CONTRACTS
With respect to each Trust, unless otherwise specified in the related
Prospectus Supplement, all collections on the Contracts will be deposited in or
credited to the Collection Account within two Business Days of the receipt by
the Servicer of payments from obligors. Unless otherwise specified in the
related Prospectus Supplement, such collections will include: Full Prepayments
and partial prepayments (pending transfer of Payaheads on Rule of 78's Contracts
to any Payahead Account), Net Liquidation Proceeds and Net Insurance Proceeds,
any amounts deposited by Onyx or the Seller in the Collection Account to
purchase Contracts because of certain material defects in documents related to
the Contracts or certain breaches in representations or warranties regarding the
Contracts made by Onyx or the Seller in the Agreement that materially and
adversely affect the interests of the Securityholders or any applicable Security
Insurer, any amounts deposited by the Servicer in the Collection Account to
purchase Contracts as to which the Servicer has breached certain servicing
covenants, and any amounts deposited by the Servicer in the Collection Account
as a result of such entity exercising its right under certain circumstances to
purchase all or a portion of the Contracts. "NET LIQUIDATION PROCEEDS" are
proceeds received by the Servicer (net of Liquidation Expenses) upon liquidation
of any Defaulted Contract. "LIQUIDATION EXPENSES" are the reasonable
out-of-pocket expenses (exclusive of overhead expenses) incurred by the Servicer
in realizing upon a Defaulted Contract which are not recoverable under any
insurance policy. "NET INSURANCE PROCEEDS" are proceeds paid by any insurer
under a comprehensive and collision or vendor's single interest insurance policy
related to a Contract (other than funds used for the repair of the related
Financed Vehicle or otherwise released to the related obligor in accordance with
normal servicing procedures), after reimbursement to the Servicer of expenses
recoverable under such policy. Partial prepayments of Rule of 78's Contracts are
initially deposited in the Collection Account and are transferred to the
Payahead Account, if any, on the Servicer Report Date.
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PAYMENTS AND DISTRIBUTIONS
With respect to each series of Securities, beginning on the
Distribution Date specified in the related Prospectus Supplement, payments and
distributions of principal and interest (or, where applicable, of principal or
interest only) on each class of such Securities entitled thereto will be made by
the applicable Indenture Trustee to the Noteholders and by the applicable
Trustee to the Certificateholders of such series. The timing, calculation,
allocation, order, source, priorities of and requirements for all payments and
distributions to each class of Securities of such series will be set forth in
the related Prospectus Supplement.
With respect to each Trust, on each Distribution Date collections on
the related Contracts will be withdrawn from the related Collection Account and
will be paid and distributed to the Noteholders and/or Certificateholders as
provided in the related Prospectus Supplement. Credit enhancement will be
available to cover any shortfalls in the amount available for payment or
distribution to the Securityholders on such date to the extent specified in the
related Prospectus Supplement. If specified in the related Prospectus
Supplement, payments or distributions in respect of one or more classes of
Securities of the applicable series may be subordinate to payments or
distributions in respect of one or more other classes of Securities of such
series.
CREDIT AND CASH FLOW ENHANCEMENT
The amounts and types of credit and cash flow enhancement
arrangements and the provider thereof, if applicable, with respect to each class
of Securities of a given series, if any, will be set forth in the related
Prospectus Supplement. If and to the extent provided in the related Prospectus
Supplement, credit and cash flow enhancement may be in the form of subordination
of one or more classes of Securities, one or more Security Insurance Policies,
reserve funds, over-collateralization, letters of credit, credit or liquidity
facilities, guaranteed investment contracts, swaps or other interest rate
protection agreements, repurchase obligations, yield supplement agreements,
other agreements with respect to third party payments or other support, cash
deposits or such other arrangements as may be described in the related
Prospectus Supplement or any combination of two or more of the foregoing. If
specified in the applicable Prospectus Supplement, credit or cash flow
enhancement for a class of Securities may cover one or more other classes of
Securities of the same series, and credit or cash flow enhancement for a series
of Securities may cover one or more other series of Securities.
The presence of credit enhancement for the benefit of any class or
series of Securities is intended to enhance the likelihood of receipt by the
Securityholders of such class or series of the full amount of principal and
interest due thereon and to decrease the likelihood that such Securityholders
will experience losses. Unless otherwise specified in the related Prospectus
Supplement, the credit enhancement for a class or series of Securities will not
provide protection against all risks of loss and will not guarantee repayment of
the entire principal balance and interest thereon. If losses occur which exceed
the amount covered by any credit enhancement or which are not covered by any
credit enhancement, Securityholders of any class or series will bear their
allocable share of deficiencies, as described in the related Prospectus
Supplement. In addition, if a form of credit enhancement covers more than one
class or series of Securities, Securityholders of any such series will be
subject to the risk that such credit enhancement will be exhausted by the claims
of Securityholders of other classes or series.
INSURANCE ON FINANCED VEHICLES
Each obligor on a Contract will be required to maintain insurance
covering physical damage to the Financed Vehicle of such obligor in an amount
not less than the lesser of its maximum insurable value or the unpaid principal
balance under such Contract. Onyx or the applicable Onyx subsidiary will be
required to be named as a loss payee under the policy of insurance obtained by
the obligor. Each Financed Vehicle will be required to be insured against loss
and damage due to fire, theft, transportation, collision and other risks covered
by comprehensive coverage. Since obligors may choose their own insurers to
provide the required coverage, the specific terms and conditions of their
policies vary.
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SERVICER REPORTS TO THE TRUSTEES AND SECURITY INSURER
The Servicer will perform certain monitoring and reporting functions
for the applicable Indenture Trustee, if any, the applicable Trustee, and any
applicable Security Insurer, including the preparation and delivery on the
Servicer Report Date of a statement (the "DISTRIBUTION DATE STATEMENT") setting
forth the amounts on deposit in the Collection Account, the sources of such
amounts and the amounts to be paid to Securityholders. The Distribution Date
Statement shall also include information regarding Contracts purchased by the
Servicer or repurchased by the Seller.
REPURCHASE OF CONTRACTS
Each Sale and Servicing Agreement and Pooling and Servicing Agreement
will provide that the Servicer will have the option to purchase the remaining
Contracts included in the Trust Property of a Trust on any Distribution Date as
of which the related Pool Balance (after giving effect to the principal payments
and distributions otherwise to be made on such Distribution Date) has declined
to the percentage of the Original Pool Balance specified in the related
Prospectus Supplement. Any such purchase must be effected at the price specified
in the related Prospectus Supplement, if applicable, plus all amounts due to any
applicable Security Insurer. In addition, Onyx or the Seller will be required to
purchase or repurchase, respectively, Contracts under certain circumstances if
certain representations and warranties made by Onyx or the Seller respectively
are incorrect in any manner that materially and adversely affects the interest
of the Securityholders. Additionally, the Servicer will be required to purchase
Contracts as to which the Servicer has breached certain servicing covenants.
SERVICING FEE
The Servicer will be entitled to compensation for the performance of
its obligations under each Sale and Servicing Agreement and Pooling and
Servicing Agreement. Unless otherwise specified in the related Prospectus
Supplement, the Servicer shall be entitled to receive on each Distribution Date
an amount (the "SERVICING FEE") equal to the product of a specified percentage
per annum (as set forth in the related Prospectus Supplement, the "SERVICING FEE
RATE") multiplied by the Pool Balance as of the end of the Collection Period
preceding the related Collection Period. Unless otherwise specified in the
related Prospectus Supplement, the Servicer or its designee shall be entitled to
retain, as additional compensation, all late payment charges, extension fees and
similar items paid in respect of the Contracts. The Servicer or its designee may
also be entitled to receive as servicing compensation reinvestment earnings on
Eligible Investments and the amount, if any, by which the outstanding principal
balance based on the Rule of 78's of a Contract that is subject to a Full
Prepayment exceeds the Scheduled Balance of such Contract. Unless otherwise
specified in the related Prospectus Supplement, the Servicer shall pay all
expenses incurred by it in connection with its servicing activities under the
Agreement and shall not be entitled to reimbursement of such expenses except to
the extent they constitute Liquidation Expenses or expenses recoverable under an
applicable insurance policy.
WAIVERS AND EXTENSIONS
Each Sale and Servicing Agreement and Pooling and Servicing Agreement
will require the Servicer to use its best efforts to collect all payments called
for under the terms and provisions of the related Contracts. Unless otherwise
specified in the related Prospectus Supplement, and subject to any limitations
set forth therein, the Servicer, consistent with the foregoing, will be
permitted, in its discretion, to (i) waive any late payment charges in
connection with delinquent payments on a Contract, (ii) waive prepayment charges
and (iii) grant up to three extensions of thirty (30) days or less in order to
work out a default or an impending default.
REALIZATION UPON DEFAULTED CONTRACTS
The Servicer will liquidate any Contract that comes into and
continues in default and as to which no satisfactory arrangements can be made
for collection of delinquent payments. Such liquidation may be through
repossession or sale
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of the Financed Vehicle securing such Contract or otherwise. In connection with
such repossession or other conversion, the Servicer will follow such procedures
as are normal and usual for holders of motor vehicle retail installment sales
contracts. In this regard, the Servicer may sell the Financed Vehicle at a
repossession or other sale.
EVIDENCE AS TO COMPLIANCE
Each Sale and Servicing Agreement and Pooling and Servicing Agreement
will provide that a firm of independent public accountants will furnish to the
related Trustee or Indenture Trustee, as applicable, and, if applicable, the
related Security Insurer, on or before each March 15 after the end of each
fiscal year of the Servicer, a statement as to compliance by the Servicer during
the preceding fiscal year with certain standards relating to the servicing of
the applicable Contracts.
Each Sale and Servicing Agreement and Pooling and Servicing Agreement
will also provide for delivery to the related Trustee or Indenture Trustee, as
applicable, and, if applicable, the related Security Insurer, on each March 15
after the end of each fiscal year of the Servicer, of a certificate signed by an
authorized officer of the Servicer stating that the Servicer has fulfilled its
obligations under the Sale and Servicing Agreement or Pooling and Servicing
Agreement, as applicable, throughout the preceding fiscal year or, if there has
been a default in the fulfillment of any such obligation, describing each such
default.
Copies of such statements and certificates may be obtained by
Securityholders by a request in writing addressed to the applicable Trustee or
Indenture Trustee.
CERTAIN MATTERS REGARDING THE SERVICER
Each Sale and Servicing Agreement and Pooling and Servicing Agreement
will provide that the Servicer may not resign from its obligations and duties as
Servicer thereunder except upon determination that the Servicer's performance of
such duties is no longer permissible under applicable law. No such resignation
will become effective until the related Trustee or Indenture Trustee, as
applicable, or a successor servicer, has assumed the Servicer's servicing
obligations and duties under the Sale and Servicing Agreement or Pooling and
Servicing Agreement, as applicable. See "-- The Trustee and Indenture Trustee".
Each Sale and Servicing Agreement and Pooling and Servicing
Agreement will further provide that neither the Servicer nor any of its
directors, officers, employees, and agents shall be under any liability to the
related Trust or the related Securityholders for taking any action or for
refraining from taking any action pursuant to the Sale and Servicing Agreement
or Pooling and Servicing Agreement, as applicable, or for errors in judgment;
provided, however, that neither the Servicer nor any such person will be
protected against any liability that would otherwise be imposed by reason of
willful misfeasance, bad faith or negligence (except errors in judgment) in the
performance of duties or by reason of reckless disregard of obligations and
duties thereunder. In addition, the Sale and Servicing Agreement or Pooling and
Servicing Agreement, as applicable, will provide that the Servicer is under no
obligation to appear in, prosecute or defend any legal action that is not
incidental to the Servicer's servicing responsibilities under the Sale and
Servicing Agreement or Pooling and Servicing Agreement, as applicable, and that,
in its opinion, may cause it to incur any expense or liability.
The Servicer may, however, undertake any reasonable action that it may deem
necessary or desirable in respect of the Sale and Servicing Agreement or Pooling
and Servicing Agreement, as applicable, and the rights and duties of the parties
thereto and the interests of the Securityholders thereunder. In such event, the
legal expenses and costs of such action and any liability resulting therefrom
will be expenses, costs and liabilities of the related Trust, and the Servicer
will be entitled to be reimbursed therefor out of the Collection Account. Any
such indemnification or reimbursement could reduce the amount otherwise
available for distribution to Securityholders.
Any corporation into which the Servicer may be merged or
consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Servicer is a party or any corporation succeeding to
the business of the Servicer, or, with respect to the Servicer's obligation as
the Servicer, will be the successor of the Servicer under the Sale and Servicing
Agreement or Pooling and Servicing Agreement, as applicable.
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SERVICER DEFAULT
Except as otherwise provided in the related Prospectus Supplement,
"SERVICER DEFAULT" under the Sale and Servicing Agreement or Pooling and
Servicing Agreement, as applicable, will consist of: (i) any failure by the
Servicer to deposit in or credit to the Collection Account or the Payahead
Account, if any, any amount required to be so deposited or credited, which
failure continues unremedied for three Business Days after written notice from
the applicable Trustee or Indenture Trustee, or, if applicable, the related
Security Insurer, is received by the Servicer or discovery by the Servicer; (ii)
any failure by the Servicer to deliver to such Trustee or Indenture Trustee, or,
if applicable, the related Security Insurer, certain reports required by such
Sale and Servicing Agreement or Pooling and Servicing Agreement, as applicable,
by the Servicer Report Date or to perform certain other covenants under such
Sale and Servicing Agreement or Pooling and Servicing Agreement, as applicable;
(iii) any failure by the Servicer or the Seller duly to observe or perform in
any material respect any other covenants or agreements of the Servicer or the
Seller in such Sale and Servicing Agreement or Pooling and Servicing Agreement,
which failure materially and adversely affects the rights of Securityholders or
the applicable Trustee or Indenture Trustee, or, if applicable, the related
Security Insurer, and which continues unremedied for 30 days after the giving of
written notice of such failure (A) to the Servicer or the Seller as the case may
be, by the applicable Trustee or Indenture Trustee, or, if applicable, the
related Security Insurer, or (B) to the Servicer or the Seller, as the case may
be, and to the applicable Trustee or Indenture Trustee by Holders of Securities
evidencing not less than 25% in principal amount of such Securities, acting
together as a single class, or, if applicable, the related Security Insurer;
(iv) certain events of insolvency, readjustment of debt, marshalling of assets
and liabilities, or similar proceedings and certain actions by the Servicer or
Seller indicating its insolvency, reorganization pursuant to bankruptcy or
similar proceedings or inability to pay its obligations; (v) any breach of any
of the representations and warranties of the Servicer or the Seller (except for
any breaches relating to Contracts repurchased by the Seller or the Servicer)
which breach has a material adverse effect on the related Trust and which
continues for 30 days after the giving of notice of such breach to the Seller or
the Servicer, as the case may be, by the applicable Trustee or Indenture Trustee
or the Holders of Securities evidencing not less than 25% in principal amount of
such Securities, acting together as a single class, or, if applicable, the
related Security Insurer; (vi) any change in control of the Servicer in
violation of the covenants set forth in such Sale and Servicing Agreement or
Pooling and Servicing Agreement; and (vii) if applicable, the determination by
the Security Insurer that the quality of performance of the Servicer is not in
compliance with either the terms of the Sale and Servicing Agreement or Pooling
and Servicing Agreement, as applicable, or that the Servicer's performance is
not adequate, as measured in accordance with industry standards, in respect of
all Motor Vehicle Contracts serviced by the Servicer.
RIGHTS UPON SERVICER DEFAULT
In the case of any Trust that has issued Notes, unless otherwise provided in the
related Prospectus Supplement, as long as a Servicer Default under a Sale and
Servicing Agreement remains unremedied, the related Indenture Trustee, the
related Security Insurer, if any, or holders of Notes of the related series
evidencing not less than 25% of principal amount of such Notes then outstanding,
acting together as a single class, may terminate all the rights and obligations
of the Servicer under such Sale and Servicing Agreement, whereupon such
Indenture Trustee or a successor servicer appointed by such Indenture Trustee
will succeed to all the responsibilities, duties and liabilities of the Servicer
under such Sale and Servicing Agreement and will be entitled to similar
compensation arrangements; provided, however, that such Indenture Trustee will
not be obligated to purchase Contracts if certain representations and warranties
of Onyx as Servicer prove incorrect or if certain covenants of Onyx as Servicer
are breached. In the case of any Trust that has not issued Notes, unless
otherwise provided in the related Prospectus Supplement, as long as a Servicer
Default under the related Sale and Servicing Agreement or Pooling and Servicing
Agreement remains unremedied, the related Trustee, the related Security Insurer,
if any, or holders of Certificates of the related series evidencing not less
than 25% of the principal amount of such Certificates then outstanding, acting
together as a single class, may terminate all the rights and obligations of the
Servicer under such Sale and Servicing Agreement or Pooling and Servicing
Agreement, whereupon such Trustee or a successor servicer appointed by such
Trustee will succeed to all the responsibilities, duties and liabilities of the
Servicer under such Sale and Servicing Agreement or Pooling and Servicing
Agreement and will be entitled to similar compensation arrangements; provided,
however, that such Trustee will not be obligated to purchase Contracts if
certain representations and warranties of Onyx as Servicer prove incorrect or if
certain covenants of Onyx as Servicer are breached. In the event that such
Indenture Trustee or Trustee is unwilling or unable to so act, it may appoint,
or petition a court of competent jurisdiction for the appointment of, a
successor with a net worth of at least $50,000,000 and whose regular business
includes the servicing of automobile and/or light duty truck receivables.
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With respect to each Trust that has issued Notes, unless otherwise
provided in the related Prospectus Supplement, the holders of Notes of the
related series evidencing not less than 51% of the principal amount of such
Notes then outstanding, acting together as a single class, with the consent of
the related Security Insurer, if any, may, on behalf of all Securityholders of
the related series, waive any default by the Servicer in the performance of its
obligations under the related Sale and Servicing Agreement and its consequences,
except a Servicer Default in making any required deposits to or payments from
any of the Trust Accounts in accordance with such Sale and Servicing Agreement.
With respect to each Trust that has not issued Notes, holders of Certificates of
the related series evidencing not less than 51% of the principal amount of such
Certificates then outstanding, acting together as a single class, with the
consent of the related Security Insurer, if any, may, on behalf of all such
Certificateholders, waive any default by the Servicer in the performance of its
obligations under the related Sale and Servicing Agreement or Pooling and
Servicing Agreement, except a Servicer Default in making any required deposits
to or payments from the related Trust Accounts in accordance with such Sale and
Servicing Agreement or Pooling and Servicing Agreement. No such waiver will
impair such Noteholders' or Certificateholders' rights with respect to
subsequent defaults.
With respect to each Trust, unless otherwise provided in the related
Prospectus Supplement, the applicable Trustee or Indenture Trustee will be under
no obligation to exercise any of the trusts or powers vested in it by the Sale
and Servicing Agreement or Pooling and Servicing Agreement, as applicable, or to
make any investigation of matters arising thereunder or to institute, conduct,
or defend any litigation thereunder or in relation thereto at the request,
order, or direction of any of the Securityholders, unless such Securityholders
have offered to such Trustee or Indenture Trustee reasonable security or
indemnity against the costs, expenses and liabilities which may be incurred
therein or thereby. Unless otherwise specified in the related Prospectus
Supplement, no Securityholder will have any right under the Sale and Servicing
Agreement or the Pooling and Servicing Agreement to institute any proceeding
with respect thereto, unless such Holder previously has given to such Trustee or
Indenture Trustee, as applicable, written notice of default and unless (i) in
the case of a Trust that has issued Notes, holders of Notes of the related
Series evidencing not less than 25% of the principal amount of such Notes then
outstanding, or (ii) in the case of a Trust that has not issued Notes, holders
of Certificates of the related series evidencing not less than 25% of the
principal amount of such Certificates then outstanding, in either case with the
consent of the related Security Insurer, if any, have made written request upon
such Trustee or Indenture Trustee to institute such proceeding in its own name
as Trustee or Indenture Trustee thereunder and have offered to such Trustee or
Indenture Trustee reasonable indemnity and such Trustee or Indenture Trustee for
30 days has neglected or refused to institute any such proceedings.
AMENDMENT
Unless otherwise provided in the related Prospectus Supplement, each
of the Transfer and Servicing Agreements may be amended by the parties thereto,
without the consent of the related Securityholders, but with the consent of the
related Security Insurer, if any, to cure any ambiguity, correct or supplement
an provision therein which may be inconsistent with any other provision therein,
or make any other provisions with respect to matters or questions arising
thereunder which are not inconsistent with the provisions of such Transfer and
Servicing Agreement; provided that such action will not materially and adversely
affect the interest of any such Securityholder. Any amendment shall not be
deemed to materially and adversely affect the interest of any Securityholder if
the person requesting the amendment obtains a letter from each Rating Agency to
the effect that the amendment would not result in a downgrading or withdrawal of
the ratings then assigned to the applicable Securities by such Rating Agency.
Unless otherwise specified in the related Prospectus Supplement, the Transfer
and Servicing Agreements may also be amended by the Seller, the Servicer, the
related Trustee and any related Indenture Trustee with the consent of (i) in the
case of a Trust that has issued Notes, the holders of Notes of the related
series evidencing not less than 51% of the principal amount of such Notes then
outstanding, acting together as a single class, or (ii) in the case of a Trust
that has not issued Notes, the holders of Certificates of the related series
evidencing not less than 51% of the principal amount of such Certificates then
outstanding, acting together as a single class, and in either case with the
consent of the related Security Insurer, if any, for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
such Transfer and Servicing Agreements or of modifying in any manner the rights
of such Noteholders or
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Certificateholders; provided, however, that no such amendment may (i) increase
or reduce in any manner the amount of, or accelerate or delay the timing of,
collections of payments on the related Contracts or distributions that are
required to be made for the benefit of such Noteholders or Certificateholders or
(ii) reduce the aforesaid percentage of the Notes or Certificates of such series
which are required to consent to any such amendment, without the consent of the
holders of all the outstanding Notes or Certificates, as the case may be, of
such series.
TERMINATION
With respect to each Trust, except as otherwise set forth in the
related Prospectus Supplement, the obligations of the Seller, the Servicer, the
related Trustee and the related Indenture Trustee, if any, pursuant to the
Transfer and Servicing Agreements will terminate upon the earlier of (i) the
maturity or other liquidation of the last related Contract and the disposition
of any amounts received upon liquidation of any remaining Contracts that are
part of the related Trust Property and (ii) (a) the payment to Noteholders, if
any, and Certificateholders of the related series of all amounts required to be
paid to them pursuant to the Transfer and Servicing Agreements and the
disposition of all property held as part of the related Trust, (b) if
applicable, the termination of the related Security Insurance Policy in
accordance with its terms and the surrender of such policy to the related
Security Insurer for cancellation, (c) the payment of all amounts owed to such
Trustee or Indenture Trustee under the Transfer and Servicing Agreements and (d)
if applicable, the payment of all amounts owed to the related Security Insurer
in connection with the related Security Insurance Policy. Unless otherwise
specified in the related Prospectus Supplement, in order to avoid excessive
administrative expense, the Servicer will be permitted at its option to purchase
the remaining Contracts included in the Trust Property of a Trust on any
Distribution Date as of which the related Pool Balance (after giving effect to
the principal payments and distributions otherwise to be made on such
Distribution Date) has declined to the percentage of the Original Pool Balance
specified in the related Prospectus Supplement at the price specified in the
related Prospectus Supplement and, if applicable, all amounts due to the related
Security Insurer in connection with the related Security Insurance Policy. The
applicable Trustee or Indenture Trustee will give written notice of termination
to each Securityholder of record. The final payment or distribution to any
Securityholder will be made only upon surrender and cancellation of such
Securityholder's Security at an office or agency of the applicable Trustee or
Indenture Trustee specified in the notice of termination. Any funds remaining in
the applicable Trust, after the applicable Trustee or Indenture Trustee has
taken certain measures to locate a Securityholder and such measures have failed,
will be distributed to a charity designated by the Servicer.
THE TRUSTEE AND INDENTURE TRUSTEE
With respect to each Trust, the applicable Trustee or Indenture
Trustee will not make any representations as to the validity or sufficiency of
the related Transfer and Servicing Agreements, the related Indenture, if any,
the Securities, or any related Contracts or related documents, or the investment
of any monies by the Servicer before such monies are deposited in or credited to
the related Collection Account. At the applicable Closing Date, such Trustee or
Indenture Trustee will not have examined the Contracts. If no Event of Default
has occurred, such Trustee or Indenture Trustee will be required to perform only
those duties specifically required of it under the related Transfer and
Servicing Agreements or the related Indenture, if applicable. Generally, those
duties are limited to the receipt of the various certificates, reports or other
instruments required to be furnished to such Trustee or Indenture Trustee under
the related Transfer and Servicing Agreements or the related Indenture, if
applicable, the making of payments or distributions to Securityholders in the
amounts specified in certificates provided by the Servicer and, if applicable,
drawing on the related Security Insurance Policy if required to make payments or
distributions to Securityholders.
Each Trustee and Indenture Trustee, and any of its affiliates, may
hold Securities in their own names. In addition, for the purpose of meeting the
legal requirements of certain local jurisdictions, each Trustee and Indenture
Trustee (in certain circumstances, acting jointly with the Servicer) shall have
the power to appoint co-trustees or separate trustees of all or any part of the
related Trust Property. In the event of such appointment, all rights, powers,
duties and obligations conferred or imposed upon such Trustee or Indenture
Trustee by the related Transfer and Servicing Agreement or Indenture, as
applicable, shall be conferred or imposed upon such Trustee or Indenture Trustee
and such separate trustee or co-trustee jointly, or, in any jurisdiction in
which such Trustee or Indenture Trustee shall be
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incompetent or unqualified to perform certain acts, singly upon such separate
trustee or co-trustee who shall exercise and perform such rights, powers, duties
and obligations solely at the direction of such Trustee or Indenture Trustee.
Unless otherwise specified in the related Prospectus Supplement, each
applicable Trustee and Indenture Trustee may resign at any time, in which event
a successor trustee will be appointed pursuant to the terms of the related
Transfer and Servicing Agreement or Indenture, as applicable. Each applicable
Trustee and Indenture Trustee may be removed if it ceases to be eligible to
continue as such under the related Transfer and Servicing Agreement or
Indenture, as applicable, or if such Trustee or Indenture Trustee becomes
insolvent. Any resignation or removal of such Trustee or Indenture Trustee and
appointment of a successor does not become effective until acceptance of the
appointment by the successor trustee.
Each applicable Trustee or Indenture Trustee shall be entitled to a
fee which, unless otherwise specified in the related Prospectus Supplement, will
be payable on an annual basis by the Servicer. Unless otherwise specified in the
related Prospectus Supplement, the related Transfer and Servicing Agreement or
Indenture, as applicable, will further provide that such Trustee or Indenture
Trustee will be entitled to indemnification by the Servicer for, and will be
held harmless against, any loss, liability, or expense incurred by such Trustee
or Indenture Trustee not resulting from such Trustee's or Indenture Trustee's
own willful misfeasance, bad faith, or negligence (other than errors in
judgment) or by reason of breach of any of their respective representations or
warranties set forth in the related Transfer and Servicing Agreement or
Indenture, as applicable, except to the extent that such loss, liability, or
expense relates to a specific Contract or Contracts or certain taxes that could
be asserted against such Trustee or Indenture Trustee, the related Trust or the
related Contracts, in which case such Trustee or Indenture Trustee would be
entitled to be indemnified by the applicable Trust.
Onyx may maintain other banking relationships with each applicable
Trustee or Indenture Trustee in the ordinary course of business.
ADMINISTRATION AGREEMENT
With respect to a Trust that issues Notes, Onyx or another party
specified in the related Prospectus Supplement, in its capacity as administrator
(the "ADMINISTRATOR"), may enter into an agreement (as amended and supplemented
from time to time, an "ADMINISTRATION AGREEMENT") with such Trust and the
related Indenture Trustee pursuant to which the Administrator will agree, to the
extent provided in such Administration Agreement, to provide the notices and to
perform other administrative obligations required by the related Indenture.
Unless otherwise specified in the related Prospectus Supplement with respect to
any such Trust, as compensation for the performance of the Administrator's
obligations under the applicable Administration Agreement and as reimbursement
for its expenses related thereto, the Administrator will be entitled to a
monthly administration fee of such amount as may be set forth in the related
Prospectus Supplement (the "ADMINISTRATION FEE"), which fee will be paid by the
Servicer.
THE INDENTURE
The following summary describes certain terms of each Indenture
pursuant to which the Notes, if any, of a series will be issued. A form of
Indenture has been filed as an exhibit to the Registration Statement of which
this Prospectus is a part. This summary does not purport to be complete and is
subject to, and qualified in its entirety by reference to, all the provisions of
each applicable Indenture and the related Prospectus Supplement.
MODIFICATION OF INDENTURE
With respect to each Trust that has issued Notes pursuant to an
Indenture, unless otherwise provided in the related Prospectus Supplement, the
Trust and the Indenture Trustee may, with the consent of the holders of Notes of
the related series evidencing not less than 51% of the principal amount of such
Notes then outstanding, acting as a single class, and with the consent of the
related Security Insurer, if any, execute a supplemental indenture to add
provisions
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to, change in any manner or eliminate any provisions of, the related
Indenture, or modify (except as provided below) in any manner the rights of the
related Noteholders.
Unless otherwise specified in the related Prospectus Supplement with
respect to a series that includes Notes, without the consent of the holder of
each such outstanding Note affected thereby no supplemental indenture will: (i)
change the due date of any installment of principal of or interest on any such
Note or reduce the principal amount thereof, the interest rate specified thereon
or the redemption price with respect thereto or change any place of payment
where or the coin or currency in which any such Note or any interest thereon is
payable; (ii) impair the right to institute suit for the enforcement of certain
provisions of the related Indenture regarding payment; (iii) reduce the
percentage of the aggregate amount of the outstanding Notes of such series, 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 the related Indenture or of certain defaults
thereunder and their consequences as provided for in such Indenture; (iv) modify
or alter the provisions of the related Indenture regarding the voting of Notes
held by the applicable Trust, any other obligor on such Notes, the Seller or an
affiliate of any of them; (v) reduce the percentage of the aggregate outstanding
amount of such Notes, the consent of the holders of which is required to direct
the related Indenture Trustee to sell or liquidate the Contracts if the proceeds
of such sale would be insufficient to pay the principal amount and accrued but
unpaid interest on the outstanding Notes of such series; (vi) decrease the
percentage of the aggregate principal amount of such Notes required to amend the
sections of the related Indenture which specify the applicable percentage of
aggregate principal amount of the Notes of such series necessary to amend such
Indenture or certain other related agreements; or (vii) permit the creation of
any lien ranking prior to or on a parity with the lien of the related Indenture
with respect to any of the collateral for such Notes or, except as otherwise
permitted or contemplated in such Indenture, terminate the lien of such
Indenture on any such collateral or deprive the holder of any such Note of the
security afforded by the lien of such Indenture.
Unless otherwise provided in the applicable Prospectus Supplement
with respect to a series that includes Notes, the related Trust and the
applicable Indenture Trustee may also enter into supplemental indentures,
without obtaining the consent of the Noteholders of the related series, but with
the consent of the related Security Insurer, if any, for the purpose of, among
other things, adding any provisions to or changing in any manner or eliminating
any of the provisions of the related Indenture or of modifying in any manner the
rights of such Noteholders; provided that such action will not materially and
adversely affect the interest of any such Noteholder.
INDENTURE EVENTS OF DEFAULT; RIGHTS UPON EVENT OF DEFAULT
With respect to the Notes of a given series, unless otherwise
specified in the related Prospectus Supplement, "INDENTURE EVENTS OF DEFAULT"
under the related Indenture will consist of: (i) a default for five days or more
in the payment of any interest on any such Note; (ii) a default in the payment
of the principal of or any installment of the principal of any such Note when
the same becomes due and payable; (iii) a default in the observance or
performance of any covenant or agreement of the applicable Trust made in the
related Indenture and the continuation of any such default for a period of 90
days after notice thereof is given to such Trust by the applicable Indenture
Trustee or if applicable, the related Security Insurer, or to such Trust and
such Indenture Trustee by the holders of at least 25% in principal amount of
such Notes then outstanding acting together as a single class; (iv) any
representation or warranty made by such Trust in the related Indenture or in any
certificate delivered pursuant thereto or in connection therewith having been
incorrect in a material respect as of the time made, and such breach not having
been cured within 30 days after notice thereof is given to such Trust by the
applicable Indenture Trustee or, if applicable, the related Security Insurer, or
to such Trust and such Indenture Trustee by the holders of at least 25% in
principal amount of such Notes then outstanding acting together as a single
class; or (v) certain events of bankruptcy, insolvency, receivership or
liquidation of the applicable Trust. Unless otherwise specified in the related
Prospectus Supplement, the failure to pay principal on a class of Notes
generally will not result in the occurrence of an Indenture Event of Default
until the final scheduled Distribution Date for such class of Notes.
With respect to each series that includes Notes, the rights and
remedies of the related Indenture Trustee, the related holders of such Notes,
and the related Security Insurer, if any, will be described in the related
Prospectus Supplement.
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CERTAIN COVENANTS
Unless otherwise specified in a Prospectus Supplement with respect to
a series that includes Notes, each Indenture will provide that the related Trust
may not consolidate with or merge into any other entity, unless (i) the entity
formed by or surviving such consolidation or merger is organized under the laws
of the United States, any state or the District of Columbia, (ii) such entity
expressly assumes such Trust's obligation to make due and punctual payments upon
the Notes of the related series and the performance or observance of every
agreement and covenant of such Trust under the Indenture, (iii) no Indenture
Event of Default shall have occurred and be continuing immediately after such
merger or consolidation, (iv) such Trust has been advised that the rating of the
Securities of such series then in effect would not be reduced or withdrawn by
any Rating Agency as a result of such merger or consolidation and (v) such Trust
has received an opinion of counsel to the effect that such consolidation or
merger would have no material adverse tax consequence to the Trust or to any
holder of the Securities of such series.
Each Trust that has issued Notes will not, among other things, (i)
except as expressly permitted by the applicable Indenture, the applicable
Transfer and Servicing Agreements or certain related documents with respect to
such Trust (collectively, the "RELATED DOCUMENTS"), sell, transfer, exchange or
otherwise dispose of any of the assets of such Trust, (ii) claim any credit on
or make any deduction from the principal and interest payable in respect of the
Notes of the related series (other than amounts withheld under the Code or
applicable state law) or assert any claim against any present or former holder
of such Notes because of the payment of taxes levied or assessed upon such
Trust, (iii) dissolve or liquidate in whole or in part, (iv) permit the validity
or effectiveness of the related Indenture to be impaired or permit any person to
be released from any covenants or obligations with respect to such Notes under
such Indenture except as may be expressly permitted thereby or (v) permit any
lien, charge, excise, claim, security interest, mortgage or other encumbrance to
be created on or extend to or otherwise arise upon or burden the assets of such
Trust or any part thereof, or any interest therein or the proceeds thereof.
No Trust that has issued Notes will incur, assume or guarantee any
indebtedness other than indebtedness incurred pursuant to the related Notes and
the related Indenture, or otherwise in accordance with the Related Documents.
ANNUAL COMPLIANCE STATEMENT
Each Trust that has issued Notes will be required to file annually
with the related Indenture Trustee a written statement as to the fulfillment of
its obligations under the Indenture.
INDENTURE TRUSTEE'S ANNUAL REPORT
The Indenture Trustee for each Trust that has issued Notes will be
required to mail each year to all related Noteholders a brief report relating to
its eligibility and qualification to continue as Indenture Trustee under the
related Indenture, any amounts advanced by it under the Indenture, the amount,
interest rate and maturity date of certain indebtedness owing by such Trust to
the applicable Indenture Trustee in its individual capacity, the property and
funds physically held by such Indenture Trustee as such and any action taken by
it that materially affects the related Notes and that has not been previously
reported.
SATISFACTION AND DISCHARGE OF INDENTURE
An Indenture will be discharged with respect to the collateral
securing the related Notes upon the delivery to the related Indenture Trustee
for cancellation of all such Notes or, with certain limitations, upon deposit
with such Indenture Trustee of funds sufficient for the payment in full of all
such Notes.
THE INDENTURE TRUSTEE
Certain matters relating to the Indenture Trustee for each series
that includes Notes are described under "Description of the Transfer and
Servicing Agreements--The Trustee and Indenture Trustee".
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CERTAIN LEGAL ASPECTS OF THE CONTRACTS
GENERAL
The transfer of Contracts by Onyx and any Selling Subsidiary to the
Seller, and by the Seller to the applicable Trust, and, if applicable, the
pledge thereof to an Indenture Trustee, the perfection of the security interests
in the Contracts and the enforcement of rights to realize on the related
Financed Vehicles as collateral for the Contracts are subject to a number of
federal and state laws, including the Uniform Commercial Code (the "UCC") as in
effect in various states. The Servicer and the Seller will take the action
described below to perfect the rights of the applicable Trustee and, if
applicable, the Indenture Trustee in the Contracts. If, through inadvertence or
otherwise, another party purchases (including the taking of a security interest
in) a Contract for new value in the ordinary course of its business, without
actual knowledge of the Trust's interest therein and, if applicable, the
Indenture Trustee's interest therein, and takes possession of such Contract,
such purchaser would acquire an interest in the Contracts superior to the
interest of the Trust and, if applicable, the interest of such Indenture
Trustee.
