<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended Commission file number 0-20526
September 30, 1996
OLYMPIC FINANCIAL LTD.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Minnesota 41-1664848
(State or other (I.R.S. Employer
jurisdiction Identification No.)
of incorporation or
organization)
7825 Washington Avenue South, Minneapolis, MN 55439-2435
- --------------------------------------------------------------------------------
(Address of principal executive offices)
(612) 942-9880
--------------
Registrant's telephone number, including area code
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES X NO
---------- ---------
The number of shares of the Common Stock of the registrant outstanding as of
November 6, 1996 was 34,773,144.
<PAGE>
FORM 10-Q INDEX
PART I FINANCIAL INFORMATION PAGE
- ------ ----
Item 1. Consolidated Financial Statements . . . . . . . . . . . . . . . 3
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . . . . . . . . 9
PART II OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . 19
Item 2. Changes in Securities . . . . . . . . . . . . . . . . . . . . . 19
Item 3. Defaults Upon Senior Securities . . . . . . . . . . . . . . . . 19
Item 4. Submission of Matters to a Vote of Security Holders . . . . . . 19
Item 5. Other Information . . . . . . . . . . . . . . . . . . . . . . . 19
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . 20
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
EXHIBIT INDEX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
The financial information for the interim periods is unaudited. In the
opinion of management, all adjustments necessary for a fair presentation of
the results of operations (which are of a normal recurring nature) have been
included. The results of operations for an interim period are not
necessarily indicative of the results that may be expected for a full year or
any other interim period.
SAFE HARBOR STATEMENT UNDER THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1996
This Form 10-Q for the quarter ended September 30, 1996 contains certain
forward-looking statements as defined in the Private Securities Litigation
Reform Act of 1995, which may be identified by the use of forward-looking
terminology such as "may," "will," "expect," "anticipate," "estimate,"
"goal," "continue," or comparable terminology, that involve risks or
uncertainties and that are qualified in their entirety by the cautions and
risk factors contained in the Company's Form 8-K dated February 20, 1996 and
other documents filed with the Securities and Exchange Commission.
2
<PAGE>
OLYMPIC FINANCIAL LTD.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(UNAUDITED)
SEPTEMBER 30, DECEMBER 31,
1996 1995
-------------- ------------
<S> <C> <C>
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
ASSETS
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . $ 3,593 $ 1,340
Due from securitization trust . . . . . . . . . . . . . . . . . . . . . . 188,373 ----
Auto loans held for sale . . . . . . . . . . . . . . . . . . . . . . . . 18,925 118,556
Finance income receivable . . . . . . . . . . . . . . . . . . . . . . . . 430,024 249,581
Furniture, fixtures and equipment . . . . . . . . . . . . . . . . . . . . 12,629 6,346
Advances due to servicer . . . . . . . . . . . . . . . . . . . . . . . . 12,364 9,046
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,917 12,925
--------- ----------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 683,825 $ 397,794
--------- ----------
--------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Amounts due under warehouse facilities . . . . . . . . . . . . . . . . . $ 38,486 $ 26,530
Senior term notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145,000 145,000
Subordinated notes . . . . . . . . . . . . . . . . . . . . . . . . . . . 53,563 13,005
Capital lease obligations . . . . . . . . . . . . . . . . . . . . . . . . 8,049 3,924
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 44,405 18,700
Accounts payable and accrued liabilities . . . . . . . . . . . . . . . . 20,059 9,822
--------- ----------
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 309,562 216,981
Commitments and contingencies
Shareholders' equity:
Capital stock, $.01 par value, 100,000,000 shares authorized:
8% Cumulative Convertible Exchangeable Preferred Stock, 689,483 and
1,071,036 shares issued and outstanding, respectively . . . . . . . . . 7 11
Common stock 33,003,889 and 22,038,567 shares issued and outstanding,
respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 330 220
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . 308,750 157,204
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . 65,176 23,378
--------- ----------
Total shareholders' equity . . . . . . . . . . . . . . . . . . . . . 374,263 180,813
--------- ----------
Total liabilities and shareholders' equity . . . . . . . . . . . . . $ 683,825 $ 397,794
--------- ----------
--------- ----------
</TABLE>
SEE NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
3
<PAGE>
OLYMPIC FINANCIAL LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------- ------------------------
1996 1995 1996 1995
---------- --------- ---------- ----------
<S> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
REVENUES:
Net interest margin . . . . . . . . . . . . . . . . . . . . . . . . . $ 18,079 $ 9,601 $ 45,464 $ 21,769
Gain on sale of loans . . . . . . . . . . . . . . . . . . . . . . . . 30,113 17,587 80,794 40,947
Servicing fee income . . . . . . . . . . . . . . . . . . . . . . . . 7,474 3,872 19,774 9,175
Other non-interest income . . . . . . . . . . . . . . . . . . . . . 1,406 405 4,579 802
--------- -------- --------- --------
Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . 57,072 31,465 150,611 72,693
EXPENSES:
Salaries and benefits . . . . . . . . . . . . . . . . . . . . . . . . 10,286 5,146 28,196 13,718
Other operating expenses . . . . . . . . . . . . . . . . . . . . . . 13,107 6,097 35,150 15,565
--------- -------- --------- --------
Total operating expenses . . . . . . . . . . . . . . . . . . . . 23,393 11,243 63,346 29,283
Long-term debt and other interest expense . . . . . . . . . . . . . 6,660 5,205 18,609 11,624
--------- -------- --------- --------
Total expenses . . . . . . . . . . . . . . . . . . . . . . . . 30,053 16,448 81,955 40,907
--------- -------- --------- --------
Operating income before income taxes and extraordinary items . . . . 27,019 15,017 68,656 31,786
Provision for income taxes . . . . . . . . . . . . . . . . . . . . . 9,862 6,007 25,706 12,698
--------- -------- --------- --------
Income before extraordinary items . . . . . . . . . . . . . . . . . . 17,157 9,010 42,950 19,088
Extraordinary items . . . . . . . . . . . . . . . . . . . . . . . . . ---- ---- ---- (3,856)
--------- -------- --------- --------
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 17,157 $ 9,010 $ 42,950 $ 15,232
--------- -------- --------- --------
--------- -------- --------- --------
PRIMARY EARNINGS PER SHARE:
Net income per common share before extraordinary items . . . . . . . $ 0.47 $ 0.34 $ 1.32 $ 0.89
Extraordinary items per common share . . . . . . . . . . . . . . . . ---- ---- ---- (0.19)
--------- -------- --------- --------
Net income per common share . . . . . . . . . . . . . . . . . . $ 0.47 $ 0.34 $ 1.32 $ 0.70
--------- -------- --------- --------
--------- -------- --------- --------
FULLY DILUTED EARNINGS PER SHARE:
Net income per share before extraordinary items . . . . . . . . . . . $ 0.44 $ 0.30 $ 1.20 $ 0.74
Extraordinary items per share . . . . . . . . . . . . . . . . . . . . ---- ---- ---- (0.15)
--------- -------- --------- --------
Net income per share . . . . . . . . . . . . . . . . . . . . . . $ 0.44 $ 0.30 $ 1.20 $ 0.59
--------- -------- --------- --------
--------- -------- --------- --------
Weighted average common and common
equivalent shares outstanding
Primary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,896,149 24,528,119 31,564,219 19,481,661
Fully diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39,423,446 30,406,065 35,851,933 25,888,975
</TABLE>
4
See notes to unaudited consolidated financial statements.
<PAGE>
OLYMPIC FINANCIAL LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------------
1996 1995
------------ ------------
<S> <C> <C>
(DOLLARS IN THOUSANDS)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 42,950 $ 15,232
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,052 688
Loss on sale of furniture, fixtures and equipment . . . . . . . . . . . . . . . . . 147 153
(Increase) decrease in assets:
Automobile loans held for sale:
Purchases of automobile loans . . . . . . . . . . . . . . . . . . . . . . . . (2,009,614) (1,463,746)
Sales of automobile loans . . . . . . . . . . . . . . . . . . . . . . . . . . 2,067,225 1,359,044
Repayments of automobile loans . . . . . . . . . . . . . . . . . . . . . . . . 42,020 19,762
Finance income receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . (180,443) (118,750)
Due from securitization trusts . . . . . . . . . . . . . . . . . . . . . . . . . (188,373) 38,083
Advances due servicer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,318) (4,616)
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,601) (3,035)
Increase (decrease) in liabilities:
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,705 10,035
Accounts payable and accrued liabilities . . . . . . . . . . . . . . . . . . . . 10,237 12,393
------------ ------------
Total cash used in operating activities . . . . . . . . . . . . . . . . . (194,013) (134,757)
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of furniture, fixtures and equipment . . . . . . . . . . . . . . . . 18 37
Purchase of furniture, fixtures and equipment . . . . . . . . . . . . . . . . . . . . . (2,764) (599)
Purchase of subordinated certificates . . . . . . . . . . . . . . . . . . . . . . . . . (1,869) (1,309)
Collections on subordinated certificates . . . . . . . . . . . . . . . . . . . . . . . . 817 287
------------ ------------
Total cash used in investing activities . . . . . . . . . . . . . . . . . (3,798) (1,584)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of Common Stock . . . . . . . . . . . . . . . . . . . . . . . 150,879 90,163
Payment of dividends on 8% Convertible Preferred Stock . . . . . . . . . . . . . . . . . (1,152) (1,677)
Proceeds from borrowings under warehouse facilities . . . . . . . . . . . . . . . . . . 1,297,228 1,155,166
Repayment of borrowings under warehouse facilities . . . . . . . . . . . . . . . . . . . (1,285,272) (1,220,073)
Net proceeds from issuance of subordinated notes . . . . . . . . . . . . . . . . . . . . 40,558 8,885
Repayment of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ---- (30,000)
Proceeds from issuance of Senior Notes . . . . . . . . . . . . . . . . . . . . . . . . . ---- 55,000
Repayment of Senior Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ---- (55,000)
Proceeds from issuance of Senior Term Notes . . . . . . . . . . . . . . . . . . . . . . ---- 145,000
Repayment of Senior Subordinated Notes . . . . . . . . . . . . . . . . . . . . . . . . . ---- (15,000)
Deferred debt issuance cost, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . (338) (2,754)
Reduction of capital lease obligations . . . . . . . . . . . . . . . . . . . . . . . . . (1,839) (817)
------------ ------------
Total cash provided by financing activities . . . . . . . . . . . . . . . 200,064 128,893
------------ ------------
Net increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . . . . . . 2,253 (7,448)
Cash and cash equivalents at beginning of period . . . . . . . . . . . . . . . . . . . . 1,340 16,617
------------ ------------
Cash and cash equivalents at end of period . . . . . . . . . . . . . . . . . . . . . . . $ 3,593 $ 9,169
------------ ------------
------------ ------------
Supplemental disclosures of cash flow information:
Non-cash activities:
Additions to capital leases . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,964 $ 2,141
Cash paid for:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 20,062 $ 7,318
Income taxes $ ---- $ 93
</TABLE>
See notes to unaudited consolidated financial statements.
5
<PAGE>
OLYMPIC FINANCIAL LTD.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
-------------------------------------------------------------------------------------------------
NUMBER OF NUMBER OF ADDITIONAL
PREFERRED COMMON PREFERRED COMMON PAID IN RETAINED
SHARES SHARES VALUE PAR VALUE CAPITAL EARNINGS TOTAL
------------- ------------ --------- --------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS, EXCEPT
SHARE AMOUNTS)
BALANCE, DECEMBER 31, 1995 1,071,036 22,038,567 $ 11 $ 220 $ 157,204 $ 23,378 $ 180,813
Exercise of options and warrants . ---- 940,775 ---- 9 4,171 ---- 4,180
Issuance of Common Stock:
Public Offering . . . . . . . ---- 8,050,000 ---- 81 145,925 ---- 146,006
Benefit plans . . . . . . . . ---- 195,752 ---- 2 691 ---- 693
Amortization of deferred
compensation . . . . . . . . . . ---- ---- ---- ---- 773 ---- 773
Preferred Stock conversion to
Common Stock . . . . . . . . . . (381,553) 1,778,795 (4) 18 (14) ---- ----
Payment of dividends on 8%
Convertible Preferred Stock . . ---- ---- ---- ---- ---- (1,152) (1,152)
Net income . . . . . . . . . . . . ---- ---- ---- ---- ---- 42,950 42,950
------------- ------------ --------- --------- ----------- --------- ----------
BALANCE, SEPTEMBER 30, 1996 689,483 33,003,889 $ 7 $ 330 $ 308,750 $ 65,176 $ 374,263
------------- ------------ --------- --------- ----------- --------- ----------
------------- ------------ --------- --------- ----------- --------- ----------
</TABLE>
See notes to unaudited consolidated financial statements.
6
<PAGE>
OLYMPIC FINANCIAL LTD.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE QUARTER ENDED SEPTEMBER 30, 1996
1. BASIS OF PRESENTATION
The interim financial statements have been prepared by the Company
pursuant to the rules and regulations of the Securities and Exchange
Commission applicable to quarterly reports on Form 10-Q. Certain information
and footnote disclosures normally included in financial statements prepared
in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations, although
management believes that the disclosures are adequate to make the information
presented not misleading. These financial statements should be read in
conjunction with the audited consolidated financial statements and related
notes and schedules included in the Company's 1995 Annual Report filed on
Form 10-K/A-2 dated March 18, 1996.
The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated.
Certain reclassifications have been made to the September 30, 1995
balances to conform to current period presentation.
2. FINANCE INCOME RECEIVABLE
Finance income receivable includes the estimated present value of future
amounts permitted to be withdrawn from spread accounts established in
connection with securitization transactions.
AT SEPTEMBER 30, AT DECEMBER 31,
1996 1995
(DOLLARS IN THOUSANDS) ---------------- ---------------
Estimated cash flows on loans sold, net of
estimated prepayments (1) . . . . . . . . . . $ 593,264 $ 349,097
Less:
Discount to present value . . . . . . . (28,262) (19,466)
Deferred servicing income . . . . . . . (53,670) (37,780)
Reserve for loan losses . . . . . . . . (81,308) (42,270)
---------------- ---------------
$ 430,024 $ 249,581
---------------- ---------------
(1) Included in estimated cash flows is the anticipated return to the
Company of restricted cash inrequired spread accounts. Actual spread
account balances were $122.1 million at September 30, 1996 and $65.4
million at December 31, 1995.
7
<PAGE>
The following represents the roll-forward of the finance income receivable
balance:
(DOLLARS IN THOUSANDS)
BALANCE, DECEMBER 31, 1995 $ 249,581
Excess cash flows on loans sold, net of estimated prepayments . 196,311
Return of excess cash flows (1) . . . . . . . . . . . . . . . . (28,869)
Recognition of present value effect of cash flows . . . . . . . 13,001
-----------
BALANCE, SEPTEMBER 30, 1996 $ 430,024
-----------
-----------
(1) Includes approximately $2.5 million of cash released to the Company from
remaining spread account balances associated with three securitization
transactions initiated in 1992 and closed out during the first nine months
of 1996.
3. SUBORDINATED NOTES
AT SEPTEMBER 30, AT DECEMBER 31,
1996 1995
(DOLLARS IN THOUSANDS) ---------------- ---------------
Senior subordinated notes, Series 1996-A . . . $ 30,000 $ ----
Junior subordinated notes . . . . . . . . . . 23,563 13,005
---------------- ---------------
$ 53,563 $ 13,005
---------------- ---------------
---------------- ---------------
In March 1996, the Company sold to the public $30.0 million aggregate
principal amount of its 10.125% Subordinated Notes , Series 1996-A due 2001
(the "Senior Subordinated Notes"). Interest on the Senior Subordinated Notes
is payable monthly beginning May 15, 1996. The Subordinated Notes may not be
redeemed prior to May 15, 1998. At any time on such date or thereafter, the
Company may at its option elect to redeem the Senior Subordinated Notes, in
whole or in part, at 101.5% of the principal amount of Senior Subordinated
Notes redeemed, or 100% thereof on or after May 15, 1999, plus accrued
interest to and including the redemption date. The Senior Subordinated Notes
are unsecured general obligations of the Company and are subordinated in
right of payment to all existing and future Senior Debt (as defined in the
indenture governing the Senior Subordinated Notes).
4. SHAREHOLDERS' EQUITY
On April 22, 1996, the Company completed a public offering of 8,050,000
shares of its Common Stock at $19.25 per share, including an over-allotment
option of 1,050,000 shares, and received net proceeds from the issuance of
the Common Stock of approximately $146.0 million.