Unless otherwise specified in the related Prospectus Supplement,
under each Sale and Servicing Agreement, Pooling and Servicing Agreement or
Indenture, as applicable, the applicable Trustee or Indenture Trustee initially
will have custody of the Contracts included in the Trust Property of a Trust
following the sale of the Contracts to the related Trust and, if applicable, the
pledge thereof to the related Indenture Trustee, and will hold the Contracts as
bailee for the benefit of such Trust or as secured party. The Servicer may be
appointed by the applicable Trustee or Indenture Trustee to act as the custodian
of the Contracts. Upon such appointment physical possession of the Contracts
would shift from such Trustee or Indenture Trustee to the Servicer. While the
Contracts will not be physically marked to indicate the ownership interest
thereof by the Trust, appropriate UCC-1 financing statements will be filed to
perfect by filing and give notice of the Trust's ownership interest in, and, if
applicable, the Indenture Trustee's security interest in, the Contracts. If,
through inadvertence or otherwise, any of the Contracts were sold to another
party who purchased such Contracts in the ordinary course of its business and
took possession of such Contracts, the purchaser would acquire an interest in
the Contracts superior to the interests of the Trust if the purchaser acquired
the Contracts in good faith, for value and without actual knowledge of the
Trust's ownership interest in the Contracts.
SECURITY INTERESTS IN THE FINANCED VEHICLES
General. Retail installment sale contracts such as the Contracts
evidence the credit sale of automobiles and/or light duty trucks by dealers to
consumers. The contracts also constitute personal property security agreements
and include grants of security interests in the vehicles under the applicable
UCC. In most states, a security interest in automobiles and/or light duty trucks
is perfected by obtaining the certificate of title to the Financed Vehicle or
notation of the secured party's lien on the vehicles' certificate of title. The
Seller will warrant to the related Trust in the Sale and Servicing Agreement or
Pooling and Servicing Agreement, as applicable, that Onyx or a subsidiary of
Onyx has taken all steps necessary to obtain a perfected first priority security
interest with respect to all Financed Vehicles securing the Contracts and that
such security interest has been assigned to such Trust. If Onyx fails, because
of clerical errors or otherwise, to effect or maintain the notation of such
security interest on the certificate of title relating to a Financed Vehicle,
such Trust may not have a first priority security interest in such Financed
Vehicle.
Perfection. The Seller will sell the Contracts and assign the
security interest in each Financed Vehicle to the related Trust. However,
because of the administrative burden and expense, such Trust will not amend the
certificates of title to identify such Trust as the new secured party.
Accordingly, Onyx or a subsidiary of Onyx will continue to be named as the
secured party on the certificates of title relating to the Financed Vehicles.
Under the law of California and most other states, the assignment of the
Contracts is an effective conveyance of the security interests in the Financed
Vehicles without amendment of the lien noted on the related certificate of title
and the new secured party succeeds to the assignor's rights as the secured
party. However, there exists a risk in not identifying the related Trust as the
new secured party on the certificate of title that, through fraud or negligence,
the security interest of such Trust could be released.
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In the absence of fraud or forgery by the Financed Vehicle owner or
administrative error by state recording officials, notation of the lien of Onyx
or a subsidiary of Onyx will be sufficient to protect the related Trust against
the rights of subsequent purchasers of a Financed Vehicle or subsequent lenders
who take a security interest in a Financed Vehicle. If there are any Financed
Vehicles as to which Onyx or a subsidiary of Onyx has failed to perfect the
security interest assigned to the related Trust, such security interest would be
subordinate to, among others, subsequent purchasers of the Financed Vehicles and
holders of perfected security interests.
In the event that the owner of a Financed Vehicle relocates to a
state other than the state in which the Financed Vehicle was registered at the
inception of the Contract, under the laws of most states the perfected security
interest in the Financed Vehicle would continue for four months after such
relocation and thereafter, in most instances, until the owner re-registers the
Financed Vehicle in such state. A majority of states generally require surrender
of a certificate of title to re-register a vehicle. Therefore, the Servicer will
provide the department of motor vehicles or other appropriate state or county
agency of the state of relocation with the certificate of title so that the
owner can effect the re-registration. If the Financed Vehicle owner moves to a
state that provides for notation of lien on the certificate of title to perfect
the security interests in the Financed Vehicle, Onyx or a subsidiary of Onyx,
absent clerical errors or fraud, would receive notice of surrender of the
certificate of title if its lien is noted thereon. Each subsidiary of Onyx named
as the secured party on a certificate of title will agree to promptly forward to
Onyx any such notice received by such subsidiary. Accordingly, Onyx will have
notice and the opportunity to re-perfect the security interest in the Financed
Vehicle in the state of relocation. If the Financed Vehicle owner moves to a
state which does not require surrender of a certificate of title for
registration of a motor vehicle, re-registration could defeat perfection. In the
ordinary course of servicing its portfolio of motor vehicle installment sales
contracts, Onyx takes steps to effect such re-perfection upon receipt of notice
of registration or information from the obligor as to relocation. Similarly,
when an obligor under a Contract sells a Financed Vehicle, the Servicer must
provide the owner with the certificate of title, or the Servicer will receive
notice as a result of its lien or its subsidiary's lien noted thereon and
accordingly will have an opportunity to require satisfaction of the related
Contract before release of the lien. Under the Sale and Servicing Agreement or
Pooling and Servicing Agreement, as applicable, Onyx, at its cost, will be
obligated to maintain the continuous perfection of the security interest of Onyx
or its subsidiary in the Financed Vehicle.
Under the laws of most states (including California), certain
statutory liens such as liens for unpaid taxes, liens for towing and storage of
and repairs performed on a motor vehicle, motor vehicle accident liens, and
liens arising under various state and federal criminal statutes take priority
even over a perfected security interest. The Internal Revenue Code of 1986, as
amended, also grants priority to certain federal tax liens over the lien of a
secured party. The laws of most states and federal law permit the confiscation
of motor vehicles by governmental authorities under certain circumstances if
used in or acquired with the proceeds of unlawful activities, which may result
in the loss of a secured party's perfected security interest in a confiscated
vehicle. The Seller will represent in each Sale and Servicing Agreement or
Pooling and Servicing Agreement, as applicable, that, as of the initial issuance
of the Securities of the related series, no such state or federal liens exist
with respect to any Financed Vehicle securing payment on any related Contract.
However, such liens could arise, or such a confiscation could occur, at any time
during the term of a Contract. No notice will be given to the Servicer in the
event such a lien arises or such a confiscation occurs, and any such lien
arising or confiscation occurring after the related Closing Date would not give
rise to the Seller's repurchase obligations under the related Sale and Servicing
Agreement or Pooling and Servicing Agreement, as applicable.
REPOSSESSION
In the event of default by an obligor, the holder of the related
retail installment sale contract has all the remedies of a secured party under
the UCC, except where specifically limited by other state laws. Among the UCC
remedies, the secured party has the right to perform repossession by self-help
means, unless such means would constitute a breach of the peace or is otherwise
limited by applicable state law. Unless a financed vehicle is voluntarily
surrendered, self-help repossession is accomplished simply by retaking
possession of the financed vehicle. In cases where the obligor objects or raises
a defense to repossession, or if otherwise required by applicable state law, a
court order must be obtained from the appropriate state court, and the financed
vehicle must then be recovered in accordance with that order. In some
jurisdictions, the secured party is required to notify the obligor of the
default and the intent to repossess the collateral and to give the obligor a
time period within which to cure the default prior to repossession. Generally,
this
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right of cure may only be exercised on a limited number of occasions during
the term of the related contract. Other jurisdictions permit repossession
without prior notice if it can be accomplished without a breach of the peace
(although in some states, a course of conduct in which the creditor has accepted
late payments has been held to create a right by the obligor to receive prior
notice). In most states, under certain circumstances after the financed vehicle
has been repossessed, the obligor may reinstate the related contract by paying
the delinquent installments and other amounts due.
NOTICE OF SALE; REDEMPTION RIGHTS
The UCC and other state laws require the secured party to provide the
obligor with reasonable notice of the date, time and place of any public sale
and/or the date after which any private sale of the collateral may be held. In
addition, some states also impose substantive timing requirements on the sale of
repossessed vehicles in certain circumstances and/or various substantive timing
and content requirements on such notices. In some states, under certain
circumstances after a financed vehicle has been repossessed, the obligor may
redeem the collateral by paying the delinquent installments and other amounts
due. The obligor has the right to redeem the collateral prior to actual sale or
entry by the secured party into a contract for sale of the collateral by paying
the secured party the unpaid principal balance of the obligation, accrued
interest thereon, reasonable expenses for repossessing, holding, and preparing
the collateral for disposition and arranging for its sale, plus, in some
jurisdictions, reasonable attorneys' fees and legal expenses or in some other
states, by payment of delinquent installments on the unpaid principal balance of
the related obligation.
DEFICIENCY JUDGMENTS AND EXCESS PROCEEDS
The proceeds of resale of the vehicles generally will be applied
first to the expenses of resale and repossession and then to the satisfaction of
the indebtedness. While some states impose prohibitions or limitations on
deficiency judgments if the net proceeds from resale do not cover the full
amount of the indebtedness, a deficiency judgment can be sought in those states
that do not prohibit or limit such judgments. In addition to the notice
requirement, the UCC requires that every aspect of the sale or other
disposition, including the method, manner, time, place and terms, be
"commercially reasonable". Generally, courts have held that when a sale is not
"commercially reasonable", the secured party loses its right to a deficiency
judgment.
In addition, the UCC permits the debtor or other interested party to
recover for any loss caused by noncompliance with the provisions of the UCC.
Also, prior to a sale, the UCC permits the debtor or other interested person to
prohibit the secured party from disposing of the collateral if it is established
that the secured party is not proceeding in accordance with the "default"
provisions under the UCC. Any deficiency judgment would be a personal judgment
against the obligor for the shortfall, and a defaulting obligor can be expected
to have very little capital or sources of income available following
repossession. Therefore, in many cases, it may not be useful to seek a
deficiency judgment or, if one is obtained, it may be settled at a significant
discount or be uncollectible.
Occasionally, after resale of a repossessed vehicle and payment of
all expenses and indebtedness, there is a surplus of funds. In that case, the
UCC requires the creditor to remit the surplus to any holder of a subordinate
lien with respect to such vehicle or if no such lienholder exists, the UCC
requires the creditor to remit the surplus to the obligor.
CONSUMER PROTECTION LAWS
Numerous federal and state consumer protection laws and related
regulations impose substantial requirements upon lenders and servicers involved
in consumer finance. These laws include the Truth-in-Lending Act, the Equal
Credit Opportunity Act, the Federal Trade Commission Act, the Fair Credit
Billing Act, the Fair Credit Reporting Act, the Fair Debt Collection Practices
Act, the Magnuson-Moss Warranty Act, the Federal Reserve Board's Regulations B
and Z, the Soldiers' and Sailors' Civil Relief Act of 1940, state adoptions of
the National Consumer Act and of the Uniform Consumer Credit Code, state motor
vehicle retail installment sales acts, state "lemon" laws and other similar
laws. Also, state laws impose finance charge ceilings and other restrictions on
consumer transactions and require contract disclosures in addition to those
required under federal law. These requirements impose specific statutory
liabilities upon creditors
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who fail to comply with their provisions. In some cases, this liability could
affect an assignee's ability to enforce consumer finance contracts such as the
Contracts.
The so-called "Holder-in-Due-Course" Rule of the Federal Trade
Commission (the "FTC RULE"), the provisions of which are generally duplicated by
the Uniform Consumer Credit Code, other statutes or the common law, has the
effect of subjecting any assignee of the seller in a consumer credit transaction
(and certain related creditors and their assignees) to all claims and defenses
which the obligor in the transaction could assert against the seller. Liability
under the FTC Rule is limited to the amounts paid by the obligor under the
contract, and the holder of the contract may also be unable to collect any
balance remaining due thereunder from the obligor. The FTC Rule is generally
duplicated by the Uniform Consumer Credit Code, other state statutes or the
common law in certain states.
Most of the Contracts will be subject to the requirements of the FTC
Rule. Accordingly, each Trust, as holder of the related Contracts, will be
subject to any claims or defenses that the purchaser of the applicable Financed
Vehicle may assert against the seller of the Financed Vehicle. As to each
obligor, such claims are limited to a maximum liability equal to the amounts
paid by the obligor on the related Contract. The Seller will represent in each
Sale and Servicing Agreement or Pooling and Servicing Agreement, as applicable,
that each of the Contracts, and the sale of the related Financed Vehicle
thereunder, complied with all material requirements of such laws and the
regulations issued pursuant thereto.
Any shortfalls or losses arising in connection with the matters
described in the two preceding paragraphs, to the extent not covered by amounts
payable to the Securityholders from amounts available under a credit enhancement
mechanism, could result in losses to the Securityholders.
Courts have applied general equitable principles to secured parties
pursuing repossession and litigation involving deficiency balances. These
equitable principles may have the effect of relieving an obligor from some or
all of the legal consequences of a default.
In several cases, consumers have asserted that the self-help remedies
of secured parties under the UCC and related laws violate the due process
protections provided under the 14th Amendment to the Constitution of the United
States. Courts have generally upheld the notice provisions of the UCC and
related laws as reasonable or have found that the repossession and resale by the
creditor do not involve sufficient state action to afford constitutional
protection to borrowers.
OTHER LIMITATIONS
In addition to the laws limiting or prohibiting deficiency judgments,
numerous other statutory provisions, including federal bankruptcy laws and
related state laws, may interfere with or affect the ability of a secured party
to realize upon collateral or to enforce a deficiency judgment. For example, in
a Chapter 13 proceeding under the federal bankruptcy law, a court may prevent a
creditor from repossessing a vehicle, and, as part of the rehabilitation plan,
reduce the amount of the secured indebtedness to the market value of the vehicle
at the time of bankruptcy (as determined by the court), leaving the creditor as
a general unsecured creditor for the remainder of the indebtedness. A bankruptcy
court may also reduce the monthly payments due under a contract or change the
rate of interest and time of repayment of the indebtedness.
Under the terms of the Soldiers' and Sailors' Relief Act of 1940, an
obligor who enters the military service after the origination of such obligor's
Contract (including an obligor who is a member of the National Guard or is in
reserve status at the time of the origination of the obligor's Contract and is
later called to active duty) may not be charged interest above an annual rate of
6% during the period of such obligor's active duty status, unless a court orders
otherwise upon application of the lender. In addition, pursuant to the Military
Reservist Relief Act, under certain circumstances, California residents called
into active duty with the reserves can delay payments on retail installment
sales contracts, including the Contracts, for a period, not to exceed 180 days,
beginning with the order to active duty and ending 30 days after release. It is
possible that the foregoing could have an effect on the ability of the Servicer
to collect the full amount of interest owing on certain of the Contracts. In
addition, the Relief Acts impose limitations that would impair the ability of
the Servicer to repossess an affected Contract during the obligor's period of
active duty status. Thus, in the event that
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such a Contract goes into default, there may be delays and losses occasioned by
the inability to exercise the Trust's rights with respect to the related
Financed Vehicle in a timely fashion.
Any shortfalls or losses arising in connection with the matters
described in the two preceding paragraphs, to the extent not covered by amounts
payable to the Securityholders from amounts available under a credit enhancement
mechanism, could result in losses to the Securityholders.
REPURCHASE OBLIGATION
Under each Sale and Servicing Agreement or Pooling and Servicing
Agreement, the Seller will make representations and warranties relating to
validity, subsistence, perfection and priority of the security interest in each
related Financed Vehicle as of the related Closing Date. See "Description of the
Transfer and Servicing Agreements-- Sale and Assignment of the Contracts".
Accordingly, if any defect exists in the perfection of the security interest in
any Financed Vehicle as of the Closing Date and such defect adversely affects
the related Trust's interest in the related Contract, such defect would
constitute a breach of a warranty under the Sale and Servicing Agreement or
Pooling and Servicing Agreement, as applicable, and would create an obligation
of the Seller to repurchase such Contract unless the breach is cured.
Additionally, in Sale and Servicing Agreement or Pooling and Servicing
Agreement, as applicable, the Servicer will make certain representations,
warranties and affirmative covenants regarding, among other things, the
maintenance of the security interest in each Financed Vehicle, the breach of
which would create an obligation of the Servicer to purchase any affected
Contract from the related Trust unless the breach is cured.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following general discussion of the anticipated material federal
income tax consequences of the purchase, ownership and disposition of the Notes
and the Certificates of any series, to the extent it relates to matters of law
or legal conclusions with respect thereto, represents the opinion of tax counsel
to each Trust with respect to the related series on the material matters
associated with such consequences, subject to the qualifications set forth
herein. "Tax Counsel" with respect to each Trust will be Andrews & Kurth L.L.P.
The summary does not purport to deal with federal income tax consequences
applicable to all categories of investors, some of which may be subject to
special rules. For example, it does not discuss the tax treatment of Noteholders
or Certificateholders that are insurance companies, regulated investment
companies or dealers in securities. Moreover, there are no cases or Internal
Revenue Service ("IRS") rulings on similar transactions involving both debt and
equity interests issued by a trust with terms similar to those of the Notes and
the Certificates. As a result, the IRS may disagree with all or a part of the
discussion below. Prospective investors are urged to consult their own tax
advisors in determining the federal, state, local, foreign and any other tax
consequences to them of the purchase, ownership and disposition of the Notes and
the Certificates.
The following summary is based upon current provisions of the
Internal Revenue Code of 1986, as amended (the "CODE"), the Treasury regulations
promulgated thereunder and judicial or ruling authority, all of which are
subject to change, which change may be retroactive. Each Trust will be provided
with an opinion of Tax Counsel regarding certain federal income tax matters
discussed below. An opinion of Tax Counsel, however, is not binding on the IRS
or the courts. No ruling on any of the issues discussed below will be sought
from the IRS. For purposes of the following summary, references to the Trust,
the Notes, the Certificates and related terms, parties and documents shall be
deemed to refer, unless otherwise specified herein, to each Trust and the Notes,
Certificates and related terms, parties and documents applicable to such Trust.
The federal income tax consequences to Certificateholders will vary depending on
whether an election is made to treat the Trust as a partnership under the Code
or whether the Trust will be treated as a grantor trust. The Prospectus
Supplement for each series of Certificates will specify whether a partnership
election will be made or the Trust will be treated as a grantor trust.
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TRUSTS FOR WHICH A PARTNERSHIP ELECTION IS MADE
TAX CHARACTERIZATION OF THE TRUST AS A PARTNERSHIP
The following general discussion of the anticipated federal income
tax consequences of the purchase, ownership and disposition of the Notes and the
Certificates of a Trust for which a partnership election will be made, to the
extent it relates to matters of law or legal conclusions with respect thereto,
represents the opinion of Tax Counsel to each Trust with respect to the related
series on the material matters associated with such consequences, subject to the
qualifications set forth herein. In addition, Tax Counsel has prepared or
reviewed the statements in the Prospectus under the heading "Certain Federal
Income Tax Consequences--Trusts for Which a Partnership Election is Made", and
is of the opinion that such statements are correct in all material respects.
Such statements are intended as an explanatory discussion of the related tax
matters affecting investors generally, but do not purport to furnish information
in the level of detail or with the attention to an investor's specific tax
circumstances that would be provided by an investor's own tax advisor.
Accordingly, each investor is advised to consult its own tax advisors with
regard to the tax consequences to it of investing in Notes or Certificates.
Tax Counsel will deliver its opinion that a Trust for which a
partnership election is made will not be an association (or publicly traded
partnership) taxable as a corporation for federal income tax purposes. This
opinion will be based on the assumption that the terms of the Trust Agreement
and related documents will be complied with, and on counsel's conclusions that
the nature of the income of the Trust will exempt it from the rule that certain
publicly traded partnerships are taxable as corporations.
If the Trust were taxable as a corporation for federal income tax
purposes, the Trust would be subject to corporate income tax on its taxable
income. The Trust's taxable income would include all its income on the
Contracts, possibly reduced by its interest expense on the Notes. Any such
corporate income tax could materially reduce cash available to make payments on
the Notes and distributions on the Certificates, and Certificateholders could be
liable for any such tax that is unpaid by the Trust.
TAX CONSEQUENCES TO HOLDERS OF THE NOTES
Treatment of the Notes as Indebtedness. The Seller will agree, and
the Noteholders will agree by their purchase of Notes, to treat the Notes as
debt for federal income tax purposes. Tax Counsel will, except as otherwise
provided in the related Prospectus Supplement, advise the Trust that the Notes
will be classified as debt for federal income tax purposes. The discussion below
assumes this characterization of the Notes is correct.
OID, Indexed Securities, etc. The discussion below assumes that all
payments on the Notes are denominated in U.S. dollars, and that the Notes are
not Strip Notes. Moreover, the discussion assumes that the interest formula for
the Notes meets the requirements for "qualified stated interest" under Treasury
regulations (the "OID REGULATIONS") relating to original issue discount ("OID"),
and that any OID on the Notes (i.e., any excess of the principal amount of the
Notes over their issue price) does not exceed a de minimis amount (i.e., 1/4% of
their principal amount multiplied by the number of full years included in their
term), all within the meaning of the OID regulations. If these conditions are
not satisfied with respect to any given series of Notes, additional tax
considerations with respect to such Notes will be disclosed in the applicable
Prospectus Supplement.
Interest Income on the Notes. Based on the above assumptions, except
as discussed in the following paragraph, the Notes will not be considered issued
with OID. The stated interest thereon will be taxable to a Noteholder as
ordinary interest income when received or accrued in accordance with such
Noteholder's method of tax accounting. Under the OID regulations, a holder of a
Note issued with a de minimis amount of OID must include such OID in income, on
a pro rata basis, as principal payments are made on the Note. A purchaser who
buys a Note for more or less than its principal amount will generally be
subject, respectively, to the premium amortization or market discount rules of
the Code.
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A holder of a Note that has a fixed maturity date of not more than
one year from the issue date of such Note (a "SHORT-TERM NOTE") may be subject
to special rules. An accrual basis holder of a Short-Term Note (and certain cash
method holders, including regulated investment companies, as set forth in
Section 1281 of the Code) generally would be required to report interest income
as interest accrues on a straight-line basis over the term of each interest
period. Other cash basis holders of a Short-Term Note would, in general, be
required to report interest income as interest is paid (or, if earlier, upon the
taxable disposition of the Short-Term Note). However, a cash basis holder of a
Short-Term Note reporting interest income as it is paid may be required to defer
a portion of any interest expense otherwise deductible on indebtedness incurred
to purchase or carry the Short-Term Note until the taxable disposition of the
Short-Term Note. A cash basis taxpayer may elect under Section 1281 of the Code
to accrue interest income on all nongovernment debt obligations with a term of
one year or less, in which case the taxpayer would include interest on the
Short-Term Note in income as it accrues, but would not be subject to the
interest expense deferral rule referred to in the preceding sentence. Certain
special rules apply if a Short-Term Note is purchased for more or less than its
principal amount.
Sale or Other Disposition. If a Noteholder sells a Note, the holder
will recognize gain or loss in an amount equal to the difference between the
amount realized on the sale and the holder's adjusted tax basis in the Note. The
adjusted tax basis of a Note to a particular Noteholder will equal the holder's
cost for the Note, increased by any market discount, acquisition discount, OID
and gain previously included by such Noteholder in income with respect to the
Note and decreased by the amount of bond premium, if any, previously amortized
and by the amount of principal payments previously received by such Noteholder
with respect to such Note. Any such gain or loss will be capital gain or loss if
the Note was held as a capital asset, except for gain representing accrued
interest and accrued market discount not previously included in income. Capital
losses generally may be used only to offset capital gains.
Foreign Holders. Interest payments made (or accrued) to a Noteholder
who is a nonresident alien, foreign corporation or other non-United States
person (a "FOREIGN PERSON") generally will be considered "portfolio interest",
and generally will not be subject to United States federal income tax and
withholding tax, if the interest is not effectively connected with the conduct
of a trade or business within the United States by the foreign person and the
foreign person (i) is not actually or constructively a "10 percent shareholder"
of the Trust or the Seller (including a holder of 10% of the outstanding
Certificates) or a "controlled foreign corporation" with respect to which the
Trust or the Seller is a "related person" within the meaning of the Code and
(ii) provides the Owner Trustee or other person who is otherwise required to
withhold U.S. tax with respect to the Notes with an appropriate statement (on
Form W-8 or a similar form), signed under penalties of perjury, certifying that
the beneficial owner of the Note is a foreign person and providing the foreign
person's name and address. If a Note is held through a securities clearing
organization or certain other financial institutions, the organization or
institution may provide the relevant signed statement to the withholding agent;
in that case, however, the signed statement must be accompanied by a Form W-8 or
substitute form provided by the foreign person that owns the Note. If such
interest is not portfolio interest, then it will be subject to United States
federal income and withholding tax at a rate of 30 percent, unless reduced or
eliminated pursuant to an applicable tax treaty.
Any capital gain realized on the sale, redemption, retirement or
other taxable disposition of a Note by a foreign person will be exempt from
United States federal income and withholding tax, provided that (i) such gain is
not effectively connected with the conduct of a trade or business in the United
States by the foreign person and (ii) in the case of an individual foreign
person, the foreign person is not present in the United States for 183 days or
more in the taxable year.
Final regulations dealing with withholding tax on income paid to
foreign persons and related matters (the "NEW WITHHOLDING REGULATIONS") were
issued by the Treasury Department on October 6, 1997. The New Withholding
Regulations will generally be effective for payments made after December 31,
1999, subject to certain transition rules. Prospective investors who are foreign
persons are strongly urged to consult their own tax advisors with respect to the
New Withholding Regulations.
Backup Withholding. Each holder of a Note (other than an exempt
holder such as a corporation, tax-exempt organization, qualified pension and
profit-sharing trust, individual retirement account or nonresident alien who
provides certification as to status as a nonresident) will be required to
provide, under penalties of perjury, a certificate containing the holder's name,
address, correct federal taxpayer identification number and a statement that the
holder is not subject
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to backup withholding. Should a nonexempt Noteholder fail to provide the
required certification, the Trust will be required to withhold 31 percent of the
amount otherwise payable to the holder, and remit the withheld amount to the IRS
as a credit against the holder's federal income tax liability.
Possible Alternative Treatments of the Notes. If, contrary to the
opinion of Tax Counsel, the IRS successfully asserted that one or more of the
Notes did not represent debt for federal income tax purposes, the Notes might be
treated as equity interests in the Trust. If so treated, the Trust might be
taxable as a corporation with the adverse consequences described above (and the
taxable corporation would not be able to reduce its taxable income by deductions
for interest expense on Notes recharacterized as equity). Alternatively, and
more likely in the view of Tax Counsel, the Trust might be treated as a publicly
traded partnership that would not be taxable as a corporation because it would
meet certain qualifying income tests. Nonetheless, treatment of the Notes as
equity interests in such a publicly traded partnership could have adverse tax
consequences to certain holders. For example, income to certain tax-exempt
entities (including pension funds) would be "unrelated business taxable income",
income to foreign holders generally would be subject to U.S. tax and U.S. tax
return filing and withholding requirements, and individual holders might be
subject to certain limitations on their ability to deduct their share of Trust
expenses.
TAX CONSEQUENCES TO HOLDERS OF THE CERTIFICATES
Treatment of the Trust as a Partnership. The Seller and the Servicer
will agree, and the Certificateholders will agree by their purchase of
Certificates, to treat the Trust as a partnership for purposes of federal and
state income tax, franchise tax and any other tax measured in whole or in part
by income, with the assets of the partnership being the assets held by the
Trust, the partners of the partnership being the Certificateholders (including
the Seller in its capacity as recipient of distributions from the reserve fund,
if any), and the Notes being debt of the partnership. However, the proper
characterization of the arrangement involving the Trust, the Certificates, the
Notes, the Seller and the Servicer is not clear because there is no authority on
transactions closely comparable to that contemplated herein.
A variety of alternative characterizations are possible. For example,
because the Certificates have certain features characteristic of debt, the
Certificates might be considered debt of the Seller or the Trust. Any such
characterization would not result in materially adverse tax consequences to
Certificateholders as compared to the consequences from treatment of the
Certificates as equity in a partnership, described below. The following
discussion assumes that the Certificates represent equity interests in a
partnership.
Partnership Taxation. As a partnership, the Trust will not be subject
to federal income tax. Rather, each Certificateholder will be required to
separately take into account such holder's allocated share of income, gains,
losses, deductions and credits of the Trust. The Trust's income will consist
primarily of interest and finance charges earned on the Contracts (including
appropriate adjustments for market discount, OID and bond premium) and any gain
upon collection or disposition of Contracts. The Trust's deductions will consist
primarily of interest accruing with respect to the Notes, servicing and other
fees, and losses or deductions upon collection or disposition of Contracts.
The tax items of a partnership are allocable to the partners in
accordance with the Code, Treasury regulations and the partnership agreement
(here, the Trust Agreement and related documents). The Trust Agreement will
provide, in general, that the Certificateholders will be allocated taxable
income of the Trust for each month equal to the sum of (i) the interest that
accrues on the Certificates in accordance with their terms for such month,
including interest accruing at the Certificate Rate for such month and interest
on amounts previously due on the Certificates but not yet distributed; (ii) any
Trust income attributable to discount on the Contracts that corresponds to any
excess of the principal amount of the Certificates over their initial issue
price; (iii) prepayment premium payable to the Certificateholders for such
month; and (iv) any other amounts of income payable to the Certificateholders
for such month. Such allocation
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will be reduced by any amortization by the Trust of premium on Contracts that
corresponds to any excess of the issue price of Certificates over their
principal amount. All remaining taxable income of the Trust will be allocated to
the Seller. Based on the economic arrangement of the parties, this approach for
allocating Trust income should be permissible under applicable Treasury
regulations, although no assurance can be given that the IRS would not require a
greater amount of income to be allocated to Certificateholders. Moreover, even
under the foregoing method of allocation, Certificateholders may be allocated
income equal to the entire Certificate Rate plus the other items described
above even though the Trust might not have sufficient cash to make current cash
distributions of such amount. Thus, cash basis holders will in effect be
required to report income from the Certificates on the accrual basis and
Certificateholders may become liable for taxes on Trust income even if they have
not received cash from the Trust to pay such taxes. In addition, because tax
allocations and tax reporting will be done on a uniform basis for all
Certificateholders but Certificateholders may be purchasing Certificates at
different times and at different prices, Certificateholders may be required to
report on their tax returns taxable income that is greater or less than the
amount reported to them by the Trust.
All of the taxable income allocated to a Certificateholder that is a
pension, profit sharing or employee benefit plan or other tax-exempt entity
(including an individual retirement account) will constitute "unrelated business
taxable income" generally taxable to such a holder under the Code.
An individual taxpayer's share of expenses of the Trust (including
fees to the Servicer but not interest expense) would be miscellaneous itemized
deductions and thus allowable as a deduction only to the extent that in the
aggregate all such expenses exceed two percent of such individual tax payer's
adjusted gross income. Furthermore, certain otherwise allowable itemized
deductions will be reduced, but not by more than 80%, by an amount equal to 3%
of the individual's adjusted gross income in excess of a statutorily defined
threshold. Therefore, such deductions might be disallowed to the individual in
whole or in part and might result in such holder being taxed on an amount of
income that exceeds the amount of cash actually distributed to such holder over
the life of the Trust.
The Trust intends to make all tax calculations relating to income and
allocations to Certificateholders on an aggregate basis. If the IRS were to
require that such calculations be made separately for each Contact, the Trust
might be required to incur additional expense but it is believed that there
would not be a material adverse effect on Certificateholders.
Discount and Premium. It is believed that the Contracts were not
issued with OID, and, therefore, the Trust should not have OID income. However,
the purchase price paid by the Trust for the Contracts may be greater or less
than the remaining principal balance of the Contracts at the time of purchase.
If so, the Contracts will have been acquired at a premium or discount, as the
case may be. (As indicated above, the Trust will make this calculation on an
aggregate basis, but might be required to recompute it on a Contract-by-Contract
basis.)
If the Trust acquires the Contracts at a market discount or premium,
the Trust will elect to include any such discount in income currently as it
accrues over the life of the Contracts or to offset any such premium against
interest income on the Contracts. As indicated above, a portion of such market
discount income or premium deduction may be allocated to Certificateholders.
Section 708 Termination. Under Section 708 of the Code, the Trust
will be deemed to terminate for federal income tax purposes if 50% or more of
the capital and profits interests in the Trust are sold or exchanged within a
12-month period. If such a termination occurs, the Trust will be considered to
contribute its assets to a new partnership and, immediately thereafter, the
terminated partnership distributes interests in the new partnership to the
partners in liquidation of the terminated partnership. The Trust will not comply
with certain technical requirements that might apply when such a constructive
termination occurs. As a result, the Trust may be subject to certain tax
penalties and may incur additional expenses if it is required to comply with
those requirements. Furthermore, the Trust might not be able to comply due to
lack of data.
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Disposition of Certificates. Generally, capital gain or loss will be
recognized on a sale of Certificates in an amount equal to the difference
between the amount realized and the seller's tax basis in the Certificates sold.
A Certificateholder's tax basis in a Certificate will generally equal the
holder's cost increased by the holder's share of Trust income (includible in
income) and decreased by any distributions received with respect to such
Certificate. In addition, both the tax basis in the Certificates and the amount
realized on a sale of a Certificate would include the holder's share of the
Notes and other liabilities of the Trust. A holder acquiring Certificates at
different prices may be required to maintain a single aggregate adjusted tax
basis in such Certificates, and, upon sale or other disposition of some of the
Certificates, allocate a portion of such aggregate tax basis to the Certificates
sold (rather than maintaining a separate tax basis in each Certificate for
purposes of computing gain or loss on a sale of that Certificate).
Any gain on the sale of a Certificate attributable to the holder's
share of unrecognized accrued market discount on the Contracts would generally
be treated as ordinary income to the holder and would give rise to special tax
reporting requirements. The Trust does not expect to have any other assets that
would give rise to such special reporting requirements. Thus, to avoid those
special reporting requirements, the Trust will elect to include market discount
in income as it accrues.
If a Certificateholder is required to recognize an aggregate amount
of income (not including income attributable to disallowed itemized deductions
described above) over the life of the Certificates that exceeds the aggregate
cash distributions with respect thereto, such excess will generally give rise to
a capital loss upon the retirement of the Certificates.
Allocations Between Transferors and Transferees. In general, the
Trust's taxable income and losses will be determined monthly and the tax items
for a particular calendar month will be apportioned among the Certificateholders
in proportion to the principal amount of Certificates owned by them as of the
close of the last day of such month. As a result, a holder purchasing
Certificates may be allocated tax items (which will affect its tax liability and
tax basis) attributable to periods before the actual transaction.
The use of such a monthly convention may not be permitted by existing
regulations. If a monthly convention is not allowed (or only applies to
transfers of less than all of the partner's interest), taxable income or losses
of the Trust might be reallocated among the Certificateholders. The Seller is
authorized to revise the Trust's method of allocation between transferors and
transferees to conform to a method permitted by future regulations.
Section 754 Election. In the event that a Certificateholder sells its
Certificates at a profit (loss), the purchasing Certificateholder will have a
higher (lower) basis in the Certificates than the selling Certificateholder had.
The tax basis of the Trust's assets will not be adjusted to reflect that higher
(or lower) basis unless the Trust were to file an election under Section 754 of
the Code. In order to avoid the administrative complexities that would be
involved in keeping accurate accounting records, as well as potentially onerous
information reporting requirements, the Trust will not make such election. As a
result, Certificateholders might be allocated a greater or lesser amount of
Trust income than would be appropriate based on their own purchase price for
Certificates.
Administrative Matters. The Owner Trustee is required to keep or have
kept complete and accurate books of the Trust. Such books will be maintained for
financial reporting and tax purposes on an accrual basis and the fiscal year of
the Trust will be set forth in the related Prospectus Supplement. The Trustee
will file a partnership information return (IRS Form 1065) with the IRS for each
taxable year of the Trust and will report each Certificateholder's allocable
share of items of Trust income and expense to holders and the IRS on Schedule
K-1. The Trust will provide the Schedule K-1 information to nominees that fail
to provide the Trust with the information statement described below and such
nominees will be required to forward such information to the beneficial owners
of the Certificates. Generally, holders must file tax returns that are
consistent with the information return filed by the Trust or be subject to
penalties unless the holder notifies the IRS of all such inconsistencies.
Under Section 6031 of the Code, any person that holds Certificates as
a nominee at any time during a calendar year is required to furnish the Trust
with a statement containing certain information on the nominee, the beneficial
owners and the Certificates so held. Such information includes (i) the name,
address and taxpayer identification number
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of the nominee and (ii) as to each beneficial owner (x) the name, address and
identification number of such person, (y) whether such person is a United States
person, a tax-exempt entity or a foreign government, an international
organization, or any wholly owned agency or instrumentality of either of the
foregoing, and (z) certain information on Certificates that were held, bought or
sold on behalf of such person throughout the year. In addition, brokers and
financial institutions that hold Certificates through a nominee are required to
furnish directly to the Trust information as to themselves and their ownership
of Certificates. A clearing agency registered under Section 17A of the Exchange
Act is not required to furnish any such information statement to the Trust. The
information referred to above for any calendar year must be furnished to the
Trust on or before the following January 31. Nominees, brokers and financial
institutions that fail to provide the Trust with the information described above
may be subject to penalties.
The Seller will be designated as the tax matters partner in the
related Trust Agreement and, as such, will be responsible for representing the
Certificateholders in any dispute with the IRS. The Code provides for
administrative examination of a partnership as if the partnership were a
separate and distinct taxpayer. Generally, the statute of limitations for
partnership items does not expire before three years after the date on which the
partnership information return is filed. Any adverse determination following an
audit of the return of the Trust by the appropriate taxing authorities could
result in an adjustment of the returns of the Certificateholders, and, under
certain circumstances, a Certificateholder may be precluded from separately
litigating a proposed adjustment to the items of the Trust. An adjustment could
also result in an audit of a Certificateholder's returns and adjustments of
items not related to the income and losses of the Trust.
Tax Consequences to Foreign Certificateholders. It is not clear
whether the Trust would be considered to be engaged in a trade or business in
the United States for purposes of federal withholding taxes with respect to
non-U.S. persons because there is no clear authority dealing with that issue
under facts substantially similar to those described herein. Although it is not
expected that the Trust would be engaged in a trade or business in the United
States for such purposes, the Trust will withhold as if it were so engaged in
order to protect the Trust from possible adverse consequences of a failure to
withhold. The Trust expects to withhold on the portion of its taxable income
that is allocable to foreign Certificateholders pursuant to Section 1446 of the
Code, as if such income were effectively connected to a U.S. trade or business,
at a rate of 35% for foreign holders that are taxable as corporations and 39.6%
for all other foreign holders. The New Withholding Regulations or subsequent
adoption of Treasury regulations or the issuance of other administrative
pronouncements may require the Trust to change its withholding procedures. In
determining a holder's withholding status, the Trust may rely on IRS Form W-8,
IRS Form W-9 or the holder's certification of nonforeign status signed under
penalties of perjury.