RESTRICTED STOCK ELECTION PLAN
As disclosed in the Company's 1995 Annual Report filed on Form 10-K/A-2,
in December 1995 the Board of Directors of the Company adopted a Restricted
Stock Election Plan applicable to bonuses which may be earned by certain key
associates of the Company in the years 1998 through 2000 (the "1998 Stock
Election Plan") subject to approval by the Company's shareholders. The Stock
Election plan was approved by shareholders on May 16, 1996. As a result, the
Company recorded deferred compensation as a component of equity in the amount
of $4.8 million during the second quarter of 1996. The deferred compensation
will be amortized and recognized as compensation expense ratably over the
shorter of the period in which management anticipates restrictions will be
lifted or the maximum vesting period.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
Substantially all of the Company's earnings are derived from the
purchase, securitization and servicing of consumer automobile loans
originated primarily by new car dealers affiliated with major foreign and
domestic manufacturers. At September 30, 1996, the Company had purchased
loans from more than 7,000 dealers in 38 states, a substantial majority of
which sell loans to the Company on a regular basis. Loans are purchased
through 17 regional buying centers, supplemented by a network of dealer
development representatives ("DDRs") serving various markets, or "spokes",
surrounding the buying center "hubs". DDRs operating in these "spokes"
generate loans in their assigned market, and all administrative functions,
including credit approval and loan processing, are performed at the "hub" or
at the Company's headquarters in Minneapolis, Minnesota.
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
RESULTS OF OPERATIONS
NET INTEREST MARGIN. The components of net interest margin for each of
the three and nine month periods ended September 30 were:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
(DOLLARS IN THOUSANDS) SEPTEMBER 30, SEPTEMBER 30,
--------------------- ---------------------
1996 1995 1996 1995
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Interest income on loans, net of interest
expense on warehouse facilities . . . . . . . . . . $ 9,161 $ 5,470 $ 21,801 $ 11,499
Interest income on short-term investments, spread
accounts and other cash accounts . . . . . . . . . 4,105 1,927 11,140 5,479
Recognition of present value discount . . . . . . . . 5,048 2,254 13,001 4,856
Provision for credit losses on loans held for sale. . (235) (50) (478) (65)
--------- --------- --------- ---------
Net interest margin . . . . . . . . . . . . . . $ 18,079 $ 9,601 $ 45,464 $ 21,769
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
Net interest margin increased 88% and 109% during the three and nine
month periods ended September 30, 1996, respectively, compared with the same
periods in 1995. The rise in net interest margin is primarily due to growth
in the average balance of loans held for sale pending securitization,
increased weighted average interest rates earned on loans purchased, and
increased volume of loans securitized.
Increased loan purchasing volume during the three and nine month periods
ended September 30, 1996, resulted in increases from the same periods a year
ago of 25% and 54%, respectively, in the average balance of loans held for
sale pending securitization, on which the Company earns interest income until
such loans are securitized. The growth in loan purchasing volume is
primarily attributed to the opening of three additional regional buying
centers since September 1995 and the expansion of the Company's dealer
network to more than 7,000 dealers at September 30, 1996, compared to 4,494
dealers at September 30, 1995. Loan purchases under the Company's Premier
and Classic loan programs were:
9
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------- ------------------------
1996 1995 1996 1995
--------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Premier . . . . . . . . . . . . . . . . . . . . . . $438,792 $464,249 $1,362,185 $1,233,845
Classic . . . . . . . . . . . . . . . . . . . . . . 279,433 89,349 647,429 229,901
--------- --------- ----------- -----------
Total loans purchased . . . . . . . . . . . . $718,225 $553,598 $2,009,614 $1,463,746
--------- --------- ----------- -----------
--------- --------- ----------- -----------
</TABLE>
The net interest margin earned on loans held for sale was further
enhanced by an increase in the annual percentage interest rate ("APR") paid
by obligors on loans purchased. During the three and nine month periods ended
September 30, 1996, the weighted average APR on loans purchased was 14.82%
and 14.36%, respectively, compared with 13.92% and 14.30%, respectively,
during the same periods in 1995. The increase in APR is principally due to
an increased proportion of its higher yielding Classic loans which grew from
16% of total loan purchases during both the three and nine month periods
ended September 30, 1995, to 39% and 32%, respectively, during the same
periods in 1996.
The rise in interest income on short-term investments, spread accounts
and other cash accounts and the increase in earnings from the recognition of
the present value discount associated with the gain on sale of loans is
attributable to growth in the Company's securitized loan portfolio which
increased to $3.4 billion at September 30, 1996 from $1.8 billion at
September 30, 1995.
GAIN ON SALE OF LOANS. Gain on sale of loans provided net revenues of
$30.1 million and $80.8 million during the three and nine months ended
September 30, 1996, respectively, representing increases of 71% and 97%,
respectively, from the same periods a year ago. The increase in gain on sale
of loans primarily resulted from growth in the volume of loans securitized,
an increase in gross interest rate spreads and a decrease in the
participation rate paid by the Company to dealers for loan purchases. During
the three and nine months ended September 30, 1996, the Company securitized
$737.0 million and $2.1 billion of loans, respectively, which represent
increases of 48% and 52%, respectively, from the same periods in 1995. Gross
interest rate spreads earned on loans securitized and utilized in the
computation of gain during the three and nine months ended September 30 are
illustrated in the following table:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------- ------------------------
1996 1995 1996 1995
--------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Weighted average APR of loans securitized . . . . . . 14.77% 13.92% 14.34% 14.32%
Weighted average securitization rate . . . . . . . . 6.74 6.05 6.39 6.59
---- ----- ----- -----
Gross interest rate spread (1) . . . . . . . . . . . 8.03% 7.87% 7.95% 7.73%
---- ----- ----- -----
---- ----- ----- -----
</TABLE>
- -------------------
(1) Before gains/losses on hedge transactions.
10
<PAGE>
As previously discussed, an increased proportion of higher yielding
Classic loans resulted in a rise in the APR earned on loans purchased and
subsequently securitized during both the three and nine months ended
September 30, 1996. A general market decline in consumer interest rates
during early 1996 compared to early 1995, partially offset the impact of the
higher yielding Classic loans during the nine months ended 1996. Increases
in the two-year Treasury rate as compared to the third quarter of 1995
resulted in higher securitization costs during the third quarter of 1996,
partially offsetting the favorable APR variance. The company's weighted
average securitization rate during the first nine months of 1996 was slightly
lower than the same period of 1995 primarily due to a favorable two-year
Treasury market during the first quarter of 1996.
The unamortized balance of participations paid to dealers are expensed
at the time the related loans are securitized and recorded as a reduction to
the gain on sale. Due to growth in volume of Classic loans, participations
paid have decreased to 3.33% and 3.52% of the principal balance of loans
purchased during the three and nine months ended September 30, 1996,
respectively, compared with 4.26% and 4.16% during the same periods of 1995,
respectively. The lower dealer participations resulted in an increased gain
on sale.
The Company's gain on sale of loans was further increased by $1.2
million and $4.6 million of realized gains on hedging transactions during the
three and nine months ended September 30, 1996, respectively, compared with
$2.6 million and $10.1 million of realized losses during the same periods in
1995. There were no realized losses during the nine months ended September
30, 1996 and no realized gains during the same period in 1995.
SERVICING FEE INCOME. The Company's servicing fee income increased to
$7.5 million during the three months ended September 30, 1996 from $3.9
million in the same three months in 1995. For the nine months ended September
30, 1996, servicing fee income was $19.8 million compared with $9.2 million
for the same period in 1995. The increase in servicing fee income was
directly related to an increase in the average servicing portfolio
outstanding. The following table reflects the growth in the Company's
servicing portfolio from September 30, 1995 to September 30, 1996.
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS, EXCEPT AS NOTED) AT SEPTEMBER 30,
-------------------------
1996 1995
----------- ------------
<S> <C> <C>
Principal balance of automobile loans held for sale . . . . $ 21,104 $ 105,352
Principal balance of loans serviced under securitizations . 3,373,470 1,788,290
----------- ------------
Servicing portfolio . . . . . . . . . . . . . . . . . . . . $ 3,394,574 $ 1,893,642
----------- -----------
----------- -----------
Average unpaid principal balance (actual dollars) . . . . . $ 12,537 $ 12,078
Number of loans serviced . . . . . . . . . . . . . . . . . 270,759 156,778
</TABLE>
OTHER NON-INTEREST INCOME. Other income rose to $1.4 million and $4.6
million during the three and nine months ended September 30, 1996,
respectively, compared with $0.4 million and $0.8 million, respectively,
during the same periods in 1995. This increase is primarily due to the
introduction of late fee and insufficient funds charges to borrowers during
late 1995.
OPERATING EXPENSES. During the three and nine months ended September
30, 1996, salaries and benefits expense increased to $10.3 million and $28.2
million, respectively, up 100% and 106% from $5.1 million and $13.7 million
during the same periods in 1995, respectively. The increase in salaries and
benefits is primarily attributable to an increase in the number of employees
to 1,003 at September 30, 1996 from 544 at September 30, 1995, to accommodate
the rise in loan purchasing volume and the subsequent servicing of such
loans.
11
<PAGE>
Other operating costs, including occupancy, depreciation and
amortization, servicing and collection expenses increased to $13.1 million
and $35.2 million during the three and nine months ended September 30, 1996,
increases of 115% and 126%, respectively, compared with the same periods a
year ago. The increase in other operating costs reflects the continued
growth in the Company's facilities, loan purchasing and servicing portfolio.
Total annualized operating expenses as a percentage of average servicing
portfolio also increased to 2.93% and 2.99% during the three and nine months
ended September 30, 1996, compared to 2.64% and 2.90% in the same periods in
1995. The rise in operating expense percentage reflects the Company's
expansion of its servicing facilities and personnel reflecting the growth in
the Company's servicing portfolio and increased servicing needs and related
costs associated with the rise in Classic loan volume.
INTEREST EXPENSE. Long-term debt and other interest expense increased
to $6.7 million from $5.2 million during the three months ended September 30,
1996 and 1995, respectively. For the nine months ended September 30, 1996,
long-term debt and other interest expense was $18.6 million compared to $11.6
million in the same period of 1995. These increases are directly related to
the issuance of $145.0 million of 13% Senior Notes in April 1995 and $30.0
million of 10.125% Subordinated Notes in April 1996.
FINANCIAL CONDITION
AUTOMOBILE LOANS HELD FOR SALE. Prior to securitization, the Company
holds automobile loans for sale in its portfolio. The Company's portfolio of
loans held for sale decreased 84% to $18.9 million at September 30, 1996 from
$118.6 million at December 31, 1995 due to the timing in delivery of loans
associated with the Company's securitizations. At September 30, 1996, the
Company had delivered $188.4 million of loans into a securitization trust for
which the Company received cash from the trust for such loans concurrent with
the legal closing of the transaction in October of 1996. There were no loans
delivered and pending a legal closing at December 31, 1995.
DUE FROM SECURITIZATION TRUST. Changes in due from securitization trust
reflect the timing of delivery of loans into securitizations. See discussion
of AUTOMOBILE LOANS HELD FOR SALE above.
FINANCE INCOME RECEIVABLE. Finance income receivable increased to
$430.0 million as of September 30, 1996, from $249.6 million at December 31,
1995. This 72% increase is the result of an increase in loan securitization
volume and related increase in gain on sale of loans.
OTHER ASSETS. Other assets increased to $17.9 million at September 30,
1996 compared to $12.9 million at December 31, 1995. This $5.0 million
increase includes a $1.1 million increase in the Company's investment in
subordinated certificates purchased in connection with 1996 securitization
transactions and a $0.9 million rise in servicing fee receivable reflecting
growth in the Company's servicing portfolio. In addition, cash surrender
value of life insurance policies increased $1.0 million since December 31,
1995.
SUBORDINATED NOTES. See Liquidity - Principal Sources of Cash in
Operating Activities.
12
<PAGE>
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES. Accounts payable and accrued
liabilities increased to $20.1 million at September 30, 1996 compared to $9.8
million at December 31, 1995. This increase is primarily due to increased
accruals for salary, occupancy and various operating expenses reflecting the
continued growth in the Company's staffing, facilities, loan purchases and
servicing portfolio.
DELINQUENCY, LOAN LOSS AND REPOSSESSION EXPERIENCE
The following tables describe the Company's delinquencies, loan losses
and repossessions for the periods indicated. A delinquent loan may result in
the repossession and foreclosure on the collateral for the loan. Losses
resulting from repossession and foreclosure of loans are charged against
applicable allowances.
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
DELINQUENCY EXPERIENCE (1): 1996 1995
---------------------- -----------------------
NUMBER OF NUMBER OF
LOANS BALANCE LOANS BALANCE
----------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Servicing portfolio at end of period 270,759 $3,394,574 185,241 $2,267,107
Delinquencies:
31-60 days . . . . . . . . . . . . . . . . . . . . . . . . 2,948 $ 35,785 1,536 $17,667
61-90 days . . . . . . . . . . . . . . . . . . . . . . . . 1,014 12,851 520 5,694
91 days or more . . . . . . . . . . . . . . . . . . . . . 2,012 25,723 614 6,881
----------- ---------- ----------- ----------
Total automobile loans delinquent 31 or more days . . . . . . . 5,974 $ 74,359 2,670 $ 30,242
Delinquencies as a percentage of number of loans and amount
outstanding at end of period (2) . . . . . . . . . . . . . . 2.21% 2.19% 1.44% 1.33%
Amount in repossession (3) . . . . . . . . . . . . . . . . . . 3,331 $ 46,520 1,489 $ 17,676
----------- ---------- ----------- ----------
Total delinquencies and amount in repossession (2) . . . . . . 9,305 $ 120,879 4,159 $ 47,918
----------- ---------- ----------- ----------
----------- ---------- ----------- ----------
Total delinquencies and amount in repossession as a percentage
of servicing portfolio outstanding at end of period . . . . . 3.44% 3.56% 2.25% 2.11%
</TABLE>
- ------------------------------
(1) All amounts and percentages are based on the principal amount
scheduled to be paid on each loan. The information in the table includes
previously sold loans which the Company continues to service.
(2) Amounts shown do not include loans which are less than 31 days delinquent.
(3) Amount in repossession represents financed automobiles which have been
repossessed but not yet liquidated.
13
<PAGE>
<TABLE>
<CAPTION>
CREDIT LOSS/REPOSSESSION EXPERIENCE (1): THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------------- ----------------------------
1996 1995 1996 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Average servicing portfolio outstanding during
the period . . . . . . . . . . . . . . . . . . . . . . $3,194,633 $1,703,678 $2,822,414 $1,347,404
Average number of loans outstanding during the period . 255,881 142,184 227,276 114,339
Number of repossessions . . . . . . . . . . . . . . . . 3,884 1,253 10,146 2,420
Annualized repossessions as a percentage of average
number of loans outstanding . . . . . . . . . . . . . 6.07% 3.53% 5.95% 2.82%
Gross charge-offs (2) . . . . . . . . . . . . . . . . . $ 9,432 $ 3,324 $ 22,994 $ 7,124
Recoveries (3) . . . . . . . . . . . . . . . . . . . . . 1,842 255 4,448 587
------------- ------------- ------------- -------------
Net losses . . . . . . . . . . . . . . . . . . . . . . . $ 7,590 $ 3,069 $ 18,546 $ 6,537
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Annualized gross charge-offs as a percentage of average
servicing portfolio . . . . . . . . . . . . . . . . . 1.18% 0.78% 1.09% 0.71%
Annualized net losses as a percentage of average
servicing portfolio . . . . . . . . . . . . . . . . . 0.95% 0.72% 0.88% 0.65%
</TABLE>
- -------------------------------
(1) All amounts and percentages are based on the principal amount
scheduled to be paid on each loan. The information in the table includes
previously sold loans which the Company continues to service.
(2) Gross charge-offs represent principal amounts which management estimated
to be uncollectable after the consideration of anticipated proceeds
from the disposition of repossessed assets and selling expenses. When
estimating the value of repossessed inventory, management utilizes
industry published reports listing retail and wholesale values of used
automobiles and determines estimated proceeds within a range that
management believes reflects the then current market conditions and the
Company's disposition strategy for such inventory.
(3) Includes post-disposition amounts received on repossessed assets.
The Company believes the rise in delinquency, repossession rates and
annualized net losses reflected in the tables above are primarily due to the
introduction and expansion of the Company's Classic loan program and the
seasoning of the Company's servicing portfolio to include a greater
proportion of loans in the period of highest probability for defaults.
In February 1996, the Company elected to increase, over time depending
on market conditions, the percentage of the Company's aggregate loan
purchases that may be purchased through its Classic program up to a limit of
50% of originations. Through the first nine months of 1996, Classic loans
represented 32% of total loan purchases compared with 16% during the same
period in 1995. The purposes of the Company's increased emphasis on the
Classic program are to provide the Company with the opportunity for greater
interest rate spreads relative to its previous loan mix which management
believes more than offsets any additional risks associated with the Classic
loans and, as the Company offers lower dealer participations on Classic
loans, to reduce origination costs in comparison to the Premier program. The
Company has determined that the pricing advantages and ability to expand the
Company's prime lending market under the Classic loan program offsets
anticipated increases in delinquency and repossession rates, which the
Company expects to continue to increase as the Classic loans purchased
continue to season. To account for the anticipated increase in delinquency
and repossession rates, the Company has established higher reserves following
the introduction of the Classic program and has increased these reserves as
the proportion of Classic loans has increased in the Company's total
portfolio. The Company's total reserves at September 30, 1996 were $81.3
million or 2.40% of the Company's servicing portfolio compared to $24.5
million or 1.30% at September 30, 1995. Although the introduction and
expansion of the Classic program has contributed to the increase in total
portfolio delinquencies, repossession rates, and annualized net loss rates,
these increases have been anticipated by management and are within the
reserves established by the Company.
14
<PAGE>
LIQUIDITY
The Company's business requires substantial cash to support its
operating activities. The principal cash requirements include (i) amounts
necessary to purchase and finance automobile loans pending securitization,
(ii) dealer participations, (iii) cash held from time to time in restricted
spread accounts to support securitizations and other securitization expenses,
(iv) interest advances to securitization trusts and (v) interest expense. The
Company also uses significant amounts of cash for operating expenses. Cash
is returned to the Company principally from excess cash flow received from
securitization trusts and from fees earned through servicing of loans held by
such trusts. The Company has operated on a negative operating cash flow
basis and expects to continue to do so in the foreseeable future. The
Company has historically funded, and expects to continue to fund, these
negative operating cash flows, subject to limitations in various debt
covenants, principally through borrowings from financial institutions, sales
of equity securities and sales of senior and subordinated notes, among other
resources, although there can be no assurance that the Company will have
access to capital markets in the future or that financing will be available
to satisfy the Company's operating and debt service requirements or to fund
its future growth. See "Capital Resources."
PRINCIPAL USES OF CASH IN OPERATING ACTIVITIES
PURCHASES AND FINANCING OF AUTOMOBILE LOANS. Automobile loan purchases
represent the Company's most significant cash flow requirement. The Company
funds the purchase price of loans through the use of warehouse facilities.
However, because advance rates under the warehouse facilities only provide
funds for 90% to 99.9% of the principal balance of the loans, the Company is
required to fund the remainder of all purchases with other available cash
resources. The Company purchased $2.0 billion of loans during the first nine
months of 1996 compared to $1.5 billion during the same period in 1995.
DEALER PARTICIPATIONS. Consistent with industry practice, the Company
pays dealers participations for selling loans to the Company which typically
require the Company to advance an up-front amount to dealers. Participations
paid by the Company to dealers during the nine months ended September 30,
1996 were $70.8 million, or approximately 3.52% of the principal balance of
loans purchased, compared with $60.9 million, or approximately 4.16% of loans
purchased, during the same period in 1995. The decrease in dealer
participation as a percentage of loans purchased reflects the growth in
volume of Classic loans.
SECURITIZATION OF AUTOMOBILE LOANS. In connection with securitizations,
the Company is required to fund spread accounts related to each transaction.
The Company funds these spread accounts by foregoing receipt of excess cash
flow until these spread accounts exceed predetermined levels. The Company
had $122.1 million of restricted cash in spread accounts at September 30,
1996, compared with $65.4 million at December 31, 1995. Restricted cash is
included as a component of finance income receivable.
15
<PAGE>
The Company also incurs certain expenses in connection with
securitizations, including underwriting fees, credit enhancement fees,
trustee fees and other costs, which approximate 0.5% per annum of the
principal amount of the asset-backed securities sold into the
securitizations.
NET INTEREST MARGIN. Although the Company records net interest margin
as earned, the interest income component is generally received in cash from
excess cash flow, while the interest expense component (primarily warehousing
interest) is paid prior to securitization.
ADVANCES DUE TO SERVICER. As the servicer of loans sold in
securitizations, the Company periodically makes interest advances to the
securitization trusts to provide for temporary delays in the receipt of
required interest payments by borrowers. In accordance with servicing
agreements, the Company makes advances only in the event it expects to
recover them through the ultimate payments from the obligor on the loan.
PRINCIPAL SOURCES OF CASH IN OPERATING ACTIVITIES
EXCESS CASH FLOW. The Company receives excess cash flow from
securitization trusts, including the realization of gain on sale, the
recovery of dealer participations, and the recovery of accrued interest
receivable earned, but not yet collected, on loans held for sale. Recovery of
dealer participations and accrued interest receivable, which occur throughout
the life of the securitization, result in a reduction of the finance income
receivable and, because they have been considered in the original
determination of the gain on sale of loans, have no effect on the Company's
results of operations in the year in which the participations and interest
are recovered from the securitization trust. During the first nine months of
1996, the Company received $28.9 million of excess cash flow, compared with
$15.3 million during the same nine months in 1995. Included in excess cash
flows during 1995, is approximately $1.7 million of cash received from the
sale of interest-only securities related to securitization transactions.
There were no interest-only securities issued during the first nine months on
1996. The Company received an additional $2.5 million of cash during the
first nine months of 1996 which was released from spread accounts associated
with three securitization transactions closed-out during the first quarter of
1996.
SERVICING FEES. The Company also receives servicing fee income with
respect to loans held by securitization trusts equal to 1% per annum of the
remaining principal balance. During the nine months ended September 30, 1996
and 1995, the Company received cash for such servicing in the amount of $18.9
million and $8.2 million, respectively. Servicing fee income is reflected in
the Company's revenues as earned.
CAPITAL RESOURCES
The Company finances the acquisition of automobile loans primarily
through (i) warehouse facilities, pursuant to which loans are sold or
financed generally on a temporary basis and (ii) the securitization of loans,
pursuant to which loans are sold as asset-backed securities. Additional
financing is required to fund the Company's operations.
16
<PAGE>
WAREHOUSE FACILITIES. Automobile loans held for sale are funded
primarily through warehouse facilities. Currently, the Company has an
aggregate capacity in its warehouse facilities of $700.0 million, of which
$661.5 million was available at September 30, 1996. The warehouse facilities
are subject to renewal on mutually acceptable terms upon the expiration of
each facility ranging from December 1996 to July 1997.
SECURITIZATION PROGRAM. The most important capital resource for the
Company has been its ability to sell automobile loans in the secondary
markets through securitizations. The following table summarizes the Company's
securitization transactions for the nine months ended September 30, 1996, all
of which were publicly issued and rated "AAA/Aaa".
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
REMAINING
REMAINING BALANCE AS
BALANCE AS A CURRENT WEIGHTED GROSS
OF PERCENTAGE WEIGHTED AVERAGE INTEREST
ORIGINAL SEPTEMBER 30, OF ORIGINAL AVERAGE SECURITIZATION RATE
DATE BALANCE 1996 BALANCE APR RATE SPREAD
- -------------------- ------------ -------------------- ----------------- ------------ ---------------- -----------
<S> <C> <C> <C> <C> <C> <C>
March 1996 $ 600,000 $ 485,403 80.90% 13.79% 5.81% 7.98%
June 1996 650,000 591,612 91.02% 14.49% 6.62% 7.87%
September 1996 (1) 725,000 687,556 94.84% 14.67% 6.75% 7.92%
---------- ----------
$1,975,000 $1,764,571
---------- ----------
---------- ----------
</TABLE>
- -------------------
(1) As of September 30, 1996, the Company had delivered $697.4 million to the
trust and $27.6 million cash remained in the pre-funded portion of the
trust.
OTHER CAPITAL RESOURCES
Historically, the Company has utilized various debt and equity
financings to offset negative operating cash flows and support the continued
growth in loan volume, increased dealer participations, securitizations and
general operating expenses.
In April 1996, the Company sold to the public 8,050,000 shares of Common
Stock. Net proceeds received from the offering of Common Stock approximated
$146.0 million.
In March 1996, the Company sold to the public $30.0 million aggregate
principal amount of 10.125% Subordinated Notes Series 1996-A, due 2001 (the
"Senior Subordinated Notes"). Net proceeds received from the offering of
Senior Subordinated Notes approximated $29.0 million.
The terms of the Company's 13% Senior Term Note Indenture (the
"Indenture") limit the incurrence of additional indebtedness by the Company
and restrict certain payments, including dividends on common or preferred
stock (other than dividends on the Company's 8% Cumulative Convertible
Exchangeable Preferred Stock) subject to the Company's ability to meet
certain tests as set forth in the Indenture. If the Company's Fixed Charge
Coverage Ratio, as defined in the Indenture, is less than 2.0 to 1 for a four
quarter period, the Company is restricted from paying dividends on common and
preferred stock (other than dividends on its 8% Cumulative Convertible
Exchangeable Preferred Stock) and unable to incur additional indebtedness
(excluding indebtedness under warehouse facilities). The Fixed Charge
Coverage Ratio for the four-quarter period ended September 30, 1996 was:
17
<PAGE>
<TABLE>
<CAPTION>
FOR THE FOUR
QUARTERS ENDED
SEPTEMBER 30, 1996
----------------------
<S> <C>
(IN THOUSANDS)
Operating Cash Receipts:
Excess cash flows received from securitization trusts......... $ 34,589
Servicing fee income.......................................... 23,339
Other cash income............................................. 5,035
---------
Total Operating Cash Receipts............................. 62,963
Less Cash Expenses:
Payment of dealer participations............................ 96,359
Cash operating expenses..................................... 82,175
Interest paid on warehouse and other debt................... 32,035
Preferred dividends......................................... 1,898
---------
Total Cash Expenses....................................... 212,467
Consolidated Cash Flow........................................ (149,504)
Fixed Charges included in Cash Expenses....................... 33,933
---------
Adjusted Consolidated Cash Flow............................. $(115,571)
---------
---------
Fixed Charges:
Interest expense (accrued or paid).......................... $ 34,052
Preferred dividends......................................... 1,898
---------
Total Fixed Charges....................................... $ 35,950
---------
---------
</TABLE>
The Company has had, and expects to continue to have, negative
Consolidated Cash Flow (as defined in the Indenture) and does not expect to
be able to meet the Fixed Charge Coverage Ratio test for the foreseeable
future.
The Company may incur additional indebtedness under the terms of the
Indenture, without regard to the Fixed Charge Coverage Ratio, if total
indebtedness (excluding indebtedness under warehouse facilities) would not
exceed 200% of Consolidated Net Worth (as defined in the Indenture). As of
September 30, 1996, the Company would be able to incur additional
indebtedness under the Consolidated Net Worth test, provided that such new
indebtedness has a Weighted Average Life to Maturity (as defined in the
Indenture) equal to or longer than the Senior Term Notes.
18
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company is party to litigation in the ordinary course of
business, generally involving actions against borrowers to
collect amounts on loans or recover vehicles. The Company does not
expect any pending proceedings to have a material adverse effect on
the Company or its results of operations.
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
On August 26, 1996, the Company announced that it had received an
unsolicited indication of interest to buy the Company. In connection
with this development, the Company engaged Donaldson, Lufkin &
Jenrette Securities Corporation ("DLJ") to assist the Board of
Directors (the "Board") in examining the strategic alternatives
available to the Company.
On the same day, the Board accepted the resignation of Jeffrey C. Mack
as Chairman, President, Chief Executive Officer and member of
the Board due to philosophical differences with the Board. The
Board appointed Warren Kantor, who was then serving as a member of the
Board, to be Chairman of the Executive Committee and announced that
Scott Anderson, Vice Chairman, Credit Administration and
Operations, would continue to oversee the day-to-day operations
of the Company.
The Board has created a committee to conduct a national search for a
new Chief Executive Officer and has retained an executive search
firm to assist the committee in its effort.
On October 16, 1996, the Company announced that the party that had
indicated an interest in buying the Company and certain other
interested parties had elected not to make definitive offers. The
Company also announced that, assisted by DLJ, it would continue to
examine strategic alternatives available to it. The Company
indicated that any proposal would be evaluated in light of market
conditions that prevail at the time of the proposal, and that the
Board had not set a specific price range or terms for an acceptable
proposal. There can be no assurance given that the Company will
receive any acceptable proposals to buy the Company.
On November 4, 1996, the Company announced that the Board of Directors
has adopted a Shareholder Rights Plan in which preferred stock
purchase Rights will be distributed as a dividend at the rate of one
Right for each share of the Company's Common Stock held as of the
close of business on November 22, 1996. The Rights will expire on
October 28, 2006.
19
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) EXHIBITS
The following exhibits are filed in response to Item 601 of Regulation S-K.
EXHIBIT NO. DESCRIPTION
----------- -----------
3.1 Restated Articles of Incorporation of Registrant, as amended
(incorporated by reference to Exhibit 4.1 to Registrant's
Registration Statement on Form S-2, File No. 33-90108).
3.2 Bylaws of Registrant, as amended (incorporated by reference
to Exhibit 3.2 to Registrant's Registration Statement on
Form S-18, File No. 33-433270c, and to Registrant's Current
Report on Form 8-K, dated September 30, 1996).
10.1 Series 1996-C Supplement, dated as of September 12, 1996,
to Spread Account Agreement, dated as of March 25, 1995,
as amended and restated as of December 6, 1995, among
Registrant, Olympic Receivables Finance Corp., Financial
Security Assurance Inc. and Norwest Bank Minnesota, National
Association, as Trustee and Collateral Agent.
10.2 Insurance and Indemnity Agreement, dated as of September 12,
1996, among Registrant, Financial Security Assurance Inc.,
Olympic Automobile Receivables Trust, 1996-C, Olympic First
GP, Inc., Olympic Second GP, Inc. and Olympic Receivables
Finance Corp.
10.3 Amendment, dated as of September 12, 1996, among Olympic
Financial Ltd., Olympic Receivables Finance Corp., Financial
Security Assurance Inc., and Norwest Bank Minnesota,
National Association, as Collateral Agent, to Series 1996-B
Supplement, dated as of June 14, 1996, Series 1996-A
Supplement, dated as of March 14, 1996, Series 1995-E
Supplement, dated as of December 6, 1995, Series 1995-D
Supplement, dated as of September 21, 1995, as amended by
that certain Amendment to Series Supplements to Spread
Account Agreement, dated as of December 6, 1995,
Series 1995-C Supplement, dated as of June 15, 1995, as
amended by that certain Amendment to Series Supplements
to Spread Account Agreement, dated as of September 21,
1995, and as further amended by the December 1995 Amendment,
Series 1995-B Supplement, dated as of March 15, 1995, as
amended by that certain Amendment to Series Supplements to
Spread Account Agreement, dated as of June 15, 1995, as
further amended by the September 1995 Amendment, and as
further amended by the December 1995 Amendment to
the Spread Account Agreement, dated as of March 25, 1993,
as amended and restated as of December 6, 1994, among
Registrant, Olympic Automobile Receivables Trust, Financial
Security and Norwest Bank Minnesota, National Association
as Trustee and as Collateral Agent.
20
<PAGE>
10.4 Amendment to Insurance and Indemnity Agreement, dated as of
June 14, 1996, Insurance and Indemnity Agreement, dated as
of March 14, 1996, Insurance and Indemnity Agreement, dated
as of December 5, 1995, Insurance and Indemnity Agreement,
dated as of September 21, 1995, as amended by that certain
Amendment No. 2 to Insurance and Indemnity Agreements, dated
as of December 6, 1995, Insurance and Indemnity Agreement,
dated as of June 15, 1995, as amended by Amendment No. 2,
Insurance and Indemnity Agreement, dated as of March 15,
1995, as amended by that certain Amendment No. 1 to Insurance
and Indemnity Agreements, dated as of June 15, 1996, and as
further amended by Amendment No. 2, Insurance and Indemnity
Agreement, dated as of February 9, 1995, as amended by
Amendment No. 2, and as further amended by Amendment No. 2,
dated as of May 31, 1996, among Financial Security Assurance
Inc., Olympic Automobile Receivables Trust, 1996-A, Olympic
Automobile Receivables Trust, 1995-E, Olympic Automobile
Receivables Trust, 1995-D, Olympic Automobile Receivables
Trust, 1995-C, Olympic Automobile Receivables Trust, 1995-B,
Olympic Automobile Receivables Trust, 1995-A, Olympic First
GP Inc., Olympic Second GP Inc., Olympic Receivables Finance
Corp., and Olympic Financial Ltd., in each case with respect
to each Insurance and Indemnity Agreement with respect to
which such person is a party.
10.5 Spread Account Agreement, dated as of March 25, 1993, as
amended and restated as of September 12, 1996, among Olympic
Financial Ltd., Olympic Receivables Financial Corp.,
Financial Security Assurance Inc. and Norwest Bank
Minnesota, National Association, as Trustee and as Collateral
Agent.