Each foreign holder might be required to file a U.S. individual or
corporate income tax return (including, in the case of a corporation, the branch
profits tax) on its share of the Trust's income. Each foreign holder must obtain
a taxpayer identification number from the IRS and submit that number to the
Trust on Form W-8 in order to assure appropriate crediting of the taxes
withheld. A foreign holder generally would be entitled to file with the IRS a
claim for refund with respect to taxes withheld by the Trust, taking the
position that no taxes were due because the Trust was not engaged in a U.S.
trade or business. However, interest payments made (or accrued) to a
Certificateholder who is a foreign person generally will be considered
guaranteed payments to the extent such payments are determined without regard to
the income of the Trust. If these interest payments are properly characterized
as guaranteed payments, then the interest will not be considered "portfolio
interest." As a result, Certificateholders will be subject to United States
federal income tax and withholding tax at a rate of 30 percent, unless reduced
or eliminated pursuant to an applicable treaty. In such case, a foreign holder
would only be entitled to claim a refund for that portion of the taxes in excess
of the taxes that should be withheld with respect to the guaranteed payments.
Backup Withholding. Distributions made on the Certificates and
proceeds from the sale of the Certificates will be subject to a "backup"
withholding tax of 31% if, in general, the Certificateholder fails to comply
with certain identification procedures, unless the holder is an exempt recipient
under applicable provisions of the Code.
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<PAGE> 48
TRUSTS TREATED AS GRANTOR TRUSTS
TAX CHARACTERIZATION OF THE TRUST AS A GRANTOR TRUST
The following general discussion of the anticipated federal income
tax consequences of the purchase, ownership and disposition of the Notes and the
Certificates of a Trust for which a partnership election will not be made, to
the extent it relates to matters of law or legal conclusions with respect
thereto, represents the opinion of Tax Counsel to each Trust with respect to the
related series on the material matters associated with such consequences,
subject to the qualifications set forth herein. In addition, Tax Counsel has
prepared or reviewed the statements in the Prospectus under the heading "Certain
Federal Income Tax Consequences--Trusts Treated as Grantor Trusts", and is of
the opinion that such statements are correct in all material respects. Such
statements are intended as an explanatory discussion of the possible effects of
the classification of any Trust as a grantor trust for federal income tax
purposes on investors generally and of related tax matters affecting investors
generally, but do not purport to furnish information in the level of detail or
with the attention to an investor's specific tax circumstances that would be
provided by an investor's own tax advisor. Accordingly, each investor is advised
to consult its own tax advisors with regard to the tax consequences to it of
investing in Notes or Certificates.
If a partnership election is not made, Tax Counsel will deliver its
opinion that the Trust will not be classified as an association taxable as a
corporation and that such Trust will be classified as a grantor trust under
subpart E, Part I of subchapter J of Chapter 1 of Subtitle A of the Code. In
this case, owners of Certificates (referred to herein as "GRANTOR TRUST
CERTIFICATEHOLDERS") will be treated for federal income tax purposes as owners
of a portion of the Trust's assets as described below. The Certificates issued
by a Trust that is treated as a grantor trust are referred to herein as "GRANTOR
TRUST CERTIFICATES".
Characterization. Each Grantor Trust Certificateholder will be
treated as the owner of a pro rata undivided interest in the interest and
principal portions of the Trust represented by the Grantor Trust Certificates
and will be considered the equitable owner of a pro rata undivided interest in
each of the Contracts in the Trust. Any amounts received by a Grantor Trust
Certificateholder in lieu of amounts due with respect to any Contract because of
a default or delinquency in payment will be treated for federal income tax
purposes as having the same character as the payments they replace.
Each Grantor Trust Certificateholder will be required to report on
its federal income tax return in accordance with such Grantor Trust
Certificateholder's method of accounting its pro rata share of the entire income
from the Contracts in the Trust represented by Grantor Trust Certificates,
including interest, OID, if any, prepayment fees, assumption fees, any gain
recognized upon an assumption and late payment charges received by the Servicer.
Under Sections 162 or 212 each Grantor Trust Certificateholder will be entitled
to deduct its pro rata share of servicing fees, prepayment fees, assumption
fees, any loss recognized upon an assumption and late payment charges retained
by the Servicer, provided that such amounts are reasonable compensation for
services rendered to the Trust. Grantor Trust Certificateholders that are
individuals, estates or trusts will be entitled to deduct their share of
expenses only to the extent such expenses plus all other Section 212 expenses
exceed two percent of its adjusted gross income. A Grantor Trust
Certificateholder using the cash method of accounting must take into account its
pro rata share of income and deductions as and when collected by or paid to the
Servicer. A Grantor Trust Certificateholder using an accrual method of
accounting must take into account its pro rata share of income and deductions as
they become due or are paid to the Servicer, whichever is earlier. If the
servicing fees paid to the Servicer are deemed to exceed reasonable servicing
compensation, the amount of such excess could be considered as an ownership
interest retained by the Servicer (or any person to whom the Servicer assigned
for value all or a portion of the servicing fees) in a portion of the interest
payments on the Contracts. The Contracts would then be subject to the "coupon
stripping" rules of the Code discussed below.
Premium. The price paid for a Grantor Trust Certificate by a holder
will be allocated to such holder's undivided interest in each Contract based on
each Contract's relative fair market value, so that such holder's undivided
interest in each Contract will have its own tax basis. A Grantor Trust
Certificateholder that acquires an interest in Contracts at a premium may elect
to amortize such premium under a constant interest method. Amortizable bond
-44-
<PAGE> 49
premium will be treated as an offset to interest income on such Grantor Trust
Certificate. The basis for such Grantor Trust Certificate will be reduced to the
extent that amortizable premium is applied to offset interest payments. It is
not clear whether a reasonable prepayment assumption should be used in computing
amortization of premium allowable under Section 171. A Grantor Trust
Certificateholder that makes this election for a Grantor Trust Certificate that
is acquired at a premium will be deemed to have made an election to amortize
bond premium with respect to all debt instruments having amortizable bond
premium that such Grantor Trust Certificateholder acquires during the year of
the election or thereafter.
If a premium is not subject to amortization using a reasonable
prepayment assumption, the holder of a Grantor Trust Certificate acquired at a
premium should recognize a loss if a Contract prepays in full, equal to the
difference between the portion of the prepaid principal amount of such Contract
that is allocable to the Grantor Trust Certificate and the portion of the
adjusted basis of the Grantor Trust Certificate that is allocable to such
Contract. If a reasonable prepayment assumption is used to amortize such
premium, it appears that such a loss would be available, if at all, only if
prepayments have occurred at a rate faster than the reasonable assumed
prepayment rate. It is not clear whether any other adjustments would be required
to reflect differences between an assumed prepayment rate and the actual rate of
prepayments.
STRIPPED BONDS AND STRIPPED COUPONS
Although the tax treatment of stripped bonds is not entirely clear,
based on guidance issued by the IRS, each purchaser of a Grantor Trust
Certificate will be treated as the purchaser of a stripped bond which generally
should be treated as a single debt instrument issued on the day it is purchased
for purposes of calculating any original issue discount. Generally, under
applicable Treasury regulations (the "SECTION 1286 TREASURY REGULATIONS"), if
the discount on a stripped bond is larger than a de minimis amount (as
calculated for purposes of the OID rules of the Code) such stripped bond will be
considered to have been issued with OID. See "Original Issue Discount". Based on
the preamble to the Section 1286 Treasury Regulations, Tax Counsel is of the
opinion that, although the matter is not entirely clear, the interest income on
the Certificates at the sum of the Certificate Rate and the portion of the
Servicing Fee Rate that does not constitute excess servicing will be treated as
"qualified stated interest" within the meaning of the Section 1286 Treasury
Regulations and such income will be so treated in the Trustee's tax information
reporting.
Original Issue Discount. The IRS has stated in published rulings
that, in circumstances similar to those described herein, the special rules of
the Code relating to "original issue discount" (currently Sections 1271 through
1273 and 1275) will be applicable to a Grantor Trust Certificateholder's
interest in those Contracts meeting the conditions necessary for these sections
to apply. Generally, a Grantor Trust Certificateholder that acquires an
undivided interest in a Contract issued or acquired with OID must include in
gross income the sum of the "daily portions," as defined below, of the OID on
such Contract for each day on which it owns a Certificate, including the date of
purchase but excluding the date of disposition. In the case of an original
Grantor Trust Certificateholder, the daily portions of OID with respect to a
Contract generally would be determined as follows. A calculation will be made of
the portion of OID that accrues on the Contract during each successive monthly
accrual period (or shorter period in respect of the date of original issue or
the final Distribution Date). This will be done, in the case of each full
monthly accrual period, by adding (i) the present value of all remaining
payments to be received on the Contract under the prepayment assumption used in
respect of the Contracts and (ii) any payments received during such accrual
period, and subtracting from that total the "adjusted issue price" of the
Contract at the beginning of such accrual period. No representation is made that
the Contracts will prepay at any prepayment assumption. The "adjusted issue
price" of a Contract at the beginning of the first accrual period is its issue
price (as determined for purposes of the OID rules of the Code) and the
"adjusted issue price" of a Contract at the beginning of a subsequent accrual
period is the "adjusted issue price" at the beginning of the immediately
preceding accrual period plus the amount of OID allocable to that accrual period
and reduced by the amount of any payment (other than "qualified stated
interest") made at the end of or during that accrual period. The OID accruing
during such accrual period will then be divided by the number of days in the
period to determine the daily portion of OID for each day in the period. With
respect to an initial accrual period shorter than a full monthly accrual period,
the daily portions of OID must be determined according to a reasonable method,
provided that such method is consistent with the method used to determine the
yield to maturity of the Contracts.
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<PAGE> 50
With respect to the Contracts, the method of calculating OID as
described above will cause the accrual of OID to either increase or decrease
(but never below zero) in any given accrual period to reflect the fact that
prepayments are occurring at a faster or slower rate than the prepayment
assumption used in respect of the Contracts. Subsequent purchasers that purchase
Contracts at more than a de minimis discount should consult their tax advisors
with respect to the proper method to accrue such OID.
The Taxpayer Relief Act of 1997 requires the use of a prepayment
assumption to accrue OID with respect to "any pool of debt instruments the yield
on which may be affected by reason of prepayments (or to the extent provided in
regulation, by reason of other events)." Unless otherwise provided in the
related Prospectus Supplement, the Trustee will deem the prepayment assumption
to be that the Contracts will not prepay. If the IRS were to require that OID be
computed using a different prepayment assumption, the character and timing of a
Certificateholder's income could be adversely affected.
Market Discount. A Grantor Trust Certificateholder that acquires an
undivided interest in Contracts may be subject to the market discount rules of
Sections 1276 through 1278 to the extent an undivided interest in a Contract is
considered to have been purchased at a "market discount." Generally, the amount
of market discount is equal to the excess of the portion of the principal amount
of such Contract allocable to such holder's undivided interest over such
holder's tax basis in such interest. Market discount with respect to a Grantor
Trust Certificate will be considered to be zero if the amount allocable to the
Grantor Trust Certificate is less than 0.25% of the Grantor Trust Certificate's
stated redemption price at maturity multiplied by the weighted average maturity
remaining after the date of purchase. Treasury regulations implementing the
market discount rules have not yet been issued; therefore, investors should
consult their own tax advisors regarding the application of these rules and the
advisability of making any of the elections allowed under Code Sections 1276
through 1278.
The Code provides that any principal payment (whether a scheduled
payment or a prepayment) or any gain on disposition of a market discount bond
shall be treated as ordinary income to the extent that it does not exceed the
accrued market discount at the time of such payment. The amount of accrued
market discount for purposes of determining the tax treatment of subsequent
principal payments or dispositions of the market discount bond is to be reduced
by the amount so treated as ordinary income.
The Code also grants the Treasury Department authority to issue
regulations providing for the computation of accrued market discount on debt
instruments, the principal of which is payable in more than one installment.
While the Treasury Department has not yet issued regulations, rules described in
the relevant legislative history will apply. Under those rules, the holder of a
market discount bond may elect to accrue market discount either on the basis of
a constant interest rate or according to one of the following methods. If a
Grantor Trust Certificate is issued with OID, the amount of market discount that
accrues during any accrual period would be equal to the product of (i) the total
remaining market discount and (ii) a fraction, the numerator of which is the OID
accruing during the period and the denominator of which is the total remaining
OID at the beginning of the accrual period. For Grantor Trust Certificates
issued without OID, the amount of market discount that accrues during a period
is equal to the product of (i) the total remaining market discount and (ii) a
fraction, the numerator of which is the amount of stated interest paid during
the accrual period and the denominator of which is the total amount of stated
interest remaining to be paid at the beginning of the accrual period. For
purposes of calculating market discount under any of the above methods in the
case of instruments (such as the Grantor Trust Certificates) that provide for
payments that may be accelerated by reason of prepayments of other obligations
securing such instruments, the same prepayment assumption applicable to
calculating the accrual of OID will apply. Because the regulations described
above have not been issued, it is impossible to predict what effect those
regulations might have on the tax treatment of a Grantor Trust Certificate
purchased at a discount or premium in the secondary market.
A holder who acquired a Grantor Trust Certificate at a market
discount also may be required to defer a portion of its interest deductions for
the taxable year attributable to any indebtedness incurred or continued to
purchase or carry such Grantor Trust Certificate purchased with market discount.
For these purposes, the de minimis rule referred above applies. Any such
deferred interest expense would not exceed the market discount that accrues
during such taxable year and is, in general, allowed as a deduction not later
than the year in which such market discount is includible in income.
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<PAGE> 51
If such holder elects to include market discount in income currently as it
accrues on all market discount instruments acquired by such holder in that
taxable year or thereafter, the interest deferral rule described above will not
apply.
Premium. To the extent a Grantor Trust Certificateholder is
considered to have purchased an undivided interest in a Contract for an amount
that is greater than its stated redemption price at maturity of such Contract,
such Grantor Trust Certificateholder will be considered to have purchased the
Contract with "amortizable bond premium" equal in amount to such excess. A
Grantor Trust Certificateholder (who does not hold the Certificate for sale to
customers or in inventory) may elect under Section 171 of the Code to amortize
such premium. Under the Code, premium is allocated among the interest payments
on the Contracts to which it relates and is considered as an offset against (and
thus a reduction of) such interest payments. With certain exceptions, such an
election would apply to all debt instruments held or subsequently acquired by
the electing holder. Absent such an election, the premium will be deductible as
an ordinary loss only upon disposition of the Certificate or pro rata as
principal is paid on the Contracts.
Election to Treat All Interest as OID. The OID regulations permit a
Grantor Trust Certificateholder to elect to accrue all interest, discount
(including de minimis market or original issue discount) and premium in income
as interest, based on a constant yield method. If such an election were to be
made with respect to a Grantor Trust Certificate with market discount, the
Certificateholder would be deemed to have made an election to include in income
currently market discount with respect to all other debt instruments having
market discount that such Grantor Trust Certificateholder acquires during the
year of the election or thereafter. Similarly, a Grantor Trust Certificateholder
that makes this election for a Grantor Trust Certificate that is acquired at a
premium will be deemed to have made an election to amortize bond premium with
respect to all debt instruments having amortizable bond premium that such
Grantor Trust Certificateholder owns or acquires. See "--Premium" herein. The
election to accrue interest, discount and premium on a constant yield method
with respect to a Grantor Trust Certificate is irrevocable.
Sale or Exchange of a Grantor Trust Certificate. Sale or exchange of
a Grantor Trust Certificate prior to its maturity will result in gain or loss
equal to the difference, if any, between the amount received and the owner's
adjusted basis in the Grantor Trust Certificate. Such adjusted basis generally
will equal the seller's purchase price for the Grantor Trust Certificate,
increased by the OID included in the seller's gross income with respect to the
Grantor Trust Certificate, and reduced by principal payments on the Grantor
Trust Certificate previously received by the seller. Such gain or loss will be
capital gain or loss to an owner for which a Grantor Trust Certificate is a
"capital asset" within the meaning of Section 1221, and will be long-term or
short-term depending on whether the Grantor Trust Certificate has been owned for
the long-term capital gain holding period (currently more than one year).
Grantor Trust Certificates will be "evidences of indebtedness" within
the meaning of Section 582(c)(1), so that gain or loss recognized from the sale
of a Grantor Trust Certificate by a bank or a thrift institution to which such
section applies will be treated as ordinary income or loss.
Non-U.S. Persons. Generally, interest or OID paid by the person
required to withhold tax under Section 1441 or 1442 to (i) an owner that is not
a U.S. Person (as defined below) or (ii) a Grantor Trust Certificateholder
holding on behalf of an owner that is not a U.S. Person and accrued OID
recognized by the owner on the sale or exchange of such a Grantor Trust
Certificate will not be subject to withholding to the extent that a Grantor
Trust Certificate evidences ownership in Contracts issued after July 18, 1984 by
natural persons if such Grantor Trust Certificateholder complies with certain
identification requirements (including delivery of a statement, signed by the
Grantor Trust Certificateholder under penalties of perjury, certifying that such
Grantor Trust Certificateholder is not a U.S. Person and providing the name and
address of such Grantor Trust Certificateholder). Additional restrictions apply
to Contracts where the obligor is not a natural person in order to qualify for
the exemption from withholding.
As used herein, a "U.S. PERSON" means a citizen or resident of the
United States, a corporation, a partnership, or other entity created or
organized in or under the laws of the United States or any political subdivision
thereof (except, in the case of a partnership as otherwise provided by
regulations), an estate, the income of which is includible in gross income for
United States federal income tax purposes regardless of its source or a trust
whose administration is subject to the primary supervision of a United States
court and which has one or more United States persons who have authority to
control all substantial decisions of the trust.
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<PAGE> 52
Information Reporting and Backup Withholding. The Servicer will
furnish or make available, within a reasonable time after the end of each
calendar year, to each person who was a Grantor Trust Certificateholder at any
time during such year, such information as may be deemed necessary or desirable
to assist Grantor Trust Certificateholders in preparing their federal income tax
returns, or to enable holders to make such information available to beneficial
owners or financial intermediaries that hold Grantor Trust Certificates as
nominees on behalf of beneficial owners. If a holder, beneficial owner,
financial intermediary or other recipient of a payment on behalf of a beneficial
owner fails to supply a certified taxpayer identification number or if the
Secretary of the Treasury determines that such person has not reported all
interest and dividend income required to be shown on its federal income tax
return, 31% backup withholding may be required with respect to any payments. Any
amounts deducted and withheld from a distribution to a recipient would be
allowed as a credit against such recipient's federal income tax liability.
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<PAGE> 53
THE FEDERAL TAX DISCUSSIONS SET FORTH ABOVE ARE INCLUDED FOR GENERAL
INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A NOTEHOLDER'S OR
CERTIFICATEHOLDER'S PARTICULAR TAX SITUATION. PROSPECTIVE PURCHASERS SHOULD
CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE
PURCHASE, OWNERSHIP AND DISPOSITION OF NOTES AND CERTIFICATES, INCLUDING THE TAX
CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE
EFFECTS OF CHANGES IN FEDERAL OR OTHER TAX LAWS.
ERISA CONSIDERATIONS
Section 406 of ERISA and Section 4975 of the Code prohibit a pension,
profit-sharing or other employee benefit plan, as well as individual retirement
accounts and certain types of Keogh Plans (each a "BENEFIT PLAN"), from engaging
in certain transactions involving "plan assets" with persons that are "parties
in interest" under ERISA or "disqualified persons" under the Code with respect
to such Benefit Plan. ERISA also imposes certain duties on persons who are
fiduciaries of Benefit Plans subject to ERISA and prohibits certain transactions
between a Benefit Plan and parties in interest with respect to such Benefit
Plans. Under ERISA, any person who exercises any authority or control with
respect to the management or disposition of the assets of a Benefit Plan is
considered to be a fiduciary of such Benefit Plan (subject to certain exceptions
not here relevant). A violation of these "prohibited transaction" rules may
result in an excise tax or other penalties and liabilities under ERISA and the
Code for such persons.
Certain transactions involving a Trust might be deemed to constitute
prohibited transactions under ERISA and the Code with respect to a Benefit Plan
that purchased Notes or Certificates if assets of the Trust were deemed to be
assets of the Benefit Plan. Under a regulation issued by the United States
Department of Labor (the "PLAN ASSETS REGULATION"), the assets of a Trust would
be treated as plan assets of a Benefit Plan for the purposes of ERISA and the
Code only if the Benefit Plan acquired an "equity interest" in the Trust and
none of the exceptions contained in the Plan Assets Regulation was applicable.
An equity interest is defined under the Plan Assets Regulation as an interest
other than an instrument which is treated as indebtedness under applicable local
law and which has no substantial equity features. The likely treatment in this
context of Notes and Certificates of a given series will be discussed in the
related Prospectus Supplement.
Employee benefit plans that are governmental plans (as defined in
Section 3(32) of ERISA) and certain church plans (as defined in Section 3(33) of
ERISA) are not subject to ERISA requirements. Due to the complexities of the
"prohibited transaction" rules and the penalties imposed upon persons involved
in prohibited transactions, it is important that the fiduciary of any Benefit
Plan considering the purchase of Securities consult with its tax and/or legal
advisors regarding whether the assets of the related Trust would be considered
plan assets, the possibility of exemptive relief from the prohibited transaction
rules and other issues and their potential consequences.
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<PAGE> 54
PLAN OF DISTRIBUTION
Unless otherwise specified in the related Prospectus Supplement, on
the terms and conditions set forth in one or more underwriting agreements with
respect to the Securities of a series (collectively, the "UNDERWRITING
AGREEMENT"), the Seller will agree to cause the related Trust to sell to the
underwriter(s) named therein and in the related Prospectus Supplement, and each
of such underwriters will severally agree to purchase, the principal amount of
each class of Securities, as the case may be, of the related series set forth
therein and in the related Prospectus Supplement.
Unless otherwise specified in the related Prospectus Supplement, in
the Underwriting Agreement with respect to any given series of Securities, the
applicable underwriter(s) will agree, subject to the terms and conditions set
forth therein, to purchase all the Securities described therein which are
offered hereby and by the related Prospectus Supplement if any of such
Securities are purchased.
Each Prospectus Supplement will either (i) set forth the price at
which each class of Securities being offered thereby will be offered to the
public and any concessions that may be offered to certain dealers participating
in the offering of such Securities or (ii) specify that the related Securities
are to be resold by the underwriter(s) in negotiated transactions at varying
prices to be determined at the time of such sale. After the initial public
offering of any such Securities, such public offering prices and such
concessions may be changed.
Unless otherwise specified in the related Prospectus Supplement, each
Underwriting Agreement will provide that Onyx and the Seller will indemnify the
underwriters against certain civil liabilities, including liabilities under the
Securities Act, or contribute to payments the several underwriters may be
required to make in respect thereof.
Unless otherwise specified in the related Prospectus Supplement,
pursuant to each Underwriting Agreement with respect to a given series of
Securities, the closing of the sale of any class of Securities subject to such
Underwriting Agreement will be conditioned on the closing of the sale of all
other such classes of Securities of that series.
The place and time of delivery for the Securities in respect of which
this Prospectus is delivered will be set forth in the related Prospectus
Supplement.
LEGAL OPINIONS
Certain legal matters relating to the Securities of any series will
be passed upon for the related Trust, the Seller and the Servicer by Andrews &
Kurth L.L.P. In addition, certain United States federal tax and other matters
will be passed upon for the related Trust by Andrews & Kurth L.L.P.
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<PAGE> 55
INDEX OF TERMS
<TABLE>
<S> <C>
"Administration Agreement"................................................................................30
"Administration Fee" .....................................................................................30
"Administrator"...........................................................................................30
"APR" ....................................................................................................13
"Auto Finance Centers"....................................................................................10
"Bankruptcy Code" ........................................................................................16
"Benefit Plan" ...........................................................................................48
"Certificate Principal Balance"............................................................................2
"Certificate Rate".........................................................................................2
"Certificateholders" ......................................................................................8
"Certificates" ............................................................................................i
"Closing Date" ............................................................................................4
"Code" ...................................................................................................37
"Collection Account" .....................................................................................22
"Collection Period" ......................................................................................21
"Commission" ............................................................................................iii
"Contracts" .............................................................................................i,3
"Cut-Off Date" ............................................................................................4
"Dealers" .................................................................................................4
"Defaulted Contract" .....................................................................................21
"Definitive Securities"...................................................................................19
"Distribution Date Statement".............................................................................25
"Distribution Date" ......................................................................................ii
"DTC Rules" ..............................................................................................19
"DTC" .....................................................................................................8
"Due Date" ...............................................................................................11
"Eligible Investments"....................................................................................23
"ERISA" ...................................................................................................5
"Exchange Act" ..........................................................................................iii
"Financed Vehicles" .....................................................................................i,3
"foreign person" .........................................................................................39
"FTC Rule" ...............................................................................................36
"Full Prepayment" ........................................................................................14
"Grantor Trust Certificateholders"........................................................................44
"Grantor Trust Certificates"..............................................................................44
"Holders" ................................................................................................19
"Indenture Events of Default".............................................................................31
"Indenture Trustee" .......................................................................................i
"Indenture" ...............................................................................................1
"Indirect Participants"...................................................................................18
"Insolvency Laws" .........................................................................................6
"Interest Rate" ...........................................................................................2
"IRS" ....................................................................................................37
"Issuer" ..................................................................................................1
"Liquidation Expenses"....................................................................................23
"Monthly P&I" ............................................................................................14
"Motor Vehicle Contracts"..................................................................................9
"Net Insurance Proceeds"..................................................................................23
"Net Liquidation Proceeds"................................................................................23
"New Withholding Regulations".............................................................................39
"Note Principal Balance"...................................................................................2
"Noteholders" .............................................................................................8
"Notes" ...................................................................................................i
"OCS".....................................................................................................11
</TABLE>
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<PAGE> 56
<TABLE>
<S> <C>
"OID regulations".........................................................................................38
"OID" ....................................................................................................38
"Onyx" ..................................................................................................i,1
"Original Pool Balance"...................................................................................15
"Participants" ...........................................................................................18
"Payahead Account" .......................................................................................23
"Payaheads" ..............................................................................................23
"Plan Assets Regulation"..................................................................................48
"Pool Balance" ...........................................................................................15
"Pooling and Servicing Agreement"..........................................................................1
"Prefunded Amount" .......................................................................................14
"Prefunding Account" .....................................................................................14
"Prefunding Arrangement"................................................................................4,14
"Prospectus Supplement"....................................................................................i
"Purchase Agreement" .....................................................................................16
"Rating Agency" ...........................................................................................5
"Recomputed Actuarial Method".............................................................................14
"Recomputed Yield" .......................................................................................14
"Registration Statement".................................................................................iii
"Related Documents" ......................................................................................32
"Repurchase Amount" ......................................................................................22
"Rule of 78's Contracts"..................................................................................13
"Sale and Servicing Agreement".............................................................................4
"Section 1286 Treasury Regulations".......................................................................45
"Securities Act" ......................................................................................iii,1
"Securities" ..............................................................................................i
"Security Insurance Policy"................................................................................4
"Security Insurer" ........................................................................................4
"Security Owners" ........................................................................................18
"Securityholders" .........................................................................................8
"Seller" ................................................................................................i,1
"Selling Subsidiary" ......................................................................................4
"Servicer Default" .......................................................................................27
"Servicer Report Date"....................................................................................23
"Servicer" ................................................................................................i
"Servicing Fee Rate" .....................................................................................25
"Servicing Fee" ..........................................................................................25
"Simple Interest Contracts"...............................................................................13
"Simple Interest Method"..................................................................................13
"Strip Certificates" ......................................................................................3
"Strip Notes" .............................................................................................2
"Subsequent Contracts"..................................................................................4,14
"Transfer and Servicing Agreements".......................................................................21
"Trust Accounts" .........................................................................................23
"Trust Agreement" .........................................................................................1
"Trust Property" ........................................................................................3,8
"Trustee" .................................................................................................i
"Trust" ................................................................................................i, 1
"UCC" ..................................................................................................6,33
"Underwriting Agreement"..................................................................................48
</TABLE>
-52-
<PAGE> 57
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION*
The following is an itemized list of the estimated expenses to be
incurred in connection with the offering of the securities being offered
hereunder other than underwriting discounts and commissions.
<TABLE>
<S> <C>
Registration Fee....................................................... $ 295,000
Blue Sky Fees and Expenses............................................. 100,000
Printing Expenses...................................................... 180,000
Trustee Fees and Expenses.............................................. 70,000
Legal Fees and Expenses................................................ 450,000
Accounting Fees and Expenses........................................... 70,000
Rating Agencies' Fees.................................................. 240,000
Miscellaneous.......................................................... 95,000
----------
Total........................................................ $1,500,000
==========
</TABLE>
* All amounts except registration fee are estimates.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under Section 145 of the Delaware General Corporation Law ("DELAWARE
LAW") Onyx Acceptance Financial Corporation (the "COMPANY") has broad powers to
indemnify its directors and officers against liabilities they may incur in such
capacities, including liabilities under the Securities Act of 1933, as amended
(the "SECURITIES ACT"). The Company's Bylaws (the "BYLAWS") provide that the
Company shall indemnify its directors and officers to the fullest extent
permitted by law and requires the Company to advance litigation expenses upon
receipt by the Company of an undertaking by the director or officer to repay
such advances if it is ultimately determined that the director is not entitled
to indemnification. The Bylaws further provide that rights conferred under such
Bylaws shall not be deemed to be exclusive of any other right such persons may
have or acquire under any bylaw, agreement, vote of stockholders or
disinterested directors, or otherwise.
The Certificate of Incorporation (the "CERTIFICATE OF INCORPORATION")
provides that, pursuant to Delaware Law, its directors shall not be liable for
monetary damages for breach of the directors' fiduciary duty of care to the
Company and its stockholders. This provision in the Certificate of Incorporation
does not eliminate the duty of care, and in appropriate circumstances equitable
remedies such as injunctive or other forms of non-monetary relief will remain
available under Delaware Law. In addition, each director will continue to be
subject to liability for breach of the director's duty of loyalty to the Company
for acts or omissions not in good faith or involving intentional misconduct, for
knowing violations of law, for actions leading to improper personal benefits to
the director, and for payment of dividends or approval of stock repurchases or
redemptions that are unlawful under Delaware Law. The provision also does not
affect a director's responsibilities under any other law, such as the federal
securities laws or state or federal environmental laws. The Certificate of
Incorporation further provides that the Company shall indemnify its directors
and officers to the fullest extent permitted by law, and requires the Company to
advance litigation expenses in the case of stockholder derivative actions or
other actions, against an undertaking by the director to repay such advances if
it is ultimately determined that the director is not entitled to
indemnification. The Certificate of Incorporation also provides that rights
conferred under such Certificate of Incorporation shall not be deemed to be
exclusive of any other right such persons may have or acquire under any statute,
the Certificate of Incorporation, the Bylaws, agreement, vote of stockholders or
disinterested directors, or otherwise.
The Company has acquired a directors' and officers' liability
insurance policy that, subject to the terms and conditions of the policy,
insures the directors and officers of the Company against losses arising from
any wrongful act (as defined by the policy) in his or her capacity as a director
or officer. The policy reimburses the Company for amounts
II-1
<PAGE> 58
which the Company lawfully indemnifies or for which it is required or permitted
by law to indemnify its directors and officers.
In addition, the Company has entered into agreements to indemnify its
directors and certain of its officers in addition to indemnification provided
for in the Certificate of Incorporation and Bylaws. These agreements will, among
other things, indemnify the Company's directors and certain of its officers for
certain expenses (including attorneys' fees), judgments, fines and settlement
amounts incurred by such person in any action or proceeding, including any
action by or in the right of the Company, on account of services as a director
or officer of the Company or as a director or officer of any subsidiary of the
Company, or as a director or officer of any other company or enterprise that the
person provides services to at the request of the Company.
The Underwriting Agreement provides for indemnification by the
Company of the Underwriter, for certain liabilities rising under the Securities
Act or otherwise. It also provides, in certain limited instances, for
indemnification by the Underwriter of the Company with respect to information
furnished by or on behalf of the Underwriter that are contained in this
prospectus or included as part of this Registration Statement.
[Remainder of Page Intentionally Left Blank]
II-2
<PAGE> 59
ITEM 16. EXHIBITS AND FINANCIAL STATEMENTS
a. Exhibits:
<TABLE>
<S> <C>
**1.1 Form of Underwriting Agreement
**4.1 Form of Trust Agreement between the Registrant, the
Servicer and the Owner Trustee
**4.2 Form of Indenture between the Trust and the Indenture
Trustee
*4.3 Form of Sale and Servicing Agreement among the
Registrant, the Servicer and the Owner Trustee
**4.4 Form of Pooling and Servicing Agreement among the
Registrant, the Servicer and the Trustee
**4.5 Form of Administration Agreement among the Trust, the
Administrator and the Indenture Trustee
**5.1(a) Opinion of Andrews & Kurth L.L.P. with respect to
legality of Notes
**5.1(b) Opinion of Andrews & Kurth L.L.P. with respect to
legality of Certificates
***8.1 Opinion of Andrews & Kurth L.L.P. with respect to tax
matters
**23.1 Consent of Andrews & Kurth L.L.P. (included as part of
Exhibits 5.1(a) and 5.1(b))
***23.2 Consent of Andrews & Kurth L.L.P. (included as part of
Exhibit 8.1)
**24.1 Power of Attorney of Directors and Officers of the
Registrant.
****99.1 Form of Prospectus Supplement (Grantor Trust)
****9.2 Form of Prospectus Supplement (Owner Trust)
</TABLE>
- ------------
* Filed herewith.
** Previously filed with the Commission as an exhibit to the Registrant's
Form S-3 Registration Statement (File No. 333-51239) on April 28, 1998 and
incorporated herein by reference.
*** Previously filed with the Commission as an exhibit to the Registrant's
Amendment No. 1 to Form S-3 Registration Statement (File No. 333-51239) on
April 30, 1998 and incorporated herein by reference.
**** Previously filed with the Commission as part of the Registrant's Form S-3
Registration Statement (File No. 333-51239) on April 28, 1998 and
incorporated herein by reference.
ITEM 17. UNDERTAKINGS
(a) As to Rule 415:
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers
or sales are being made of the securities registered
hereby, a post-effective amendment to this registration
statement:
(i) to include any prospectus required
by Section 10(a)(3) of the Securities Act of
1933, as amended;
(ii) to reflect in the prospectus any
facts or events arising after the effective date
of this registration statement (or the most
recent post-effective amendment hereof) which,
individually or in the aggregate, represent a
fundamental change in the information set forth
in this registration statement; and
(iii) to include any material
information with respect to the plan of
distribution not previously disclosed in this
registration statement or any material change to
such information in this registration statement.
Provided, however, that the undertakings set
forth in clauses (i) and (ii) above do not apply if the
information required to be included in a post-effective
amendment by those clauses is contained in periodic
reports filed by the registrant pursuant to Section 13
or Section 15(d) of the Securities Exchange Act of 1934,
as amended, that are incorporated by reference in this
registration statement.
(2) That, for the purpose of determining any
liability under the Securities Act of 1933, as amended,
each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities
offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide
offering thereof.
(3) To remove from registration by means of a
post-effective amendment any of the securities being
registered which remain unsold at the termination of the
offering.
II-3
<PAGE> 60
(b) As to documents subsequently filed that are incorporated by
reference:
The undersigned registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act of
1933, as amended, each filing of the registrant's annual report
pursuant to Section 13(a) or Section 15(d) of the Securities Exchange
Act of 1934, as amended, that is incorporated by reference in this
registration statement shall be deemed to be a new registration
statement relating to the securities offered herein, and the offering
of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(c) As to indemnification:
Insofar as indemnification for liabilities arising under
the Securities Act of 1933, as amended, may be permitted to
directors, officers and controlling persons of the registrant
pursuant to the provisions described under Item 15 above, or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Securities Act of 1933, as amended,
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in such
Securities Act of 1933, as amended, and will be governed by the final
adjudication of such issue.
II-4
<PAGE> 61
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Amendment
No. 2 to Registration Statement No. 333-51239 to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Irvine, State of
California, on June 3, 1998.
Onyx Acceptance Financial Corporation
By: JOHN W. HALL*
---------------------------------------------
John W. Hall
Director, President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Amendment No. 2 to Registration Statement No. 333-51239 has been signed by the
following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
JOHN W. HALL* President and Chief June 3, 1998
- -------------------------------------- Executive Officer, Director
John W. Hall (Principal Executive Officer)
DON P. DUFFY* Executive Vice President June 3, 1998
- -------------------------------------- and Chief Financial Officer,
Don P. Duffy Director (Principal Financial
and Accounting Officer)
/s/ REGAN E. KELLY Executive Vice President, June 3, 1998
- -------------------------------------- Director
Regan E. Kelly
KURT C. BICKNELL* Director June 3, 1998
- --------------------------------------
Kurt C. Bicknell
STEVE M. BOND* Director June 3, 1998
- --------------------------------------
Steve M. Bond
* By: /s/ REGAN E. KELLY
-------------------------------
Regan E. Kelly
Attorney-in-fact
</TABLE>
II-5
<PAGE> 62
EXHIBIT INDEX
-------------
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
**1.1 Form of Underwriting Agreement
**4.1 Form of Trust Agreement between the Registrant, the
Servicer and the Owner Trustee
**4.2 Form of Indenture between the Trust and the Indenture
Trustee
*4.3 Form of Sale and Servicing Agreement among the
Registrant, the Servicer and the Owner Trustee
**4.4 Form of Pooling and Servicing Agreement among the
Registrant, the Servicer and the Trustee
**4.5 Form of Administration Agreement among the Trust, the
Administrator and the Indenture Trustee
**5.1(a) Opinion of Andrews & Kurth L.L.P. with respect to
legality of Notes
**5.1(b) Opinion of Andrews & Kurth L.L.P. with respect to
legality of Certificates
***8.1 Opinion of Andrews & Kurth L.L.P. with respect to tax
matters
**23.1 Consent of Andrews & Kurth L.L.P. (included as part of
Exhibits 5.1(a) and 5.1(b))
***23.2 Consent of Andrews & Kurth L.L.P. (included as part of
Exhibit 8.1)
**24.1 Power of Attorney of Directors and Officers of the
Registrant.