10.6 Olympic Financial Ltd. Employee Bonus Plan.
11.1 Computation of Earnings Per Share
12.1 Computation of Ratio Earnings to Fixed Charges
12.2 Computation of Ratio Earnings to Fixed Charges and
Preferred Stock Dividends
27.1 Financial Data Schedule
21
<PAGE>
(b) REPORTS ON FORM 8-K
The Company filed a current report on Form 8-K, filed and dated August
26, 1996, announcing that its Board of Directors has received an indication
of interest to buy the Company and that the Company has engaged Donaldson,
Lufkin and Jenrette to assist the Board in examining the strategic
alternatives available. The Company further announced that Warren Kantor has
been appointed Chairman of the Company's Executive Committee and that the
Board has accepted the resignation of Jeffrey C. Mack as President and Chief
Executive Officer of the Company.
On October 7, 1996, the Company filed a current report on Form 8-K,
dated September 30, 1996, announcing an amendment to Section 4.1 of the
Company's Bylaws defining the officers of the Company.
22
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
OLYMPIC FINANCIAL LTD.
SIGNATURE TITLE DATE
- -------------------------------- ---------------------- -------------------
/s/ Warren Kantor
-------------------------------
Warren Kantor Acting Chief November 11, 1996
Executive Officer,
Chairman of
Executive Committee
and Director
/s/ John A. Witham
-------------------------------
John A. Witham Executive Vice November 11, 1996
President and Chief
Financial Officer
(Principal
Financial Officer)
/s/ Brian S. Anderson
-------------------------------
Brian S. Anderson Senior Vice November 11, 1996
President,
Corporate
Controller and
Assistant Secretary
(Principal
Accounting Officer)
23
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
----------- -----------
3.1 Restated Articles of Incorporation of Registrant, as amended
(incorporated by reference to Exhibit 4.1 to Registrant's
Registration Statement on Form S-2, File No. 33-90108).
3.2 Bylaws of Registrant, as amended (incorporated by reference
to Exhibit 3.2 to Registrant's Registration Statement on
Form S-18, File No. 33-433270c, and to Registrant's Current
Report on Form 8-K, dated September 30, 1996).
10.1 Series 1996-C Supplement, dated as of September 12, 1996, to
Spread Account Agreement, dated as of March 25, 1995, as
amended and restated as of December 6, 1995, among
Registrant, Olympic Receivables Finance Corp., Financial
Security Assurance Inc. and Norwest Bank Minnesota, National
Association, as Trustee and Collateral Agent.
10.2 Insurance and Indemnity Agreement, dated as of September 12,
1996, among Registrant, Financial Security Assurance Inc.,
Olympic Automobile Receivables Trust, 1996-C, Olympic First
GP, Inc., Olympic Second GP, Inc. and Olympic Receivables
Finance Corp.
10.3 Amendment, dated as of September 12, 1996, among Olympic
Financial Ltd., Olympic Receivables Finance Corp., Financial
Security Assurance Inc., and Norwest Bank Minnesota,
National Association, as Collateral Agent, to Series 1996-B
Supplement, dated as of June 14, 1996, Series 1996-A
Supplement, dated as of March 14, 1996, Series 1995-E
Supplement, dated as of December 6, 1995, Series 1995-D
Supplement, dated as of September 21, 1995, as amended by
that certain Amendment to Series Supplements to Spread
Account Agreement, dated as of December 6, 1995,
Series 1995-C Supplement, dated as of June 15, 1995, as
amended by that certain Amendment to Series Supplements
to Spread Account Agreement, dated as of September 21, 1995,
and as further amended by the December 1995 Amendment,
Series 1995-B Supplement, dated as of March 15, 1995, as
amended by that certain Amendment to Series Supplements to
Spread Account Agreement, dated as of June 15, 1995, as
further amended by the September 1995 Amendment, and as
further amended by the December 1995 Amendment to the
Spread Account Agreement, dated as of March 25, 1993, as
amended and restated as of December 6, 1994, among
Registrant, Olympic Automobile Receivables Trust,
Financial Security and Norwest Bank Minnesota, National
Association as Trustee and as Collateral Agent.
24
<PAGE>
10.4 Amendment to Insurance and Indemnity Agreement, dated as of
June 14, 1996, Insurance and Indemnity Agreement, dated as of
March 14, 1996, Insurance and Indemnity Agreement, dated as
of December 5, 1995, Insurance and Indemnity Agreement,
dated as of September 21, 1995, as amended by that certain
Amendment No. 2 to Insurance and Indemnity Agreements, dated
as of December 6, 1995, Insurance and Indemnity Agreement,
dated as of June 15, 1995, as amended by Amendment No. 2,
Insurance and Indemnity Agreement, dated as of March 15,
1995, as amended by that certain Amendment No. 1 to Insurance
and Indemnity Agreements, dated as of June 15, 1996, and as
further amended by Amendment No. 2, Insurance and Indemnity
Agreement, dated as of February 9, 1995, as amended by
Amendment No. 2, and as further amended by Amendment No. 2,
dated as of May 31, 1996, among Financial Security Assurance
Inc., Olympic Automobile Receivables Trust, 1996-A, Olympic
Automobile Receivables Trust, 1995-E, Olympic Automobile
Receivables Trust, 1995-D, Olympic Automobile Receivables
Trust, 1995-C, Olympic Automobile Receivables Trust,
1995-B, Olympic Automobile Receivables Trust, 1995-A, Olympic
First GP Inc., Olympic Second GP Inc., Olympic Receivables
Finance Corp., and Olympic Financial Ltd., in each case with
respect to each Insurance and Indemnity Agreement with
respect to which such person is a party.
10.5 Spread Account Agreement, dated as of March 25, 1993, as
amended and restated as of September 12, 1996, among
Olympic Financial Ltd., Olympic Receivables Financial Corp.,
Financial Security Assurance Inc. and Norwest Bank Minnesota,
National Association, as Trustee and as Collateral Agent.
10.6 Olympic Financial Ltd. Employee Bonus Plan.
11.1 Computation of Earnings Per Share
12.1 Computation of Ratio Earnings to Fixed Charges
12.2 Computation of Ratio Earnings to Fixed Charges and
Preferred Stock Dividends
27.1 Financial Data Schedule
25
<PAGE>
SERIES 1996-C SUPPLEMENT
dated as of September 12, 1996
to
SPREAD ACCOUNT AGREEMENT
dated as of March 25, 1993,
as amended and restated
as of September 12, 1996
among
OLYMPIC FINANCIAL LTD.
OLYMPIC RECEIVABLES FINANCE CORP.
FINANCIAL SECURITY ASSURANCE INC.
and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
as Trustee and as Collateral Agent
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.2 Rules of Interpretation. . . . . . . . . . . . . . . . . 8
ARTICLE II
CREDIT ENHANCEMENT FEE; SERIES SUPPLEMENTS; THE COLLATERAL
Section 2.1 Series 1996-C Credit Enhancement Fee . . . . . . . . . . 8
Section 2.2 Series Supplements . . . . . . . . . . . . . . . . . . . 9
Section 2.3 Grant of Security Interest by OFL and the Seller . . . . 9
ARTICLE III
SPREAD ACCOUNT
Section 3.1 Establishment of Series 1996-C Spread Account; Initial
Deposit into Series 1996-C Spread Account . . . . . . . 10
Section 3.2 Spread Account Additional Deposits . . . . . . . . . . . 10
ARTICLE IV
MISCELLANEOUS
Section 4.1 Further Assurances . . . . . . . . . . . . . . . . . . . 10
Section 4.2 Governing Law. . . . . . . . . . . . . . . . . . . . . . 10
Section 4.3 Counterparts . . . . . . . . . . . . . . . . . . . . . . 11
Section 4.4 Headings . . . . . . . . . . . . . . . . . . . . . . . . 11
<PAGE>
SERIES 1996-C SUPPLEMENT
SERIES 1996-C SUPPLEMENT, dated as of September 12, 1996 (the "Series
1996-C Supplement"), by and among OLYMPIC FINANCIAL LTD., a Minnesota
corporation ("OFL"), OLYMPIC RECEIVABLES FINANCE CORP., a Delaware
corporation (the "Seller"), FINANCIAL SECURITY ASSURANCE INC., a New York
stock insurance company ("Financial Security"), and NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION, a national banking association, in its capacities as
Trustee under each Pooling and Servicing Agreement and as Indenture Trustee
under each Indenture referred to in the Spread Account Agreement (as defined
below), in such capacity as agent for the Noteholders and Certificateholders
with respect to the related Series (in each of such capacities, the
"Trustee") and as Collateral Agent hereunder.
RECITALS
1. The parties hereto have previously entered into a Spread Account
Agreement, dated as of March 25, 1993, as amended and restated as of
September 12, 1996 (the "Spread Account Agreement"), and, as contemplated by
Section 2.02 of the Spread Account Agreement, this Series 1996-C Supplement
constitutes a Series Supplement to the Spread Account Agreement so that
hereafter this Series 1996-C Supplement shall form a part of the Spread
Account Agreement for all purposes thereof, and all references herein and
hereafter to the Spread Account Agreement shall mean the Spread Account
Agreement, as supplemented hereby.
2. Olympic Automobile Receivables Trust, 1996-C (the "Series 1996-C
Trust") is being formed contemporaneously herewith pursuant to the Series
1996-C Trust Agreement (as defined herein).
3. Pursuant to the Series 1996-C Sale and Servicing Agreement, the
Seller is selling to the Series 1996-C Trust all of its right, title and
interest in and to the Initial Receivables (as defined in the Series 1996-C
Sale and Servicing Agreement) and certain other Trust Property (as defined in
the Series 1996-C Trust Agreement).
4. Pursuant to the Series 1996-C Trust Agreement, the Series 1996-C
Trust is issuing the Series 1996-C Certificates (as defined herein).
Pursuant to the Series 1996-C Indenture, the Series 1996-C Trust is issuing
the Series 1996-C Notes (as defined herein).
5. The Seller has requested that Financial Security issue the Series
1996-C Note Policy to the Trustee to guarantee payment of the Scheduled
Payments (as defined in such Policy) on each Payment Date in respect of the
Series 1996-C Notes, and has requested that Financial Security issue the
Series 1996-C Certificate Policy to Mellon Bank (DE), National Association,
as Owner Trustee under the Series 1996-C Trust Agreement, to guarantee
payment of the Guaranteed Distributions (as defined in such Policy) on each
Distribution Date in respect of the Series 1996-C Certificates.
<PAGE>
6. In partial consideration of the issuance of the Series 1996-C Note
Policy and the Series 1996-C Certificate Policy, the Seller has agreed that
Financial Security shall have certain rights as Controlling Party, to the
extent set forth in the Spread Account Agreement and the Series 1996-C
Indenture.
7. The Seller is a wholly owned special purpose subsidiary of OFL.
The Series 1996-C Trust has agreed to pay the Series 1996-C Credit
Enhancement Fee to the Seller in consideration of the obligations of the
Seller and OFL pursuant hereto and in consideration of the obligations of OFL
pursuant to the Series 1996-C Insurance Agreement (such obligations forming
part of the Series 1996-C Insurer Secured Obligations as referred to herein).
The Series 1996-C Insurer Secured Obligations form part of the consideration
to Financial Security for its issuance of the Series 1996-C Policies.
8. In order to secure the performance of the Series 1996-C Secured
Obligations, to further effect and enforce the subordination provisions to
which the Series 1996-C Credit Enhancement Fee is subject, and in
consideration of the receipt of the Series 1996-C Credit Enhancement Fee, OFL
and the Seller have agreed to pledge the Series 1996-C Collateral as
Collateral to the Collateral Agent for the benefit of Financial Security and
for the benefit of the Trustee on behalf of the Trust, upon the terms and
conditions set forth herein.
AGREEMENTS
In consideration of the premises, and for other good and valuable
consideration, the adequacy, receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 DEFINITIONS. All terms defined in Section 1.1 of the
Series 1996-C Sale and Servicing Agreement shall have the same meaning with
respect to this Series 1996-C Supplement. The following terms shall have the
following meanings:
"COLLECTION ACCOUNT SHORTFALL" means, with respect to Series 1996-C and
any Distribution Date, the Deficiency Claim Amount, as defined in the Series
1996-C Sale and Servicing Agreement, with respect to such Distribution Date.
"DEEMED CURED" means, (a) with respect to a Trigger Event that has
occurred pursuant to clause (i) of the definition thereof, as of a
Determination Date with respect to Series 1996-C, that no Trigger Event as
specified in clause (i) of the definition thereof with respect to such Series
shall have occurred as of such Determination Date or as of any of the five
consecutively preceding Determination Dates, and (b) with respect to a
Trigger Event that has occurred pursuant to clause (ii) or clause (iii) of
the definition thereof, as of the next Determination Date
2
<PAGE>
which occurs in a calendar month which is a multiple of three months
succeeding the Series 1996-C Closing Date, that no such clause (ii) or clause
(iii) Trigger Event with respect to such Series shall have occurred as of
such Determination Date.
"INITIAL PRINCIPAL AMOUNT" means $508,992,447.05 with respect to Series
1996-C.
"INITIAL SPREAD ACCOUNT DEPOSIT" means $7,250,000 for Series 1996-C.
"INITIAL SPREAD ACCOUNT MAXIMUM AMOUNT" means, with respect to Series
1996-C and any Distribution Date, an amount equal to the greater of (i) 7% of
the Series 1996-C Balance as of the close of business on such Distribution
Date and (ii) the Spread Account Minimum Amount as of the close of business
on such Distribution Date.
"SERIES 1996-C BALANCE" means, with respect to Series 1996-C and any
Distribution Date, the sum of the aggregate principal amount of the Series
1996-C Notes and the Certificate Balance with respect to Series 1996-C
Certificates as of such Distribution Date (after giving effect to the
distributions in respect of principal on the Notes and on the Certificates
made on such Distribution Date).
"SERIES 1996-C CERTIFICATE POLICY" means the financial guaranty
insurance policy issued by Financial Security with respect to the Series
1996-C Certificates.
"SERIES 1996-C CERTIFICATES" means the Certificates issued on the date
hereof pursuant to the Series 1996-C Trust Agreement.
"SERIES 1996-C COLLATERAL" has the meaning specified in Section 2.3(a)
hereof.
"SERIES 1996-C CREDIT ENHANCEMENT FEE" means the amount distributable on
each Distribution Date pursuant to Section 4.6(viii) and (ix) of the Series
1996-C Sale and Servicing Agreement.
"SERIES 1996-C INDENTURE" means the Indenture, dated as of September 1,
1996, among the Series 1996-C Trust, the Trustee and the Indenture Collateral
Agent.
"SERIES 1996-C NOTE POLICY" means the financial guaranty insurance
policy issued by Financial Security with respect to the Series 1996-C Notes.
"SERIES 1996-C NOTES" means the Class A-1, Class A-2, Class A-3, Class
A-4 and Class A-5 Notes issued pursuant to the Series 1996-C Indenture.
"SERIES 1996-C OWNER TRUSTEE" means Mellon Bank (DE), National
Association, not in its individual capacity but solely as Owner Trustee, or
its successor in interest, and any successor Owner Trustee appointed as
provided in the Series 1996-C Trust Agreement.
3
<PAGE>
"SERIES 1996-C RECEIVABLE" means each Receivable referenced on the
Schedule of Receivables attached to the Series 1996-C Sale and Servicing
Agreement, as supplemented from time to time during the Funding Period by one
or more Subsequent Transfer Agreements.
"SERIES 1996-C RESERVE ACCOUNT" means the Reserve Account established
pursuant to Section 4.1(d) of the Series 1996-C Sale and Servicing Agreement.
"SERIES 1996-C SALE AND SERVICING AGREEMENT" means the Sale and
Servicing Agreement, dated as of September 1, 1996, and attached hereto as
Exhibit A, among the Series 1996-C Trust, OFL, in its individual capacity and
as Servicer, the Seller and the Backup Servicer, as such agreement may be
supplemented, amended or modified from time to time.
"SERIES 1996-C SECURED OBLIGATIONS" means the Insurer Secured
Obligations and the Trustee Secured Obligations with respect to Series 1996-C.
"SERIES 1996-C SECURITIES" means the Series 1996-C Notes and the Series
1996-C Certificates, collectively.
"SERIES 1996-C SPREAD ACCOUNT" means the Spread Account established
pursuant to Section 3.1(a) hereof.
"SERIES 1996-C SUPPLEMENT" means this Series 1996-C Supplement which
constitutes a Series Supplement to the Spread Account Agreement.
"SERIES 1996-C TRUST AGREEMENT" means the Trust Agreement, dated as of
September 1, 1996, among the Seller, Olympic First GP Inc., Olympic Second GP
Inc., Financial Security and the Series 1996-C Owner Trustee.
"SPREAD ACCOUNT ADDITIONAL DEPOSIT" means, with respect to Series 1996-C
and any Subsequent Transfer Date, an amount equal to 0.00% of the aggregate
Principal Balance (as of the related Subsequent Cutoff Date) of the
Subsequent Receivables being transferred to the Series 1996-C Trust on such
Subsequent Transfer Date or such greater amount as required by the Rating
Agencies to confirm that the rating assigned to the Series 1996-C Notes and
the Series 1996-C Certificates will be in the highest category by such Rating
Agencies.