- ---------------
* Filed herewith.
** Previously filed with the Commission as an exhibit to the Registrant's
Form S-3 Registration Statement (File No. 333-51239) on April 28, 1998 and
incorporated herein by reference.
*** Previously filed with the Commission as an exhibit to the Registrant's
Amendment No. 1 to Form S-3 Registration Statement (File No. 333-51239) on
April 30, 1998 and incorporated herein by reference.
**** Previously filed with the Commission as part of the Registrant's Form S-3
Registration Statement (File No. 333-51239) on April 28, 1998 and
incorporated herein by reference.
<PAGE> 1
EXHIBIT 4.3
SALE AND SERVICING AGREEMENT
by and between
ONYX ACCEPTANCE OWNER TRUST 1998-A
as Issuer,
ONYX ACCEPTANCE FINANCIAL CORPORATION
as Seller,
and
ONYX ACCEPTANCE CORPORATION
as Servicer
Dated as of June 1, 1998
<PAGE> 2
This SALE AND SERVICING AGREEMENT, dated as of June 1, 1998 (this
"AGREEMENT"), is by and between Onyx Acceptance Owner Trust 1998-A (the
"ISSUER"), Onyx Acceptance Financial Corporation (the "SELLER") and Onyx
Acceptance Corporation ("ONYX" or, in its capacity as servicer, the "SERVICER").
In consideration of the premises and the mutual covenants herein
contained, the parties hereto agree as follows:
ARTICLE ONE
DEFINITIONS
Section 1.01. DEFINITIONS. Whenever used in this Agreement, the
following words and phrases, unless the context otherwise requires, shall have
the following meanings:
"ACCELERATE PRINCIPAL COMMENCEMENT DATE" means ______________, 199__.
"ACCELERATED PRINCIPAL DISTRIBUTABLE AMOUNT" means, with respect to any
Distribution Date occurring on or after the Accelerated Principal Commencement
Date, an amount equal to the lesser of (i) one-twelfth of ____% of the aggregate
outstanding principal balance of the Notes as of the close of business on the
prior Distribution Date and (ii) amounts remaining on deposit in the Collection
Account for such Distribution Date after giving effect to the distributions
pursuant to clauses (i) through (x) of Section 5.05(a) without regard to the
inclusion of such amount as part of the Note Principal Distributable Amount.
"AFFILIATE" of any specified Person means any other Person controlling
or controlled by or under common control with such specified Person. For the
purposes of this definition, "control" when used with respect to any specified
Person means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms "controlling" or "controlled" have meanings
correlative to the foregoing.
"AGGREGATE NET LIQUIDATION LOSSES" means, with respect to any Collection
Period, the aggregate of the amounts by which (i) the principal amount of each
Contract that became a Liquidated Contract pursuant to clause (ii) or (iv) of
the definition of the term "Liquidated Contract" during such Collection Period
plus accrued and unpaid interest thereon (adjusted to the Net Contract Rate) to
the last Due Date in such Collection Period exceeds (ii) the Net Liquidation
Proceeds for such Contract.
"AMOUNT FINANCED" means, with respect to a Contract, the aggregate
amount advanced under the Contract toward the purchase price of the related
Financed Vehicle and related costs, including amounts advanced in respect of
accessories, insurance premiums, service warranty, contracts, other items
customarily financed as part of retail automobile installment sales contracts,
and related costs.
1
<PAGE> 3
"APPOINTMENT OF CUSTODIAN" means the letter agreement between the Owner
Trustee and the Servicer substantially in the form attached hereto as Exhibit A.
"APR" of a Contract means the annual percentage rate used to determine
the total interest expected to be charged over the term of a Contract as of its
inception, as shown on such Contract
"ASSIGNMENTS" means, collectively, (i) the original instrument of
assignment of a Contract and all other documents securing such Contract made by
the Seller to the Owner Trustee (or in the case of any Contract acquired by the
Seller from another Person, from such other Person to the Seller and from the
Seller to the Owner Trustee), and (ii) the original instrument granting a
security interest in such Contract and other documents made by the Owner Trustee
to the Insurer, which, in the case of clause (i) above, is in a form sufficient
under the laws of the jurisdiction under which the security interest in the
related Financed Vehicle arises to permit the assignee to exercise all rights
granted by the Obligor under such Contract and such other documents and all
rights available under applicable law to the Obligee under such Contract and
such other documents and, in the case of clause (ii) above, is in a form
sufficient under the laws of the jurisdiction under which the security interest
in the related Financed Vehicle arises to permit the Insurer, as a secured
party, to exercise, upon default, all rights granted by the Obligor under such
Contract and such other documents and all rights available under applicable law
to the Obligee under such Contract and which, in the case of either clause (i)
or (ii) above, may, to the extent permitted by the laws of such jurisdiction, be
a blanket instrument of assignment covering other Contracts as well and which
may also, to the extent permitted by the laws of the jurisdiction governing such
Contract, be an instrument of assignment running directly from the Seller to the
Owner Trustee and the Insurer.
"BANK"means the institution designated as such pursuant to the Insurance
Agreement, or a successor Person pursuant to the Insurance Agreement, and
thereafter "Bank" shall mean such successor Person.
"BASIC DOCUMENTS" shall have the meaning specified in the Indenture.
"BLANKET INSURANCE POLICY" means the Lender's Blanket Consumer Loan
Insurance Policy covering losses with respect to the Contracts, which policy has
been issued by United Financial Casualty Company and the Servicer's rights
therein with respect to the Contracts have been validly assigned to the
Indenture Trustee acting on behalf of the Trust.
"BUSINESS DAY"means any day other than a Saturday, a Sunday or other day
on which commercial banking institutions or savings associations located in Los
Angeles, California or New York, New York are authorized or obligated by law,
regulation, executive order or governmental decree to be closed.
"CALCULATION DAY" means the last day of each calendar month.
2
<PAGE> 4
"CERTIFICATE BALANCE" equals $__________ on the Closing Date, and, on
any date thereafter, equals the Original Certificate Balance, reduced by all
amounts allocable to principal previously distributed to Certificateholders.
"CERTIFICATE DISTRIBUTABLE AMOUNT" means, with respect to any
Distribution Date, the sum of the Certificate Principal Distributable Amount and
the Certificate Interest Distributable Amount for such Distribution Date.
"CERTIFICATE DISTRIBUTION ACCOUNT" shall have the meaning specified in
the Trust Agreement.
"CERTIFICATE FINAL SCHEDULED DISTRIBUTION DATE" means the Distribution
Date occurring in _____________, 20___.
"CERTIFICATE INTEREST CARRYOVER SHORTFALL" means, with respect to any
Distribution Date, the excess of the sum of the Certificate Interest
Distributable Amount for the immediately preceding Distribution Date and any
outstanding Certificate Interest Carryover Shortfall on such preceding
Distribution Date, over the amount in respect of interest on the Certificates
that is actually deposited in the Certificate Distribution Account on such
preceding Distribution Date, plus interest on such excess, to the extent
permitted by law, at the Certificate Rate for the related Interest Accrual
Period.
"CERTIFICATE INTEREST DISTRIBUTABLE AMOUNT" means, with respect to any
Distribution Date, the sum of (i) an amount equal to the interest accrued during
the related Interest Accrual Period at the Certificate Rate on the Certificate
Balance on the immediately preceding Distribution Date, after giving effect to
all distributions of principal on or prior to such Distribution Date (or, in the
case of the first Distribution Date, the original Certificate Balance) and ii)
the Certificate Interest Carryover Shortfall for such Distribution Date.
Interest with respect to the Certificates shall be computed on the basis of a
360-day year consisting of twelve 30-day months for all purposes of this
Agreement and the other Basic Documents.
"CERTIFICATE PERCENTAGE" means (i) for each Distribution Date to but
excluding the Distribution Date on which the principal amount of the Class ____
Notes is reduced to zero, zero; (ii) for the Distribution Date on which the
principal amount of the Class ____ Notes is reduced to zero, (A) zero until the
principal amount of the Class ____ Notes has been reduced to zero and (B) with
respect to any remaining portion of the Regular Principal Distributable Amount,
100%; and (iii) for any Distribution Date thereafter, 100%.
"CERTIFICATE POOL FACTOR" means, as of any Distribution Date, a
six-digit decimal figure equal to the Certificate Balance (after giving effect
to any reductions therein to be made on such Distribution Date) divided by the
Original Certificate Balance.
"CERTIFICATE PRINCIPAL CARRYOVER SHORTFALL" means, as of any
Distribution Date, the excess of the sum of the Certificate Principal
Distributable Amount and any outstanding Certificate
3
<PAGE> 5
Principal Carryover Shortfall for the immediately preceding Distribution Date,
over the amount in respect of principal that is actually deposited in the
Certificate Distribution Account on such Distribution Date.
"CERTIFICATE PRINCIPAL DISTRIBUTABLE AMOUNT" means, with respect to any
Distribution Date, the sum of (i) the Certificate Percentage of the Regular
Principal Distributable Amount for such Distribution Date and (ii) any
outstanding Certificate Principal Carryover Shortfall for the immediately
preceding Distribution Date; provided, however, that the Certificate Principal
Distributable Amount shall not exceed the Certificate Balance. In addition, on
the Certificate Final Distribution Date, the amount required to be deposited
into the Certificate Distribution Account will include the amount necessary to
reduce the Certificate Balance to zero.
"CERTIFICATE RATE" means _____% per annum.
"CERTIFICATE REGISTER" shall have the meaning specified in the Trust
Agreement.
"CERTIFICATEHOLDERS" shall have the meaning specified in the Trust
Agreement.
"CERTIFICATES" means the Certificates (as such term is defined in the
Trust Agreement).
["CHARGE-OFF PERCENTAGE" means, with respect to any three calendar month
period, the annualized percentage equivalent of the average of the percentages
of charged-off Contracts for each month in such period. For each month, the
percentage of charged-off Contracts shall be the percentage equivalent of a
fraction, the numerator of which is the aggregate Scheduled Balance for such
month of all Contracts that became Liquidated Contracts pursuant to clauses (ii)
or (iv) of the definition of the term "Liquidated Contract" during such month,
less any Net Liquidation Proceeds received during such month (and not reflected
in prior periods) with respect to such Contracts or from any Contracts
charged-off in prior periods, and the denominator of which is the aggregate
Scheduled Balances of all Outstanding Contracts as of the end of the immediately
preceding month.]
"CLASS" means all Notes whose form is identical except for variation in
denomination, principal amount or owner.
"CLASS A-1 FINAL SCHEDULED DISTRIBUTION DATE" means the Distribution
Date occurring in _____________, 199__.
"CLASS A-1 NOTEHOLDER" means the Person in whose name a Class A-1 Note
is registered in the Note Register.
"CLASS A-1 RATE" means _____% per annum.
"CLASS A-2 FINAL SCHEDULED DISTRIBUTION DATE"means the Distribution Date
occurring in _____________, 199__.
4
<PAGE> 6
"CLASS A-2 NOTEHOLDER" means the Person in whose name a Class A-2 Note
is registered in the Note Register.
"CLASS A-2 RATE" means _____% per annum.
"CLASS A-3 FINAL SCHEDULED DISTRIBUTION DATE"means the Distribution Date
occurring in _____________, 199__.
"CLASS A-3 NOTEHOLDER" means the Person in whose name a Class A-3 Note
is registered in the Note Register.
"CLASS A-3 RATE" means _____% per annum.
"CLASS A-4 FINAL SCHEDULED DISTRIBUTION DATE" means the Distribution
Date occurring in _____________, 20___.
"CLASS A-4 NOTEHOLDER" means the Person in whose name a Class A-4 Note
is registered in the Note Register.
"CLASS A-4 RATE" means _____% per annum.
"CLEARING ACCOUNT" means Account No. 4159359173 in the name of the
Seller maintained at Wells Fargo Bank, N.A.
"CLEARING AGENCY" means an organization registered as a "clearing
agency" pursuant to Section 17A of the Exchange Act.
"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 June __, 1998.
"COLLECTION ACCOUNT" means the account established and maintained as
such pursuant to Section 5.01.
"COLLECTION PERIOD" means, with respect to any Distribution Date, the
calendar month preceding the month in which such Distribution Date occurs;
provided that for Liquidated Contracts the Collection Period will be the period
from but excluding the sixth Business Day preceding the immediately preceding
Distribution Date to and including the sixth Business Day preceding such
Distribution Date; provided, further, however, that with respect to the first
Distribution Date the "Collection Period" for Liquidated Contracts shall be the
period from and including the Cut-Off Date to and including the sixth Business
Day preceding such first Distribution Date.
5
<PAGE> 7
"CONTRACT" means each retail installment sales contract and security
agreement or installment loan agreement and security agreement and all proceeds
thereof and payments thereunder, which contract or agreement has been executed
by an Obligor and pursuant to which such Obligor purchased or financed the
Financed Vehicle described therein, agreed to pay the deferred purchase price
(i.e., the purchase price net of any down payment) or amount borrowed, together
with interest, as therein provided in connection with such purchase or loan,
granted a security interest in such Financed Vehicle, and undertook to perform
certain other obligations as specified in such contract or agreement. Each
Contract shall have been (i) either (A) originated or purchased by a subsidiary
of Onyx and subsequently conveyed to Onyx or (B) originated by a Dealer and
assigned to Onyx in accordance with the assignment provisions set forth therein
and (ii) in either case subsequently conveyed by Onyx to Finco pursuant to the
Purchase Agreement and then by Finco to the Issuer pursuant to this Agreement.
"CONTRACT DOCUMENTS" means, with respect to each Contract, (a) the
Contract and the original credit application fully executed by the Obligor
thereunder; (b) either (i) the original Title Document for the related Financed
Vehicle or a duplicate copy thereof issued or certified by the Registrar of
Titles which issued the original thereof (or, with respect to certain of the
Financed Vehicles registered in the State of California, evidence of the
electronic Title Document), together with evidence of perfection of the security
interest in the related Financed Vehicle granted by such Contract, as determined
by the Servicer to be permitted or required to perfect such security interest
under the laws of the applicable jurisdiction, or (ii) written evidence that the
Title Document for such Financed Vehicle showing Onyx or a subsidiary of Onyx as
first lienholder has been applied for; and (c) any agreement(s) modifying the
Contract (including, without limitation, any extension agreement(s)).
"CONTRACT FILES" means the Contract Documents and all other papers and
computerized records customarily kept by the Servicer in servicing contracts and
loans comparable to the Contracts.
"CONTRACT NUMBER" means, with respect to any Contract included in the
Trust, the number assigned to such Contract by the Servicer, which number is set
forth in the related Schedule of Contracts.
"CONTRACT RATE" means, (i) with respect to a Simple Interest Contract,
the APR and (ii) with respect to a Rule of 78's Contract, the Recomputed Yield
for such contract used in accordance with the definition of the term "Scheduled
Balance" to derive the Scheduled Balance from time to time of such Contract.
"CORPORATE TRUST OFFICE" means the principal office of the Indenture
Trustee at which at any particular time its corporate trust business shall be
administered, which office at the date of the execution of this Agreement is
located at _____________________________________________;
6
<PAGE> 8
or at such other address as the Indenture Trustee may designate from time to
time by notice to the Certificateholders, the Insurer, the Servicer and the
Seller.
["CRAM DOWN LOSSES" means, with respect to a Contract if a court of
appropriate jurisdiction in an insolvency proceeding shall have issued an order
reducing the amount owed on such Contract or otherwise modifying or
restructuring the scheduled payments to be made on such Contract, an amount
equal to (i) the excess of the Principal Balance of such Contract immediately
prior to such order over the Principal Balance of such Contract as so reduced
and/or (ii) if such court shall have issued an order reducing the effective rate
of interest on such Contract, the excess of the Principal Balance of such
Contract immediately prior to such order over the net present value (using as
the discount rate the higher of the annual percentage rate on such Contract or
the rate of interest, if any, specified by the court in such order) of the
scheduled payments as so modified or restructured. A Cram Down Loss shall be
deemed to have occurred on the date of issuance of such order.]
"CUT-OFF DATE" means June 1, 1998.
"DEALER" means the seller of a Financed Vehicle, which seller originated
and assigned the related Contract.
"DEFAULT" means any occurrence which with the giving of notice or the
lapse of time or both would become a Servicer Default.
"DEFAULTED CONTRACT" means, with respect to any Collection Period, a
Contract (i) which is, at the end of such Collection Period, past due in an
aggregate amount equal to two or more monthly installments of Monthly P&I or
(ii) with respect to which the related Financed Vehicle has been repossessed or
repossession efforts with respect to the related Financed Vehicle have been
commenced.
"DEFICIENCY CLAIM DATE" means, with respect to any Distribution Date,
the fourth Business Day immediately preceding such Distribution Date.
"DEFICIENCY NOTICE" means, with respect to any Distribution Date, the
notice delivered pursuant to Section 5.02(c) by the Servicer to the Indenture
Trustee, with a copy to the Insurer and the Owner Trustee.
"DELINQUENCY PERCENTAGE" means, with respect to any three calendar month
period, the average of the percentages of delinquent Contracts for each month in
such period. For each month the percentage of delinquent Contracts shall be the
percentage equivalent of a fraction, the numerator of which is the sum of (i)
the aggregate Scheduled Balance of all Outstanding Contracts 61 days or more
delinquent (after taking into account permitted extensions), plus (ii) the
aggregate Scheduled Balance of all Contracts in respect of which the related
Financed Vehicles have been repossessed but have not been liquidated (to the
extent the related Contract is not otherwise reflected in clause
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(i) above), and the denominator of which is the aggregate Scheduled Balance of
all outstanding Contracts, in each case, on the last day of such calendar month.
"DELIVERY" means, when used with respect to Trust Account Property:
(a) with respect to certificated securities, bankers' acceptances,
commercial paper, negotiable certificates of deposit and any other obligations
which evidence a right to the payment of money and is not itself a security
agreement or lease and is of a type which is in ordinary course of business
transferred by delivery with necessary endorsement or assignment (collectively,
"Physical Property"): (i) the Indenture Trustee or the Owner Trustee, as the
case may be, or its Financial Intermediary acquires possession of the Physical
Property, and evidence that any such Physical Property that is in registrable
form has been registered in the name of the Trustee, its Financial Intermediary,
its custodian or its nominee; (ii) the Financial Intermediary, not a clearing
corporation, sends the Indenture Trustee or the Owner Trustee, as the case may
be, confirmation of the transfer and also by book entry or otherwise identifies
as belonging to the Indenture Trustee or the Owner Trustee, as the case may be,
the Physical Property in the Financial Intermediaries possession; or (iii) with
respect to a clearing corporation, appropriate entries to the account of the
Indenture Trustee or the Owner Trustee, as the case may be, or a Person
designated by him or her and, if certificated, it is both, in the custody of the
clearing corporation or another clearing corporation, a custodian bank or a
nominee of any of them and, in bearer form or endorsed in blank by the
appropriate person or registered in the name of the clearing corporation,
custodian bank, or a nominee of any of them;
(b) with respect to any Trust Account Property that is a book-entry
security held through the Federal Reserve System pursuant to Federal book-entry
regulations, the following procedures, all in accordance with applicable law,
including applicable Federal regulations and Articles 8 and 9 of the UCC: (i)
book-entry registration of such property to an appropriate book-entry account
maintained with a Federal Reserve Bank by the Indenture Trustee or the Owner
Trustee, as the case may be, of a deposit advice or other written confirmation
of such book-entry registration, (ii) the making by any such custodian of
entries in its books and records identifying such book-entry security held
through the Federal Reserve System pursuant to federal book-entry regulations as
belonging to the Indenture Trustee or the Owner Trustee, as the case may be, and
indicating that such custodian holds such Trust Account Property solely as agent
for the Indenture Trustee or the Owner Trustee, as the case may be, and the
making by the Indenture Trustee or the Owner Trustee, as the case may be, of
entries in its books and records establishing that it holds such Trust Account
Property solely as trustee pursuant to Section 5.01, and (iii) such additional
or alternative procedures as may hereafter become necessary to effect complete
transfer of ownership of any such Trust Account Property to the Indenture
Trustee or the Owner Trustee, as the case may be, consistent with changes in
applicable law or regulations or the interpretation thereof; and
(c) with respect to any Trust Account Property that is an uncertificated
security under Article 8 of the UCC and that is not governed by clause (ii)
above, registration of the transfer to, and
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ownership of such Trust Account Property by, the Indenture Trustee or the Owner
Trustee, as the case may be, its custodian or its nominee by the issuer of such
Trust Account Property.
"DEPOSITOR" means the Seller in its capacity as Depositor under the
Trust Agreement, and its successors.
"DISTRIBUTION DATE"means the 15th day of each month or if such date
shall not be a Business Day, the following Business Day, commencing in July
1998.
"DISTRIBUTION DATE OUTSTANDING PRINCIPAL BALANCE" means, with respect to
any Rule of 78's Contract which has been the subject of a partial prepayment,
the amount equal to the total of all Monthly P&I due after the Distribution Date
next succeeding the Collection Period during which such partial prepayment was
received, less any unearned finance charge as of the Due Date next preceding
such Distribution Date computed in accordance with the Rule of 78's.
"DISTRIBUTION DATE STATEMENT" shall have the meaning specified in
Section 4.09(a).
"DTC" means The Depository Trust Company, and its successors.
"DUE DATE" means, as to any Contract, the date upon which an installment
of Monthly P&I is due.
"ELIGIBLE ACCOUNT" means (i) a trust account that is either (a)
maintained by the Indenture Trustee, (b) maintained with a depository
institution or trust company the commercial paper or other short-term debt
obligations of which have credit ratings from Standard & Poor's at least equal
to "A-1" and from Moody's equal to "P-1," which account is fully insured up to
applicable limits by the Federal Deposit Insurance Corporation or (c) maintained
with a depository institution acceptable to the Insurer, as evidenced by a
letter from the Insurer to that effect or (ii) a general ledger account or
deposit account at a depository institution acceptable to the Insurer, as
evidenced by a letter from the Insurer to that effect.
"ELIGIBLE INVESTMENTS" means any one or more of the following
obligations or securities, all of which shall be denominated in United States
dollars:
(a) direct obligations of, and obligations fully guaranteed as to timely
payment of principal and interest by, the United States of America or any agency
or instrumentality of the United States of America the obligations of which are
backed by the full faith and credit of the United States of America and, to the
extent, at the time of investment, acceptable to the Insurer and each Rating
Agency for securities having a rating equivalent to the rating of the Notes at
the Closing Date, the direct obligations of, or obligations fully guaranteed by,
the Federal Home Loan Mortgage Corporation and the Federal National Mortgage
Association;
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(b) demand and time deposits in, certificates of deposit of, banker's
acceptances issued by, or federal funds sold by any depository institution or
trust company (including the Indenture Trustee or the Owner Trustee)
incorporated under the laws of the United States of America or any State and
subject to supervision and examination by Federal and/or State banking
authorities, so long as at the time of such investment or contractual commitment
providing for such investment either (i) the long-term, unsecured debt
obligations of such depository institution or trust company have credit ratings
from Standard & Poor's at least equal to "AA-" and from Moody's at least equal
to "Aa2" or (ii) such depository institution is acceptable to the Insurer as
evidenced by a letter from the Insurer to the Indenture Trustee;
(c) repurchase obligations with respect to (i) any security described in
clause (a) above or (ii) any other security issued or guaranteed as to timely
payment of principal and interest by an agency or instrumentality of the United
States of America, in either case entered into with any depository institution
or trust company (including the Indenture Trustee and the Owner Trustee), acting
as principal, described in clause (b) above;
(d) securities bearing interest or sold at a discount issued by any
corporation incorporated under the laws of the United States of America or any
state thereof which at the time of such investment or contractual commitment
providing for such investment have long-term, unsecured debt obligations rated
by Standard & Poor's "AA-" or better and by Moody's "Aa2" or better; provided,
however, that securities issued by any corporation will not be Eligible
Investments to the extent that investment therein will cause the then
outstanding principal amount of securities issued by such corporation and held
as part of the Trust to exceed 10% of the aggregate Outstanding Principal
Balances of the Contracts and all amounts of Eligible Investments held as part
of the Trust;
(e) commercial paper having the highest rating by Standard & Poor's and
Moody's at the time of such investment;
(f) investments in money market funds or money market mutual funds
having a rating from Standard & Poor's and Moody's in the highest investment
category granted thereby, including funds for which the Indenture Trustee, the
Owner Trustee or any of their respective Affiliates is investment manager or
advisor; and
(g) such other obligations or securities acceptable to the Insurer, as
evidenced by a letter from the Insurer to the Indenture Trustee (which
acceptability may be revoked at any time by the Insurer).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"EXCESS AMOUNTS" shall have the meaning specified in Section 5.05(b).
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
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"FDIC" means the Federal Deposit Insurance Corporation, and its
successors.
"FHLMC" means the Federal Home Loan Mortgage Corporation, and its
successors.
"FNMA" means the Federal National Mortgage Association, and its
successors.
"FINAL SCHEDULED DISTRIBUTION DATE" means with respect to (i) the Notes,
the Class A-1 Final Scheduled Distribution Date, the Class A-2 Final Scheduled
Distribution Date, the Class A-3 Final Scheduled Distribution Date or the Class
A-4 Final Scheduled Distribution Date, as the case may be, and (ii) the
Certificates, the Certificate Final Scheduled Distribution Date.
"FINANCED VEHICLE" means, as to any Contract, an automobile, light-duty
truck or van, together with all accessions thereto, securing the related
Obligor's indebtedness under such Contract.
"FINANCIAL INTERMEDIARY" means a bank, broker, clearing corporation or
the Person (or the nominee of any of them) that in the ordinary course of its
business maintains security accounts for its customers and is acting in that
capacity.
"FISCAL AGENT" shall have the meaning set forth in the Policies.
"FULL PREPAYMENT" means any of the following: (a) with respect to any
Contract other than a Contract referred to in clause (ii), (iii) or (iv) of the
definition of the term "Liquidated Contract", payment by or on behalf of the
Obligor of the total amount required by the terms of such Contract to be paid
thereunder, which amount shall be at least equal to the sum of (i) 100% of the
Scheduled Balance of such Contract, (ii) interest accrued thereon to the date of
such payment at the APR; and (iii) any overdue amounts; or (b) with respect to
any Contract, payment by the Seller to the Indenture Trustee of the Repurchase
Amount of such Contract in connection with the repurchase of such Contract
pursuant to Section 3.02, or payment by the Servicer of the Repurchase Amount of
such Contract in connection with the purchase of such Contract pursuant to
Section 4.07 or the purchase of all Contracts pursuant to Section 9.01.
"HOLDER" means, with respect to a (i) Certificate, the Person in whose
name such Certificate is registered in the Certificate Register and (ii) Note,
the Person in whose name such Note is registered in the Note Register.
"INDENTURE" means the Indenture, dated as of the date hereof, among the
Issuer and the Indenture Trustee.
"INDENTURE TRUSTEE" means the Person acting as Indenture Trustee under
the Indenture, its successors in interest and any successor trustee under the
Indenture.
"INDEPENDENT", when used with respect to any specified Person, means
such a Person who (i) is in fact independent of the Issuer, the Seller or Onyx,
(ii) is not a director, officer or employee
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of any Affiliate of the Issuer, the Seller or Onyx, (iii) is not a person
related to any officer or director of the Issuer, the Seller, Onyx or any of
their respective Affiliates, (iv) is not a holder (directly or indirectly) of
more than 10% of any voting securities of Issuer, the Seller, Onyx or any of
their respective Affiliates, and (v) is not connected with the Issuer, the
Seller or Onyx as an officer, employee, promoter, underwriter, trustee, partner,
director or person performing similar functions.
"INSOLVENCY EVENT" means, with respect to a specified Person, (i) the
entry of a decree or order for relief by a court or regulatory authority having
jurisdiction in respect of such Person in an involuntary 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 appointing a
receiver, liquidator, assignee, custodian, trustee, sequestrator or other
similar official for such Person or for any substantial part of its property, or
ordering the winding-up or liquidation of such Person's affairs, and the
continuance of any such decree or order unstayed and in effect for a period of
60 consecutive days; (ii) the commencement of an involuntary case under the
federal bankruptcy laws, as now or hereinafter in effect, or any other present
or future federal or state bankruptcy, insolvency or similar law and such case
is not dismissed within 60 days; or (iii) the commencement by such Person of a
voluntary case under the federal bankruptcy laws, as now or hereinafter in
effect, or any other present or future federal or state, bankruptcy, insolvency
or similar law, or the consent by such Person to the appointment of or taking
possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator
or other similar official for such Person or for any substantial part of its
property, or the making by such Person of an assignment for the benefit of
creditors or the failure by such Person generally to pay its debts as such debts
become due or the taking of corporate action by such Person in furtherance of
any the foregoing.
"INSOLVENCY PROCEEDING" shall have the meaning specified in Section
8.06.
"INSOLVENCY PROCEEDS" shall have the meaning specified in Section
9.01(b).
"INSURANCE AGREEMENT" means the Insurance and Reimbursement Agreement,
to be dated as of the Closing Date, among the Insurer, the Issuer, the Seller,
the Servicer and the Indenture Trustee., as amended, modified or restated from
time to time.
"INSURANCE PROCEEDS" means proceeds paid pursuant to the Blanket
Insurance Policy and amounts (exclusive of rebated premiums) paid by any insurer
under any other insurance policy related to a Financed Vehicle or a Contract.
"INSURER" means MBIA Insurance Corporation or its successors in
interest.
"INSURER INSOLVENCY" means (i) the entry of a decree or order for relief
by a court or regulatory authority having jurisdiction in respect of the Insurer
in an involuntary case under the federal bankruptcy laws, as now or hereafter in
effect, or any other present or future federal or state bank bankruptcy,
insolvency, rehabilitation or similar law, or appointing a receiver, liquidator,
assignee, trustee, custodian, sequestrator or other similar official of the
Insurer or with respect to any
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substantial part of its property, or ordering the winding up or liquidation of
the affairs of the Insurer and the continuance of any such decree or order
unstayed and in effect for a period of 60 consecutive days; or (ii) the
commencement by the 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, rehabilitation or similar law, or the consent by
the Insurer to the appointment of or taking possession by a receiver,
liquidator, assignee, trustee, custodian, sequestrator or other similar official
of the Insurer or of any substantial part of its property or the making by the
Insurer of an assignment for the benefit of creditors or the failure by the
Insurer generally to pay its debts as such debts become due or the taking of
corporate action by the Insurer in furtherance of any of the foregoing.
"INTEREST ACCRUAL PERIOD" means, with respect to any Distribution Date,
the period from and including the Distribution Date immediately preceding such
Distribution Date (or, in the case of the first Distribution Date, from and
including the Closing Date) to but excluding such Distribution Date.
"INTEREST RATE" means the Class A-1 Rate, the Class A-2 Rate, the Class
A-3 Rate or the Class A-4 Rate, as the case may be.
"INVESTMENT EARNINGS" means, with respect to any Distribution Date, the
investment earnings (net of losses and investment expenses) on amounts on
deposit in the Trust Accounts, [other than the Payahead Account,] to be
deposited into the Collection Account on such Distribution Date pursuant to
Section 5.01(b).
"ISSUER" means the Onyx Acceptance Owner Trust 1998-A.
"LIEN" means a security interest, lien, charge, pledge, equity or
encumbrance of any kind, other than tax liens, mechanics' liens and any liens
that attach to the respective Contract by operation of law.
"LIQUIDATED CONTRACT"means a Contract which (i) was or is the subject of
a Full Prepayment; or (ii) was or is a Defaulted Contract with respect to which
Liquidation Proceeds constituting, in the Servicer's reasonable judgment, the
final amounts recoverable in respect of such Defaulted Contract have been
received and deposited in the Collection Account; or (iii) was or is paid in
full on or after its Maturity Date; or (iv) has been a Defaulted Contract for
four or more Collection Periods and with respect to which Liquidation Proceeds
have not been deposited in the Collection Account; provided, however, that in
any event a Contract that is delinquent in the amount of five monthly
installments of Monthly P&I at the end of a Collection Period is a Liquidated
Contract. The Scheduled Balance of a Contract that becomes a Liquidated Contract
shall be reduced to zero as provided in the definition of "Scheduled Balance."
"LIQUIDATION EXPENSES" means reasonable out-of-pocket expenses (not to
exceed Liquidation Proceeds), other than any overhead expenses, incurred by the
Servicer in connection with the realization of the full amounts due under any
Defaulted Contract (including the attempted
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liquidation of a Contract which is brought current and is no longer in default
during such attempted liquidation) and the sale of any property acquired in
respect thereof which are not recoverable as Insurance Proceeds.
"LIQUIDATION PROCEEDS" means amounts received by the Servicer (before
reimbursement for Liquidation Expenses) in connection with the realization of
the full amounts due and to become due under any Defaulted Contract and the sale
of any property acquired in respect thereof.
"NOTE REGISTER" shall have the meaning specified in the Indenture.
"MATURITY DATE" means, with respect to any Contract, the date on which
the last scheduled payment of such Contract shall be due and payable as such
date may be extended pursuant to Section 4.02.
"MONTHLY P&I" means, with respect to any Contract, the amount of each
monthly installment of principal and interest payable to the Obligee of such
Contract in accordance with the terms thereof, exclusive of any charges
allocable to the financing of any insurance premium and charges which represent
late payment charges or extension fees.
"MOODY'S" means Moody's Investors Service, Inc., and its successors.
"NET COLLECTIONS" means, with respect to any Distribution Date and the
related Collection Period, the sum of (i) all payments of Monthly P&I, all
partial prepayments, all Full Prepayments, Net Liquidation Proceeds and Net
Insurance Proceeds in each case, collected with respect to the Contracts during
such Collection Period, less partial prepayments of Rule of 78's Contracts
collected with respect to the Contracts during such Collection Period which are
deposited in the Payahead Account pursuant to Section ___, (ii) amounts
withdrawn from the Payahead Account pursuant to Section ____ and deposited in
the Collection Account with respect to such Distribution Date, and (iii) the
aggregate Repurchase Amount for Repurchased Contracts deposited in or credited
to the Collection Account pursuant to Section 5.04(c) on the Business Day
preceding the Servicer Report Date next preceding such Distribution Date.
"NET CONTRACT RATE" means, with respect to any Contract, its Contract
Rate less the sum of the Servicing Fee Percent.
"NET INSURANCE PROCEEDS" means, with respect to any Contract, Insurance
Proceeds net of any such amount applied to the repair of the related Financed
Vehicle, released to the related Obligor in accordance with the normal servicing
procedures of the Servicer or representing expenses incurred by the Servicer and
recoverable hereunder.
"NET LIQUIDATION PROCEEDS" means the amount derived by subtracting from
the Liquidation Proceeds of a Contract the related Liquidation Expenses.
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"NOTE DISTRIBUTABLE AMOUNT" means, with respect to any Distribution
Date, the sum of the Note Principal Distributable Amount and the Note Interest
Distributable Amount for such Distribution Date.
"NOTE DISTRIBUTION ACCOUNT" means the account established and maintained
as such pursuant to Section 5.01.
"NOTE FINAL SCHEDULED DISTRIBUTION DATE" means the Class A-1 Final
Scheduled Distribution Date, the Class A-2 Final Scheduled Distribution Date,
the Class A-3 Final Scheduled Distribution Date or the Class A-4 Final Scheduled
Distribution Date, as the case may be.
"NOTE INTEREST CARRYOVER SHORTFALL" means, with respect to any
Distribution Date and a Class of Notes, the excess, if any, of the sum of the
Note Interest Distributable Amount for such Class for the immediately preceding
Distribution Date plus any outstanding Note Interest Carryover Shortfall for
such Class on such preceding Distribution Date, over the amount in respect of
interest that is actually deposited in the Note Distribution Account with
respect to such Class on such preceding Distribution Date, plus, to the extent
permitted by applicable law, interest on the amount of interest due but not paid
to Noteholders of such Class on the preceding Distribution Date at the related
Interest Rate for the related Interest Accrual Period.
"NOTE INTEREST DISTRIBUTABLE AMOUNT" means, with respect to any
Distribution Date and a Class of Notes, the sum of (i) an amount equal to the
interest accrued during the related Interest Accrual Period at the related
Interest Rate for such Class of Notes on the outstanding principal amount of
such Class of Notes on the immediately preceding Distribution Date, after giving
effect to all payments of principal to Noteholders of such Class on or prior to
such Distribution Date (or, in the case of the first Distribution Date, on the
original principal amount of such Class of Notes) and (ii) the Note Interest
Carryover Shortfall for such class of Notes for such Distribution Date.
"NOTE PERCENTAGE" means, (i) for each Distribution Date to but excluding
the Distribution Date on which the principal amount of the Class A-4 Notes is
reduced to zero, 100%; (ii) for the Distribution Date on which the principal
amount of the Class A-4 Notes is reduced to zero, (A) 100% until the principal
amount of the Class A-4 Notes has been reduced to zero and (B) with respect to
any remaining portion of the Regular Principal Distributable Amount, zero; and
(iii) for any Distribution Date after the principal amount of the Class A-4
Notes has been reduced to zero, 0%.
"NOTE POOL FACTOR" means, with respect to any Class of Notes as of any
Distribution Date, a six-digit decimal figure equal to the outstanding principal
amount of such Class of Notes (after giving effect to any reductions thereof to
be made on such Distribution Date) divided by the original outstanding principal
amount of such Class of Notes.