"SPREAD ACCOUNT MAXIMUM AMOUNT" means, with respect to Series 1996-C and
any Distribution Date:
(i) if no Insurance Agreement Event of Default with respect to
Series 1996-C has occurred and is continuing, no Capture Event has occurred
and is continuing, no Trigger Event has occurred on the related
Determination Date, and if any Trigger Event with respect to Series 1996-C
has occurred as of a prior Determination Date, such Trigger Event is Deemed
Cured as of the related Determination Date, the Initial Spread Account
Maximum Amount with respect to Series 1996-C and such Distribution Date;
4
<PAGE>
(ii) if (A) a Trigger Event with respect to Series 1996-C has
occurred as of the Determination Date or (B) a Trigger Event with respect
to Series 1996-C has occurred as of a prior Distribution Date and is not
Deemed Cured as of the related Determination Date, and no Insurance
Agreement Event of Default with respect to Series 1996-C has occurred and
is continuing and no Capture Event has occurred and is continuing, the
Spread Account Maximum Amount shall be equal to the greater of (i) 10% of
the Series 1996-C Balance as of the close of business on such Distribution
Date and (ii) the Spread Account Minimum Amount as of the close of business
on such Distribution Date; or
(iii) if (A) an Insurance Agreement Event of Default with respect
to Series 1996-C has occurred and is continuing or (B) a Capture Event has
occurred and is continuing as of the related Determination Date, the Spread
Account Maximum Amount shall be equal to the greater of (i) 25% of the
Series 1996-C Balance as of the close of business on such Distribution Date
and (ii) the Spread Account Minimum Amount as of the close of business on
such Distribution Date.
"SPREAD ACCOUNT MINIMUM AMOUNT" means, with respect to Series 1996-C and
any Distribution Date, an amount equal to the greater of:
(i) $100,000, and
(ii) the lesser of:
(A) 1% of the Initial Principal Amount of Series 1996-C, and
(B) the Series 1996-C Balance.
"SPREAD ACCOUNT WITHDRAWAL FLOOR" means, with respect to Series 1996-C and
any Determination Date, an amount equal to the greater of:
(i) the Spread Account Minimum Amount, and
(ii) 3% of the Series 1996-C Balance.
"TRIGGER EVENT" means, with respect to Series 1996-C and as of a
Determination Date, the occurrence of any of the following events:
(i) the Average Delinquency Ratio for such Determination Date shall
be 5.9% or greater;
(ii) the Cumulative Default Rate shall be equal to or greater than (A)
2.60%, with respect to any Determination Date occurring prior to
or during the third calendar month succeeding the Series 1996-C
Closing Date, (B) 4.71%, with respect to any Determination Date
occurring after the third, and prior to or during the 6th,
calendar month succeeding the Series 1996-
5
<PAGE>
C Closing Date, (C) 6.55%, with respect to any Determination
Date occurring after the 6th, and prior to or during the 9th,
calendar month succeeding the Series 1996-C Closing Date, (D)
8.03%, with respect to any Determination Date occurring after
the 9th, and prior to or during the 12th, calendar month
succeeding the Series 1996-C Closing Date, (E) 8.73%, with
respect to any Determination Date occurring after the 12th,
and prior to or during the 15th, calendar month succeeding the
Series 1996-C Closing Date, (F) 9.63%, with respect to any
Determination Date occurring after the 15th, and prior to or
during the 18th, calendar month succeeding the Series 1996-C
Closing Date, (G) 10.45%, with respect to any Determination
Date occurring after the 18th, and prior to or during the
21st, calendar month succeeding the Series 1996-C Closing
Date, (H) 11.10%, with respect to any Determination Date
occurring after the 21st, and prior to or during the 24th,
calendar month succeeding the Series 1996-C Closing Date, (I)
11.68%, with respect to any Determination Date occurring after
the 24th, and prior to or during the 27th, calendar month
succeeding the Series 1996-C Closing Date, (J) 12.18%, with
respect to any Determination Date occurring after the 27th,
and prior to or during the 30th, calendar month succeeding the
Series 1996-C Closing Date, (K) 12.54%, with respect to any
Determination Date occurring after the 30th, and prior to or
during the 33rd, calendar month succeeding the Series 1996-C
Closing Date, (L) 12.82%, with respect to any Determination
Date occurring after the 33rd, and prior to or during the
36th, calendar month succeeding the Series 1996-C Closing
Date, (M) 13.04%, with respect to any Determination Date
occurring after the 36th, and prior to or during the 39th,
calendar month succeeding the Series 1996-C Closing Date, (N)
13.19%, with respect to any Determination Date occurring after
the 39th, and prior to or during the 42nd, calendar month
succeeding the Series 1996-C Closing Date, (O) 13.33%, with
respect to any Determination Date occurring after the 42nd,
and prior to or during the 45th calendar month succeeding the
Series 1996-C Closing Date, (P) 13.44%, with respect to any
Determination Date occurring after the 45th, and prior to or
during the 48th, calendar month succeeding the Series 1996-C
Closing Date, (Q) 13.50%, with respect to any Determination
Date occurring after the 48th, and prior to or during the
51st, calendar month succeeding the Series 1996-C Closing
Date, (R) 13.56%, with respect to any Determination Date
occurring after the 51st, and prior to or during the 54th,
calendar month succeeding the Series 1996-C Closing Date, (S)
13.60%, with respect to any Determination Date occurring after
the 54th, and prior to or during the 57th, calendar month
succeeding the Series 1996-C Closing Date, (T) 13.64%, with
respect to any Determination Date occurring after the 57th,
and prior to or during the 60th, calendar month succeeding the
Series 1996-C Closing Date, (U) 13.65%, with respect to any
Determination Date occurring after the 60th, and prior to or
during the 63rd, calendar month succeeding the Series 1996-C
Closing Date, (V) 13.67%, with respect to any Determination
6
<PAGE>
Date occurring after the 63rd, and prior to or during the 66th,
calendar month succeeding the Series 1996-C Closing
Date, (W) 13.69%, with respect to any Determination Date
occurring after the 66th, and prior to or during the 69th,
calendar month succeeding the Series 1996-C Closing Date, or
(X) 13.71%, with respect to any Determination Date occurring
after the 69th calendar month succeeding the Series 1996-C
Closing Date; or
(iii) the Cumulative Net Loss Rate shall be equal to or greater than
(A) 1.31%, with respect to any Determination Date occurring prior
to or during the third calendar month succeeding the Series 1996-
C Closing Date, (B) 2.28%, with respect to any Determination Date
occurring after the third, and prior to or during the 6th,
calendar month succeeding the Series 1996-C Closing Date, (C)
3.08%, with respect to any Determination Date occurring after the
6th, and prior to or during the 9th, calendar month succeeding
the Series 1996-C Closing Date, (D) 3.66%, with respect to any
Determination Date occurring after the 9th, and prior to or
during the 12th, calendar month succeeding the Series 1996-C
Closing Date, (E) 3.98%, with respect to any Determination Date
occurring after the 12th, and prior to or during the 15th,
calendar month succeeding the Series 1996-C Closing Date, (F)
4.29%, with respect to any Determination Date occurring after the
15th, and prior to or during the 18th, calendar month succeeding
the Series 1996-C Closing Date, (G) 4.54%, with respect to any
Determination Date occurring after the 18th, and prior to or
during the 21st, calendar month succeeding the Series 1996-C
Closing Date, (H) 4.75%, with respect to any Determination Date
occurring after the 21st, and prior to or during the 24th,
calendar month succeeding the Series 1996-C Closing Date, (I)
4.92%, with respect to any Determination Date occurring after the
24th, and prior to or during the 27th, calendar month succeeding
the Series 1996-C Closing Date, (J) 5.08%, with respect to any
Determination Date occurring after the 27th, and prior to or
during the 30th, calendar month succeeding the Series 1996-C
Closing Date, (K) 5.18%, with respect to any Determination Date
occurring after the 30th, and prior to or during the 33rd,
calendar month succeeding the Series 1996-C Closing Date, (L)
5.28%, with respect to any Determination Date occurring after the
33rd, and prior to or during the 36th, calendar month succeeding
the Series 1996-C Closing Date, (M) 5.35%, with respect to any
Determination Date occurring after the 36th, and prior to or
during the 39th, calendar month succeeding the Series 1996-C
Closing Date, (N) 5.42%, with respect to any Determination Date
occurring after the 39th, and prior to or during the 42nd,
calendar month succeeding the Series 1996-C Closing Date, (O)
5.48%, with respect to any Determination Date occurring after the
42nd, and prior to or during the 45th calendar month succeeding
the Series 1996-C Closing Date, (P) 5.52%, with respect to any
Determination Date occurring after the 45th, and prior to or
during the 48th, calendar month succeeding the Series
7
<PAGE>
1996-C Closing Date, (Q) 5.55%, with respect to any
Determination Date occurring after the 48th, and prior to or
during the 51st, calendar month succeeding the Series 1996-C
Closing Date, (R) 5.58%, with respect to any Determination
Date occurring after the 51st, and prior to or during the
54th, calendar month succeeding the Series 1996-C Closing
Date, (S) 5.61%, with respect to any Determination Date
occurring after the 54th, and prior to or during the 57th,
calendar month succeeding the Series 1996-C Closing Date, (T)
5.63%, with respect to any Determination Date occurring after
the 57th, and prior to or during the 60th, calendar month
succeeding the Series 1996-C Closing Date, (U) 5.64%, with
respect to any Determination Date occurring after the 60th,
and prior to or during the 63rd, calendar month succeeding the
Series 1996-C Closing Date, (V) 5.66%, with respect to any
Determination Date occurring after the 63rd, and prior to or
during the 66th, calendar month succeeding the Series 1996-C
Closing Date, (W) 5.67%, with respect to any Determination
Date occurring after the 66th, and prior to or during the
69th, calendar month succeeding the Series 1996-C Closing
Date, or (X) 5.69%, with respect to any Determination Date
occurring after the 69th calendar month succeeding the Series
1996-C Closing Date.
Section 1.2 RULES OF INTERPRETATION. The terms "hereof," "herein,"
"hereto" or "hereunder," unless otherwise modified by more specific reference,
shall refer to this Series 1996-C Supplement. Unless otherwise indicated in
context, the terms "Article," "Section" or "Exhibit" shall refer to an Article
or Section of, or Exhibit to, this Series 1996-C Supplement. The definition of
a term shall include the singular, the plural, the past, the present, the
future, the active and the passive forms of such term. A term defined herein
and used herein preceded by a Series designation, shall mean such term as it
relates to the Series designated.
ARTICLE II
CREDIT ENHANCEMENT FEE; SERIES SUPPLEMENTS; THE COLLATERAL
Section 2.1 SERIES 1996-C CREDIT ENHANCEMENT FEE. The Series 1996-C
Sale and Servicing Agreement provides for the payment to the Seller of the
Series 1996-C Credit Enhancement Fee, to be paid to the Seller by distribution
of such amounts to the Collateral Agent for deposit and distribution pursuant to
this Agreement. The Seller and OFL hereby agree that payment of the Series
1996-C Credit Enhancement Fee in the manner and subject to the conditions set
forth herein and in the Series 1996-C Sale and Servicing Agreement is adequate
consideration and the exclusive consideration to be received by the Seller or
OFL for the obligations of the Seller pursuant hereto and the obligations of OFL
pursuant hereto (including, without limitation, the transfer by the Seller to
the Collateral Agent of the Initial Spread Account Deposit with respect to
Series 1996-C) and pursuant to the Series 1996-C Insurance Agreement. The
Seller and OFL hereby agree with the Trustee and with Financial Security that
payment of the Series 1996-C Credit Enhancement Fee to the Seller is expressly
conditioned on subordination of the Series 1996-C Credit Enhancement Fee to
payments on the Notes (if any)
8
<PAGE>
and Certificates of any Series, payments of amounts due to Financial Security
and the other obligations of the Trusts, in each case to the extent provided
in Section 4.6 of the Standard Terms and Conditions or Section 4.6 of the
related Sale and Servicing Agreement, as applicable, and Section 3.03 of the
Spread Account Agreement, and the Security Interest of the Secured Parties in
the Series 1996-C Collateral is intended to effect and enforce such
subordination and to provide security for the Series 1996-C Secured
Obligations and subject to the terms hereof the Secured Obligations with
respect to other Series.
Section 2.2 SERIES SUPPLEMENTS. As provided in and subject to the
conditions specified in Section 2.02 of the Spread Account Agreement, the
parties hereto are entering into this Series 1996-C Supplement with respect to
the Series 1996-C Securities.
Section 2.3 GRANT OF SECURITY INTEREST BY OFL AND THE SELLER.
(a) In order to secure the performance of the Secured Obligations with
respect to each Series, the Seller (and OFL, to the extent it may have any
rights therein) hereby pledges, assigns, grants, transfers and conveys to the
Collateral Agent, on behalf of and for the benefit of the Secured Parties to
secure the Secured Obligations, a lien on and security interest in (which lien
and security interest is intended to be prior to all other liens, security
interests or other encumbrances), all of its right, title and interest in and to
the following (all being collectively referred to herein as the "Series 1996-C
Collateral"):
(i) the Series 1996-C Credit Enhancement Fee and all rights and
remedies that the Seller may have to enforce payment of the Series 1996-C
Credit Enhancement Fee whether under the Series 1996-C Sale and Servicing
Agreement or otherwise;
(ii) the Series 1996-C Spread Account established pursuant to
Section 3.1 of this Series 1996-C Supplement and Section 3.01 of the Spread
Account Agreement, and each other account owned by the Seller and
maintained by the Collateral Agent (including, without limitation, all
monies, checks, securities, investments and other documents from time to
time held in or evidencing any such accounts);
(iii) all of the Seller's right, title and interest in and to
investments made with proceeds of the property described in clauses (i) and
(ii) above, or made with amounts on deposit in the Series 1996-C Spread
Account; and
(iv) all distributions, revenues, products, substitutions,
benefits, profits and proceeds, in whatever form, of any of the foregoing.
(b) In order to effectuate the provisions and purposes of this Series
1996-C Supplement, including for the purpose of perfecting the security
interests granted hereunder, the Seller represents and warrants that it has,
prior to the execution of this Series 1996-C Supplement, executed and filed an
appropriate Uniform Commercial Code financing statement in Minnesota sufficient
to ensure that the Collateral Agent, as agent for the Secured Parties, has
9
<PAGE>
a first priority perfected security interest in all Series 1996-C Collateral
which can be perfected by the filing of a financing statement.
ARTICLE III
SPREAD ACCOUNT
Section 3.1 ESTABLISHMENT OF SERIES 1996-C SPREAD ACCOUNT; INITIAL
DEPOSIT INTO SERIES 1996-C SPREAD ACCOUNT.
(a) On or prior to the Closing Date relating to the Series 1996-C
Certificates, the Collateral Agent shall establish with respect to Series
1996-C, at its office or at another depository institution or trust company,
an Eligible Account, designated "Spread Account--Series 1996-C--Norwest Bank
Minnesota, National Association, as Collateral Agent for Financial Security
Assurance Inc. and another Secured Party" (the "Series 1996-C Spread
Account").
(b) On the Closing Date relating to the Series 1996-C, the Collateral
Agent shall deposit the Initial Spread Account Deposit with respect to Series
1996-C received from the Seller into the Series 1996-C Spread Account.
Section 3.2 SPREAD ACCOUNT ADDITIONAL DEPOSITS. On each Subsequent
Transfer Date, the Series 1996-C Trust will, pursuant to Section 2.4 of the
Series 1996-C Sale and Servicing Agreement, deliver on behalf of the Seller the
Spread Account Additional Deposit for such Subsequent Transfer Date to the
Collateral Agent. The Collateral Agent shall deposit each such Spread Account
Additional Deposit received from the Series 1996-C Trust into the Series 1996-C
Spread Account.
ARTICLE IV
MISCELLANEOUS
Section 4.1 FURTHER ASSURANCES. Each party hereto shall take such
action and deliver such instruments to any other party hereto, in addition to
the actions and instruments specifically provided for herein, as may be
reasonably requested or required to effectuate the purpose or provisions of this
Series 1996-C Supplement or to confirm or perfect any transaction described or
contemplated herein.
Section 4.2 GOVERNING LAW. This Series 1996-C Supplement shall be
governed by and construed, and the obligations, rights and remedies of the
parties hereunder shall be determined, in accordance with the laws of the State
of New York.
10
<PAGE>
Section 4.3 COUNTERPARTS. This Series 1996-C Supplement may be executed
in two or more counterparts by the parties hereto, and each such counterpart
shall be considered an original and all such counterparts shall constitute one
and the same instrument.
Section 4.4 HEADINGS. The headings of sections and paragraphs and the
Table of Contents contained in this Series 1996-C Supplement are provided for
convenience only. They form no part of this Series 1996-C Supplement and shall
not affect its construction or interpretation.