"NOTE PRINCIPAL CARRYOVER SHORTFALL" means, as of the close of any
Distribution Date, the excess of the sum of the Note Principal Distributable
Amount and any outstanding Note Principal
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Carryover Shortfall for the immediately preceding Distribution Date over the
amount in respect of principal that is actually deposited in the Note
Distribution Account on such Distribution Date.
"NOTE PRINCIPAL DISTRIBUTABLE AMOUNT" means, with respect to any
Distribution Date, the sum of (i) the Note Percentage of the Regular Principal
Distributable Amount for such Distribution Date, (ii) the Accelerated Principal
Distributable Amount, if any, for such Distribution Date and (iii) any
outstanding Note Principal Carryover Shortfall for the immediately preceding
Distribution Date; provided, however, that the Note Principal Distributable
Amount shall not exceed the aggregate outstanding principal amount of the Notes;
and provided further that the Note Principal Distributable Amount on the Note
Final Scheduled Distribution Date for a class of Notes shall not be less than
the amount that is necessary (after giving effect to other amounts to be
deposited in the Note Distribution Account on such Distribution Date and
allocable to principal) to reduce the outstanding principal amount of such class
of Notes to zero.
"NOTE REGISTER" shall have the meaning specified in the Indenture.
"OBLIGEE" means, with respect to any Contract, the Person to whom an
Obligor is indebted under such Contract.
"OBLIGOR" means, with respect to any Contract, the purchaser or
co-purchasers of the Financed Vehicle and any other Person who owes payments
under such Contract.
"OFFERED SECURITIES" shall have the meaning specified in Section
6.03(b)(ii).
"OFFICERS' CERTIFICATE" means a certificate signed by the Chairman, the
President or a Vice President, and by the Treasurer, an Assistant Treasurer, the
Controller, an Assistant Controller, the Secretary or an Assistant Secretary of
any Person delivering such certificate and delivered to the Person to whom such
certificate is required to be delivered. In the case of an Officers' Certificate
of the Servicer, at least one of the signing officers must be a Servicing
Officer. Unless otherwise specified, any reference herein to an Officers'
Certificate shall be to an Officers' Certificate of the Servicer.
"ONYX" means Onyx Acceptance Corporation and its successors in interest.
"OPINION OF COUNSEL" means a written opinion of counsel (who may be
counsel to the Seller or the Servicer) acceptable to the Indenture Trustee or
the Owner Trustee, as the case may be, and the Insurer.
"ORIGINAL CERTIFICATE BALANCE" means $__________.
"ORIGINAL CLASS A-1 NOTE BALANCE" means $__________.
"ORIGINAL CLASS A-2 NOTE BALANCE" means $__________.
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"ORIGINAL CLASS A-3 NOTE BALANCE" means $__________.
"ORIGINAL CLASS A-4 NOTE BALANCE" means $__________.
"ORIGINAL POOL BALANCE" means $__________, which is the aggregate of the
Principal Balances of the Contracts as of the Cut-Off Date .
"OUTSTANDING" means,
(a) with respect to a Contract and as of time of reference thereto, a
Contract that has not reached its Maturity Date, has not been fully prepaid, has
not become a Liquidated Contract and has not been repurchased pursuant to
Section 3.02, 4.07 or 9.01; and
(b) with respect to Securities, as of the date of determination, all
Notes of one Class or of all Classes, all Certificates or all Notes and
Certificates, as the case may be, theretofore authenticated and delivered
except:
(i) Securities theretofore canceled by the applicable Registrar
or delivered to the applicable registrar for cancellation;
(ii) Securities or portions thereof the payment for which money
in the necessary amount has been theretofore deposited with the
Indenture Trustee, the Owner Trustee or any Paying Agent, as the case
may be, in trust for the Holders of such Securities (provided, however,
that if such Securities are to be redeemed or repurchased, notice of
such redemption or repurchase has been duly given or provision for such
notice has been made, satisfactory to the Indenture Trustee, Owner
Trustee or Paying Agent, as applicable); and
(iii) Securities in exchange for or in lieu of other Securities
which have been authenticated and delivered unless proof satisfactory to
the applicable Indenture Trustee or Owner Trustee, as applicable, is
presented that any such Securities are held by a bona fide purchaser;
provided, however, that Securities which have been paid with proceeds of the
Securities Insurance Policy shall continue to remain Outstanding until the
Insurer has been paid as subrogee hereunder or reimbursed pursuant to the
Insurance Agreement as evidenced by a written notice from the Insurer delivered
to the Indenture Trustee or the Owner Trustee, as applicable, and the Insurer
shall be deemed to be the Holder thereof to the extent of any payments thereon
made by the Insurer; provided, further, that in determining whether the Holders
of a specified Outstanding Amount of Securities have given any request, demand,
authorization, direction, notice, consent or waiver hereunder or under any other
Basic Document, Securities owned by the Issuer, any other obligor upon the
Securities, the Seller, Onyx or any of their respective Affiliates shall be
disregarded and deemed not to be Outstanding, except that, in determining
whether the Indenture Trustee or Owner Trustee, as applicable, shall be
protected in relying upon any such request, demand, authorization,
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direction, notice, consent or waiver, only Securities that the applicable
trustee knows to be so owned shall be so disregarded. Securities so owned that
have been pledged in good faith may be regarded as Outstanding if the pledgee
establishes to the satisfaction of the Indenture Trustee or Owner Trustee, as
applicable, the pledgee's right so to act with respect to such Securities and
that the pledgee is not the Issuer, any other obligor upon the Securities, the
Seller, Onyx or any of their respective Affiliates.
"OUTSTANDING AMOUNT" means the aggregate principal amount of all Notes
of one Class or of all Classes, of all Certificates or of all Securities, as the
case may be, Outstanding at the date of determination.
"OUTSTANDING PRINCIPAL BALANCE" means, as of the Cut-Off Date, (i) with
respect to any Rule of 78's Contract, the amount set forth as the Outstanding
Principal Balance of such Contract on the Schedule of Contracts, such amount
being the total of all unpaid Monthly P&I due on or after the Cut-Off Date,
minus any unearned (or earned but unpaid) interest as of the Cut-Off Date
computed in accordance with the Rule of 78's, and (ii) with respect to any
Simple Interest Contract, the amount set forth as the Outstanding Principal
Balance of such Contract on the Schedule of Contracts, such amount being the
total of all principal payments due on or after the Cut-Off Date.
"OWNER TRUSTEE" means the Person acting as Owner Trustee under the Trust
Agreement, its successors in interest and any successor owner trustee under the
Trust Agreement.
"OWNER TRUSTEE CORPORATE TRUST OFFICE" shall have the meaning specified
in the Trust Agreement.
["PAYAHEAD ACCOUNT" means the account established and maintained as such
pursuant to Section 5.01.]
"PERSON" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"PHYSICAL PROPERTY" shall have the meaning specified in the definition
of the term "Delivery".
"POOL BALANCE" as of the time of determination means the aggregate of
the Principal Balances of the Contracts, exclusive of the Principal Balances of
all Contracts that are not Outstanding at the end of the Collection Period
ending immediately prior to such time of determination.
"PREFERENCE CLAIM" shall have the meaning specified in Section 8.06.
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"PREFERENTIAL TRANSFER" shall have the meaning specified for the term
"Preference" in the Insurance Agreement.
["PURCHASE AGREEMENT" means the Purchase Agreement dated as of June __,
1998 between Onyx as seller and Finco as purchaser.]
"RATING AGENCY" means Moody's and Standard & Poor's.
"RECOMPUTED YIELD" for any Rule of 78's Contract means the per annum
rate determined as of the Cut-Off Date, such that the net present value of the
remaining scheduled payments due on such Contract, discounted at such rate from
the Due Date for each such scheduled payment to the Due Date for such Contract
immediately preceding the Cut-Off Date, will equal the Outstanding Principal
Balance.
"RECORD DATE" means, with respect to a Class of Notes or the
Certificates and any Distribution Date, the Business Day immediately preceding
such Distribution Date or, if Definitive Securities are issued, the last day of
the immediately preceding calendar month..
"REGISTRAR OF TITLES" means the agency, department or office having the
responsibility for maintaining records of titles to motor vehicles and issuing
documents evidencing such titles in the jurisdiction in which a particular
Financed Vehicle is registered.
"REGULAR PRINCIPAL DISTRIBUTABLE AMOUNT" means, with respect to any
Distribution Date, the amount equal to the sum of the following amounts with
respect to the related Collection Period: (i) collections received on Contracts
(other than Liquidated Contracts and Purchased Contracts) allocable to principal
as determined by the Servicer, including full and partial principal prepayments,
(ii) the Principal Balance of all Contracts (other than Purchased Contracts)
that became Liquidated Contracts during the related Collection Period, (iii) the
portion of the Purchase Amount allocable to principal of all Contracts that
became Purchased Contracts as of the immediately preceding Record Date and (iv)
the aggregate amount of Cram Down Losses incurred during the related Collection
Period.
"REPURCHASE AMOUNT" means the amount, as of the date of purchase or
repurchase of any Contract, equal to the Scheduled Balance of such Contract as
of the due Date in the Collection Period in which such purchase or repurchase
occurs plus interest on such Contract through such Due Date, to the extent not
previously collected.
"REPURCHASED CONTRACT" means a Contract (i) purchased as of the Business
Day prior to the respective related Servicer Report Date by the Servicer
pursuant to Section 4.07 or (ii) repurchased by the Seller pursuant to Section
3.02.
"RESPONSIBLE OFFICER" means any officer of the Indenture Trustee within
the Corporate Trust Office including any vice president, assistant vice
president, assistant treasurer, assistant secretary
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or any other officer of the Indenture Trustee customarily performing functions
similar to those performed by any of the above designated officers with direct
responsibility for the administration of this Agreement, respectively, or to
whom any corporate trust matter is referred because of his knowledge of and
familiarity with the particular subject.
"RULE OF 78'S CONTRACT"means a Contract as to which the portion of
payments allocable to earned interest and principal thereunder is determined
according to the "Rule of 78's." Under the "Rule of 78's," the amount of each
payment allocable to interest on a Contract is determined by multiplying the
total amount of add-on interest payable over the term of the Contract by a
fraction, the denominator of which is equal to the sum of a series of numbers
representing the total number of monthly payments due under the Contract and the
numerator of which is the number of payments remaining before giving effect to
the payment to which the fraction is being applied.
"SCHEDULE OF CONTRACTS" means the list or lists of Contracts attached as
Schedule A to this Agreement, which Contracts are being transferred to the Owner
Trustee as part of the Trust Estate, together with supplemental data regarding
the contracts calculated by Merrill Lynch & Co. and verified by the Servicer.
The Schedule of Contracts attached hereto as Schedule A sets forth the Original
Pool Balance, as well as the following information with respect to Contract in
columns:
Contract Number ("ACCT NBR")
Date of Origination ("ORG DT")
Maturity Date ("MAT DT")
Monthly P&I ("P&I")
Original Principal Balance ("ORIG AMT")
Outstanding Principal Balance ("PRIN BAL")
Annual Percentage Rate ("APR")
In addition, the information contained in Schedule A shall also be contained on
a computer disk or tape (the "DISK") that shall be delivered by the Servicer to
the Indenture Trustee not later than the 5th Business Day following the Closing
Date. The Recomputed Yield and the Scheduled Balance of each Rule of 78's
Contract for each Due Date after the Cut-Off Date, computed in accordance with
the definition of Scheduled Balance set forth herein, as calculated by Merrill
Lynch & Co. and verified by the Servicer, shall supplement Schedule A and shall
be a part of the Schedule of Contracts and made available by the Servicer to the
Trustee upon reasonable request.
"SCHEDULED BALANCE"means, with respect to any Simple Interest Contract
as of the Cut-Off Date, the amount set forth as the "Original Principal Balance"
of such Contract on the Schedule of Contracts. "Scheduled Balance" means, with
respect to any Simple Interest Contract for the Due Date or any other date in
each month, the original principal balance of such Contract reduced by the
portion of Monthly P&I paid on or prior to the date of calculation that is
allocated to principal under the Simple Interest Method. "Scheduled Balance"
means, with respect to any Rule of 78's Contract for the Due Date in each month
and as of the Cut-Off Date, the amount set forth as the "Scheduled
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Balance" of such Contract for the Due Date or the Cut-Off Date, as applicable,
on the Schedule of Contracts. For a Rule of 78's Contract, the "Scheduled
Balance" of such Contract as of the Cut-Off Date or for any date in each month
shall be the present value as of the Cut-Off Date or other date of calculation
for the applicable month (determined as provided below), of all payments of
Monthly P&I on the Contract due after such month (or due during or after the
first Collection Period in the case of a Scheduled Balance as of the Cut-Off
Date). Such present value as of the Cut-Off Date shall be determined by
discounting, on a monthly basis, each such scheduled payment of Monthly P&I from
the Due Date for such payment back to the Cut-Off Date, using the Recomputed
Yield for such Contract as the discount rate. Such present value as of any date
in each month shall be determined by discounting, on a monthly basis, each such
scheduled payment of Monthly P&I from the Due Date for such payment back to the
Due Date for such Contract in the Collection Period in which the date of
calculation falls, using the Recomputed Yield for such Contract as the discount
rate. The Scheduled Balance of a Rule of 78's Contract that becomes a Liquidated
Contract or a Repurchased Contract shall be reduced to zero as of the close of
business on the Due Date for such Contract in the Collection Period in which
such Contract became a Liquidated Contract or a Repurchased Contract. The
Scheduled Balance of a Simple Interest Contract that becomes a Liquidated
Contract or a Repurchased Contract shall be reduced to zero as of the close of
business on the date the Contract becomes a Liquidated Contract or is
repurchased, as the case may be.
"SECURITIES" means the Notes and the Certificates.
"SECURITIES POLICY" means the financial guarantee insurance policy for
the Securities, number _________ dated June ___, 1998 and issued by the Insurer
to the Indenture Trustee, guaranteeing payment of any Securities Policy Claim
Amount.
"SECURITIES POLICY CLAIM AMOUNT" means, with respect to each
Distribution Date, sum of:
(a) the amount, if any, by (i) which the sum of (A) the Note Interest
Distributable Amount for such Distribution Date and (B) if such Distribution
Date is the Note Final Scheduled Distribution Date with respect to a Class of
Notes, the outstanding principal amount of such Class of Notes as of such
Distribution Date, exceeds (ii) the amount of Net Collections actually deposited
in the Note Distribution Account on such Distribution Date in accordance with
Section 5.05; and
(b) the amount, if any, by which the sum of (i) the Certificate Interest
Distributable Amount for such Distribution Date and (ii) if such Distribution
Date is the Certificate Final Scheduled Distribution Date, the Certificate
Balance as of such Distribution Date exceeds the amount of Net Collections
actually deposited in the Certificate Distribution Account on such Distribution
Date in accordance with Section 5.05.
"SECURITYHOLDERS" means the Holders of the Notes and the Certificates.
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"SELLER" means Onyx Acceptance Financial Corporation, in its capacity as
the Seller of the Contracts under this Agreement, and each successor thereto (in
the same capacity) pursuant to Section 6.03.
"SERVICER" means Onyx in its capacity as the servicer of the Contracts
under Section 4.01, and, in each case upon succession in accordance herewith,
each successor servicer in the same capacity pursuant to Section 4.01 and each
successor servicer pursuant to Section 8.02.
"SERVICER DEFAULT" means an event specified in Section 8.01.
"SERVICER REPORT DATE" means, with respect to any Distribution Date, the
fifth Business Day prior to such Distribution Date.
"SERVICING FEE" means, as to any Distribution Date, the fee payable to
the Servicer for services rendered during the Collection Period ending
immediately prior to such Distribution Date, which shall equal with respect to
each Outstanding Contract, the product of (A) one-twelfth of the Servicing Fee
Percent and (B) the Scheduled Balance of such Contract as of the opening of
business on the first day of such Collection Period; provided, however, that
with respect to the first Distribution Date the aggregate of the Servicing Fees
for all of the Contracts shall be the product of (A) one-twelfth of the
Servicing Fee Percent and (B) the Original Pool Balance. As additional
compensation, the Servicer will be entitled to any late fees and other
administrative fees and expenses or similar charges collected with respect to
the Contracts. The Servicer or its designee will also receive as servicing
compensation all investment earnings on funds credited to the Collection Account
and the amount, if any, by which the outstanding principal balance of a Rule of
78's Contract (calculated in accordance with the Rule of 78's method) that is
subject to a Full Prepayment exceeds the Scheduled Balance of such Contract;
provided, however, that the Servicer agrees that each amount payable to it in
respect of a Full Prepayment on a Rule on 78's Contract that exceeds such
Contract's Scheduled Balance shall be deposited in the Spread Account [and
applied in accordance with the Insurance Agreement].
"SERVICING FEE PERCENT" means 1.00% per annum.
"SERVICING OFFICER" means any officer of the Servicer involved in, or
responsible for, the administration and servicing of the Contracts whose name
appears on a list of servicing officers furnished to the Indenture Trustee by
the Servicer pursuant to Section 4.01, as such list may be amended or
supplemented from time to time.
"SIMPLE INTEREST CONTRACT" means a Contract as to which the portion of
payments allocable to earned interest and principal thereunder is determined
according to the Simple Interest Method. For such Contracts, interest accrued as
of the Due Date is paid first, and then the remaining payment is applied to the
unpaid principal balance. Accordingly, if an Obligor pays the fixed monthly
installment in advance of the Due Date, the portion of the payment allocable to
interest for the period since the preceding payment will be less than it would
be if the payment were made on the Due Date,
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and the portion of the payment allocable to reduce the principal balance will be
correspondingly greater. Conversely, if an Obligor pays the fixed monthly
installment after its Due Date, the portion of the payment allocable to interest
for the period since the preceding payment will be greater than it would be if
the payment were made on the Due Date, and the portion of the payment allocable
to reduce the principal balance will be correspondingly smaller. When necessary,
an adjustment will be made at the maturity of the Contract to the scheduled
final payment to reflect the larger or smaller, as the case may be, allocations
of payments to the amount financed under the Contract as a result of early or
late payments, as the case may be.
"SIMPLE INTEREST METHOD" means the method for calculating interest on a
Contract whereby interest due is calculated each day based on the actual
principal balance of the Contract on that day.
"SPREAD ACCOUNT" means the account [established and maintained as such
pursuant to Section 5.01] / [so named and provided for in the Insurance
Agreement].
"STANDARD & POOR'S" means Standard & Poor's Ratings Services, a division
of The McGraw-Hill Companies, Inc., and its successors in interest.
"SUCCESSOR CUSTODIAN" shall have the meaning set forth in Section 3.03.
"TITLE DOCUMENT" means, with respect to any Financed Vehicle, the
certificate of title for, or other evidence of ownership of, such Financed
Vehicle issued by the Registrar of Titles in the jurisdiction in which such
Financed Vehicle is registered. For Financed Vehicles registered in the State of
California, the Title Document may consist of electronic evidence of ownership
on the Electronic Lien and Title system of the California Department of Motor
Vehicles.
"TRUST" means the Issuer.
"TRUST ACCOUNT PROPERTY" means the Trust Accounts, all amounts and
investments held from time to time in any Trust Account (whether in the form of
deposit accounts, physical property, book-entry securities, uncertificated
securities or otherwise) and all proceeds of the foregoing.
"TRUST ACCOUNTS" shall have the meaning specified in Section 5.01(a).
"TRUST AGREEMENT" means the Trust Agreement, dated as of June __, 1998,
by and between the Depositor, the Company, the Insurer and the Owner Trustee.
"TRUST ESTATE" has the meaning set forth in Section 2.1 hereof. [Spread
Account and Payahead Account]
"UCC" means the Uniform Commercial Code as in effect in the applicable
jurisdiction.
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["UNREIMBURSED INSURER AMOUNTS" means, on any date, the amount that is
the sum of (i) all payments (if any) made under the Securities Policy for which
the Insurer has not yet been reimbursed as of such date, plus (ii) all
[Insurance Agreement Obligations] as of such date.]
["VEHICLE RECEIVABLES" shall have the meaning specified in Section
6.03(b)(ii).]
Section 1.02. USAGE OF TERMS. With respect to all terms in this
Agreement, the singular includes the plural and the plural 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
amendments, modifications and supplements thereto or any 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 term "including" means "including without limitation."
Section 1.03. SECTION REFERENCES. All section references, unless
otherwise indicated, shall be to Sections in this Agreement.
Section 1.04. CALCULATIONS. Except as otherwise provided herein, all
interest rate and basis point calculations hereunder will be made on the basis
of a 360-day year and twelve 30-day months (or, in the case of the Class A-1
Notes, on the basis of a 360-day year and the actual number of days elapsed
since the immediately preceding Distribution Date or June 1, 1998, in the case
of the first Distribution Date) and will be carried out to at least three
decimal places. Collections of interest on Rule of 78's Contracts shall be
calculated as if such Contracts were actuarial contracts the scheduled principal
balances of which are the Scheduled Balances thereof, and collections of
interest on Simple Interest Contracts will be calculated in accordance with the
terms thereof.
Section 1.05. ACCOUNTING TERMS. All accounting terms used but not
specifically defined herein shall be construed in accordance with generally
accepted accounting principles in the United States of America.
ARTICLE TWO
CONVEYANCE OF CONTRACTS
Section 2.01. CONVEYANCE OF CONTRACTS.
(a) In consideration of the Issuer's delivery of the Notes and
Certificates to or upon the order of the Seller of $__________, effective upon
the Closing Date, the Seller hereby sells, grants, transfers, conveys and
assigns to the Issuer, without recourse (except as expressly provided in Section
2.3 hereof), all of the right, title and interest of the Seller in, to and under
the:
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(i) the Contracts listed in the Schedule of Contracts including,
without limitation, all payments of Monthly P&I due on or after the
Cut-Off Date, all Net Liquidation Proceeds and Net Insurance Proceeds
with respect to any Financed Vehicle to which a Contract relates
received on or after the Cut-Off Date and all other proceeds received on
or after the Cut-Off Date in respect of such Contracts and any and all
security interests in the Financed Vehicles;
(ii) the Contract Documents relating to the Contracts (except the
Contract Documents for Contracts which have been the subject of a Full
Prepayment received on or after the Cut-Off Date but no later than two
Business Days prior to the Closing Date, in lieu of which the Seller
shall have deposited in or credited to the Collection Account on or
prior to the Closing Date an amount equal to such Full Prepayment);
(iii) all amounts on deposit in the Collection Account, including
all Eligible Investments credited thereto (but excluding investment
earnings thereon);
(iv) the right of the Seller, as purchaser under the Purchase
Agreement, to cause Onyx as seller thereunder to repurchase Contracts
listed in the Schedule of Contracts under certain circumstances;
(v) the security interest of the Seller in the Financed Vehicles
and the rights to receive proceeds from claims on certain insurance
policies covering the Financed Vehicles or the individual Obligors under
each related Contract;
(vi) the Seller's right to proceeds under the Blanket Insurance
Policy; and
(vii) all proceeds in any way delivered with respect to the
foregoing, all rights to payments with respect to the foregoing and all
rights to enforce the foregoing.
The foregoing items of property listed in this Section 2.1, [together
with the Spread Account and the rights of the Indenture Trustee under the
Securities Policy], are collectively referred to as the "TRUST ESTATE".
It is the intention of the Seller and the Issuer that the assignment and
transfer herein contemplated constitute (and shall be construed and treated for
all purposes as) a true and complete sale of the Trust Estate (other than the
Spread Account and the Securities Policy), conveying good title thereto free and
clear of any liens and encumbrances, from the Seller to the Issuer. However, in
the event that such conveyance is deemed to be a pledge to secure a loan (in
spite of the express intent of the parties hereto that this conveyance
constitutes (and shall be construed and treated for all purposes) as a true and
complete sale), the Seller hereby grants to the Issuer, for the benefit of the
Securityholders, a first priority perfected security interest in all of the
Seller's right, title and interest in the Trust Estate whether now existing or
hereafter created and all proceeds of the foregoing to secure the loan deemed to
be made in connection with such pledge and, in such event, this Agreement shall
constitute a security agreement under applicable law.
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(b) As of the Closing Date, the Issuer acknowledges the conveyance to it
of the Trust Estate, including from the Seller all right, title and interest of
the Seller in and to the Trust Estate, receipt of which is hereby acknowledged
by the Issuer. Concurrently with such delivery and in exchange therefor, the
Issuer has pledged to the Indenture Trustee the Trust Estate and the Indenture
Trustee, pursuant to the written instructions of the Issuer, has executed and
caused to be authenticated and delivered the Notes to the Seller or its
designee, upon the order of the Issuer. In addition, concurrently with such
delivery and in exchange therefor, the Owner Trustee, pursuant to the
instructions of the Seller, has executed (not in its individual capacity, but
solely as Owner Trustee on behalf of the Issuer) and caused to be authenticated
and delivered the Certificates to the Seller or its designee, upon the order of
the Seller.
(c) In connection with the sale of the Contracts pursuant to the
Purchase Agreement, Onyx has filed with the office of the Secretary of State of
the State of California UCC-1 financing statements naming Onyx as debtor, naming
the Seller as secured party and including the Contracts in the description of
the collateral. In connection with the sale of the Contracts pursuant to this
Agreement, the Seller has filed or caused to be filed with the Secretary of
State of the State of California UCC-1 financing statements naming the Seller as
debtor, naming the Issuer as secured party and including the Contracts in the
description of the collateral. In connection with the pledge of the Contracts
pursuant to the Indenture, the Owner Trustee has filed with the offices of the
Secretary of State of the States of California and Delaware UCC-1 financing
statements naming the Owner Trustee as debtor and the Indenture Trustee, on
behalf of the Noteholders, as secured party. the grant of a security interest to
the Indenture Trustee and the rights of the Indenture Trustee int he Contracts
shall be governed by the Indenture.
The Seller shall have caused UCC-2 termination statements to have been
filed with the office of Secretary of State of the State of California
terminating any effective UCC-1 financing statements with respect to any
outstanding security interests in the Contracts.
(d) From time to time, the Servicer shall cause to be taken such actions
as are necessary to continue the perfection of the respective interests of the
Owner Trustee and the Indenture Trustee in the Contracts and to continue the
first priority security interest of the Indenture Trustee in the Financed
Vehicles and their proceeds (other than, as to such priority, any statutory lien
arising by operation of law after the Closing Date which is prior to such
interest), including, without limitation, the filing of financing statements,
amendments thereto or continuation statements and the making of notations on
records or documents of title.
(e) If any change in the name, identity or corporate structure of the
Seller or Onyx or the relocation of the chief executive office of either of them
would make any financing or continuation statement or notice of lien filed under
this Agreement or the other Basic Documents seriously misleading within the
meaning of applicable provisions of the UCC or any title statute, the Servicer,
within the time period required by applicable law, shall file such financing
statements or amendments as may be required to preserve and protect the
interests of the Indenture Trustee, the Owner Trustee the Securityholders [and
the Insurer] in the Contracts, the related Financed Vehicles
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and the proceeds thereof. Promptly thereafter, the Servicer shall deliver to the
Indenture Trustee, the Owner Trustee an Opinion of Counsel stating that, in the
opinion of such counsel, all financing statements or amendments necessary fully
to preserve and protect the interests of the Indenture Trustee, the Owner
Trustee, Securityholders and the Insurer in the Contracts, the related Financed
Vehicles and the proceeds thereof have been filed, and reciting the details of
such filings.
(f) During the term of this Agreement, the Seller and Onyx shall each
maintain its chief executive office in one of the states of the United States.
(g) The Servicer shall pay all reasonable costs and disbursements in
connection with the perfection and the maintenance of perfection, as against all
third parties, of the Indenture Trustee's right, title and interest in and to
the Contracts and in connection with maintaining the first priority security
interest (subject to the security interest of the Insurer pursuant to the
Insurance Agreement) in the Financed Vehicles and the proceeds thereof.
ARTICLE THREE
THE CONTRACTS
Section 3.01. REPRESENTATIONS AND WARRANTIES OF THE SELLER. The Seller
hereby makes the following representations and warranties on which (i) the
Issuer is deemed to have relied in acquiring the Contracts and (ii) the Insurer
is deemed to have relied in issuing the Securities Policy. Such representations
and warranties speak as of the execution and delivery of this Agreement and as
of the Closing Date, but shall survive the sale, transfer and assignment of the
Contracts to the Issuer and the pledge thereof to the Indenture Trustee pursuant
to the Indenture.
(a) As to the Seller:
(i) The Seller is duly organized and validly existing as a
corporation organized and existing and in good standing under the laws
of the State of Delaware, with power and authority to own its properties
and to conduct its business and had at all relevant times, and has,
power, authority, and legal right to originate or acquire and own the
Contracts.
(ii) The Seller is duly qualified to do business as a foreign
corporation in good standing, and shall have obtained all necessary
licenses and approvals in all jurisdictions in which the ownership or
lease of property or the conduct of its business requires such
qualifications.
(iii) The Seller has the power and authority to execute and
deliver this Agreement and to carry out its terms; the Seller has full
power and authority to sell and assign the property to be sold and
assigned to and deposited with the Issuer and has duly authorized such
sale and assignment to the Issuer by all necessary corporate action; and
the execution, delivery, and performance of this Agreement has been duly
authorized by the Seller by all necessary corporate action.
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(iv) This Agreement constitutes (A) a valid sale, transfer, and
assignment of the Contracts, enforceable against creditors of and
purchasers from the Seller and (B) a legal, valid, and binding
obligation of the Seller enforceable in accordance with its terms,
except as such 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.
(v) The consummation of the transactions contemplated by this
Agreement and the fulfillment of the terms hereof shall not conflict
with, result in any breach of any of the terms and provisions of, nor
constitute (with or without notice or lapse of time) a default under,
the Certificate of Incorporation or Bylaws of the Seller, or any
indenture, agreement, or other instrument to which the Seller is a party
or by which it shall be bound; nor result in the creation or imposition
of any Lien upon any of the properties of the Seller pursuant to the
terms of any such indenture, agreement, or other instrument (other than
pursuant to the Basic Documents to which the Seller is a party); nor
violate any law or any order, rule, or regulation applicable to the
Seller of any court or of any federal or state regulatory body,
administrative agency, or other governmental instrumentality having
jurisdiction over the Seller or its properties.
(vi) to the Seller's best knowledge after due inquiry, there are
no proceedings or investigations pending, or threatened, before any
court, regulatory body, administrative agency, or other governmental
instrumentality having jurisdiction over the Seller or its properties:
(A) asserting the invalidity of this Agreement, the Notes or the
Certificates, (B) seeking to prevent the issuance of the Notes or the
Certificates or the consummation of any of the transactions contemplated
by this Agreement, (C) seeking any determination or ruling that might
materially and adversely affect the performance by the Seller of its
obligations under, or the validity or enforceability of, this Agreement,
the Notes or the Certificates, or (D) naming the Seller which might
adversely affect the federal income tax attributes of the Notes or the
Certificates.
(b) As to each Contract (except as noted below as being applicable only
to either Rule of 78' contracts or Simple Interest Contracts):
(i) The information pertaining to such Contract set forth in the
related Schedule of Contracts was true and correct in all material
respects at the Closing Date and the calculations of the Scheduled
Balances appearing in such Schedule of Contracts for each such Contract
at the Cut-Off Date, and in the case of Rule of 78's Contracts at each
Distribution Date thereafter prior to the related Maturity Date, have
been performed in accordance with this Agreement and are accurate.
(ii) As of the Closing Date, such Contract was secured by a valid
and enforceable first priority security interest in favor of Onyx in the
related Financed Vehicle, and such
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security interest has been duly perfected and is prior to all other
liens upon and security interests in such Financed Vehicle which now
exist or may hereafter arise or be created (except, as to priority, for
any lien for unpaid taxes or unpaid storage or repair charges which may
arise after the Closing Date); such security interest had been assigned
by Onyx to the Seller pursuant to the Purchase Agreement and, as of the
Closing Date, has been assigned by the Seller to the Issuer pursuant to
Section 2.01(a)(i) hereof.
(iii) (A) If the related Financed Vehicle was originated in a
state in which notation of a security interest on the Title Document (or
in the electronic title records, in the case of the State of California)
is required or permitted to perfect such security interest, the Title
Document or the electronic title records for such Financed Vehicle
shows, or, if a new or replacement Title Document is being applied for
with respect to such Financed Vehicle, the Title Document will be
received within 180 days of the Closing Date and will show, Onyx or a
subsidiary of Onyx named as the original secured party under the related
Contract as the holder of a first priority security interest in such
Financed Vehicle, and (B) if the related Financed Vehicle was originated
in a state in which the filing of a financing statement under the UCC is
required to perfect a security interest in motor vehicles, such filings
or recordings have been duly made and show Onyx or a subsidiary of Onyx
named as the original secured party under the related Contract, and in
either case, the Trustee on behalf of the Trust has the same rights as
such secured party has or would have (if such secured party were still
the owner of such Contract) against all parties claiming an interest in
such Financed Vehicle. With respect to each Contract for which the Title
Document has not yet been returned from the Registrar of Titles (or
evidenced in the electronic title records, in the case of the State of
California), Onyx has written evidence that such Title Documents showing
Onyx or a subsidiary of Onyx as first lienholder have been applied for.
(iv) As of the Closing Date, the Seller had good and marketable
title to and was the sole owner of each Contract to be transferred to
the Issuer pursuant to Section 2.01 free of liens, claims, encumbrances
and rights of others and, upon transfer of such Contract to the Issuer
pursuant to Section 2.01, the Issuer will have good and marketable title
to, will have a first priority perfected security interest in and will
be the sole owner of such Contract free of liens, encumbrances and
rights of others.
(v) As of the Cut-Off Date, the most recent scheduled payment due
on each such Contract had been made or was not delinquent more than 30
days and, to the best of the Seller's knowledge, all payments on the
Contract were made by the related Obligors.
(vi) As of the Closing Date, there is no lien against the related
Financed Vehicle for delinquent taxes.
(vii) As of the Closing Date, there is no right of rescission,
offset, defense or counterclaim to the obligation of the related
Obligor(s) to pay the unpaid principal or interest due under such
Contract; the operation of the terms of such Contract or the exercise of
any
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right thereunder will not render such Contract unenforceable in whole or
in part or subject such Contract to any right of rescission, offset,
defense or counterclaim, and the Seller has no knowledge that such right
of rescission, offset, defense or counterclaim has been asserted or
threatened.
(viii) As of the Closing Date, to the best of the Seller's
knowledge, there are no liens or claims which have been filed, including
liens for work, labor, material or storage affecting the related
Financed Vehicle which are or may become a lien prior to or equal with
the security interest granted by such Contract.
(ix) Such Contract, and the sale of the Financed Vehicle sold
thereunder, complied, at the time it was made, in all material respects
with all applicable federal, state and local laws (and regulations
thereunder), including without limitation usury, equal credit
opportunity, fair credit reporting, truth-in-lending or other similar
laws, the Federal Trade Commission Act, and applicable state laws
regulating retail installment sales contracts and loans in general and
motor vehicle retail installment contracts and loans in particular; and
the consummation of the transactions herein contemplated, including,
without limitation, the transfer of ownership of the Contracts to the
Issuer and the receipt of interest by the Certificateholders, will not
violate any applicable federal, state or local law.
(x) Such Contract is the legal, valid and binding obligation of
the related Obligor(s) thereunder and is enforceable in accordance with
its terms, except only as such enforcement may be limited by bankruptcy,
insolvency or similar laws affecting the enforcement of creditors'
rights generally; each party to such Contract had full legal capacity to
execute and deliver such Contract and all other documents related
thereto and to grant the security interest purported to be granted
thereby; the terms of such Contract have not been waived, amended or
modified in any respect, except by instruments that are part of the
related Contract Documents, and no such waiver, amendment or
modification has caused such Contract to fail to meet all of the
representations, warranties and conditions, set forth herein with
respect thereto.
(xi) Such Contract contains customary and enforceable provisions
such as to render the rights and remedies of the holder or assignee
thereof adequate for the practical realization against the collateral of
the benefits of the security, subject, as to enforceability, to
bankruptcy, insolvency, reorganization or similar laws affecting the
enforcement of creditors' rights generally.
(xii) As of the Closing Date, there was no default, breach,
violation or event permitting acceleration existing under such Contract
(except payment delinquencies permitted by subparagraph (v) above) and
no event which, with notice and the expiration of any grace or cure
period, would constitute such a default, breach, violation or event
permitting acceleration under such Contract, and the Seller has not
waived any such default,
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breach, violation or event permitting acceleration except payment
delinquencies permitted by subparagraph (v) above.
(xiii) At the Closing Date each related Financed Vehicle will be
covered by the Blanket Insurance Policy; each of Onyx and the Seller
shall at all times comply with all of the provisions of such insurance
policy applicable to it.
(xiv) At the Closing Date, (a) such Contract will require that
the related Obligor(s) obtain and maintain in effect for the related
Financed Vehicle a comprehensive and collision insurance policy (i) in
an amount at least equal to the lesser of (x) its maximum insurable
value or (y) the principal amount due from the related Obligor(s) under
such Contract, (ii) naming Onyx or a subsidiary of Onyx as a 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 and (b) the Servicer shall have put
in place a vendor's single interest insurance policy providing coverage
upon repossession of the related Financed Vehicle in an amount equal to
the lesser of the actual cash value of such Financed Vehicle, the cost
of repair or replacement for such Financed Vehicle and the unpaid
balance of the related Contract. Each of Onyx and the Seller shall, and
Onyx shall cause any subsidiary of Onyx which originated a Contract to,
at all times comply with all of the provisions of such insurance
policies applicable to it.
(xv) Such Contract was either originated by a subsidiary of Onyx,
purchased by a subsidiary of Onyx or acquired by Onyx from a Dealer with
which it ordinarily does business, and no adverse selection procedures
have been utilized in selecting such Contract from all other similar
contracts purchased or originated by Onyx or any such subsidiary.
(xvi) Payments under such Contract have been applied in
accordance with the Rule of 78's or the Simple Interest Method, as
provided in the applicable Contract, and are due monthly in
substantially equal amounts through its Maturity Date sufficient to
fully amortize the principal balance of such Contract by its Maturity
Date.