11
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Series 1996-C
Supplement as of the date set forth on the first page hereof.
OLYMPIC FINANCIAL LTD.
By /s/ John A. Witham
-------------------------------------------
John A. Witham
Executive Vice President and
Chief Financial Officer
OLYMPIC RECEIVABLES FINANCE CORP.
By /s/ John A. Witham
-------------------------------------------
John A. Witham
Senior Vice President and
Chief Financial Officer
FINANCIAL SECURITY ASSURANCE INC.
By /s/ illegible signature
-------------------------------------------
Authorized Officer
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Trustee
By /s/ Thomas D. Wraalstad
-------------------------------------------
Thomas D. Wraalstad
Corporate Trust Officer
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Collateral Agent
By /s/ Thomas D. Wraalstad
-------------------------------------------
Thomas D. Wraalstad
Corporate Trust Officer
<PAGE>
- --------------------------------------------------------------------------------
INSURANCE AND INDEMNITY AGREEMENT
among
FINANCIAL SECURITY ASSURANCE INC.,
OLYMPIC AUTOMOBILE RECEIVABLES TRUST, 1996-C,
OLYMPIC FIRST GP INC.,
OLYMPIC SECOND GP INC.,
OLYMPIC RECEIVABLES FINANCE CORP.
and
OLYMPIC FINANCIAL LTD.
Dated as of September 12, 1996
- --------------------------------------------------------------------------------
Olympic Automobile Receivables Trust, 1996-C
5.616% Class A-1 Money Market Automobile Receivables-Backed Notes
6.30% Class A-2 Automobile Receivables-Backed Notes
6.625% Class A-3 Automobile Receivables-Backed Notes
6.80% Class A-4 Automobile Receivables-Backed Notes
7.00% Class A-5 Automobile Receivables-Backed Notes
6.85% Automobile Receivables-Backed Certificates
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
Section 1.01. Definitions. . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 2.01. Representations and Warranties of the Trust. . . . . . . . . 8
Section 2.02. Affirmative Covenants of the Trust . . . . . . . . . . . . . 11
Section 2.03. Negative Covenants of the Trust. . . . . . . . . . . . . . . 17
Section 2.04. Representations and Warranties of OFL and of the Class GP
Certificateholders . . . . . . . . . . . . . . . . . . . . . 18
Section 2.05. Affirmative Covenants of OFL and each Class GP
Certificateholder. . . . . . . . . . . . . . . . . . . . . . 21
Section 2.06. Negative Covenants of OFL and each Class GP
Certificateholder. . . . . . . . . . . . . . . . . . . . . . 25
Section 2.07. Representations and Warranties of OFL and the Seller . . . . 27
Section 2.08. Affirmative Covenants of OFL and the Seller. . . . . . . . . 32
Section 2.09. Negative Covenants of OFL and the Seller . . . . . . . . . . 36
Section 2.10. Representations and Warranties of OFL. . . . . . . . . . . . 38
Section 2.11. Affirmative Covenants of OFL . . . . . . . . . . . . . . . . 40
Section 2.12. Negative Covenants of OFL. . . . . . . . . . . . . . . . . . 44
ARTICLE III
THE POLICIES; REIMBURSEMENT; INDEMNIFICATION
Section 3.01. Conditions Precedent to Issuance of the Policies . . . . . . 45
Section 3.02. Payment of Fees and Premium. . . . . . . . . . . . . . . . . 51
Section 3.03. Reimbursement and Additional Payment Obligation. . . . . . . 51
Section 3.04. Certain Obligations Not Recourse to OFL; Recourse to Trust
Property . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 3.05. Indemnification. . . . . . . . . . . . . . . . . . . . . . . 53
Section 3.06. Payment Procedure. . . . . . . . . . . . . . . . . . . . . . 55
Section 3.07. Subrogation. . . . . . . . . . . . . . . . . . . . . . . . . 55
ARTICLE IV
FURTHER AGREEMENTS; MISCELLANEOUS
Section 4.01. Effective Date; Term of Agreement. . . . . . . . . . . . . . 55
Section 4.02. Further Assurances and Corrective Instruments. . . . . . . . 56
<PAGE>
Page
Section 4.03. Obligations Absolute . . . . . . . . . . . . . . . . . . . . 56
Section 4.04. Assignments; Reinsurance; Third-Party Rights . . . . . . . . 57
Section 4.05. Liability of Financial Security. . . . . . . . . . . . . . . 58
ARTICLE V
EVENTS OF DEFAULT; REMEDIES
Section 5.01. Events of Default. . . . . . . . . . . . . . . . . . . . . . 58
Section 5.02. Remedies; Waivers. . . . . . . . . . . . . . . . . . . . . . 62
ARTICLE VI
MISCELLANEOUS
Section 6.01. Amendments, Etc. . . . . . . . . . . . . . . . . . . . . . . 63
Section 6.02. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Section 6.03. Severability . . . . . . . . . . . . . . . . . . . . . . . . 65
Section 6.04. Governing Law. . . . . . . . . . . . . . . . . . . . . . . . 65
Section 6.05. Consent to Jurisdiction. . . . . . . . . . . . . . . . . . . 65
Section 6.06. Consent of Financial Security. . . . . . . . . . . . . . . . 66
Section 6.07. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . 66
Section 6.08. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Section 6.09. Trial by Jury Waived . . . . . . . . . . . . . . . . . . . . 67
Section 6.10. Limited Liability. . . . . . . . . . . . . . . . . . . . . . 67
Section 6.11. Limited Liability of Mellon Bank (DE),
National Association . . . . . . . . . . . . . . . . . . . . 67
Section 6.12. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . 67
ii
<PAGE>
INSURANCE AND INDEMNITY AGREEMENT
INSURANCE AND INDEMNITY AGREEMENT dated as of September 12, 1996,
among FINANCIAL SECURITY ASSURANCE INC., a New York stock insurance company
("Financial Security"), OLYMPIC AUTOMOBILE RECEIVABLES TRUST, 1996-C, a Delaware
business trust (the "Trust"), OLYMPIC FIRST GP INC., a Delaware corporation
("First Class GP Certificateholder"), OLYMPIC SECOND GP INC., a Delaware
corporation ("Second Class GP Certificateholder" and collectively with First
Class GP Certificateholder, the "Class GP Certificateholders"), OLYMPIC
RECEIVABLES FINANCE CORP., a Delaware corporation (the "Seller"), and OLYMPIC
FINANCIAL LTD., a Minnesota corporation (when referred to individually
hereunder, "OFL", when referred to as servicer under the Sale and Servicing
Agreement referred to below, the "Servicer").
INTRODUCTORY STATEMENTS
1. The Seller is the owner of the Receivables. The Seller proposes
to sell to the Trust all of its right, title and interest in and to the
Receivables and certain other property pursuant to the Sale and Servicing
Agreement. The Trust will issue Certificates pursuant to the Trust Agreement
and Notes pursuant to the Indenture.
2. Each Certificate will represent a fractional undivided interest
in the Trust. Each Note will be secured by the Indenture Property. The Trust
has requested that Financial Security issue two financial guaranty insurance
policies guarantying respectively certain distributions of interest and
principal on the Certificates and the Notes on each Distribution Date (including
any such distributions subsequently avoided as a preference under applicable
bankruptcy law) upon the terms, and subject to the conditions, provided herein.
3. OFL and the Seller have previously entered into and may in the
future enter into one or more pooling and servicing agreements or sale and
servicing agreements with a trust and Seller has previously entered into a
Repurchase Agreement dated as of August 1, 1994 among the Seller and Telluride
Funding Corp., in each case, pursuant to which the Seller sold or will sell all
of its right, title and interest in and to receivables and the other trust
property and in connection therewith Financial Security has and may in the
future issue additional policies with respect to certain guaranteed
distributions on the corresponding certificates, the corresponding notes or
both.
4. The parties hereto desire to specify the conditions precedent to
the issuance of the Policies by Financial Security, the payment of premium in
respect of the Policies, the
<PAGE>
indemnity and reimbursement to be provided to Financial Security in respect
of amounts paid by Financial Security under the Policies or otherwise and
certain other matters.
In consideration of the premises and of the agreements herein
contained, Financial Security, the Trust, the Class GP Certificateholders, OFL,
individually and as Servicer, and the Seller hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. DEFINITIONS. All words and phrases defined in the
Trust Agreement, the Sale and Servicing Agreement or in the Spread Account
Agreement shall have the same meanings in this Agreement. Unless otherwise
specified, if a word or phrase defined in the Trust Agreement, the Sale and
Servicing Agreement or in the Spread Account Agreement can be applied with
respect to one or more Series, such a word or phrase shall be used herein as
applied to Series 1996-C. In addition, the following words and phrases shall
have the following respective meanings:
"ACCUMULATED FUNDING DEFICIENCY" shall have the meaning provided in
Section 412 of the Code and Section 302 of ERISA, whether or not waived.
"AGREEMENT" means this Insurance and Indemnity Agreement, as the same
may be amended, modified or supplemented from time to time.
"AUTHORIZED OFFICER" means, with respect to a corporation, the
president, the chief financial officer or any vice president.
"CERTIFICATES" means the Certificates issued under the Trust
Agreement.
"CERTIFICATE POLICY" means the financial guaranty insurance policy,
including any endorsements thereto, issued by Financial Security with respect to
the Certificates, substantially in the form attached as Exhibit B hereto.
"CODE" means the Internal Revenue Code of 1986, including, unless the
context otherwise requires, the rules and regulations thereunder, as amended
from time to time.
"COMMISSION" means the Securities and Exchange Commission.
"COMMONLY CONTROLLED ENTITY" means with respect to the Trust, the
Seller or OFL, as the case may be, each entity, whether or not incorporated,
which is affiliated with the Trust, the Seller or OFL, as the case may be,
pursuant to Section 414(b), (c), (m) or (o) of the Code.
"DEFAULT" means any event which results, or which with the giving of
notice or the lapse of time or both would result, in an Event of Default.
2
<PAGE>
"DEMAND NOTES" means the Series 1993-C Demand Notes, the Series 1993-D
Demand Notes, the Series 1994-A Demand Notes, the Series 1994-B Demand Notes,
the Series 1995-B Demand Notes, Series 1995-C Demand Notes, the Series 1995-D
Demand Notes, the Series 1995-E Demand Notes, the Series 1996-A Demand Notes,
the Series 1996-B Demand Notes and the Series 1996-C Demand Notes.
"ERISA" means the Employee Retirement Income Security Act of 1974,
including, unless the context otherwise requires, the rules and regulations
thereunder, as amended from time to time.
"EVENT OF DEFAULT" means any event of default specified in
Section 5.01 of this Agreement.
"EXPIRATION DATE" means, with respect to each Policy, the final date
of the Term of such Policy, as specified therein.
"FINANCIAL SECURITY" means Financial Security Assurance Inc., a New
York stock insurance company, its successors and assigns.
"FINANCIAL STATEMENTS" means with respect to OFL the audited
consolidated balance sheets as of December 31, 1995, December 31, 1994 and
December 31, 1993 and the related audited consolidated statements of income,
retained earnings and cash flows for the 12-month periods then ended and the
notes thereto and the unaudited balance sheets as of June 30, 1996 and June 30,
1995 and the statements of income, retained earnings and cash flows for the
fiscal quarter then ended.
"FISCAL AGENT" means the Fiscal Agent, if any, designated pursuant to
the terms of the Policies.
"INDENTURE COLLATERAL AGENT" means initially, Norwest Bank Minnesota,
National Association, in its capacity as collateral agent on behalf of Financial
Security and the Indenture Trustee on behalf of the Noteholders pursuant to the
Indenture, its successor in interest and any successor Indenture Collateral
Agent under the Indenture.
"INDENTURE PROPERTY" means the property pledged to the Indenture
Collateral Agent on behalf of Financial Security and the Indenture Trustee on
behalf of the Noteholders pursuant to the Indenture.
"INSURANCE AGREEMENT INDENTURE CROSS DEFAULT" means an Event of
Default specified in clause (a), (f), (g), (h) or (i) of Section 5.01.
"INVESTMENT COMPANY ACT" means the Investment Company Act of 1940,
including, unless the context otherwise requires, the rules and regulations
thereunder, as amended from time to time.
"IRS" means the Internal Revenue Service.
3
<PAGE>
"LATE PAYMENT RATE" means the greater of (i) a per annum rate equal to
3 percent in excess of Financial Security's cost of funds, determined on a
monthly basis, or (ii) a per annum rate equal to 3 percent in excess of the
arithmetic average of the prime or base lending rates publicly announced by The
Chase Manhattan Bank, N.A. (New York, New York) and Citibank, N.A. (New York,
New York), as in effect on the last day of the month for which interest is being
computed, but, in either case, in no event greater than the maximum rate
permitted by law.
"LIEN" means, as applied to the property or assets (or the income or
profits therefrom) of any Person, in each case whether the same is consensual or
nonconsensual or arises by contract, operation of law, legal process or
otherwise: (a) any mortgage, lien, pledge, attachment, charge, lease,
conditional sale or other title retention agreement, or other security interest
or encumbrance of any kind; or (b) any arrangement, express or implied, under
which such property or assets are transferred, sequestered or otherwise
identified for the purpose of subjecting or making available the same for the
payment of debt or performance of any other obligation in priority to the
payment of the general, unsecured creditors of such Person.
"MATERIAL ADVERSE CHANGE" means, in respect of any Person, a material
adverse change in (i) the business, financial condition, results of operations,
or properties of such Person and its Subsidiaries taken as a whole, (ii) the
ability of such Person to perform its obligations under any of the Transaction
Documents to which it is a party or (iii) the ability of Financial Security or
the Trust to realize the benefits or security afforded under the Transaction
Documents.
"MULTIEMPLOYER PLAN" means a multiemployer plan (within the meaning of
Section 4001(a)(3) of ERISA) in respect of which a Commonly Controlled Entity
makes contributions or has liability.
"NOTE POLICY" means the financial guaranty insurance policy, including
any endorsements thereto, issued by Financial Security with respect to the
Notes, substantially in the form attached as Exhibit A hereto.
"NOTICE OF CLAIM" means the Notice of Claim and Certificate in the
form attached as Exhibit A to Endorsement No. 1 to each Policy.
"OTHER TRUST PROPERTY" means the property conveyed by the Seller to
the Trust pursuant to the Sale and Servicing Agreement and any Subsequent
Transfer Agreement.
"PBGC" means the Pension Benefit Guaranty Corporation or any successor
agency, corporation or instrumentality of the United States to which the duties
and powers of the Pension Benefit Guaranty Corporation are transferred.
"PLAN" means any pension plan (other than a Multiemployer Plan)
covered by Title IV of ERISA, which is maintained by a Commonly Controlled
Entity or in respect of which a Commonly Controlled Entity has liability.
4
<PAGE>
"POLICIES" means the Note Policy and the Certificate Policy.
"PORTFOLIO PERFORMANCE EVENT OF DEFAULT" means an Event of Default
specified in clause (j), (k), or (l) of Section 5.01.
"PREMIUM" means the premium payable in accordance with Section 3.02 of
this Agreement.
"PREMIUM LETTER" means the side letter between Financial Security and
OFL dated the date hereof in respect of the premium payable by OFL in
consideration of the issuance of the Policies.
"PREMIUM SUPPLEMENT" means a non-refundable premium, in addition to
the premium payable in accordance with Section 3.02 of this Agreement, payable
by OFL to Financial Security in monthly installments commencing on the first
Distribution Date following the Premium Supplement Commencement Date and on each
Distribution Date thereafter, payable in accordance with the terms of the
Premium Letter.
"PREMIUM SUPPLEMENT COMMENCEMENT DATE" means the date of occurrence of
an Event of Default in respect of which the Premium Supplement shall have been
declared due and payable in accordance with Section 5.02 of this Agreement.
"PREVIOUS SERIES TRANSACTION DOCUMENTS" means the transaction
documents as defined in each of the insurance and indemnity agreements related
to Olympic Automobile Receivables Trust, 1993-A, Olympic Automobile Receivables
Trust, 1993-B, Olympic Automobile Receivables Trust, 1993-C, and Olympic
Automobile Receivables Trust, 1993-D, Olympic Automobile Receivables Trust,
1994-A, Olympic Automobile Receivables Trust, 1994-B, Olympic Automobile
Receivables Trust, 1995-A, Olympic Automobile Receivables Trust, 1995-B, Olympic
Automobile Receivables Trust, 1995-C, Olympic Automobile Receivables Trust,
1995-D, Olympic Automobile Receivables Trust, 1995-E, Olympic Automobile
Receivables Trust, 1996-A, Olympic Automobile Receivables Trust, 1996-B and the
Warehousing Notes.
"PROSPECTUS" has the meaning set forth in Section 2.07(o) of this
Agreement.
"RELATED DOCUMENTS" means the Transaction Documents except for the
Sale and Servicing Agreement.
"REGISTRATION STATEMENT" has the meaning set forth in Section 2.07(o)
of this Agreement.
"REPORTABLE EVENT" means any of the events set forth in
Section 4043(b) of ERISA or the regulations thereunder.
"RESTRICTIONS ON TRANSFERABILITY" means, as applied to the property or
assets (or the income or profits therefrom) of any Person, in each case whether
the same is consensual or
5
<PAGE>
nonconsensual or arises by contract, operation of law, legal process or
otherwise, any material condition to, or restriction on, the ability of such
Person or any transferee therefrom to sell, assign, transfer or otherwise
liquidate such property or assets in a commercially reasonable time and
manner or which would otherwise materially deprive such Person or any
transferee therefrom of the benefits of ownership of such property or assets.
"SALE AND SERVICING AGREEMENT" means the Sale and Servicing Agreement
dated as of September 1, 1996 among the Seller, OFL, in its individual capacity
and as Servicer, the Back-up Servicer and the Trust pursuant to which the
Initial Receivables are to be sold, serviced and administered, as the same may
be amended from time to time.
"SECURITIES ACT" means the Securities Act of 1933, including, unless
the context otherwise requires, the rules and regulations thereunder, as amended
from time to time.
"SECURITIES EXCHANGE ACT" means the Securities Exchange Act of 1934,
including, unless the context otherwise requires, the rules and regulations
thereunder, as amended from time to time.
"SENIOR NOTE INDENTURE" means the Indenture dated as of April 28, 1995
between OFL and Norwest Bank Minnesota, National Association, as amended or
supplemented, relating to OFL's $145,000,000 13% Senior Notes due 2000.
"SERIES 1993-C DEMAND NOTES" means each of the Demand Notes, dated
August 17, 1993, issued by OFL to First Class GP Certificateholder and the
Demand Note, dated August 17, 1993, issued by OFL to Second Class GP
Certificateholder.
"SERIES 1993-D DEMAND NOTES" means each of the Demand Notes, dated
December 2, 1993, issued by OFL to First Class GP Certificateholder and the
Demand Note, dated December 2, 1993, issued by OFL to Second Class GP
Certificateholder.
"SERIES 1994-A DEMAND NOTES" means each of the Demand Notes, dated
April 5, 1994, issued by OFL to First Class GP Certificateholder and the Demand
Note, dated April 5, 1994, issued by OFL to Second Class GP Certificateholder.
"SERIES 1994-B DEMAND NOTES" means each of the Demand Notes, dated
September 23, 1994, issued by OFL to Class B-GP Certificateholder and the Demand
Note, dated September 23, 1994, issued by OFL to Class I-GP Certificateholder.
"SERIES 1995-B DEMAND NOTES" means each of the Demand Notes, dated
March 15, 1995, issued by OFL to the Class GP Certificateholders.
"SERIES 1995-C DEMAND NOTES" means each of the Demand Notes, dated
June 15, 1995, issued by OFL to the Class GP Certificateholders.
"SERIES 1995-D DEMAND NOTES" means each of the Demand Notes, dated
September 21, 1995, issued by OFL to the Class GP Certificateholders.
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"SERIES 1995-E DEMAND NOTES" means each of the Demand Notes, dated
December 6, 1995, issued by OFL to the Class GP Certificateholders.
"SERIES 1996-A DEMAND NOTES" means each of the Demand Notes, dated
March 14, 1996, issued by OFL to the Class GP Certificateholders.
"SERIES 1996-B DEMAND NOTES" means each of the Demand Notes, dated
June 14, 1996, issued by OFL to the Class GP Certificateholders.
"SERIES 1996-C" means the Series of Certificates and Notes issued on
the date hereof pursuant to the Trust Agreement and the Indenture, respectively.
"SERIES 1996-C DEMAND NOTES" means each of the Demand Notes, dated
September 12, 1996, issued by OFL to the Class GP Certificateholders.
"SERIES OF CERTIFICATES", "SERIES OF NOTES" or "SERIES" means Series
1996-C or any, or as the context may require, all, additional series of
certificates or notes or both issued as described in paragraph 3 of the
Introductory Statements hereto.
"SERVICER TERMINATION SIDE LETTER" means the letter from Financial
Security to the Servicer dated as of September 12, 1996, with regard to the
renewal of the term of the Servicer.
"SPREAD ACCOUNT AGREEMENT" means the Spread Account Agreement, dated
as of March 25, 1993, as amended and restated as of September 12, 1996 as
supplemented in accordance with the terms thereof, among OFL, the Seller,
Financial Security, the Indenture Trustee and the Collateral Agent.
"STOCK PLEDGE AGREEMENT" means the Second Amended and Restated Stock
Pledge Agreement, as amended and restated, dated as of August 26, 1994, among
Financial Security, OFL, and the Collateral Agent, as the same may be amended
from time to time.
"SUBSIDIARY" means, with respect to any Person, any corporation of
which a majority of the outstanding shares of capital stock having ordinary
voting power for the election of directors is at the time owned by such Person
directly or through one or more Subsidiaries.
"TERM OF THE POLICY" means, with respect to each Policy, the meaning
provided therein.
"TERM OF THIS AGREEMENT" shall be determined as provided in
Section 4.01 of this Agreement.
"TRANSACTION" means the transactions contemplated by the Transaction
Documents, including the transactions described in the Registration Statement.
"TRANSACTION DOCUMENTS" means this Agreement, the Sale and Servicing
Agreement, the Trust Agreement, the Certificate of Trust, the Indenture, the
Underwriting
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Agreement, the Purchase Agreement, the Premium Letter, the Stock Pledge
Agreement, the Lockbox Agreement, the Depository Agreements, the Custodian
Agreement, the Servicer Termination Side Letter, the Spread Account Agreement
and the Administration Agreement.
"TRUST AGREEMENT" means the Trust Agreement, dated as of September 1,
1996, among the Seller, the Class GP Certificateholders, Financial Security and
Mellon Bank (DE), National Association, as Owner Trustee.
"TRUST INDENTURE ACT" means the Trust Indenture Act of 1939,
including, unless the context otherwise requires, the rules and regulations
thereunder, as amended from time to time.
"UNDERFUNDED PLAN" means any Plan that has an Underfunding.
"UNDERFUNDING" means, with respect to any Plan, the excess, if any, of
(a) the present value of all benefits under the Plan (based on the assumptions
used to fund the Plan pursuant to Section 412 of the Code) as of the most recent
valuation date over (b) the fair market value of the assets of such Plan as of
such valuation date.
"UNDERWRITERS" means Donaldson, Lufkin & Jenrette Securities
Corporation, Bear Stearns & Co., Inc. and J.P. Morgan Securities Inc.
"UNDERWRITING AGREEMENT" means the Pricing Agreement, dated
September 5, 1996, among OFL and the Seller and the Underwriters.
"WAREHOUSING NOTES" means the Notes issued pursuant to the Warehousing
Series Indenture dated as of August 1, 1994 between Telluride Funding Corp., as
the issuer, and Norwest Bank Minnesota, National Association, as trustee.
ARTICLE II
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 2.01. REPRESENTATIONS AND WARRANTIES OF THE TRUST. The Trust
represents, warrants and covenants, as of the date hereof and as of the Closing
Date, as follows:
(a) DUE ORGANIZATION AND QUALIFICATION. The Trust is duly formed
and validly existing as a Delaware statutory business trust and is in good
standing under the laws of the State of Delaware, with power and authority to
own its properties and to conduct its business. The Trust is duly qualified to
do business, is in good standing and has obtained all necessary licenses,
permits, charters, registrations and approvals (together, "approvals") necessary
for the conduct of its business as described in the Prospectus and the
performance of its obligations under the Transaction Documents, in each
jurisdiction in which the failure to be so qualified or to obtain such approvals
would render the Receivables in such jurisdiction or any Transaction
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Document unenforceable in any respect or would otherwise have a material
adverse effect upon the Transaction.
(b) POWER AND AUTHORITY. The Trust has all necessary trust power and
authority to conduct its business as described in the Prospectus, to execute,
deliver and perform its obligations under this Agreement and each other
Transaction Document to which the Trust is a party and to carry out the terms
of each such agreement, and has full power and authority to issue the Notes and
the Certificates and pledge and assign its assets pursuant to the Indenture and
has duly authorized the issuance of the Notes and Certificates and the
assignment of its assets by all necessary trust proceedings.
(c) DUE AUTHORIZATION. The execution, delivery and performance of
this Agreement and each other Transaction Document to which the Trust is a party
has been duly authorized by all necessary action on the part of the Trust and
does not require any additional approvals or consents or other action by or any
notice to or filing with any Person by or on behalf of the Trust, including,
without limitation, any governmental entity.
(d) NONCONTRAVENTION. Neither the execution and delivery of this
Agreement and each other Transaction Document to which the Trust is a party, the
consummation of the Transaction nor the satisfaction of the terms and conditions
of this Agreement and each other Transaction Document to which the Trust is a
party,
(i) conflicts with or results in any breach or violation of any
provision of the Certificate of Trust or the Trust Agreement or any law,
rule, regulation, order, writ, judgment, injunction, decree, determination
or award currently in effect having applicability to the Trust or any of
its properties, including regulations issued by an administrative agency or
other governmental authority having supervisory powers over the Trust,
(ii) constitutes a default by the Trust under or a breach of any
provision of any loan agreement, mortgage, indenture or other agreement or
instrument to which the Trust is a party or by which it or any of its
properties is or may be bound or affected, or
(iii) results in or requires the creation of any Lien upon or in
respect of any of the Trust's assets except as otherwise expressly
contemplated by the Transaction Documents.
(e) PENDING LITIGATION OR OTHER PROCEEDING. There is no action,
proceeding or investigation pending, or, to the Trust's best knowledge,
threatened, before any court, regulatory body, administrative agency, arbitrator
or governmental agency or instrumentality having jurisdiction over the Trust or
its properties: (A) asserting the invalidity of this Agreement or any other
Transaction Document to which the Trust is a party, (B) seeking to prevent the
issuance of the Certificates, the Notes or the consummation of the Transaction,
(C) seeking any determination or ruling that might materially and adversely
affect the validity or enforceability of this Agreement or any other Transaction
Document to which the Trust is a
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party, (D) which might result in a Material Adverse Change with respect to
the Trust or (E) which might adversely affect the federal or state tax
attributes of the Certificates, the Notes or the Trust.
(f) VALID AND BINDING OBLIGATIONS. Each of the Transaction Documents
to which the Trust is a party, when executed and delivered by the Trust, and
assuming due authorization, execution and delivery by the other parties thereto,
will constitute the legal, valid and binding obligation of the Trust enforceable
in accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally and general equitable principles. The
Certificates, when executed, authenticated and delivered in accordance with the
Trust Agreement, will be validly issued and outstanding and entitled to the
benefits of the Trust Agreement and will evidence the entire beneficial
ownership interest in the Trust. The Notes, when executed, authenticated and
delivered in accordance with the Indenture, will be entitled to the benefits of
the Indenture and will constitute legal, valid and binding obligations of the
Trust, enforceable in accordance with their terms.
(g) NO CONSENTS. No consent, license, approval or authorization
from, or registration, filing or declaration with, any regulatory body,
administrative agency, or other governmental instrumentality, nor any consent,
approval, waiver or notification of any creditor, lessor or other
non-governmental person, is required in connection with the execution, delivery
and performance by the Trust of this Agreement or of any other Transaction
Document to which the Trust is a party, except (in each case) such as have been
obtained and are in full force and effect.
(h) COMPLIANCE WITH LAW, ETC. No practice, procedure or policy
employed or proposed to be employed by the Trust in the conduct of its business
violates any law, regulation, judgment, agreement, order or decree applicable to
the Trust which, if enforced, would result in a Material Adverse Change with
respect to the Trust.
(i) ERISA. The Trust does not maintain or contribute to, or have any
obligation to maintain or contribute to, any Plan. The Trust is not subject to
any of the provisions of ERISA.
(j) COLLATERAL. On the Closing Date, and on each Subsequent Transfer
Date, the Trust will have good and marketable title to each item of Other Trust
Property conveyed on such date and will own each such item free and clear of any
Lien (other than Liens contemplated under the Indenture) or any equity or
participation interest of any other Person.
(k) PERFECTION OF LIENS AND SECURITY INTEREST. On the Closing Date,
the Lien and security interest in favor of the Indenture Collateral Agent with
respect to Indenture Property will be perfected by the filing of financing
statements on Form UCC-1 in each jurisdiction where such recording or filing is
necessary for the perfection thereof, the delivery of the Receivable Files for
the Receivables to the Custodian, and the establishment of the Collection
Account, the Subcollection Account, the Lockbox Account, the Pre-Funding
Account, the Reserve Account and the Note Distribution Account in accordance
with the provisions of the Transaction
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Documents, and no other filings in any jurisdiction or any other actions
(except as expressly provided herein) are necessary to perfect the Collateral
Agent's Lien on and security interest in the Collateral as against any third
parties.
(l) SECURITY INTEREST IN FUNDS AND INVESTMENTS. Assuming the
retention of funds in the Accounts (other than the Certificate Distribution
Account) and the acquisition of Eligible Investments in accordance with the
Transaction Documents, such funds and Eligible Investments will be subject to a
valid and perfected, first priority security interest in favor of the Collateral
Agent on behalf of the Indenture Trustee (on behalf of the Noteholders) and
Financial Security.
(m) COMPLIANCE WITH INVESTMENT COMPANY ACT. The Trust is not
required to be registered as an "investment company" under the Investment
Company Act.
(n) INCORPORATION OF CERTAIN REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the Trust set forth in each Transaction
Document are (in each case) true and correct as if set forth herein.
(o) SPECIAL PURPOSE ENTITY.
(i) The capital of the Trust is adequate for the business and
undertakings of the Trust.
(ii) Except as contemplated by the Transaction Documents, the
Trust is not engaged in any business transactions with OFL, the Seller or
any Affiliate of either of them.
(iii) The Trust's funds and assets are not, and will not be,
commingled with the funds of any other Person, except as provided in the
Transaction Documents.
(p) SOLVENCY; FRAUDULENT CONVEYANCE. The Trust is solvent and will
not be rendered insolvent by the Transaction or by the performance of its
obligations under the Transaction Documents and, after giving effect to such
Transaction, the Trust will not be left with an unreasonably small amount of
capital with which to engage in its business. The Trust does not intend to
incur, or believe that it has incurred, debts beyond its ability to pay such
debts as they mature. The Trust does not contemplate the commencement of
insolvency, bankruptcy, liquidation or consolidation proceedings or the
appointment of a receiver, liquidator, conservator, trustee or similar official
in respect of the Trust or any of its assets.
Section 2.02. AFFIRMATIVE COVENANTS OF THE TRUST. The Trust hereby
agrees that during the Term of the Agreement, unless Financial Security shall
otherwise expressly consent in writing:
(a) COMPLIANCE WITH AGREEMENTS AND APPLICABLE LAWS. The Trust will
comply with all terms and conditions of this Agreement and each other
Transaction Document to which it is a party and with all material requirements
of any law, rule or regulation applicable
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to it. The Trust will not cause or permit to become effective any amendment
to or modification of any of the Transaction Documents to which it is a party
unless (i) (so long as no Insurer Default shall have occurred and be
continuing) Financial Security shall have previously approved in writing the
form of such amendment or modification or (ii) if an Insurer Default shall
have occurred and be continuing, such amendment would not adversely affect
the interests of Financial Security. The Trust shall not take any action or
fail to take any action that would interfere with the enforcement of any
rights under this Agreement or the other Transaction Documents.
(b) FINANCIAL STATEMENTS; ACCOUNTANTS' REPORTS; OTHER INFORMATION.
The Trust shall keep or cause to be kept in reasonable detail books and records
of account of the Trust's assets and business, which shall be furnished to
Financial Security upon request. The Trust shall furnish to Financial Security,
simultaneously with the delivery of such documents to the Indenture Trustee, the
Noteholders or the Certificateholders, as the case may be, copies of all
reports, certificates, statements, financial statements or notices furnished to
the Indenture Trustee, the Noteholders or the Certificateholders, as the case
may be, pursuant to the Transaction Documents.
(i) ANNUAL FINANCIAL STATEMENTS. As soon as available, and in
any event within 90 days after the close of each fiscal year of the Trust,
the audited balance sheets of the Trust as of the end of such fiscal year
and the audited statements of income, changes in equityowners' equity and
cash flows of the Trust for such fiscal year, all in reasonable detail and
stating in comparative form the respective figures for the corresponding
date and period in the preceding fiscal year, prepared in accordance with
generally accepted accounting principles, consistently applied, and
accompanied by the certificate of the Trust's independent accountants (who
shall be acceptable to Financial Security) and by the certificate specified
in Section 2.02(c) hereof.