(xvii) There is only one original of such Contract and such
original, together with all other related Contract Documents, is being
held by the Indenture Trustee; provided, however, that upon the
execution by the Indenture Trustee and the Servicer of a letter
agreement revocably appointing the Servicer as agent of the Indenture
Trustee to act as custodian of the Contract Documents in accordance with
Section 3.03, such original Contracts together with all other Contract
Documents may be held by the Servicer. Each original Contract has been
segregated to show the Issuer as owner thereof, unless the Insurer has
waived the requirement for such segregation by notice in writing to the
Indenture Trustee and the Servicer.
(xviii) As of the Closing Date, the Servicer has clearly marked
its electronic records to indicate that such Contract is owned by the
Issuer.
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(xix) At the Cut-Off Date, such Contract has a Maturity Date no
later than ____________, 20__.
(xx) At the date of origination of the Contract, the original
principal balance of such Contract was not greater than the purchase
price to the related Obligor(s) (including taxes, warranties, licenses
and related charges) of the related Financed Vehicle.
(xxi) As of the Cut-Off Date, the Seller has not received notice
that any Obligor under such Contract has filed for bankruptcy.
(xxii) The related Obligor(s) were located in either [California,
Arizona, Colorado, Florida, Georgia, Idaho, Illinois, Indiana, Missouri,
Montana, New Jersey, New York, Nevada, Oregon, Texas, Utah, Virginia or
Washington] on the date of origination of such Contract.
(xxiii) The yield (using the Recomputed Yield for Rule of 78's
Contracts) on such Contract is at least equal to _____%.
(xxiv) As of the Cut-Off Date, such Contract had an original
maturity of not more than [72 months] and such Contract has a remaining
maturity of [72 months] or less;
(xxv) The first payment under such Contract is due on or before
[July 15, 1998].
(xxvi) As of the Cut-Off Date, such Contract has a remaining
principal balance of at least [$500].
(xxvii)As of the Cut-Off Date, such Contract is secured by a
Financed Vehicle that has not been repossessed without reinstatement.
(c) As to all of the Contracts:
(i) The aggregate Outstanding Principal Balance payable by
Obligors of the Contracts as of the Cut-Off Date equals the Original
Pool Balance.
(ii) As of the Cut-Off Date, approximately _____% of the
Outstanding Principal Balance of all Contracts is attributable to loans
to purchase new Financed Vehicles, and approximately _____% of the
Outstanding Principal Balance of all Contracts is attributable to loans
to purchase used Financed Vehicles.
(d) None of the foregoing representations and warranties shall be
construed as, and the Seller is specifically not making, any representations and
warranties regarding the collectibility of the Contracts or the future
performance of the Contracts.
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(e) The Seller has not prepared any financial statement which accounts
for the transfer of the Trust Estate (other than the Securities Policy and the
Spread Account) hereunder to the Issuer in any manner other than as a sale of
the Trust Estate (other than the Securities Policy and the Spread Account) by it
to the Issuer,. and the Seller has not in any other respect (including, but not
limited to, for accounting and tax reporting purposes) accounted for or treated
the transfer of the Trust Estate (other than the Securities Policy and the
Spread Account ) hereunder in any manner other than as a sale and absolute
assignment to the Issuer of the Seller's full right, title and ownership
interest in the Trust Estate (other than the Securities Policy and the Spread
Account) to the Issuer.
Section 3.02. REPURCHASE OF CERTAIN CONTRACTS.
The representations and warranties of the Seller set forth in Section
3.01 shall survive delivery of the Contract Documents to the Owner Trustee and
shall continue until the termination of this Agreement. Upon discovery by the
Seller, the Servicer, the Insurer or a Responsible Officer of the Owner Trustee
that any of such representations and warranties was incorrect or that any of
such conditions was unsatisfied as of the time made or that any of the Contract
Documents relating to any such Contract has not been properly executed by the
Obligor or contains a material defect or has not been received by the Owner
Trustee (or the Servicer in its capacity as custodian of the Owner Trustee
pursuant to Section 3.03), such Person making such discovery shall give prompt
notice to the other such Persons. If any such defect, incorrectness or omission
materially and adversely affects the interest of the Noteholders, the
Certificateholders, the Indenture Trustee, the Owner Trustee, the Issuer or the
Insurer, the Seller shall cure the defect or eliminate or otherwise cure the
circumstances or condition in respect of which such representation or warranty
was incorrect as of the time made; provided that if the Seller is unable to do
so by the last day of the Collection Period following the Collection Period (or,
if the Seller elects, the last day of such Collection Period) during which the
Seller becomes aware of or receives written notice from the Servicer, the
Insurer or the Owner Trustee of such defect, incorrectness or omission, it shall
repurchase such Contract on the last day of the applicable Collection Period
from the Issuer at the Repurchase Amount in the manner set forth in Section
5.04. Upon any such purchase, the Owner Trustee shall execute and deliver such
instruments of transfer or assignment, in each case without recourse, as shall
be necessary to vest in the Seller any Contract purchased hereunder. The sole
remedy of the Issuer, the Owner Trustee, the Indenture Trustee or the
Securityholders with respect to a breach of the Seller's representations and
warranties pursuant to Section 3.01 shall be to require the Seller to repurchase
Contracts pursuant to this Section; provided, however, that the Seller shall
indemnify the Owner Trustee, the Indenture Trustee, the Insurer, the Issuer and
the Securityholders against all costs, expenses, losses, damages, claims and
liabilities, including reasonable fees and expenses of counsel, which may be
asserted against or incurred by any of them as a result of third-party claims
arising out of the events or facts giving rise to such breach.
Section 3.03. CUSTODY OF CONTRACT FILES.
(a) Duties of Custodian. The Owner Trustee, and any Custodian appointed
pursuant to Section 3.03(b), while acting as Custodian shall:
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(i) segregate and maintain continuous custody of the Contract
Documents in secure and fireproof facilities in accordance with
customary standards for such custody.
(ii) with respect to the Contract Documents, (A) act exclusively
as the Custodian for the benefit of the Securityholders and for the
Insurer and (B) hold all Contract Documents for the exclusive use
(notwithstanding Sections 3.03(a)(iii) and 3.03(a)(iv) below) and for
the benefit of the Securityholders and the Insurer.
(iii) to the extent the Servicer directs the Custodian in
writing, deliver certain specified Contract Documents to the Servicer to
enable the Servicer to service the Contracts pursuant to this Agreement.
At such time as the Servicer returns such Contract Documents to the
Custodian, the Servicer shall provide written notice of such return to
the Custodian. The Custodian shall acknowledge receipt of the returned
materials by signing the Servicer's notice and shall promptly send
copies of such acknowledgment or receipt to the Servicer.
(iv) upon reasonable prior written notice, permit the Servicer
and the Insurer to examine the Contract Documents in the possession, or
under the control, of the Custodian.
(v) at its own expense, maintain at all times while acting as
Custodian, and keep in full force and effect (A) fidelity insurance, (B)
theft of documents insurance, (C) fire insurance, and (d) forgery
insurance. All such insurance shall be in amounts, with standard
coverage and subject to deductibles, as are customary for similar
insurance typically maintained by banks that act as custodian in similar
transactions.
(b) Appointment of Custodian. As of the Closing Date, the Owner Trustee
shall be the Custodian of the Contract Files; provided, however, that upon the
execution by the Owner Trustee of a letter agreement with the consent of the
Insurer (such consent not to be unreasonably withheld) substantially in the form
of Exhibit A attached hereto (the "APPOINTMENT OF CUSTODIAN"), revocably
appointing the Servicer or such other entity acceptable to the Insurer as agent
of the Owner Trustee to act as Custodian (the "SUCCESSOR CUSTODIAN") of the
Contract Documents, such Successor Custodian shall be so appointed and shall
from the effective date of such Appointment of Custodian retain custody of the
Contract Documents and any and all other documents relating to a Contract or the
related Obligor or Financed Vehicle. As of the effective date of such
Appointment of Custodian, the Contract Documents and any and all other documents
relating to a Contract or the related Obligor or Financed Vehicle will be
delivered to the Successor Custodian in its capacity as agent of the Owner
Trustee acting as Custodian.
If the Servicer is appointed Successor Custodian as of the date
specified in the Appointment of Custodian, the Servicer shall maintain the
Contract Documents held by it in a file area physically separate from the other
installment sales contracts owned or serviced by it or any of its Affiliates,
which area shall be clearly marked to indicate the Issuer as the owner of, and
the holder of the security interest in, the Contract Documents; except that if
the Insurer has waived the requirement
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for such segregation by notice in writing to the Owner Trustee and the Servicer,
such file area may contain contract documents for other installment sales
contracts serviced by the Servicer.
Section 3.04. DUTIES OF SERVICER RELATING TO THE CONTRACTS
(a) Safekeeping. The Servicer, in its capacity as servicer, shall hold
the Contract Files on behalf of the Owner Trustee, the Indenture Trustee and the
Insurer for the use and benefit of all present and future Securityholders, and
maintain such accurate and complete accounts, records and computer systems
pertaining to each Contract File as shall enable the Issuer to comply with this
Agreement. In performing its duties as servicer, the Servicer shall act with
reasonable care, using that degree of skill and attention that the Servicer
exercises with respect to the files relating to all comparable automobile
contracts that the Servicer owns or services for itself or others. The Servicer
shall (i) conduct, or cause to be conducted, periodic physical inspections of
the Contract Files (other than the Contract Documents, unless the Servicer is
acting as Custodian) held by it under this Agreement and of the related
accounts, records and computer systems; (ii) maintain the Contract Files in such
a manner as shall enable the Owner Trustee, the Indenture Trustee and the
Insurer to verify the accuracy of the Servicer's record keeping; (iii) promptly
report to the Owner Trustee, the Indenture Trustee and the Insurer any failure
on its part to hold the Contract Files (other than the Contract Documents,
unless the Servicer is acting as Custodian) and maintain its accounts, records
and computer systems as herein provided and (iv) promptly take appropriate
action to remedy any such failure.
(b) Maintenance of and Access to Records. The Servicer shall maintain
each Contract File (other than the Contract Documents, unless the Servicer is
acting as Custodian) at the address of the Servicer set forth in Section ___, or
at such other location as shall be specified to the Owner Trustee, the Indenture
Trustee and the Insurer by 30 days' prior written notice. The Servicer shall
permit the Owner Trustee, the Indenture Trustee and the Insurer or their
respective duly authorized representatives, attorneys or auditors to inspect the
Contract Files and the related accounts, records and computer systems maintained
by the Servicer at such times as such Persons may request.
(c) Release of Documents. If the Servicer is acting as Custodian
pursuant to Section 3.03, upon instruction from the Indenture Trustee (a copy of
which shall be furnished to the Owner Trustee and the Insurer), the Servicer
shall release any document in the Contract Files to the Indenture Trustee, the
Indenture Trustee's agent, or the Indenture Trustee's designee, as the case may
be, at such place or places as the Indenture Trustee may designate, as soon as
practicable.
(d) Monthly Reports. On the Servicer Report Date of each month,
commencing with the month next succeeding the month of the Closing Date, the
Servicer shall deliver to the Indenture Trustee and the Owner Trustee a
certificate of a Servicing Officer stating (i) the Contract Number and
outstanding principal balance of each Contract that has become a Liquidated
Contract since the Business Day immediately preceding the date of the last
certificate delivered pursuant to this subsection (or since the Closing Date in
the case of the first such certificate); (ii) that, if such Contract has been
the subject of a Full Prepayment pursuant to clause (a) of the definition of the
term
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"Full Prepayment" or is a Liquidated Contract pursuant to clause (iii) of the
definition of the term "Liquidated Contract," all proceeds received in respect
thereof have been deposited in or credited to the Collection Account in
accordance with Section 5.02; (iv) that, if such Contract has been the subject
of a Full Prepayment pursuant to clause (b) of the definition of the term "Full
Prepayment," the correct Repurchase Amount has been deposited in or credited to
the Collection Account in accordance with Section 4.07 or 5.04; (v) that, if
such Contract is a Liquidated Contract pursuant to clause (ii) of the definition
of the term "Liquidated Contract," there have been deposited in or credited to
the Collection Account the related Net Liquidation Proceeds in accordance with
Section 5.02; and (v) that the Owner Trustee is authorized to release such
Contract and the related Contract Documents as provided herein.
(e) Schedule of Title Documents. The Servicer shall deliver to the
Indenture Trustee, the Owner Trustee and the Insurer (i) within 60 days of the
Closing Date, a schedule of Title Documents for Financed Vehicles which, as of
the Closing Date, did not show Onyx or a subsidiary of Onyx as first lienholder
and (ii) within 180 days of the Closing Date, as to the Contracts, a schedule of
Title Documents for Financed Vehicles which, as of the date prior to such
delivery, do not show Onyx or a subsidiary of Onyx as first lienholder and as to
which the Seller is obligated to repurchase pursuant to the provisions hereof.
(f) Electronic Marking of Contracts; Possession. The Servicer shall
cause the electronic record of the Contracts maintained by it to be clearly
marked to indicate that the Contracts have been sold to the Issuer and shall not
in any way assert or claim an ownership interest in the Contracts. It is
intended that pursuant to the applicable provisions of Sections 3.03 and 3.04
hereof and the Appointment of Custodian, the Owner Trustee on behalf of the
Issuer shall be deemed to have possession of the Contract Documents for purposes
of Section 9-305 of the UCC of the state in which the Contract Documents are
located.
Section 3.05. INSTRUCTIONS; AUTHORITY TO ACT. The Servicer shall be
deemed to have received proper instructions (a copy of which shall be furnished
to the Owner Trustee and the Insurer) with respect to the Contract Files upon
its receipt of written instructions signed by a Responsible Officer of the
Indenture Trustee.
Section 3.06. INDEMNIFICATION. Subject to Section 8.02, the Servicer
shall indemnify the Issuer, the Owner Trustee, the Indenture Trustee, the
Insurer and the Securityholders for any and all liabilities, obligations,
losses, compensatory damages, payments, costs or expenses of any kind whatsoever
(including the reasonable fees and expenses of counsel) that may be imposed on,
incurred by or asserted against the Issuer, the Owner Trustee, the Indenture
Trustee, the Insurer, or the Securityholders as the result of any improper act
or omission in any way relating to the maintenance and custody by the Servicer
of the Contract Files, or the failure of the Servicer to perform its duties and
service the Contracts in compliance with the terms of this Agreement; provided,
however, that the Servicer shall not be liable to the Owner Trustee for any
portion of any such amount
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resulting from the willful misfeasance, bad faith or negligence of the Owner
Trustee, and the Servicer shall not be liable to the Indenture Trustee for any
portion of any such amount resulting from the willful misfeasance, bad faith or
negligence of the Indenture Trustee. The Servicer shall also indemnify and hold
harmless the Issuer, the Trust Estate and the Securityholders against any taxes
that may be asserted at any time against any of them with respect to the
Contracts, including any sales, gross receipts, general corporation, personal
property, privilege or license taxes (but exclusive of federal or other income
taxes arising out of payments on the Contracts) and the costs and expenses in
defending against such taxes. The Servicer shall (i) immediately notify the
Owner Trustee and the Indenture Trustee if a claim is made by a third party with
respect to the Contracts, (ii) assume, with the consent of the Owner Trustee and
the Indenture Trustee, the defense of any such claim, (iii) pay all expenses in
connection therewith, including counsel fees, and (iv) promptly pay, discharge
and satisfy any judgment or decree which may be entered against the Servicer,
the Owner Trustee or the Issuer.
Section 3.07. EFFECTIVE PERIOD AND TERMINATION. The Owner Trustee's
appointment as custodian shall become effective as of the Closing Date and shall
continue in full force and effect until the earlier of (the execution of the
Appointment of Custodian, (ii) the removal of the Owner Trustee pursuant to
Section ____ or the Final Scheduled Distribution Date. If Onyx shall resign as
Servicer in accordance with the terms of this Agreement or if all of the rights
and obligations of the Servicer shall have been terminated pursuant to Section
8.01, the appointment of the Servicer as Custodian may be terminated by the
Indenture Trustee, by the Holders of Notes evidencing not less than 51% of the
Outstanding Amount of the Notes, by the Owner Trustee, by Certificateholders
evidencing not less than 51% of the Certificate Balance, or by the Insurer, in
the same manner as the Indenture Trustee, the Owner Trustee, the Insurer, or
such Holders may terminate the rights and obligations of the Servicer pursuant
to Section 8.01 (but no occurrence of a Servicer Default shall be a precondition
to termination). As soon as practicable after any termination of such
appointment, the Custodian shall, at its own expense, deliver or cause the
delivery of the Contract Files to the Owner Trustee or its agent at such place
or places as the Owner Trustee may reasonably designate and shall cooperate in
good faith to effect such delivery. [The foregoing notwithstanding, if the
Servicer is acting as Custodian, the Servicer shall, at the request of the
Insurer, redeliver the Contract Documents to the Owner Trustee in the event that
such redelivery is required by any Rating Agency to consider the Securities
investment grade without consideration of the Securities Policy.
Section 3.08. NONPETITION COVENANT.
(a) Neither the Seller nor the Servicer shall petition or otherwise
invoke the process of any court or government 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 property, or ordering the winding up or
liquidation of the affairs of the Issuer.
(b) The Servicer shall not, nor cause the Seller to, petition or
otherwise invoke the process of any court or government authority for the
purpose of commencing or sustaining a case against the Seller 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 Seller
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or any substantial part of its property, or ordering the winding up or
liquidation of the affairs of the Seller.
Section 3.09. COLLECTING TITLE DOCUMENTS NOT DELIVERED AT THE CLOSING
DATE. In the case of any Contract in respect of which, in place of a Title
Document, the Owner Trustee received on the Closing Date written evidence from
the Dealer selling the related Financed Vehicle, or from Onyx, that the Title
Document for such Financed Vehicle showing Onyx or a subsidiary of Onyx as first
lienholder has been applied for from the Registrar of Titles, the Servicer shall
use its best efforts to collect (or in the case of California, to obtain
evidence in the electronic title records of) such Title Document from the
Registrar of Titles as promptly as possible. If such Title Document showing Onyx
or a subsidiary of Onyx as first lienholder is not received by the Servicer (or
in the case of the State of California, verified by the Servicer in the
electronic title records) within 180 days after the Closing Date with respect to
the Contracts, then the representation and warranty in Section 3.01(b)(iii) as
to such Contracts in respect of such Contract shall be deemed to have been
incorrect in a manner that materially and adversely affects the
Certificateholders, and the Seller shall be obligated to repurchase such
Contract in accordance with Section 3.02.
ARTICLE FOUR
ADMINISTRATION AND SERVICING OF CONTRACTS
Section 4.01. DUTIES OF SERVICER. The Servicer shall manage, service,
administer, and make collections on the Contracts. The Servicer agrees that its
servicing of the Contracts shall be carried out in accordance with reasonable
care and, to the extent more exacting, the procedures used by the Servicer in
respect of such contracts serviced by it for its own account; provided, however,
that, subject to Section 4.02 as to extensions, the Servicer shall not release
or waive the right to collect the unpaid balance of any Contract. The Servicer's
duties shall include collection and posting of all payments, responding to
inquiries of Obligors on the Contracts, investigating delinquencies, sending
payment coupons to Obligors, reporting tax information to Obligors, accounting
for collections, furnishing monthly and annual statements to the Indenture
Trustee, the Owner Trustee and the Insurer with respect to distributions and the
preparation of U.S. Grantor Trust Tax Returns (Form 1041) for the Owner Trustee
to sign and file on an annual basis, based on a tax year for the Issuer that is
the calendar year and any other tax forms required by any federal, state or
local tax authority including with respect to original issue discount, if any.
The Servicer shall have, subject to the terms hereof, full power and authority,
acting alone, and subject only to the specific requirements and prohibitions of
this Agreement, to do any and all things in connection with such managing,
servicing, administration, and collection that it may deem necessary or
desirable; provided, however, that the Servicer shall commence repossession
efforts in respect of any Financed Vehicle any payment on the related Contract
of which is four or more months delinquent. Without limiting the generality of
the foregoing, but subject to the provisions of this Agreement, the Servicer is
authorized and empowered by the Indenture Trustee and the Owner Trustee to
execute and deliver, on behalf of itself, the Issuer, the Insurer, the
Noteholders, the Certificateholders, the Indenture Trustee, the Owner Trustee or
any of them, any and all instruments of satisfaction or cancellation,
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or partial or full release or discharge, and all other comparable instruments,
with respect to the Contracts or to the Financed Vehicles. The Owner Trustee
shall furnish the Servicer any documents necessary or appropriate to enable the
Servicer to carry out its servicing and administrative duties hereunder. The
Servicer may engage agents and subservicers to fulfill its duties hereunder;
provided, however, that the Servicer shall remain at all times personally liable
for the acts (and failures to act) of such agents and subservicers.
On or prior to the Closing Date, the Servicer shall deliver to the
Insurer the Indenture Trustee and the Owner Trustee a list of Servicing Officers
of the Servicer involved in, or responsible for, the administration and
servicing of the Contracts, which list shall from time to time be updated by the
Servicer on request of the Owner Trustee, the Indenture Trustee or the Insurer.
On the Closing Date, the Servicer shall deposit in the Collection
Account (i) all installments of Monthly P&I due on or after the Cut-Off Date and
received by the Servicer at least two Business Days prior to the Closing Date;
(ii) the proceeds of each Full Prepayment of any Contract and all partial
prepayments on Simple Interest Contracts received by the Servicer on or after
the Cut-Off Date and at least two Business Days prior to the Closing Date; and
(iii) all Net Liquidation Proceeds and Net Insurance Proceeds received with
respect to a Financed Vehicle to which a Contract relates received on or after
the Cut-Off Date and at least two Business Days prior to the Closing Date.
Subject to Section _____ respecting deposits in the Payahead Account,
the Servicer shall deposit in or credit to the Collection Account within two
Business Days of receipt all collections of Monthly P&I due on or after the
Cut-Off Date received by it on the Contracts together with the proceeds of all
Full Prepayments on all Contracts and all partial prepayments on Simple Interest
Contracts, and any accompanying interest. The Servicer shall likewise deposit in
the Collection Account within two Business Days of receipt all Net Liquidation
Proceeds and Net Insurance Proceeds. As of the last day of each Collection
Period, all amounts received in each Collection Period shall be applied by the
Servicer with respect to each Contract, first, to the Servicer as additional
servicing compensation any amounts due for late fees, extension fees or similar
charges, second to the payment of Monthly P&I, and third, in the case of partial
prepayments on Rule of 78's Contracts, to the Payahead Account. The foregoing
requirements for deposit in the Collection Account are exclusive, it being
understood that collections in the nature of late payment charges or extension
fees may, but need not be deposited in the Collection Account and may be
retained by the Servicer as additional servicing compensation.
With respect to payments of Monthly P&I made by Obligors to the
Servicer's lock box, the Servicer shall direct the Person maintaining the lock
box to deposit the amount collected on the Contracts within one Business Day to
the Clearing Account. Such amounts shall be withdrawn from the Clearing Account
and deposited in the Collection Account no later than the next following
Business Day.
In order to facilitate the servicing of the Contracts by the Servicer,
the Servicer shall retain, subject to and only to the extent permitted by the
provisions of this Agreement, all collections on the
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Contracts prior to the time they are remitted or credited, in accordance with
such provisions, to the Collection Account or the Payahead Account, as the case
may be. The Servicer acknowledges that the unremitted collections on the
Contracts are part of the Trust Estate and the Servicer agrees to act as
custodian and bailee of the Indenture Trustee, the Owner Trustee and the Insurer
in holding such monies and collections. The Servicer agrees, for the benefit of
the Indenture Trustee, the Owner Trustee, the Securityholders and the Insurer,
to act as such custodian and bailee, and to hold and deal with such monies and
such collections, as custodian and bailee for the Indenture Trustee, the Owner
Trustee and the Insurer, in accordance with the provisions of this Agreement.
The Servicer shall retain all data (including, without limitation,
computerized title records) relating directly to or maintained in connection
with the servicing of the Contracts at the address of the Servicer set forth in
Section _____ or, upon 15 days' notice to the Insurer the Indenture Trustee and
the Owner Trustee, at such other place where the servicing offices of the
Servicer are located, and shall give the Indenture Trustee, the Owner Trustee
and the Insurer access to all data (including, without limitation, computerized
title records) at all reasonable times, and, while a Servicer Default shall be
continuing, the Servicer shall, on demand of the Indenture Trustee, the Owner
Trustee or the Insurer deliver or cause to be delivered to the Indenture
Trustee, the Owner Trustee or the Insurer, as the case may be, all data
(including, without limitation, computerized title records and, to the extent
transferable, related operating software) necessary for the servicing of the
Contracts and all monies collected by it and required to be deposited in or
credited to the Collection Account or the Payahead Account, as the case may be.
Section 4.02 COLLECTION OF CONTRACT PAYMENTS. The Servicer shall use its
best efforts to collect all payments called for under the terms and provisions
of the Contracts as and when the same shall become due and shall use its best
efforts to cause each Obligor to make all payments in respect of his or her
Contract to the Servicer. Consistent with the foregoing, the Servicer may in its
discretion (i) waive any late payment charges in connection with delinquent
payments on a Contract or prepayment charges and (ii) in order to work out a
default or an impending default due to the financial condition of an Obligor,
grant up to three extensions of the Due Date of any payment for periods of 30
days or less, such that the Maturity Date of no Contract shall, under any
circumstances, extend more than 90 days past the originally scheduled date of
the last payment on such Contract and in no event beyond the Final Distribution
Date. The Servicer shall not extend the Maturity Date of a Contract except as
provided in clause (ii) of the preceding sentence. Except as explicitly
permitted by this paragraph, the Servicer shall not change any material term of
a Contract, including but not limited to the interest rate, the payment amounts
or due dates, or the property securing such Contract.
Section 4.03 REALIZATION UPON CONTRACTS. The Servicer shall use its best
efforts, consistent with the servicing standard specified in Section 4.01, to
repossess or otherwise convert the ownership of the Financed Vehicle securing
any Contract as to which no satisfactory arrangements can be made for collection
of delinquent payments. Such servicing procedures may include reasonable efforts
to realize upon any recourse to Dealers and selling the Financed Vehicle at
public or private sale. In connection with such repossession or other
conversion, the Servicer shall follow such practices and procedures as it shall
deem necessary or advisable and as shall be normal
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and usual for prudent holders of retail installment sales contracts and as shall
be in compliance with all applicable laws, and, in connection with the
repossession of any Financed Vehicle or any contract in default, may commence
and prosecute any proceedings in respect of such Contract in its own name or, if
the Servicer deems it necessary, in the name of the Owner Trustee or on behalf
of the Owner Trustee. The Servicer's obligations under this Section are subject
to the provision that, in the case of damage to a Financed Vehicle from an
uninsured cause, the Servicer shall not be required to expend its own funds in
repairing such motor vehicle unless it shall determine (i) that such restoration
will increase the proceeds of liquidation of the related Contract, after
reimbursement to itself for such expenses and (ii) that such expenses will be
recoverable by it either as Liquidation Expenses or as expenses recoverable
under an applicable insurance policy. The Servicer shall be responsible for all
other costs and expenses incurred by it in connection with any action taken in
respect of a Defaulted Contract; provided, however, that it shall be entitled to
reimbursement of such costs and expenses to the extent they constitute
Liquidation Expenses or expenses recoverable under an applicable insurance
policy. All Net Liquidation Proceeds and Net Insurance Proceeds shall be
deposited directly in or credited to the Collection Account (without deposit in
any intervening account) to the extent required by Section ____.
Section 4.04 INSURANCE. The Servicer shall cause to be maintained the
Blanket Insurance Policy with the Owner Trustee as the named payee thereunder
with respect to the Contracts.
Section 4.05 MAINTENANCE OF SECURITY INTERESTS IN FINANCED VEHICLES. The
Servicer shall take such steps as are necessary to maintain continuous
perfection and priority of the security interest created by each Contract in the
related Financed Vehicle, including but not limited to, obtaining the execution
by the related Obligor and the recording, registering, filing, re-recording,
re-registering, and refiling of all security agreements, financing statements,
continuation statements or other instruments as are necessary to maintain the
security interest granted by such Obligor under each respective Contract. The
Owner Trustee and the Indenture Trustee each hereby authorize the Servicer to
take such steps as are necessary to re-perfect such security interest on behalf
of the Issuer in the event of the relocation of a Financed Vehicle or for any
other reason. In the event that the assignment of a Contract to the Issuer is
insufficient, without a notation on the related Financed Vehicle's certificate
of title (or, if applicable, in the case of the State of California, the
electronic title record), or without fulfilling any additional administrative
requirements under the laws of the state in which the Financed Vehicle is
located, to grant to the Issuer a perfected security interest in the related
Financed Vehicle, Onyx hereby agrees that the identification of Onyx or a
subsidiary of Onyx as the secured party on the certificate of title (or, if
applicable, in the case of the State of California, the electronic title record)
is deemed to be in its capacity as agent of the Issuer and further agrees to
hold such certificate of title (or, if applicable, in the case of the State of
California, the electronic title record) as the Owner Trustee's agent and
custodian; provided that, except as provided in Section 8.01, neither the
Servicer nor Onyx shall make, nor shall the Owner Trustee or Securityholders
have the right to require that the Servicer or Onyx make, any such notation on
the related Financed Vehicles' certificate of title (or, if applicable, in the
case of the State of California, the electronic title record) or fulfill any
such additional administrative requirement of the laws of the state in which a
Financed Vehicle is located.
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Section 4.06 COVENANTS, REPRESENTATIONS AND WARRANTIES OF SERVICER. The
Servicer hereby makes the following covenants, representations and warranties on
which (i) the Issuer is deemed to have relied in acquiring the Contracts and
(ii) the Insurer is deemed to have relied in issuing the Securities Policy. Such
covenants, representations and warranties speak as of the execution and delivery
of this Agreement and as of the Closing Date, but shall survive the sale,
transfer and assignment of the Contracts to the Issuer and the pledge thereof to
the Indenture Trustee pursuant to the Indenture.
(a) The Servicer covenants as to the Contracts:
(i) The Financed Vehicle securing each Contract shall not be
released from the lien granted by the Contract in whole or in part,
except as contemplated herein.
(ii) The Servicer shall not impair the rights of the
Securityholders in the Contracts.
(iii) The Servicer shall not increase the number of payments
under a Contract, nor increase the amount financed under a Contract, nor
extend or forgive payments on a Contract, except as provided in Section
4.02.
(iv) The Servicer may consent to the sale or transfer by an
Obligor of any Financed Vehicle if the original Obligor under the
related Contract remains liable under such Contract and the transferee
assumes all of the Obligor's obligations thereunder and upon doing so
the credit profile with respect to such Obligor will not be changed from
adequate to speculative by virtue of the addition of the transferee's
obligation thereunder.
(b) The Servicer represents and warrants as of the Closing Date:
(i) The Servicer (1) has been duly organized, is validly existing
and in good standing as a corporation organized and existing under the
laws of the State of Delaware, (2) has qualified to do business as a
foreign corporation and is in good standing in each jurisdiction where
the character of its properties or the nature of its activities makes
such qualification necessary, and (3) has full power, authority and
legal right to own its property, to carry on its business as presently
conducted, and to enter into and perform its obligations under this
Agreement.
(ii) The execution and delivery by the Servicer of this Agreement
are within the corporate power of the Servicer and have been duly
authorized by all necessary corporate action on the part of the
Servicer. Neither the execution and delivery of this Agreement, nor the
consummation of the transactions herein contemplated, nor compliance
with the provisions hereof, will conflict with or result in a breach of,
or constitute a default under, any of the provisions of any law,
governmental rule, regulation, judgment, decree or order binding on the
Servicer or its properties or the Certificate of Incorporation or Bylaws
of the
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Servicer, or any of the provisions of any indenture, mortgage, contract
or other instrument to which the Servicer is a party or by which it is
bound or result in the creation or imposition of any lien, charge or
encumbrance upon any of its property pursuant to the terms of any such
indenture, mortgage, contract or other instrument.
(iii) Other than consents that have been obtained prior to the
Closing Date, the Servicer is not required to obtain the consent of any
other party or any consent, license, approval or authorization, or
registration or declaration with, any governmental authority, bureau or
agency in connection with the execution, delivery, performance, validity
or enforceability of this Agreement.
(iv) This Agreement has been duly executed and delivered by the
Servicer and, assuming the due authorization, execution and delivery
thereof by the Owner Trustee and the Indenture Trustee, constitutes a
legal, valid and binding obligation of the Servicer enforceable against
the Servicer in accordance with its terms (subject to applicable
bankruptcy and insolvency laws and other similar laws affecting the
enforcement of creditors' rights generally).
(v) There are no actions, suits or proceedings pending or, to the
knowledge of the Servicer, threatened against or affecting the Servicer,
before or by any court, administrative agency, arbitrator or
governmental body with respect to any of the transactions contemplated
by this Agreement, or which will, if determined adversely to the
Servicer, materially and adversely affect it or its business, assets,
operations or condition, financial or otherwise, or adversely affect the
Servicer's ability to perform its obligations under this Agreement. The
Servicer is not in default with respect to any order of any court,
administrative agency, arbitrator or governmental body so as to
materially and adversely affect the transactions contemplated by the
above-mentioned documents.
(vi) The Servicer has obtained or made all necessary consents,
approvals, waivers and notifications of creditors, lessors and other
nongovernmental persons, in each case, in connection with the execution
and delivery of this Agreement, and the consummation of all the
transactions herein contemplated.
Section 4.07 PURCHASE OF CONTRACTS UPON BREACH OF COVENANT. The Servicer
or the Owner Trustee shall inform the other party and the Indenture Trustee and
the Insurer promptly, in writing, upon the discovery of any breach of the
representation and warranties set forth in Section 4.06 or of the covenants set
forth in Section 4.05. Unless the breach shall have been cured within 30 days
following such discovery or receipt of notice of such breach, the Servicer shall
purchase any Contract materially and adversely affected by such breach from the
Issuer. As consideration for the Contract, the Servicer shall remit the
Repurchase Amount on the Business Day preceding the Servicer Report Date next
succeeding the end of such 30-day cure period in the manner specified in Section
5.04. The sole remedy of the Issuer, the Owner Trustee, the Indenture Trustee,
or the Securityholders with respect to a breach pursuant to Section 4.02, 4.05
(other than as specified
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therein) or 4.06 shall be to require the Servicer to purchase Contracts pursuant
to this Section 4.07; provided, however, that the Servicer shall indemnify the
Owner Trustee, the Indenture Trustee, the Insurer, the Issuer and the
Securityholders against all costs, expenses, losses damages, claims and
liabilities, including reasonable fees and expenses of counsel, which may be
asserted against or incurred by any of them as a result of third-party claims
arising out of the events or facts giving rise to such breach.
Any successor Servicer appointed pursuant to Section 8.02 shall not be
obligated to purchase Contracts pursuant to this Section 4.07 with respect to
any breaches by any prior Servicer.
Section 4.08 SERVICING COMPENSATION. As compensation for the performance
of its obligations under this Agreement and subject to the terms of this
Section, the Servicer shall be entitled to receive on each Distribution Date the
Servicing Fee in respect of each Contract that was Outstanding at the beginning
of the Collection Period ending immediately prior to such Distribution Date;
provided, however, that with respect to the first Distribution Date the Servicer
will be entitled to receive the Servicing Fee in respect of each Outstanding
Contract as of the Cut-Off Date. As servicing compensation in addition to the
Servicing Fee, the Servicer shall be entitled (i) to retain all late payment
charges, extension fees and similar items paid in respect of Contracts, (ii) to
receive, in respect of each Rule of 78's Contract that is prepaid in full prior
to its Maturity Date, the amount by which the outstanding principal balance of
such Contract (determined in accordance with the Rule of 78's method) exceeds
the Scheduled Balance of such Contract at the time of such prepayment and (iii)
to receive all investment earnings on funds credited to the Collection Account
and the Payahead Account; provided, however, that the Servicer agrees that each
amount payable to it pursuant to clause (ii) of this Section shall be deposited
in the Spread Account and applied in accordance with the Insurance Agreement.
The Servicer shall pay all expenses incurred by it in connection with its
servicing activities hereunder and shall not be entitled to reimbursement of
such expenses except to the extent provided in Section 4.03.
Section 4.09 REPORTING BY THE SERVICER.
(a) No later than 3:00 p.m. New York City time on each Servicer Report
Date, the Servicer shall transmit to the Owner Trustee, the Indenture Trustee
and the Insurer a statement (the "DISTRIBUTION DATE STATEMENT") setting forth
with respect to the next succeeding Distribution Date:
(i) the Certificate Interest Distributable Amount and the Note
Interest Distributable Amount for such Distribution Date;
(ii) the Certificate Principal Distributable Amount and the Note
Principal Distributable Amount for such Distribution Date and the
portion thereof constituting the Accelerated Principal Distributable
Amount;
(iii) the Net Collections, the Note Percentage and the
Certificate Percentage for such Distribution Date;
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(iv) the amount otherwise distributable to each Class of
Noteholders and the Certificateholders that will be distributed to a
different Class of Noteholders on such Distribution Date;
(v) the amount to be on deposit in the Spread Account on such
Distribution Date, before and after giving effect to deposits thereto
and withdrawals therefrom to be made in respect of such Distribution
Date;
(vi) the Servicing Fee with respect to the related Collection
Period;
(vii) the amount of any Note Interest Carryover Shortfall, Note
Principal Carryover Shortfall, Certificate Interest Carryover Shortfall
and Certificate Principal Carryover Shortfall on such Distribution Date
and the change in such amounts from those with respect to the
immediately preceding Distribution Date;
(viii) the aggregate amount of Monthly P&I which was due on the
Contracts during the related Collection Period and was delinquent as of
the end of the related Collection Period (any such payment of Monthly
P&I being presumed to be delinquent to the extent that it was not
deposited in or credited to the Collection Account during such
Collection Period);
(ix) the Aggregate Net Liquidation Losses for the related
Collection Period;
(x) the Delinquency Percentage [and the Charge-Off Percentage]
for the most recent Calculation Day;
(xi) the amount of Contracts which have had their APR or
principal amount modified pursuant to Section 4.01 and the percentage
that amount constitutes of the Original Principal Balance on a
cumulative basis; in addition the aggregate Scheduled Balance of
Contracts so modified as a percentage of the Pool Balance for the most
recent Distribution Date; and
(xii) the Securities Policy Claim Amount, if any, for such
Distribution Date, separately setting forth the amount thereof payable
in respect of the Certificates and in respect of each Class of Notes;
Each such Distribution Date Statement shall be accompanied by an Officers'
Certificate of the Servicer, which Officers' Certificate shall state that the
computations reflected in such statement were made in conformity with the
requirements of this Agreement.
(b) On each Servicer Report Date, the Servicer shall deliver to the
Owner Trustee, the Indenture Trustee and the Insurer a report, in respect of the
immediately preceding Collection Period, setting forth the following:
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(i) the aggregate amount, if any, paid by or due from it for the
purchases of Contracts which the Seller or the Servicer has become
obligated to repurchase or purchase pursuant to Sections 3.02 or 4.07;
(ii) the net amount of funds which have been deposited in or
credited to the Collection Account or the Payahead Account in respect of
such Collection Period (including amounts, if any, collected during the
next preceding Collection Period and deposited in the Payahead Account
pursuant to Section 5.02) after giving effect to all permitted
deductions therefrom pursuant to Section 5.02;
(iii) with respect to each Contract that became a Liquidated
Contract during the Collection Period, the following information:
(A) its Contract Number;
(B) the effective date as of which such Contract became a
Liquidated Contract;
(C) its Monthly P&I and Scheduled Balance as of the close
of business on the last day of the preceding Collection Period
(or as of the Closing Date in the case of the first Distribution
Date); and
(D) if less than 100% of the outstanding principal balance
of and accrued and unpaid interest was recovered on such
Liquidated Contract, the amount of the Net Liquidation Proceeds
or Net Insurance Proceeds;
(iv) with respect to each Contract which was the subject of a
Full Prepayment during such Collection Period, the following
information:
(A) its Contract Number; and
(B) the date of such Full Prepayment;
(v) the Contract Numbers, Monthly P&I, Scheduled Balances and
Maturity Dates of all Contracts which became Defaulted Contracts during
such Collection Period;
(vi) any other information relating to the Contracts reasonably
requested by the Owner Trustee, the Indenture Trustee or the Insurer;
and
(vii) the amount of Net Liquidation Proceeds and Net Insurance
Proceeds which have been deposited in or credited to the Collection
Account in respect of the Collection Period ending immediately prior to
such Servicer Report Date and the cumulative amount
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of Net Liquidation Proceeds and Net Insurance Proceeds deposited in or
credited to the Collection Account during the preceding Collection
Periods.
Section 4.10 ANNUAL STATEMENT AS TO COMPLIANCE.
(a) The Servicer shall deliver to the Owner Trustee, the Indenture
Trustee and the Insurer, on or before March 15, 1999 and on or before March 15
of each fiscal year thereafter, an Officers' Certificate of the Servicer stating
that (i) a review of the activities of the Servicer during the preceding fiscal
year (since the Closing Date in the case of the first of such Officers'
Certificates required to be delivered) and of its performance under this
Agreement has been made under such officers' supervision and (ii) to the best of
such officers' knowledge, based on such review, the Servicer has fulfilled all
its obligations under this Agreement throughout such year and that no default
under this Agreement has occurred and is continuing, 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 Owner Trustee, the Indenture
Trustee, the Insurer and each Rating Agency promptly after having obtained
knowledge thereof, but in no event later than five Business Days thereafter, an
Officer's Certificate specifying any event which with the giving of notice or
lapse of time, or both, would become a Servicer Default under Section 8.01.
Section 4.11 ANNUAL INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT'S REPORT. On
or before March 15, 1999 and on or before March 15 of each fiscal year
thereafter, the Servicer at its expense shall cause a firm of nationally
recognized independent certified public accountants (who may also render other
services to the Servicer) to furnish a report to the Owner Trustee, the
Indenture Trustee and the Insurer to the effect that (i) they have audited the
balance sheet of the Servicer as of the last day of said fiscal year and the
related statements of operations, retained earnings and cash flows for such
fiscal year and have issued an opinion thereon, specifying the date thereof,
(ii) they have also audited the reports delivered by the Servicer pursuant to
Section 4.09(b) and certain other documents and the records relating to the
servicing of the Contracts and the distributions on the Notes and Certificates
under this Agreement, (iii) their audit as described under clauses (i) and (ii)
above was made in accordance with generally accepted auditing standards and
accordingly included such tests of the accounting records and such other
auditing procedures as they considered necessary in the circumstances, and (iv)
their audits described under clauses (i) and (ii) above disclosed no exceptions
which, in their opinion, were material, relating to the servicing of such
Contracts in accordance with this Agreement and the making of distributions on
the Notes and Certificates in accordance with this Agreement, or, if any such
exceptions were disclosed thereby, setting forth those exceptions which, in
their opinion, were material.
Section 4.12 ACCESS TO CERTAIN DOCUMENTATION AND INFORMATION REGARDING
CONTRACTS. If the Servicer is acting as Custodian, the Servicer shall provide to
the Securityholders, the Owner Trustee, the Indenture Trustee and the Insurer
reasonable access to the Contract Files. Access shall be afforded without
charge, but only upon reasonable request and during normal business hours at
designated offices of the Servicer. Nothing in this Section shall affect the
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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 to information as a result of such obligation shall not
constitute a breach of this Section.
Section 4.13 FIDELITY BOND. The Servicer shall maintain a fidelity bond
in such form and amount as is customary for banks acting as custodian of funds
and documents in respect of mortgage loans or consumer contracts on behalf of
institutional investors.
Section 4.14 INDEMNIFICATION; THIRD PARTY CLAIMS. Subject to Section
8.02, the Servicer agrees to indemnify and hold the Owner Trustee, the Indenture
Trustee and the Securityholders harmless against any and all claims, losses,
penalties, fines, forfeitures, reasonable legal fees and related costs,
judgments, and any reasonable other costs, fees and expenses that the Owner
Trustee, the Indenture Trustee of the Securityholders may sustain because of the
failure of the Servicer to perform its duties and service the Contracts in
compliance with the terms of this Agreement. The Servicer shall (i) immediately
notify the Owner Trustee and the Indenture Trustee if a claim is made by a third
party with respect to the Contracts, (ii) assume, with the consent of the Owner
Trustee and the Indenture Trustee, the defense of any such claim, (iii) pay all
expenses in connection therewith, including counsel fees, and (iv) promptly pay,
discharge and satisfy any judgment or decree which may be entered with respect
to such claim against the Servicer, the Owner Trustee, the Indenture Trustee, or
the Securityholders.
Section 4.15 REPORTS TO CERTIFICATEHOLDERS AND THE RATING AGENCIES.
(a) The [Indenture] Trustee at its own expense shall provide to each
Securityholder a copy of each Distribution Date Statement described in Section
4.09(a) concurrently with the delivery of the statement described in Section
[5.05] below.
(b) The [Indenture] Trustee shall provide to any Securityholder who so
requests in writing (addressed to the Corporate Trust Office of the [Indenture]
Trustee) a copy of the annual audit statement described in Section 4.10, or the
annual audit report described in Section 4.11. The [Indenture] Trustee may
require the Certificateholder to pay a reasonable sum to cover the cost of the
[Indenture] Trustee's complying with such request.
(c) The [Indenture] Trustee shall forward to the Rating Agencies and the
Insurer the statement to Securityholders described in Section [5.05] and any
other reports it may receive pursuant to this Agreement to (i) Standard & Poor's
Ratings Services, Asset-Backed Surveillance Group, 26 Broadway, Fifteenth Floor,
New York, New York 10004, (ii) Moody's Investors Service, Inc., ABS Monitoring
Dept., 99 Church Street, 4th Floor, New York, New York 10007, and (iii) the
address of the Insurer at the address set forth in the Insurance Agreement.
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ARTICLE FIVE
DISTRIBUTIONS; SPREAD ACCOUNT;
STATEMENTS TO SECURITYHOLDERS
Section 5.01. ESTABLISHMENT OF TRUST ACCOUNTS.
(a) Prior to the Closing Date, the Servicer shall open, at a depository
institution (which may be the Indenture Trustee, the Bank or the Servicer), the
following accounts (the "Trust Accounts"):
(i) an account in the name of the Indenture Trustee (the
"COLLECTION ACCOUNT"), bearing a designation clearly indicating that the
funds deposited therein are held for the benefit of the Securityholders;
(ii) an account in the name of the Indenture Trustee (the
"PAYAHEAD ACCOUNT"), bearing a designation clearly indicating that the
funds deposited therein are held for the benefit of the Securityholders;
(iii) an account in the name of the Indenture Trustee (the
"SPREAD ACCOUNT"), bearing a designation clearly indicating that the
funds deposited therein are held for the benefit of the Securityholders;
(iv) an account in the name of the Indenture Trustee (the "NOTE
DISTRIBUTION ACCOUNT") bearing a designation clearly indicating that the
funds deposited therein are held for the benefit of the Noteholders; and
(v) an account in the name of the Owner Trustee (the "CERTIFICATE
DISTRIBUTION ACCOUNT") bearing a designation clearly indicating that the
funds deposited therein are held for the benefit of the
Certificateholders.
The Trust Accounts shall be Eligible Accounts and relate solely to the
Securities and to the Contracts and Eligible Investments. The Servicer shall
give the Indenture Trustee, the Owner Trustee and the Insurer at least five
Business Days' written notice of any change in the location of any Trust Account
and any related account identification information. All monies deposited in or
credited to, from time to time, the Trust Accounts shall be part of the Trust
Estate and all monies deposited in or credited to, from time to time, the
Collection Account, the Spread Account, the Certificate Distribution Account and
the Note Distribution Account shall be invested by the Indenture Trustee in
Eligible Investments pursuant to Section 5.01(b). On the Business Day following
each Distribution Date, all amounts, if any, on deposit in or credited to the
[Payahead Account] (excluding any installments of Monthly P&I that are due in
one or more Collection Periods ending subsequent to the Distribution Date
immediately succeeding such Distribution Date) shall be transferred to the
Collection Account.
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(b) All funds in the Collection Account, the Spread Account, the Note
Distribution Account and the Certificate Distribution Account shall be invested
by the Indenture Trustee in Eligible Investments. Subject to the limitations set
forth herein, the Servicer may direct the Indenture Trustee in writing to invest
funds in the foregoing Trust Accounts in Eligible Investments; provided that in
the absence of such directions from the Servicer, the Insurer may so direct the
Indenture Trustee. All such investments shall be in the name of the Indenture
Trustee for the benefit of the Noteholders and the Certificateholders, as
applicable. All income or other gain from investment of monies deposited in or
credited to the Collection Account shall be deposited in or credited to the
Collection Account immediately upon receipt, and any loss resulting from such
investment shall be charged to the Collection Account. All income or other gain
from investment of monies deposited in or credited to the Spread Account shall
be deposited in or credited to the Spread Account immediately upon receipt, and
any loss resulting from such investment shall be charged to the Spread Account.
All income or other gain from investment of monies deposited in or credited to
the Note Distribution Account shall be deposited in or credited to the Note
Distribution Account immediately upon receipt, and any loss resulting from such
investment shall be charged to the Note Distribution Account. All income or
other gain from investment of monies deposited in or credited to the Certificate
Distribution Account shall be deposited in or credited to the Certificate
Distribution Account immediately upon receipt, and any loss resulting from such
investment shall be charged to the Certificate Distribution Account. The maximum
permissible maturities of any investments of funds in the Collection Account,
the Spread Account, the Note Distribution Account and the Certificate
Distribution Account on any date shall not be later than the fifth Business Day
immediately preceding the Distribution Date next succeeding the date of such
investment; provided, however, that such funds may be invested by the Indenture
Trustee in Eligible Investments that mature on the Business Day before the
Distribution Date. No investment in Eligible Investments may be sold prior to
its maturity.
(c) Funds in the [Payahead Account] shall not be invested.
(d) (i) The Indenture Trustee shall possess all right, title and
interest in all funds on deposit from time to time in the Trust Accounts and in
all proceeds thereof (including all income thereon) and all such funds,
investments, proceeds and income shall be part of the Trust Estate. The Trust
Accounts, other than the Certificate Distribution Account, shall be under the
sole dominion and control of the Indenture Trustee for the benefit of the
Noteholders and the Certificateholders, as the case may be. The Certificate
Distribution Account shall be in the name of the Owner Trustee for the benefit
of the Certificateholders. If, at any time, any of the Trust Accounts ceases to
be an Eligible Account, the Indenture Trustee (or the Servicer on its behalf)
shall within ten Business Days (or such longer period, not to exceed 30 calendar
days, as to which each Rating Agency may consent) establish a new Trust Account
as an Eligible Account and shall transfer any cash and/or any investments to
such new Trust Account.
(ii) With respect to the Trust Account Property, the Indenture Trustee
agrees, by its acceptance hereof, that:
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(A) any Trust Account Property that is held in deposit
accounts shall be held solely in the Eligible Accounts, subject
to the last sentence of Section 5.01(d)(i); and each such
Eligible Account shall be subject to the exclusive custody and
control of the Indenture Trustee, and the Indenture Trustee shall
have sole signature authority with respect thereto;
(B) any Trust Account Property that constitutes Physical
Property shall be delivered to the Indenture Trustee in
accordance with paragraph (i) of the definition of the term
"Delivery" and shall be held, pending maturity or disposition,
solely by the Indenture Trustee or a Financial Intermediary
acting solely for the Indenture Trustee;
(C) any Trust Account Property that is a book-entry
security held through the Federal Reserve System pursuant to
Federal book-entry regulations shall be delivered in accordance
with paragraph (ii) of the definition of the term "Delivery"
and shall be maintained by the Indenture Trustee, pending
maturity or disposition, through continued book-entry
registration of such Trust Account Property as described in such
paragraph; and
(D) any Trust Account Property that is an "uncertificated
security" under Article Eight of the UCC and that is not governed
by clause (C) above shall be delivered to the Indenture Trustee
in accordance with paragraph (iii) of the definition of the term
"Delivery" and shall be maintained by the Indenture Trustee,
pending maturity or disposition, through continued registration
of the Indenture Trustee's (or its nominee's) ownership of such
security.
(iii) The Servicer shall have the power, revocable by the
Indenture Trustee or by the Owner Trustee with the consent of the
Indenture Trustee, to instruct the Indenture Trustee to make withdrawals
and payments from the Trust Accounts for the purpose of permitting the
Servicer or the Owner Trustee to carry out its respective duties
hereunder or permitting the Indenture Trustee to carry out its duties
under the Indenture.
Section 5.02. COLLECTIONS; REALIZATION UPON POLICIES; NET DEPOSITS.
(a) Subject to Section 5.03 and subsections (d) and (e) hereof, the
Servicer shall remit or credit all payments by the Obligors on the Contracts,
all payments on behalf of Obligors on the Contracts, and all Net Liquidation
Proceeds and Net Insurance Proceeds to the Collection Account (within two
Business Days as specified in Section 4.01); provided that the Servicer shall
retain from collection of late payments and Net Liquidation Proceeds or Net
Insurance Proceeds in respect of a Contract an amount equal to previously
unreimbursed [Advances] in respect of such Contract made pursuant to Section
5.04. Amounts otherwise required to be deposited in or credited to the
Collection Account pursuant to the immediately preceding sentence shall instead
be deposited in or credited to the [Payahead Account] to the extent that such
amounts are installments of Monthly P&I
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which are due in a Collection Period for a Distribution Date subsequent to the
Distribution Date immediately succeeding the date of receipt.
(b) [Reserved.]
(c) Not later than 12:00 p.m., New York City time, on the fifth Business
Day prior to each Distribution Date, based on the information set forth in the
related Distribution Date Statement to the extent that there are insufficient
funds to make the distributions required to be made to each Class of Notes and
the Certificates as described in Sections 5.05 and 5.06, the Servicer shall
deliver to the Indenture Trustee, with a copy to the Insurer, the Owner Trustee
and the Fiscal Agent, if any, by hand delivery, telex or facsimile transmission,
a written notice (a "Deficiency Notice") specifying the Securities Policy Claim
Amount, if any, for such Distribution Date, separately identifying the amount of
the Securities Policy Claim Amount payable in respect of each Class of Notes and
the Certificates. Such Deficiency Notice shall direct the Indenture Trustee to
remit such Securities Policy Claim Amount (to the extent of funds then on
deposit in the Spread Account) [to the Indenture Trustee for deposit in the Note
Distribution Account].
(d) Not later than 12:00 p.m., New York City time, on the fourth
Business Day prior to each Distribution Date, the Indenture Trustee shall make a
claim under the Securities Policy for any Securities Policy Claim Amount for
such Distribution Date, by delivering to the Insurer and the Fiscal Agent, if
any, with a copy to the Servicer, by hand delivery, telex or facsimile
transmission, a claim for the related Securities Policy Claim Amount. In making
any such claim, the Indenture Trustee shall comply with all the terms and
conditions of the Securities Policy. [The notice of such claim shall direct the
Insurer to remit such Securities Policy Claim Amount, to the Indenture Trustee
for deposit in the Note Distribution Account.]
(e) So long as the Servicer is Onyx, the Servicer shall have the right,
on a basis not more frequently than once per month (although deposits shall be
made into the Collection Account within two Business Days pursuant to Section
4.01), to deduct from amounts received that are otherwise required to be
deposited in or credited to the Collection Account and, to the extent such
amounts are insufficient, to require that the Indenture Trustee withdraw and
deliver to it from the Collection Account, amounts due to be paid hereunder to
the Servicer or to the Seller after giving effect to application of the payment
priorities specified in this Article for the month (or other applicable period),
and to pay such amounts to itself as Servicer or to the Seller, as the case may
be. Notwithstanding the foregoing, the Servicer shall maintain the records and
accounts for such deposits and credits on a gross basis.
Section 5.03. APPLICATION OF COLLECTIONS. As of each Record Date, all
collections for the related Collection Period shall be applied by the Servicer
as follows: with respect to each Contract (including a Defaulted Contract),
payments by or on behalf of an Obligor shall be applied first to late payment
and extension fees, second to interest accrued on the Contract, third to
principal due on the Contract and fourth to administrative charges, if any. Any
excess shall be applied to prepay the principal balance of the Contract.
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[Section 5.04. ADVANCES AND NONRECOVERABLE ADVANCES; REPURCHASE AMOUNTS.
(a) If, as of the end of any Collection Period, one or more payments of
Monthly P&I due under any Contract (other than a Liquidated Contract)
Outstanding at the end of such Collection Period shall not have been received by
the Servicer and deposited in or credited to the Collection Account pursuant to
Section 5.02(a), the Servicer shall make, concurrently with the furnishing of
the related Distribution Date Statement to the Indenture Trustee and the Owner
Trustee, the Advance for such Collection Period by depositing in or crediting to
the Collection Account (i) with respect to a Rule of 78's Contract, the amount
of delinquent Monthly P&I and (ii) with respect to a Simple Interest Contract,
30 days of interest on the Outstanding Principal Balance of such Contract at a
rate equal to the sum of (A) the Certificate Rate and (B) the Servicing Fee
Percent for each month that the related Monthly P&I is delinquent at the end of
such Collection Period. The Servicer shall account for such deposit or credit in
accordance with Section 4.01. The foregoing notwithstanding, the Servicer shall
not make an Advance in respect of a Contract if the Servicer shall have
determined that any such Advance, if made, would constitute a Nonrecoverable
Advance. Any such determination shall be evidenced by an Officers' Certificate
furnished to the Indenture Trustee, the Owner Trustee and the Insurer setting
forth the basis for such determination.
(b) If the Servicer determines that it has made a Nonrecoverable Advance
or Advances, the Servicer shall reimburse itself, without interest, from
unrelated installments of Monthly P&I or prepayment proceeds to the extent it
shall, concurrently with the withholding of any such installment or proceeds
from deposit in or credit to the Collection Account as required by Section 5.02,
furnish to the Indenture Trustee, the Owner Trustee and the Insurer a
certificate of a Servicing Officer setting forth the basis for the Servicer's
determination, the amount of, and Contract with respect to which, such
Nonrecoverable Advance was made and the installment or installments or other
proceeds respecting which reimbursement has been taken.
(c) The Servicer or the Seller, as the case may be, shall remit or
credit to the Collection Account the aggregate Repurchase Amount with respect to
Repurchased Contracts on the Servicer Report Date next succeeding the last day
of the related cure period specified in Section 3.02 or 4.07, as the case may
be. In addition, the Servicer and the Seller shall deposit or cause to be
deposited in the Collection Account the aggregate Repurchase Amount with respect
to Repurchased Contracts and the Servicer shall deposit therein all amounts to
be paid under Section 9.01. ]
Section 5.05. DISTRIBUTIONS.
(a) On each Distribution Date, the Servicer shall instruct the Indenture
Trustee (based on the information contained in the Servicer's Certificate
delivered on the related Servicer Report Date pursuant to Section 4.09) to make
the following deposits and distributions for receipt by the Servicer or deposit
in the applicable account by 11:00 a.m. (New York time), to the extent of the
Net Collections for such Distribution Date, in the following order of priority:
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(i) to the Servicer, the Servicing Fee, including any unpaid
Servicing Fees with respect to one or more prior Due Periods;
(ii) to the Indenture Trustee and the Owner Trustee, any accrued
and unpaid Trustees' fees, in each case to the extent such fees have not
been previously paid by the Servicer;
(iii) to the Note Distribution Account, from Net Collections
(after giving effect to the reduction in Net Collections described in
clauses (i) and (ii) above), the Note Interest
Distributable Amount;
(iv) to the Note Distribution Account, from Net Collections
(after giving effect to the reduction in Net Collections described in
clauses (i) through (iii) above), the Note Principal Distributable
Amount to the holders of the Class A-1 Notes until the principal amount
of the Class A-1 Notes has been reduced to zero, second to the holders
of the Class A-2 Notes until the principal amount of the Class A-2 Notes
has been reduced to zero, third to the holders of the Class A-3 Notes
until the principal amount of the Class A-3 Notes has been reduced to
zero, and fourth to the holders of the Class A-4 Notes until the
principal amount of the Class A-4 Notes has been reduced to zero;
(v) to the Note Distribution Account, if such Distribution Date
is a Note Final Scheduled Distribution Date, the remaining principal
amount of the related Class of Notes from Net Collections (after giving
effect to the reduction in Net Collections described in clauses (i)
through (iv) above);
(vi) to the Certificate Distribution Account, from Net
Collections (after giving effect to the reduction in Net Collections
described in clauses (i) through (v) above), the Certificate Interest
Distributable Amount;
(vii) to the Certificate Distribution Account, from Net
Collections (after giving effect to the reduction in Net Collections
described in clauses (i) through (vi) above), the Certificate Principal
Distributable Amount;
(viii) to the Certificate Distribution Account, if such
Distribution Date is the Certificate Final Scheduled Distribution Date,
from Net Collections (after giving effect to the reduction in Net
Collections described in clauses (i) through (vii) above), the
Certificate Balance, as such balance has been reduced by payments
thereon in respect of such Distribution Date; and
(ix) to the Insurer, from Net Collections (after giving effect to
the reduction in Net Collections described in clauses (i) through (viii)
above), any Unreimbursed Insurer Amounts.
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(b) On each Distribution Date, the Servicer shall instruct the Indenture
Trustee (based on the information contained in the Servicer's Certificate
delivered on the related Servicer Report Date pursuant to Section 4.09), to
distribute any excess amounts remaining from Net Collections after making the
distributions described in Section 5.05(a) ("Excess Amounts") to the Spread
Account. On any Distribution Date on which both (i) the [Funded Amount] (after
giving effect to all deposits to, and withdrawals from, the Spread Account on
such Distribution Date) equals or exceeds the [Minimum Funded Amount] and (ii)
the [Funded Amount] equals or exceeds the [Specified Spread Account Balance],
the Servicer shall instruct the Indenture Trustee to distribute an amount in
cash equal to the lesser of (A) the amount by which the [Funded Amount] exceeds
the [Minimum Funded Amount] and (B) the amount by which the [Funded Amount]
exceeds the [Specified Spread Account Balance], first, to the Insurer, to the
extent of any [Unreimbursed Insurer Amounts], second, to the Seller until the
Seller has received an aggregate amount equal to the [Spread Account Initial
Deposit] and third, to the Seller and the Company, in the proportions of 99% and
1%, respectively. Notwithstanding that the Notes have been paid in full, the
Indenture Trustee shall continue to maintain the Collection Account hereunder
until the Certificate Balance is reduced to zero.
(c) To the extent that on any Distribution Date:
(i) the amount on deposit in the Note Distribution Account (after
giving effect to any deposits thereto on such Distribution Date) is less
than the Note Distributable Amount, Noteholders shall be entitled to
receive distributions in respect of such deficiency first, from amounts
on deposit in the Spread Account pursuant to a Deficiency Notice;
second, if such amounts are insufficient, from amounts otherwise payable
to Certificateholders in respect of the Certificate Distributable Amount
and third, if such amounts are still insufficient, from a claim made
under the Securities Policy for the Securities Policy Claim Amount
pursuant to Section 5.02(d); and
(ii) the amount on deposit in the Certificate Distribution
Account (after giving effect to any deposits thereto on such
Distribution Date) is less than the Certificate Distributable Amount,
Certificateholders shall be entitled to receive distributions in respect
of such deficiency, first, from amounts on deposit in the Spread
Account, to the extent that such amounts remain available after giving
effect to the immediately preceding paragraph, pursuant to a Deficiency
Notice and second, if such amounts are insufficient, from a claim made
under the Securities Policy for the Securities Policy Claim Amount
pursuant to Section 5.02(d).
Section 5.06. SPREAD ACCOUNT.
(a) On or prior to the Closing Date, the Owner Trustee, on behalf of the
Seller, shall deposit the [Spread Account Initial Deposit] into the Spread
Account from the net proceeds of the sale of the Notes and the Certificates. The
Spread Account will be held for the benefit of the
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Securityholders and the Insurer in order to effectuate the subordination of the
rights of the Securityholders to the extent described above.
(b) On each Calculation Day or Distribution Date on which both (i) the
[Funded Amount] (after giving effect to all deposits to, and withdrawals from,
the Spread Account on such Distribution Date) equals or exceeds the [Minimum
Funded Amount] and (ii) the [Funded Amount] equals or exceeds than the
[Specified Spread Account Balance], the Servicer shall instruct the Indenture
Trustee to distribute an amount in cash equal to the lesser of (A) the amount by
which the [Funded Amount] exceeds the [Minimum Funded Amount] and (B) the amount
by which the [Funded Amount] exceeds the [Specified Spread Account Balance],
first, to the Insurer, to the extent of any [Unreimbursed Insurer Amounts],
second, to the Seller until the Seller has received an amount equal to the
[Spread Account Initial Deposit] and third, to the Seller and the Company in the
proportions of 99% and 1%, respectively. Upon any such distribution to the
Insurer, the Seller or the Company, Securityholders will have no further rights
in, or claims to, such amounts.
(c) Amounts held in the Spread Account shall be invested in the manner
specified in Section 5.01(b), and such investments shall be made in accordance
with written instructions from the Servicer; provided that, if the Indenture
Trustee does not receive any such written instructions prior to any date on
which an investment decision must be made, the Indenture Trustee shall invest
such amounts held in the Spread Account in Eligible Investments consisting of
commercial paper given the highest rating by each Rating Agency at the time of
such investment. All such investments shall be made in the name of the Indenture
Trustee or its nominee and such investments shall not be sold or disposed of
prior to their maturity.
(d) Upon termination of the Trust pursuant to Section 9.01, any amounts
on deposit in the Spread Account, after payments of amounts due to the
Securityholders or the Insurer (if there exists any [Unreimbursed Insurer
Amounts]), will be paid to the Seller.
Section 5.07. STATEMENTS TO SECURITYHOLDERS.
(a) On each Distribution Date, (i) the Indenture Trustee shall include
with each distribution to each Noteholder of record as of the related Record
Date, and (ii) the Owner Trustee shall include with each distribution to each
Certificateholder of record as of the related Record Date, a statement, prepared
by the Servicer, based on the information in the Distribution Date Statement
furnished pursuant to Section 4.09, setting forth for such Distribution Date the
following information as of the related Record Date or such Distribution Date,
as the case may be:
(i) the amount of such distribution allocable to principal
(stated separately for each Class of Notes and the Certificates);
(ii) the amount of such distribution allocable to interest
(stated separately for each Class of Notes and the Certificates);
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(iii) the Note Percentage and the Certificate Percentage as of
the close of business on the last day of such Collection Period;
(iv) the [Aggregate Scheduled Balance] as of the close of
business on the last day of such Collection Period;
(v) the amount of the Servicing Fee paid to the Servicer with
respect to the related Collection Period;
(vi) the amount of any Certificate Interest Carryover Shortfall,
Certificate Principal Carryover Shortfall, Note Interest Carryover
Shortfall and Note Principal Carryover Shortfall on such Distribution
Date and the change in such amounts from those with respect to the
immediately preceding Distribution Date;
(vii) the Note Pool Factor for each Class of Notes and the
Certificate Pool Factor as of such Distribution Date, after giving
effect to payments allocated to principal reported under clause (i)
above; and
(viii) the amount on deposit in the Spread Account on such
Distribution Date, after giving effect to distributions made on such
Distribution Date, and the change in such balance from the immediately
preceding Distribution Date.
Each amount set forth pursuant to subclauses (i), (ii), (iv) or (v) above shall
be expressed as a dollar amount per $1,000.00 of original principal amount of a
Note or original Certificate Balance, as the case may be.
(b) Within a reasonable period of time after the end of each calendar
year, but not later than the latest date permitted by law, the Owner Trustee and
the Indenture Trustee, as the case may be, shall mail to each Person who at any
time during such calendar year shall have been a Holder of a Note or a
Certificate, respectively, a statement or statements, prepared by the Servicer,
which in the aggregate contain the sum of the amounts set forth in clauses (i),
(ii), (iv) and (v) above for such calendar year or, in the event such Person
shall have been a Holder of a Note or a Certificate during a portion of such
calendar year, for the applicable portion of such year, for the purposes of such
Noteholder's or Certificateholder's preparation of federal income tax returns.
In addition, the Servicer shall furnish to the Owner Trustee and the Indenture
Trustee for distribution to such Person at such time any other information
necessary under applicable law for the preparation of such income tax returns.
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ARTICLE SIX
THE SELLER
Section 6.01. CORPORATE EXISTENCE. During the term of this Agreement,
the Seller will keep in full force and effect its existence, rights and
franchises as a corporation under the laws of the jurisdiction of its
incorporation and will 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 Agreement, the other Basic
Documents and each other instrument or agreement necessary or appropriate to the
proper administration of this Agreement and the transactions contemplated
hereby. In addition, all transactions and dealings between the Seller and its
Affiliates will be conducted on an arm's-length basis.
Section 6.02. LIABILITY OF SELLER; INDEMNITIES. The Seller shall be
liable in accordance herewith only to the extent of the obligations specifically
undertaken by the Seller under this Agreement.
The Seller shall indemnify, defend and hold harmless the Issuer, the
Owner Trustee, the Indenture Trustee and the Servicer from and against any taxes
that may at any time be asserted against any such Person with respect to the
transactions contemplated herein and in the other Basic Documents, including any
sales, gross receipts, general corporation, tangible personal property,
privilege or license taxes (but, in the case of the Issuer, not including any
taxes asserted with respect to, and as of the date of, the sale of the Contracts
to the Issuer or the issuance and original sale of the Securities, or asserted
with respect to ownership of the Contracts, or federal or other income taxes
arising out of distributions on the Certificates or the Notes) and costs and
expenses in defending against the same.
The Seller shall indemnify, defend and hold harmless the Issuer, the
Owner Trustee, the Indenture Trustee and the Securityholders from and against
any loss, liability or expense incurred by reason of the Seller's willful
misfeasance, bad faith or negligence (other than errors in judgment) in the
performance of its duties under this Agreement, or by reason of reckless
disregard of its obligations and duties under this Agreement.
The Seller shall indemnify, defend and hold harmless the Issuer, the
Owner Trustee and the Indenture Trustee from and against all costs, expenses,
losses, claims, damages and liabilities arising out of or incurred in connection
with the acceptance or performance of the trusts and duties herein and, in the
case of the Owner Trustee, in the Trust Agreement and, in the case of the
Indenture Trustee, in the Indenture, except to the extent that such cost,
expense, loss, claim, damage or liability, in the case of (i) the Owner Trustee,
shall be due to the willful misfeasance, bad faith or negligence of the Owner
Trustee or shall arise from the breach by the Owner Trustee of any of its
representations or warranties set forth in Section 7.03 of the Trust Agreement,
or (ii) the Indenture Trustee, shall be due to the willful misfeasance, bad
faith or negligence of the Indenture Trustee.
Indemnification under this Section shall include, without limitation,
reasonable fees and expenses of counsel and expenses of litigation. If the
Seller shall have made any indemnity payments pursuant to this Section and the
Person to or on behalf of whom such payments are made thereafter
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shall collect any of such amounts from others, such Person shall promptly repay
such amounts to the Seller, without interest.
Section 6.03. MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE
OBLIGATIONS OF, SELLER; CERTAIN LIMITATIONS.
(a) The Seller shall not consolidate with or merge into any other
corporation or convey, transfer or lease substantially all of its assets as an
entirety to any Person unless the corporation formed by such consolidation or
into which the Seller has merged or the Person which acquires by conveyance,
transfer or lease substantially all the assets of the Seller as an entirety, can
lawfully perform the obligations of the Seller hereunder and executes and
delivers to the Insurer, the Owner Trustee and the Indenture Trustee an
agreement in form and substance reasonably satisfactory to the Owner Trustee,
the Indenture Trustee and the Insurer, which contains an assumption by such
successor entity of the due and punctual performance and observance of each
covenant and condition to be performed or observed by the Seller under this
Agreement. The Seller shall provide notice of any merger, consolidation or
succession pursuant to this Section to each Rating Agency and will deliver to
the Insurer, the Owner Trustee and the Indenture Trustee a letter from each
Rating Agency to the effect that such merger, consolidation or succession will
not result in a qualification, downgrading or withdrawal of its then-current
ratings of each Class of Notes or the Certificates. The Seller and Onyx shall
maintain separate corporate offices.
(b) (i) Subject to paragraph (ii) below, the purpose of the Seller shall
be to engage in any lawful activity for which a corporation may be
organized under the General Corporation Law of California and which is
permitted for operating subsidiaries of federally chartered savings
associations other than the banking business, the trust company business
or the practice of a profession permitted to be incorporated by the
California Corporations Code.
(ii) Notwithstanding paragraph (b)(i) above, the actual business
activities of the Seller shall be limited to those activities permitted
an operating subsidiary of a federally chartered savings association
pursuant to 12 CFR ss. 545.81 including the following purposes, and
activities incident to and necessary or convenient to accomplish the
following purposes: (A) to acquire, own, hold, sell, transfer, assign,
pledge, finance, refinance and otherwise deal with, retail installment
sales contracts and installment loans secured by automobiles and light
duty trucks (the "[Vehicle Receivables]"); (B) to authorize, issue, sell
and deliver one or more series of obligations, consisting of one or more
classes of notes, certificates or other securities (the "Offered
Securities") that are collateralized by or evidence an interest in
[Vehicle Receivables] and are rated in the highest available category by
at least one nationally recognized statistical rating agency; and (C) to
negotiate, authorize, execute, deliver and assume the obligations of any
agreement relating to the activities set forth in clauses (A) and (B)
above, including but not limited to any pooling and servicing agreement,
indenture, reimbursement agreement, credit support agreement,
receivables purchase agreement or underwriting agreement or to engage in
any lawful activity which is incidental
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to the activities contemplated by any such agreement. So long as any
outstanding debt of the Seller or Offered Securities are rated by any
nationally recognized statistical rating organization, the Seller shall
not issue notes or otherwise incur debt unless (I) the Seller has made a
written request to the related nationally recognized statistical rating
organization to issue notes or incur borrowings which notes or
borrowings are rated by the related nationally recognized statistical
rating organization the same as or higher than the rating afforded such
debt or securities, or (II) such notes or borrowings (X) are fully
subordinated (and which shall provide for payment only after payment in
respect of all outstanding rated debt and/or Offered Securities) or are
nonrecourse against any assets of the Seller other than the assets
pledged to secure such notes or borrowings, (Y) do not constitute a
claim against the Seller in the event such assets are insufficient to
pay such notes or borrowings, and (Z) where such notes or borrowings are
secured by the rated debt or Offered Certificates, are fully
subordinated (and which shall provide for payment only after payment in
respect of all outstanding rated debt and/or Offered Securities) to such
rated debt or Offered Securities.
(c) Notwithstanding any other provision of this Section and any
provision of law, the Seller shall not do any of the following:
(i) engage in any business or activity other than as set forth in
clause (b) above;
(ii) without the affirmative vote of a majority of the members of
the Board of Directors of the Seller (which must include the affirmative
vote of at least two duly appointed Independent directors) (A) dissolve
or liquidate, in whole or in part, or institute proceedings to be
adjudicated bankrupt or insolvent, (B) consent to the institution of
bankruptcy or insolvency proceedings against it, (C) file a petition
seeking or consent to reorganization or relief under any applicable
federal or state law relating to bankruptcy, (D) consent to the
appointment of a receiver, liquidator, assignee, trustee, sequestrator
(or other similar official) of the corporation or a substantial part of
its property, (E) make a general assignment for the benefit of
creditors, (F) admit in writing its inability to pay its debts generally
as they become due, or (G) take any corporate action in furtherance of
the actions set forth in clauses (A) through (F) above; provided,
however, that no director may be required by any shareholder of the
Seller to consent to the institution of bankruptcy or insolvency
proceedings against the Seller so long as it is solvent; or
(iii) merge or consolidate with any other corporation, company or
entity or sell all or substantially all of its assets or acquire all or
substantially all of the assets or capital stock or other ownership
interest of any other corporation, company or entity (except for the
acquisition of [Vehicle Receivables] and the sale of [Vehicle
Receivables] to one or more trusts in accordance with the terms of
clause (b)(ii) above, which shall not be otherwise restricted by this
Section 6.03(c)).
Section 6.04. LIMITATION ON LIABILITY OF SELLER AND OTHERS. The Seller
and any director or officer or employee or agent of the Seller may rely in good
faith on any document of any kind,
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prima facie properly executed and submitted by any Person respecting any matters
arising hereunder. The Seller and any director or officer or employee or agent
of the Seller shall be reimbursed by the Owner Trustee or the Indenture Trustee,
as the case may be, for any contractual damages, liability or expense incurred
by reason of the Owner Trustee's or the Indenture Trustee's willful misfeasance,
bad faith or negligence (except for errors in judgment) in the performance of
their respective duties hereunder, or by reason of reckless disregard of their
respective obligations and duties hereunder. The Seller shall not be under any
obligation to appear in, prosecute or defend any legal action that shall not be
incidental to its obligations under this Agreement, and that in its opinion may
involve it in any expense or liability. The indemnities contained in this
Section shall survive the resignation or termination of the Owner Trustee or the
termination of this Agreement.
Section 6.05. SELLER NOT TO RESIGN. Subject to the provisions of Section
6.03, the Seller shall not resign from the obligations and duties hereby imposed
on it as Seller hereunder.
Section 6.06. SELLER MAY OWN SECURITIES. The Seller and any Affiliate
thereof may in its individual or any other capacity become the owner or pledgee
of Securities with the same rights as it would have if it were not the Seller or
an Affiliate thereof, except as expressly provided herein or in any Basic
Document. Securities so owned by or pledged to the Seller or such Affiliate
shall have an equal and proportionate benefit under the provisions of this
Agreement, without preference, priority or distinction as among all of the Notes
or Certificates, as the case may be.
ARTICLE SEVEN
THE SERVICER
Section 7.01. LIABILITY OF SERVICER; INDEMNITIES. Subject to Section
8.02, the Servicer shall be liable in accordance herewith only to the extent of
the obligations specifically undertaken by the Servicer under this Agreement.
Such obligations shall include the following:
(a) The Servicer shall indemnify, defend and hold harmless the Issuer,
the Owner Trustee, the Indenture Trustee, the Securityholders and the Insurer
from and against any and all costs, expenses, losses, damages, claims and
liabilities, arising out of or resulting from the use, ownership or operation by
the Servicer, any subservicer or any of their respective Affiliates of a
Financed Vehicle.
(b) The Servicer shall indemnify, defend and hold harmless the Issuer,
the Owner Trustee, the Indenture Trustee and the Insurer from and against any
taxes that may at any time be asserted against the Owner Trustee, the Indenture
Trustee or the Issuer with respect to the transactions contemplated herein,
including, without limitation, any sales, gross receipts, general corporation,
tangible personal property, privilege or license taxes (but not including any
taxes asserted with respect to, and as of the date of, the sale of the Contracts
to the Issuer or the issuance and original sale of the Securities, or asserted
with respect to ownership of the Contracts, or federal
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or other income taxes arising out of distributions on the Securities) and costs
and expenses in defending against the same.
(c) The Servicer shall indemnify, defend and hold harmless the Issuer,
the Owner Trustee, the Indenture Trustee, the Insurer and the Securityholders
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 any such Person through, the
negligence, willful 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.
(d) The Servicer shall indemnify, defend and hold harmless the Owner
Trustee, the Indenture Trustee and the Insurer from and against any and all
costs, expenses, losses, claims, damages and liabilities arising out of or
incurred in connection with the acceptance or performance of the trusts and
duties herein contained, except to the extent that such cost, expense, loss,
claim, damage or liability (i) shall be due to the willful misfeasance, bad
faith or negligence (except for errors in judgment) of the Owner Trustee or the
Indenture Trustee, as the case may be; (ii) relates to any tax other than the
taxes with respect to which either the Seller or Servicer shall be required to
indemnify the Owner Trustee and the Indenture Trustee; (iii) shall arise from
the Owner Trustee's or the Indenture Trustee's breach of any of their respective
representations or warranties set forth herein, in the Trust Agreement or in the
Indenture; or (iv) shall be one as to which the Seller is required to indemnify
the Owner Trustee or the Indenture Trustee, as the case may be.
Indemnification under this Section shall survive the resignation or
removal of the Owner Trustee or the Indenture Trustee or the termination of this
Agreement and shall include, without limitation, reasonable fees and expenses of
counsel and expenses of litigation. If the Servicer shall have made any
indemnity payments pursuant to this Section and the Person to or on behalf of
whom such payments are made thereafter collects any of such amounts from others,
such Person shall promptly repay such amounts to the Servicer, without interest.
Section 7.02. CORPORATE EXISTENCE; STATUS AS SERVICER; MERGER. The
Servicer shall not consolidate with or merge into any other corporation or
convey, transfer or lease all or substantially all of its assets as an entirety
to any Person unless the corporation formed by such consolidation or into which
the Servicer has merged or the Person which acquires by conveyance, transfer or
lease substantially all the assets of the Servicer as an entirety can lawfully
perform the obligations of the Servicer hereunder and executes and delivers to
the Indenture Trustee and the Owner Trustee an agreement in form and substance
reasonably satisfactory to the Indenture Trustee, the Owner Trustee and the
Insurer, which contains an assumption by such successor entity of the due and
punctual performance or observance of each covenant and condition to be
performed or observed by the Servicer under this Agreement. Notice shall be sent
to each Rating Agency by the Servicer of any consolidation, merger or succession
pursuant to this Section.
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Section 7.03. PERFORMANCE OF OBLIGATIONS.
(a) The Servicer shall punctually perform and observe all of its
obligations and agreements contained in this Agreement.
(b) The Servicer shall not take any action, or permit any action to be
taken by others, which would excuse any person from any of its covenants or
obligations under any of the Contract Documents or under any other instrument
included in the Trust Estate, or which would result in the amendment,
hypothecation, subordination, termination or discharge of, or impair the
validity or effectiveness of, any of the Contract Documents or any such
instrument, except as expressly provided herein and therein.
Section 7.04. SERVICER NOT TO RESIGN; ASSIGNMENT.
(a) The Servicer shall not resign from the duties and obligations hereby
imposed on it except upon determination by its Board of Directors that by reason
of change in applicable legal requirements the continued performance by the
Servicer of its duties hereunder would cause it to be in violation of such legal
requirements in a manner which would result in a material adverse effect on the
Servicer or its financial condition, said determination to be evidenced by a
resolution of its Board of Directors to such effect accompanied by an Opinion of
Counsel, satisfactory to the Owner Trustee and the Indenture Trustee, to such
effect. No such resignation shall become effective unless and until (i) a new
servicer acceptable to the Owner Trustee, the Indenture Trustee and the Insurer
is willing to service the Contracts and enters into a servicing agreement with
the Trust and the Insurer in form and substance substantially similar to this
Agreement and satisfactory to the Owner Trustee, the Indenture Trustee and the
Insurer and (ii) each Rating Agency confirms that the selection of such new
servicer will not result in the qualification, reduction or withdrawal of its
then-current rating of each Class of Notes and the Certificates assigned by such
Rating Agency. No such resignation shall affect the obligation of the Servicer
to repurchase Contracts pursuant to Section 4.07.
(b) Except as specifically permitted in this Agreement, the Servicer may
not assign this Agreement or any of its rights, powers, duties or obligations
hereunder; provided that (i) the Servicer may assign this Agreement in
connection with a consolidation, merger, conveyance, transfer or lease made in
compliance with Section 7.02.
(c) Except as provided in Sections 7.04(a) and (b), the duties and
obligations of the Servicer under this Agreement shall continue until this
Agreement shall have been terminated as provided in Section 9.01 or the Trust
shall have been terminated as provided by the terms of the Trust Agreement, and
shall survive the exercise by the Owner Trustee, the Indenture Trustee or the
Insurer of any right or remedy under this Agreement, or the enforcement by the
Owner Trustee, the Indenture Trustee, any Certificateholder or Noteholder, or
the Insurer of any provision of the Notes, the Certificates, the Insurance
Agreement or this Agreement.
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(d) The resignation of the Servicer in accordance with this Section
shall not affect the rights of the Seller hereunder. If the Servicer resigns
pursuant to this Section, its appointment as custodian can be terminated
pursuant to Section 3.07.
Section 7.05. LIMITATION ON LIABILITY OF SERVICER AND OTHERS.
(a) Neither the Servicer nor any of the directors, officers, employees
or agents of the Servicer shall be under any liability to the Issuer, the
Noteholders or the Certificateholders, except as provided under this Agreement,
for any action taken or for refraining from the taking of any action pursuant to
this Agreement or for errors in judgment; provided, however, that this provision
shall not protect the Servicer or any such person against any liability that
would otherwise be imposed by reason of willful misfeasance, bad faith or
negligence (except errors in judgment) in the performance of duties or by reason
of reckless disregard of obligations and duties under this Agreement. The
Servicer and any director, officer, employee or agent of the Servicer may rely
in good faith on any document of any kind prima facie properly executed and
submitted by any person respecting any matters arising under this Agreement.
(b) The Servicer and any director or officer or employee or agent of the
Servicer shall be reimbursed by the Owner Trustee or the Indenture Trustee, as
the case may be, for any contractual damages, liability or expense incurred by
reason of such Trustee's willful misfeasance, bad faith or negligence (except
errors in judgment) in the performance of such Trustee's duties under this
Agreement or by reason of reckless disregard of its obligations and duties under
this Agreement.
Except as provided in this Agreement, the Servicer shall not be under
any obligation to appear in, prosecute or defend any legal action that shall not
be incidental to its duties to service the Contracts in accordance with this
Agreement, and that in its opinion may involve it in any expense or liability;
provided, however, that the Servicer may undertake any reasonable action that it
may deem necessary or desirable in respect of this Agreement and the other Basic
Documents and the rights and duties of the parties to this Agreement and the
other Basic Documents and the interests of the Securityholders under the Basic
Documents.
ARTICLE EIGHT
DEFAULT
Section 8.01. EVENTS OF DEFAULT. If any one of the following events
(each, a "SERVICER DEFAULT") shall occur and be continuing:
(a) A claim being made under the Securities Policy;
(b) Any failure by the Servicer or the Issuer to deposit or
credit, or to deliver to the Indenture Trustee for deposit, in any of
the Trust Accounts any amount required hereunder to be as deposited,
credited or delivered or to direct the Indenture Trustee to make
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any required distributions therefrom, that shall continue unremedied for
a period of three Business Days after written notice of such failure is
received from the Owner Trustee, the Indenture Trustee or the Insurer or
after discovery of such failure by an officer of the Servicer;
(c) Any failure by the Servicer to deliver to the Insurer, the
Indenture Trustee or the Owner Trustee a report in accordance with
Section 4.09 and/or Section 4.10 by the fourth Business Day prior to the
Distribution Date with respect to which such report is due, or the
Servicer shall have defaulted in the due observance of any provision of
Section 7.02 (other than failure to enter into an assumption agreement
under Section 7.02, which is a Servicer Default only if such failure
continues for ten Business Days);
(d) Failure on the part of the Seller, the Issuer or the Servicer
duly to observe or to perform in any material respect any other
covenants or agreements of the Servicer or the Seller set forth in this
Agreement or any other Basic Document, which failure shall (i)
materially and adversely affect the rights of the Insurer, the Owner
Trustee, the Indenture Trustee, the Certificateholders or Note- holders
and (ii) continue unremedied for a period of 30 days after the date on
which written notice of such failure, requiring the same to be remedied,
shall have been given (A) to the Servicer or the Seller (as the case may
be) by the Insurer, the Owner Trustee or the Indenture Trustee or (B) to
the Servicer or the Seller (as the case may be), and to the Owner
Trustee and the Indenture Trustee by the Holders of Notes evidencing not
less than 25% of the Outstanding Amount of the Notes or, if the Notes
have been paid in full, by Certificateholders evidencing not less than
25% of the Certificate Balance, or, so long as no default under the
Securities Policy has occurred and is continuing and no insolvency of
the Insurer has occurred, by the Insurer;
(e) The occurrence of an Insolvency Event with respect to the
Seller, the Issuer or the Servicer; or
(f) Any representation, warranty or statement of the Servicer,
the Issuer or the Seller made in this Agreement or any certificate,
report or other writing delivered pursuant hereto shall prove to be
incorrect in any material respect as of the time when the same shall
have been made (excluding, however, any representation or warranty to
which Section 3.01 or 4.06 shall be applicable so long as the Servicer
or the Seller shall be in compliance with Section 3.02 or 4.07, as the
case may be), and the incorrectness of such representation, warranty or
statement has a material adverse effect on the Noteholders or the
Certificateholders and, within 30 days after written notice thereof
shall have been given to the Servicer or the Seller by the Indenture
Trustee or the Owner Trustee or by the Holders of Notes evidencing not
less than 25% of the Outstanding Amount of the Notes, or
Certificate-holders evidencing not less than 25% of the Certificate
Balance or, so long as no default has occurred under the Securities
Policy and is continuing and no Insurer Insolvency has occurred, by the
Insurer, the circumstance or condition in respect of which such
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representation, warranty or statement was incorrect shall not have been
eliminated or otherwise cured;
then and in each and every case, so long as such Servicer Default shall not have
been remedied and subject to the limitations set forth in Section 6.07 of the
Insurance Agreement, either the Indenture Trustee, the Insurer, the Holders of
Notes evidencing not less than 25% of the Outstanding Amount of the Notes (or,
if the Notes have been paid in full and the Indenture has been discharged in
accordance with its terms, by the Owner Trustee or by Certificateholders
evidencing not less than 25% of the Certificate Balance), by notice then given
in writing to the Servicer (and to the Insurer, the Indenture Trustee and the
Owner Trustee if given by the Noteholders or the Certificateholders) may
terminate all the rights and obligations of the Servicer under this Agreement.
Upon such termination, termination of the Servicer as custodian can be made
pursuant to Section 3.07. On or after the receipt by the Servicer of such
written notice, all authority and power of the Servicer under this Agreement,
whether with respect to the Notes, the Certificates, the Contracts or otherwise,
shall, without further action, pass to and be vested in the Indenture Trustee or
such successor Servicer as may be appointed under Section 8.02; and, without
limitation, the Indenture Trustee and the Owner Trustee are hereby authorized
and empowered to execute and deliver, for the benefit of the predecessor
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 Contracts and related documents, or
otherwise. The Servicer shall cooperate with the Indenture Trustee and the Owner
Trustee in effecting the termination of the responsibilities and rights of the
predecessor Servicer under this Agreement, including the transfer to the
Indenture Trustee for administration by it of all cash amounts that shall at the
time be held by the predecessor Servicer for deposit, or shall thereafter be
received by it with respect to any Contract.
Section 8.02. TRUSTEE TO ACT; APPOINTMENT OF SUCCESSOR. Upon the
Servicer's receipt of notice of termination pursuant to Section 8.01 or
resignation pursuant to Section 7.04, the Indenture Trustee shall be the
successor to the Servicer in its capacity as servicer under this Agreement, and
shall be subject to all the responsibilities, duties and liabilities relating
thereto placed on the Servicer by the terms and provisions of this Agreement,
except that the Indenture Trustee shall not be obligated to purchase Contracts
pursuant to Section 4.07 unless the obligation to repurchase arose after the
date of the notice of termination given to the Servicer pursuant to Section 8.01
or be subject to any obligation of the Servicer to indemnify or hold harmless
any Person as set forth in this Agreement arising from the acts or omissions of
the previous Servicer. As compensation therefor, the Indenture Trustee 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
no such notice of termination shall have been given. If, however, a bankruptcy
trustee or similar official has been appointed for the Servicer, and no Servicer
Default other than such appointment has occurred, such trustee or official may
have the power to prevent the Indenture Trustee, Insurer or the Noteholders (or
Certificateholders) from effecting a transfer of servicing. Notwithstanding the
above, the Indenture Trustee may, if it shall be unwilling to act, or shall, if
it shall be legally unable so to act, appoint, or petition a court of competent
jurisdiction to
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appoint, any established financial institution, having a net worth of not less
than $50,000,000 and whose regular business shall include the servicing of motor
vehicle retail installment sales contracts, as the successor to the Servicer
under this Agreement. Pending appointment of any such successor Servicer, the
Indenture Trustee shall act in such capacity as provided above. In connection
with such appointment, the Indenture Trustee may make such arrangements for the
compensation of such successor out of payments on Contracts it and such
successor shall agree; provided, however, that no such compensation shall be in
excess of that permitted the Servicer under this Agreement without the consent
of the Insurer. The Indenture Trustee and such successor shall take such action,
consistent with this Agreement, as shall be necessary to effectuate any such
succession.
[Section 8.03. REPAYMENT OF ADVANCES. If the identity of the Servicer
shall change, the predecessor Servicer shall be entitled to receive
reimbursement for outstanding Advances pursuant to Section 5.04 with respect to
all Advances made by the predecessor Servicer.]
Section 8.04. NOTIFICATION TO NOTEHOLDERS AND CERTIFICATEHOLDERS. Upon
any termination of, or appointment of a successor to, the Servicer pursuant to
this Article, the Owner Trustee shall give prompt written notice thereof to
Certificateholders at their respective addresses appearing in the Certificate
Register, and the Indenture Trustee shall give prompt written notice thereof to
Noteholders at their respective addresses appearing in the Note Register and to
each Rating Agency.
Section 8.05. WAIVER OF PAST DEFAULTS. The Holders of Notes evidencing
not less than 51% of the Outstanding Amount of the Notes, or, if all the Notes
have been paid in full and the Indenture has been discharged in accordance with
its terms, Certificateholders evidencing not less than 51% of the Certificate
Balance (in the case of any default which does not adversely affect the
Indenture Trustee or the Noteholders) may, on behalf of all Securityholders,
with the consent of the Insurer, waive in writing any default by the Servicer in
the performance of its obligations hereunder and its consequences, except a
default in making any required deposits to or payments from any of the Trust
Accounts in accordance with this Agreement or in respect of a covenant or
provisions hereof which cannot be modified without the consent of each
Securityholder. Upon any such waiver of a past default, such default shall cease
to exist, and any Servicer Default 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 thereto.
Section 8.06. INSURER DIRECTION OF INSOLVENCY PROCEEDINGS. Upon receipt
of actual knowledge thereof by a Responsible Officer, the Indenture Trustee
shall promptly notify the Insurer of (i) the commencement of any of the events
or proceedings (individually, an "Insolvency Proceeding") described in the
definition of the term "Insolvency Event" or any such event or proceeding
applicable to an Obligor under a Contract and (ii) the making of any claim in
connection with any Insolvency Proceeding seeking the avoidance as a
preferential transfer (a "Preference Claim") of any payment of principal of, or
interest on, a Contract or any Notes or Certificates. Each Noteholder and Note
Owner, by its purchase of Notes or a beneficial interest
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therein, each Certificateholder and Certificate Owner, by its purchase of
Certificates or a beneficial interest therein, the Owner Trustee and the
Indenture Trustee hereby agree that, so long as neither a default under the
Policies nor an Insurer Insolvency has occurred and is continuing, the Insurer
may at any time during the continuation of an Insolvency Proceeding direct all
matters relating to such Insolvency Proceeding, including, without limitation,
(i) all matters relating to any Preference Claim, (ii) the direction of any
appeal of any order relating to any Preference Claim and (iii) the posting of
any surety, supersedes or performance bond pending any such appeal. The Insurer
shall be subrogated to the rights of the Indenture Trustee, the Owner Trustee
and each Securityholder in the conduct of any Insolvency Proceeding, including,
without limitation, all rights of any party to an adversary proceeding action
with respect to any court order issued in connection with any such Insolvency
Proceeding.
ARTICLE NINE
TERMINATION
Section 9.01. OPTIONAL PURCHASE OF ALL CONTRACTS.
(a) On each Distribution Date as of which (i) the Outstanding Amount of
the Securities is less than 5% of the Outstanding Amount of the Securities on
the Closing Date and (ii) the [Aggregate Scheduled Balance] is less than 10% of
the [Cut-Off Date Aggregate Scheduled Balance], the Seller shall have the option
to purchase the remaining Contracts from the Trust. Notice of the exercise of
such option shall be given by the Seller to the Owner Trustee, the Indenture
Trustee and the Insurer not later than the 25th day of the month immediately
preceding the month of such Distribution Date. To exercise such option, the
Seller shall pay to the Indenture Trustee for the benefit of the
Securityholders, by deposit in the Collection Account on the Business Day
immediately preceding the related Distribution Date, the aggregate Repurchase
Amount of all Contracts that were Outstanding at the beginning of the Collection
Period ending immediately prior to such Distribution Date, and shall succeed to
all interests in and to the Trust. Such purchase shall be deemed to have
occurred on the last day of such Collection Period. Notwithstanding the
foregoing, the Seller shall not be permitted to exercise such option unless the
amount to be deposited in the Collection Account pursuant to the preceding
sentence is greater than or equal to the sum of the outstanding principal amount
of the Notes and the Certificate Balance and all accrued but unpaid interest
(including any overdue interest) thereon. In addition, if the Servicer or the
Seller has outstanding senior debt and such debt is not rated "investment grade"
by Moody's at the time of exercising the option pursuant to this Section, then
the Servicer or the Seller shall deliver to the Owner Trustee, the Indenture
Trustee and Moody's, an Opinion of Counsel to the effect that such optional
purchase is not a fraudulent conveyance.
(b) Upon any sale of the assets of the Trust pursuant to Section 9.02 of
the Trust Agreement, the Servicer shall instruct the Indenture Trustee to
deposit the proceeds from such sale after all payments and reserves therefrom
have been made (the "Insolvency Proceeds") in the Collection Account. On the
Distribution Date on which the Insolvency Proceeds are deposited in the
Collection Account (or, if such proceeds are not so deposited on a Distribution
Date, on the
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Distribution Date immediately following such deposit), the Servicer shall
instruct the Indenture Trustee to make the following deposits (after the
application on such Distribution Date of Net Collections and funds on deposit in
the Spread Account pursuant to Sections 5.05 and 5.06) from the Insolvency
Proceeds and any funds remaining on deposit in the Spread Account (including the
proceeds of any sale of investments therein as described in the following
sentence):
(i) to the Note Distribution Account, any portion of the Note
Interest Distributable Amount not otherwise deposited into the Note
Distribution Account on such Distribution Date;
(ii) to the Note Distribution Account, the outstanding principal
amount of the Notes (after giving effect to the reduction in the
outstanding principal amount of the Notes to result from the deposits
made in the Note Distribution Account on such Distribution Date and on
prior Distribution Dates);
(iii) to the Certificate Distribution Account, any portion of the
Certificate Interest Distributable Amount not otherwise deposited into
the Certificate Distribution Account on such Distribution Date; and
(iv) to the Certificate Distribution Account, the Certificate
Balance (after giving effect to the reduction in the Certificate Balance
to result from the deposits made in the Certificate Distribution Account
on such Distribution Date).
(c) As described in Article Nine of the Trust Agreement, notice of any
termination of the Trust shall be given by the Servicer to the Owner Trustee,
the Insurer and the Indenture Trustee as soon as practicable after the Servicer
has received notice thereof.
(d) Following the satisfaction and discharge of the Indenture and the
payment in full of the principal of and interest on the Notes, the
Certificateholders will succeed to the rights of the Noteholders hereunder and
the Owner Trustee will succeed to the rights of, and assume the obligations of,
the Indenture Trustee pursuant to this Agreement.
Section 9.02. TRANSFER TO THE INSURER. If (i) there is one or more
Outstanding Contracts at the end of the Collection Period ending immediately
prior to the Certificate Final Scheduled Distribution Date and (ii) an amount
sufficient to pay the Certificate Distributable Amount on the Certificate Final
Scheduled Distribution Date has been deposited with the Indenture Trustee by the
Insurer for the benefit of the Certificateholders, then on the Certificate Final
Scheduled Distribution Date the Certificates shall be deemed to be transferred
by the Certificateholders to the Insurer or its designee as purchaser thereof at
the opening of business on the Certificate Final Scheduled Distribution Date and
the Owner Trustee, on behalf of the Trust, shall execute, and the Owner Trustee
shall authenticate and deliver to the Insurer or its designee, in the name of
the Insurer or its designee, as the case may be, a new Certificate evidencing
the entire Certificate Balance. Such new Certificate shall have the same terms
as the Certificates deemed transferred by the Certificateholders.
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No service charge shall be made for the issuance of such Certificate to the
Insurer or its designee, but the Owner Trustee may require payment of a sum
sufficient to cover any tax or other governmental charge imposed in connection
therewith. Such transfer shall not diminish or restrict the Insurer's rights
hereunder or under the Insurance Agreement.
ARTICLE TEN
MISCELLANEOUS
Section 10.01. AMENDMENT.
(a) This Agreement may be amended by the Seller, the Servicer and the
Owner Trustee on behalf of the Issuer, collectively, without the consent of any
Security- holders, (i) to cure any ambiguity, to correct or supplement any
provisions in this Agreement which are inconsistent with the provisions herein,
or to add any other provisions with respect to matters or questions arising
under this Agreement that shall not be inconsistent with the provisions of this
Agreement, (ii) to add or provide any credit enhancement for any Class of Notes
or the Certificates and (iii) to change any provision applicable for determining
the [Specified Spread Account Balance], the [Minimum Funded Amount] or the
manner in which the Spread Account is funded (in each case with the approval of
the Insurer); provided, however, that any such action shall not, as evidenced by
an Opinion of Counsel, adversely affect in any material respect the interests of
any Securityholder and provided, further, that in connection with any amendment
pursuant to clause (iii) above, the Servicer shall deliver to the Owner Trustee,
the Indenture Trustee and the Insurer a letter from Standard & Poor's to the
effect that such amendment will not cause its then-current rating on any Class
of Notes or the Certificates to be qualified, reduced or withdrawn, without
giving any consideration to the effect of the guarantee under the Securities
Policy of payments owing to Noteholders or to Certificateholders, and the
Servicer shall provide Moody's notice of such amendment; and provided, further,
that this Agreement may not be amended to alter the rights or obligations of the
Indenture Trustee without the prior consent of the Indenture Trustee.
(b) This Agreement may also be amended from time to time by the Seller,
the Servicer and the Owner Trustee on behalf of the Issuer, with the consent of
the Holders of Notes evidencing not less than 51% of the Outstanding Amount of
the Notes, and the consent of Certificateholders evidencing not less than 51% of
the Certificate Balance, 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 Noteholders or the Certificateholders;
provided, however, that no such amendment shall increase or reduce in any manner
the amount of, or accelerate or delay the timing of (i)(a) collections of
payments on the Contracts or distributions that shall be required to be made on
any Note or Certificate or any Interest Rate or the Certificate Rate, (b) except
as otherwise provided in Section 10.01(a), the [Specified Spread Account
Balance], the [Minimum Funded Amount] or the manner in which the Spread Account
is funded or (ii) reduce the aforesaid percentage of the Outstanding Amount of
the Notes and the Certificate Balance, the Holders of
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which are required to consent to any such amendment, without the consent of the
Insurer and the Holders of all Notes and Certificates of the relevant Class then
outstanding.
(c) Prior to the execution of any such amendment or consent, the
Indenture Trustee shall furnish written notification of the substance of such
amendment or consent, as prepared by the Seller, the Servicer and the Owner
Trustee on behalf of the Issuer, at the expense of the such party, together with
a copy thereof, to each Rating Agency and the Insurer.
(d) Promptly after the execution of any such amendment or consent, the
Owner Trustee and the Indenture Trustee, as the case may be, shall furnish the
written notification of the substance of the amendment or consent described in
paragraph (c) above, at the expense of the Seller, the Servicer or the Owner
Trustee on behalf of the Issuer, as the case may be, to each Certificateholder
and Noteholder, respectively. It shall not be necessary for the consent of
Noteholders and Certificateholders pursuant to Section 10.01(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 of evidencing the authorization by Noteholders and
Certificateholders of the execution thereof shall be subject to such reasonable
requirements as the Owner Trustee or the Indenture Trustee may prescribe.
(e) Prior to the execution of any amendment to this Agreement, the Owner
Trustee shall be entitled to receive and rely upon an Opinion of Counsel stating
that the execution of such amendment is authorized or permitted by this
Agreement. The Owner Trustee may, but shall not be obligated to, enter into any
such amendment which affects the Owner Trustee's own rights, duties or
immunities under this Agreement or otherwise.
Section 10.02. PROTECTION OF TITLE TO TRUST.
(a) The Servicer shall execute and file such financing statements and
cause to be executed and filed such continuation 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 Securityholders, the Indenture Trustee,
the Owner Trustee and the Insurer in the Contracts and in the proceeds thereof.
The Servicer shall deliver (or cause to be delivered) to the Owner Trustee and
the Indenture Trustee file-stamped copies of, or filing receipts for, any
document filed as provided above, as soon as available following such filing.
(b) Neither the Onyx, the Seller nor the Servicer shall change its name,
identity or corporate structure in any manner that would, could or might make
any financing statement or continuation statement filed in accordance with
Section 10.02(a) seriously misleading within the meaning of ss. 9-402(7) of the
UCC, unless it shall have given the Insurer, the Owner Trustee and the Indenture
Trustee at least 60 days' prior written notice thereof and shall have promptly
filed appropriate amendments to all previously filed financing statements or
continuation statements.
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(c) Onyx, the Seller and the Servicer shall give the Insurer, the Owner
Trustee and the Indenture Trustee at least 60 days' prior written notice of any
relocation of the principal executive office of Onyx or the Seller and the
Servicer or the Subservicers (in the case of notice provided by the Servicer)
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 and shall promptly file
any such amendment or new financing statement. The Servicer shall at all times
maintain each office from which it shall service Contracts, and its principal
executive office, within the United States.
(d) The Servicer shall maintain or cause to be maintained accounts and
records as to each Contract accurately and in sufficient detail to permit (i)
the reader thereof to know at any time the status of such Contract, 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
Contract and the amounts from time to time deposited in or credited to the
Collection Account and the [Payahead Account] in respect of such Contract.
(e) The Servicer shall maintain or cause to be maintained its computer
systems and those of Subservicers so that, from and after the time of sale under
this Agreement of the Contracts, the Servicer's and Subservicer's master
computer records (including any backup archives) that shall refer to a Contract
indicate clearly the interest of the Issuer and the Indenture Trustee in such
Contract and that such Contract is owned by the Issuer and has been pledged to
the Indenture Trustee. Indication of the Issuer's ownership of and the Indenture
Trustee's interest in a Contract shall be deleted from or modified on the
Servicer's computer systems when, and only when, the related Contract shall have
been paid in full or repurchased or shall have become a Liquidated Contract.
(f) If at any time the Seller, the Servicer or a Subservicer shall
propose to sell, grant a security interest in, or otherwise transfer any
interest in automotive retail installment sales contracts to any prospective
purchaser, lender or other transferee, the Servicer shall give or cause to be
given to such prospective purchaser, lender or other transferee computer tapes,
records or print-outs (including any restored from back-up archives) that, if
they shall refer in any manner whatsoever to any Contract, shall indicate
clearly that such Contract has been sold and is owned by the Issuer and has been
pledged to the Indenture Trustee.
(g) The Servicer shall permit the Owner Trustee, the Indenture Trustee
and the Insurer and its agents, at any time during normal business hours, to
inspect, audit and make copies of and abstracts from the Servicer's records
regarding any Contract.
(h) Upon request, the Servicer shall furnish to the Owner Trustee, the
Indenture Trustee and the Insurer, within five Business Days, a list of all
Contracts then held as part of the Trust Estate, together with a reconciliation
of such list to the Schedule of Contracts and to each of the Distribution Date
Statements furnished before such request indicating removal of Contracts from
the Trust.
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(i) The Servicer shall deliver to the Owner Trustee, the Indenture
Trustee, each Rating Agency and the Insurer:
(1) promptly after the execution and delivery of this Agreement
and of each amendment hereto, an Opinion of Counsel stating that, in the
opinion of such counsel, the Indenture Trustee holds a perfected
security interest in the Contracts, that the Trust holds title to the
Contracts subject to the security interest of the Indenture Trustee and
the lien of the Insurer pursuant to the Insurance Agreement, and that
the Insurer holds a lien on the Contracts under the Insurance Agreement,
subject to applicable subordination; and
(2) within 90 days after the beginning of each calendar year
beginning with the first calendar year beginning more than three months
after the Cut-Off Date, an Opinion of Counsel, dated as of a date during
such 90-day period, either (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 Owner Trustee and the Indenture Trustee in the
Contracts, and reciting the details of such filings 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 shall be
necessary to preserve and protect such interest.
Section 10.03. GOVERNING LAW. This Agreement shall be construed in
accordance with the laws of the State of California and the obligations, rights,
and remedies of the parties under the Agreement shall be determined in
accordance with such laws, except that the duties of the Owner Trustee and the
Indenture Trustee shall be governed by the laws of the State of New York.
Section 10.04. NOTICES. All demands, notices and communications upon or
to the Seller, the Servicer, the Owner Trustee, the Indenture Trustee, the
Insurer or the Rating Agencies 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 in the case of (a) the
Seller, at ______________________________, (b) the Servicer,
__________________________________, Attention: _____________________, (c) the
Issuer or the Owner Trustee, at the Corporate Trust Office (with, in the case of
the Issuer, a copy to the Seller), (d) the Indenture Trustee, at
_________________________________, Attention: ______________________________,
(e) Moody's, to Moody's Investors Service, Inc., ABS Monitoring Department, 99
Church Street, New York, New York 10007, (f) Standard & Poor's, to Standard &
Poor's Ratings Services, 26 Broadway (15th Floor), New York, New York 10004,
Attention of Asset Backed Surveillance Department and (g) the Insurer, at 350
Park Avenue, New York, New York 10022, Attention: Surveillance Department, with
a copy to the Senior Vice President -- Surveillance; or, as to each of the
foregoing, at such other address as shall be designated by written notice to the
other parties. Any notice required or permitted to be to be mailed to a
Securityholder shall be given by first class mail, postage prepaid, at the
address of such Holder as shown in the Note Register or the Certificate
Register, as the case may be. Any notice so mailed within the time prescribed
herein shall be conclusively presumed to have been duly given, whether or not
such Securityholder shall receive such notice.
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Section 10.05. SEVERABILITY OF PROVISIONS. If 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
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way affect the validity or enforceability of the other provisions of this
Agreement or of the Notes or Certificates or the rights of the Holders thereof.
Section 10.06. ASSIGNMENT. Notwithstanding anything to the contrary
contained herein, as provided in Sections 6.03 and 7.02, this Agreement may not
be assigned by the Seller or the Servicer without the prior written consent of
Holders of Notes of each Class evidencing not less than 66 2/3% of the
Outstanding Amount of Notes of such Class and Certificateholders evidencing not
less than 66 2/3% of the Certificate Balance.
Section 10.07. THIRD PARTY BENEFICIARIES. Except as otherwise
specifically provided herein, the parties hereto hereby manifest their intent
that no third party other than the Insurer shall be deemed a third party
beneficiary of this Agreement, and specifically that the Obligors are not third
party beneficiaries of this Agreement.
Section 10.08. INSURER DEFAULT OR INSOLVENCY. If a default under the
Securities Policy has occurred and is continuing or a Insurer Insolvency has
occurred, any provision giving the Insurer the right to direct, appoint or
consent to, approve of, or take any action under this Agreement, shall be
inoperative during the period of such default or the period from and after such
Insurer Insolvency and such consent or approval shall be deemed to have been
given for the purpose of such provisions.
Section 10.09. COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be an original and all of which shall together
constitute but one and the same instrument.
Section 10.10. HEADINGS. The headings of the various Articles and
Sections herein are for convenience of reference only and shall not define or
limit any of the terms or provisions hereof.
Section 10.11. ASSIGNMENT BY ISSUER. The Seller hereby acknowledges and
consents to any mortgage, pledge, assignment and grant of a security interest by
the Issuer to the Indenture Trustee pursuant to the Indenture for the benefit of
the Noteholders of all right, title and interest of the Issuer in, to and under
the Contracts and/or the assignment of any or all of the Issuer's rights and
obligations hereunder to the Indenture Trustee.
Section 10.12. LIMITATION OF LIABILITY OF OWNER TRUSTEE. Notwithstanding
anything contained herein to the contrary, this instrument has been
countersigned by Chase Manhattan Bank Delaware not in its individual capacity
but solely in its capacity as Owner Trustee of the Issuer and in no event shall
Chase Manhattan Bank Delaware in its individual capacity or any beneficial owner
of the Issuer have any liability for the representations, warranties, covenants,
agreements or other obligations of the Issuer hereunder, as to all of which
recourse shall be had solely to the assets of the Issuer. For all purposes of
this Agreement, in the performance of any duties or obligations of the Issuer
hereunder, the Owner Trustee shall be subject to, and entitled to the benefits
of, the terms and
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provisions of Articles Six, Seven and Eight of the Trust Agreement.
Notwithstanding anything herein to the contrary, Section 2.07(a) of the Trust
Agreement shall remain in full force and effect.
[Remainder of page intentionally left blank]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective officers as of the day and year first above
written.
ONYX ACCEPTANCE OWNER TRUST 1998-A
as Issuer
By: [Owner Trustee], not in its
individual capacity but solely as
Owner Trustee on behalf of the Trust
By:____________________________________
Name:__________________________________
Title:_________________________________
ONYX ACCEPTANCE FINANCIAL
CORPORATION, as Seller
By:____________________________________
Name:__________________________________
Title:_________________________________
ONYX ACCEPTANCE CORPORATION, as
Servicer
By:____________________________________
Name:__________________________________
Title:_________________________________
Acknowledged and accepted as of the day
and year first above written:
[Indenture Trustee], not in its
individual capacity but solely as Indenture
Trustee
By:_______________________________________
Name:_____________________________________
Title:____________________________________
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SCHEDULE A
SCHEDULE OF CONTRACTS
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EXHIBIT A
[FORM OF APPOINTMENT OF CUSTODIAN]
79