(ii) QUARTERLY FINANCIAL STATEMENTS. As soon as available, and
in any event within 45 days after the close of each of the first three
quarters of each fiscal year of the Trust, the unaudited balance sheets of
the Trust as of the end of such quarter and the unaudited statements of
income, changes in equityowners' equity and cash flows of the Trust for the
portion of the fiscal year then ended, all in reasonable detail and stating
in comparative form the respective figures for the corresponding date and
period in the preceding fiscal year, prepared in accordance with generally
accepted accounting principles consistently applied (subject to normal
year-end adjustments), and accompanied by the certificate specified in
Section 2.02(c) hereof.
(iii) ACCOUNTANTS' REPORTS. Promptly upon receipt thereof, copies
of any reports or comment letters submitted to the Trust by its independent
accountants in connection with any examination of the financial statements
of the Trust.
(iv) CERTAIN INFORMATION. Not less than ten days prior to the
date of filing with the IRS of any tax return or amendment thereto, copies
of the proposed form of such return or amendment and, promptly after the
filing or sending thereof, (i) copies of each tax return and amendment
thereto that the Trust files with the IRS and (ii) copies
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of all financial statements, reports, and registration statements which the
Trust files with, or delivers to, any federal government agency, authority
or body which supervises the issuance of securities by the Trust.
(v) OTHER INFORMATION. Promptly upon the request of Financial
Security, copies of all schedules, financial statements or other similar
reports delivered to or by the Trust pursuant to the terms of this
Agreement and the other Transaction Documents and such other data as
Financial Security may reasonably request.
(c) COMPLIANCE CERTIFICATE. The Trust shall deliver to Financial
Security and, upon request, any Noteholder or Certificateholder, concurrently
with the delivery of the financial statements required pursuant to Section 2.02
(b)(i) and (ii) hereof, a certificate signed by an Authorized Officer of the
Administrator stating that:
(i) a review of the Trust's performance under the Transaction
Documents during such period has been made under such officer's
supervision;
(ii) to the best of such individual's knowledge following
reasonable inquiry, no Default or Event of Default has occurred and is
continuing or, if a Default or Event of Default has occurred and is
continuing, specifying the nature thereof and, if the Trust has a right to
cure pursuant to Section 5.01, stating in reasonable detail the steps, if
any, being taken by the Trust to cure such Default or Event of Default or
to otherwise comply with the terms of the agreement or agreements to which
such Default or Event of Default relates; and
(iii) the financial reports submitted in accordance with
Section 2.02(b)(i) or (ii) hereof, as applicable, are complete and correct
in all material respects and present fairly the financial condition and
results of operations of the Trust as of the dates and for the periods
indicated, in accordance with generally accepted accounting principles
consistently applied (subject as to interim statements to normal year-end
adjustments).
(d) ACCESS TO RECORDS; DISCUSSIONS WITH OFFICERS AND ACCOUNTANTS.
The Trust shall, upon the request of Financial Security, permit Financial
Security or its authorized agents (i) to inspect the books and records of the
Trust as they may relate to the Notes, the Certificates, the Receivables and the
Other Trust Property, the obligations of the Trust under the Transaction
Documents, the Trust's business and the Transaction and (ii) to discuss the
affairs, finances and accounts of the Trust with any of its personnel and
representatives, including its Independent Accountants. Such inspections and
discussions shall be conducted during normal business hours and shall not
unreasonably disrupt the business of the Trust. The books and records of the
Trust will be maintained at the address of the Trust designated herein for
receipt of notices, unless the Trust shall otherwise advise the parties hereto
in writing.
(e) NOTICE OF MATERIAL EVENTS. The Trust shall promptly inform
Financial Security in writing of the occurrence of any of the following:
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(i) the submission of any claim or the initiation of any legal
process, litigation or administrative or judicial investigation against the
Trust involving potential damages or penalties in an uninsured amount in
excess of $100,000 in any one instance or $500,000 in the aggregate;
(ii) any change in the location of Trust's principal office or
any change in the location of the Trust's books and records;
(iii) the occurrence of any Default or Event of Default;
(iv) the commencement or threat of any rule making or
disciplinary proceedings or any proceedings instituted by or against the
Trust in any federal, state or local court or before any governmental body
or agency, or before any arbitration board, or the promulgation of any
proceeding or any proposed or final rule which, if adversely determined,
would result in a Material Adverse Change with respect to the Trust;
(v) the commencement of any proceedings by or against the Trust
under any applicable bankruptcy, reorganization, liquidation,
rehabilitation, insolvency or other similar law now or hereafter in effect
or of any proceeding in which a receiver, liquidator, conservator, trustee
or similar official shall have been, or may be, appointed or requested for
the Trust or any of its assets;
(vi) the receipt of notice that (A) the Trust is being placed
under regulatory supervision, (B) any license, permit, charter,
registration or approval necessary for the conduct of the Trust's business
is to be, or may be, suspended or revoked, or (C) the Trust is to cease and
desist any practice, procedure or policy employed by the Trust in the
conduct of its business, and such cessation may result in a Material
Adverse Change with respect to the Trust; or
(vii) any other event, circumstance or condition that has
resulted, or has a material possibility of resulting, in a Material Adverse
Change in respect of the Trust.
(f) FURTHER ASSURANCES. The Trust will file all necessary financing
statements, assignments or other instruments, and any amendments or continuation
statements relating thereto, necessary to be kept and filed in such manner and
in such places as may be required by law to preserve and protect fully the Lien
and security interest in, and all rights of the Indenture Collateral Agent with
respect to the Indenture Property, under the Indenture. In addition, the Trust
shall, upon the request of Financial Security (so long as no Insurer Default has
occurred and is continuing), from time to time, execute, acknowledge and deliver
and, if necessary, file such further instruments and take such further action as
may be reasonably necessary to effectuate the intention, performance and
provisions of the Transaction Documents to which the Trust is a party or to
protect the interest of the Indenture Collateral Agent in the Indenture Property
under the Indenture. The Trust agrees to cooperate with the Rating Agencies in
connection with any review of the Transaction which may be undertaken by the
Rating Agencies after the date hereof.
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(g) MAINTENANCE OF LICENSES. The Trust shall maintain all licenses,
permits, charters and registrations which are material to the performance by the
Trust of its obligations under this Agreement and each other Transaction
Document to which the Trust is a party or by which the Trust is bound.
(h) RETIREMENT OF NOTES AND CERTIFICATES. The Trust shall, upon
retirement of the Certificates and upon retirement of the Notes furnish to
Financial Security a notice of such retirement, and, upon such retirement and
the expiration of the term of the applicable Policy, surrender the applicable
Policy to Financial Security for cancellation.
(i) DISCLOSURE DOCUMENT. Each Prospectus delivered with respect to
the Notes and the Certificates shall clearly disclose that the Policies are not
covered by the property/casualty insurance security fund specified in Article 76
of the New York Insurance Law. In addition, each Prospectus delivered with
respect to the Notes and the Certificates which include financial statements of
Financial Security prepared in accordance with generally accepted accounting
principles (other than a Prospectus that only incorporates such financial
statements by reference) shall include the following statement immediately
preceding such financial statements:
The New York State Insurance Department recognizes only
statutory accounting practices for determining and reporting
the financial condition and results of operations of an
insurance company, for determining its solvency under the
New York Insurance Law, and for determining whether its
financial condition warrants the payment of a dividend to
its stockholders. No consideration is given by the New York
State Insurance Department to financial statements prepared
in accordance with generally accepted accounting principles
in making such determinations.
(j) SPECIAL PURPOSE ENTITY.
(i) The Trust shall conduct its business solely in its own name
through its duly authorized officers or agents so as not to mislead
others as to the identity of the entity with which those others are
concerned, and particularly will use its best efforts to avoid the
appearance of conducting business on behalf of OFL, the Seller, or any
other Affiliates thereof or that the assets of the Trust are available
to pay the creditors of OFL, the Seller, or any other Affiliates
thereof. Without limiting the generality of the foregoing, all oral
and written communications, including, without limitation, letters,
invoices, purchase orders, contracts, statements and loan
applications, will be made solely in the name of the Trust.
(ii) The Trust shall maintain trust records and books of account
separate from those of OFL, the Seller, each Class GP
Certificateholder and Affiliates of any of them.
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(iii) The Trust shall obtain proper authorization from its equity
owners of all trust action requiring such authorization, and copies of
each such authorization and the minutes or other written summary of
each such meeting shall be delivered to Financial Security within two
weeks of such authorization or meeting as the case may be.
(iv) Although the organizational expenses of the Trust have been
paid by OFL, operating expenses and liabilities of the Trust shall be
paid from its own funds.
(v) The annual financial statements of the Trust shall disclose
the effects of the Trust's transactions in accordance with generally
accepted accounting principles and shall disclose that the assets of
the Trust are not available to pay creditors of OFL, the Seller,
either Class GP Certificateholder or any Affiliate of any of them.
(vi) The resolutions, agreements and other instruments of the
Trust underlying the transactions described in this Agreement and in
the other Transaction Documents shall be continuously maintained by
the Trust as official records of the Trust separately identified and
held apart from the records of OFL, the Seller, each Class GP
Certificateholder and each Affiliate of any of them.
(vii) The Trust shall maintain an arm's-length relationship with
OFL, the Seller, each Class GP Certificateholder and each Affiliate of
any of them and will not hold itself out as being liable for the debts
of any such Person.
(viii) The Trust shall keep its assets and its liabilities wholly
separate from those of all other entities, including, but not limited
to, OFL, the Seller, each Class GP Certificateholder and each
Affiliate of any of them except, in each case, as contemplated by the
Transaction Documents.
(k) CLOSING DOCUMENTS. The Trust shall provide or cause to be
provided to Financial Security an executed original copy of each document
executed in connection with the Transaction within 10 days after the Closing
Date, except that the Seller shall cause a copy of the Trust Agreement, the Sale
and Servicing Agreement, the Series 1996-C Supplement, the Indenture, the
Administration Agreement and each Transaction Document to which Financial
Security is a party to be provided to Financial Security on the Closing Date.
(l) TAX MATTERS. The Trust will take all actions necessary to ensure
that the Trust is taxable as a partnership for federal and state income tax
purposes and not as an association (or publicly traded partnership), taxable as
a corporation.
(m) SECURITIES LAWS. The Trust shall comply in all material respects
with all applicable provisions of state and federal securities laws, including
blue sky laws and the Securities Act, the Exchange Act and the Investment
Company Act and all rules and regulations
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promulgated thereunder for which non-compliance would result in a Material
Adverse Change with respect to the Trust.
(n) INCORPORATION OF COVENANTS. The Trust agrees to comply with each
of the covenants of the Trust set forth in the Transaction Documents and hereby
incorporates such covenants by reference as if each were set forth herein.
Section 2.03. NEGATIVE COVENANTS OF THE TRUST. The Trust hereby
agrees that during the Term of this Agreement, unless Financial Security shall
otherwise give its prior express written consent:
(a) WAIVER, AMENDMENTS, ETC. The Trust shall not waive, modify,
amend, supplement or consent to any waiver, modification, amendment of or
supplement to, any of the provisions of the Certificate of Trust, the Trust
Agreement or any of the other Transaction Documents unless, if no Insurer
Default shall have occurred and be continuing, Financial Security shall have
consented thereto in writing.
(b) CREATION OF INDEBTEDNESS; GUARANTEES. The Trust shall not
create, incur, assume or suffer to exist any indebtedness or assume, guarantee,
endorse or otherwise be or become directly or contingently liable for the
obligations of any Person by, among other things, agreeing to purchase any
obligation of another Person, agreeing to advance funds to such Person or
causing or assisting such Person to maintain any amount of capital, except as
contemplated by the Transaction Documents.
(c) SUBSIDIARIES. The Trust shall not form, or cause to be formed,
any Subsidiaries.
(d) NO LIENS. The Trust shall not, except as contemplated by the
Transaction Documents create, incur, assume or suffer to exist any Lien of any
nature upon or with respect to any of its properties or assets, now owned or
hereafter acquired, or sign or file under the Uniform Commercial Code of any
jurisdiction any financing statement that names the Trust as debtor, or sign any
security agreement authorizing any secured party thereunder to file such a
financing statement.
(e) IMPAIRMENT OF RIGHTS. The Trust shall not take any action, or
fail to take any action, if such action or failure to take action may interfere
with the enforcement of any rights under the Transaction Documents that are
material to the rights, benefits or obligations of the Indenture Trustee, the
Noteholders, the Certificateholders or Financial Security.
(f) NO MERGERS. The Trust shall not consolidate with or merge into
any Person or transfer all or any material amount of its assets to any Person
(except as contemplated by the Transaction Documents) or liquidate or dissolve.
(g) ERISA. The Trust shall not contribute or incur any obligation to
contribute to, or incur any liability in respect of, any Plan or Multiemployer
Plan.
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(h) OTHER ACTIVITIES. The Trust shall not:
(i) sell, pledge, transfer, exchange or otherwise dispose of any
of its assets except as permitted under the Transaction Documents; or
(ii) engage in any business or activity except as contemplated by
the Transaction Documents and as permitted by its Certificate of
Trust.
(i) INSOLVENCY. The Trust shall not commence any case, proceeding or
other action (A) under any existing or future law of any jurisdiction, domestic
or foreign, relating to bankruptcy, insolvency, reorganization or relief of
debtors, seeking to have an order for relief entered with respect to it, or
seeking reorganization, arrangement, adjustment, winding-up, liquidation,
dissolution, consolidation or other relief with respect to it or (B) seeking
appointment of a receiver, trustee, custodian or other similar official for it
or for all or any substantial part of its assets or make a general assignment
for the benefit of its creditors. The Trust shall not take any action in
furtherance of, or indicating the consent to, approval of, or acquiescence in
any of the acts set forth above. The Trust shall not admit in writing its
inability to pay its debts.
(j) SUCCESSOR PARTIES. The Trust will not remove or replace, or
cause to be removed or replaced, the Servicer, the Indenture Trustee, the Owner
Trustee or the Administrator.
Section 2.04. REPRESENTATIONS AND WARRANTIES OF OFL AND OF THE CLASS
GP CERTIFICATEHOLDERS. Each of OFL and each Class GP Certificateholder (with
respect to) represents and warrants as of the date hereof and as of the Closing
Date, as follows:
(a) DUE ORGANIZATION AND QUALIFICATION. Each Class GP
Certificateholder is a corporation duly organized and validly 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. Each Class GP
Certificateholder is duly qualified to do business, is in good standing and has
obtained all necessary licenses, permits, charters, registrations and approvals
(together, "approvals") necessary for the conduct of its business as described
in the Transaction Documents and the performance of its obligations under the
Transaction Documents.
(b) POWER AND AUTHORITY. Each Class GP Certificateholder has all
necessary corporate power and authority to conduct its business as described in
the Transaction Documents, to execute, deliver and perform its obligations under
this Agreement and each other Transaction Document to which it is a party and to
carry out the terms of each such agreement.
(c) DUE AUTHORIZATION. The execution, delivery and performance of
this Agreement and each other Transaction Document to which each Class GP
Certificateholder is a party has been duly authorized by all necessary corporate
action on the part of such Class GP Certificateholder and does not require any
additional approvals or consents or other action by or any notice to or filing
with any Person by or on behalf of such Class GP Certificateholder,
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including, without limitation, any governmental entity or such Class GP
Certificateholder's stockholder.
(d) NONCONTRAVENTION. Neither the execution and delivery of this
Agreement and each other Transaction Document to which each Class GP
Certificateholder is a party, the consummation of the Transaction nor the
satisfaction of the terms and conditions of this Agreement and each other
Transaction Document to which it is a party,
(i) conflicts with or results in any breach or violation of any
provision of the charter or bylaws of such Class GP Certificateholder
or any law, rule, regulation, order, writ, judgment, injunction,
decree, determination or award currently in effect having
applicability to such Class GP Certificateholder or any of its
properties, including regulations issued by an administrative agency
or other governmental authority having supervisory powers over it,
(ii) constitutes a default by such Class GP Certificateholder
under or a breach of any provision of any loan agreement, mortgage,
indenture or other agreement or instrument to which such Class GP
Certificateholder is a party or by which it or any of its or their
properties is or may be bound or affected, or
(iii) results in or requires the creation of any Lien upon or in
respect of any of such Class GP Certificateholder's assets except as
otherwise expressly contemplated by the Transaction Documents.
(e) PENDING LITIGATION OR OTHER PROCEEDING. There is no action,
proceeding or investigation pending, or, to OFL's or either Class GP
Certificateholder's best knowledge, threatened, before any court, regulatory
body, administrative agency, arbitrator or governmental agency or
instrumentality having jurisdiction over either Class GP Certificateholder or
its properties: (A) asserting the invalidity of this Agreement or any other
Transaction Document to which either Class GP Certificateholder is a party,
(B) seeking to prevent the issuance of the Certificates or the Notes, or the
consummation of the Transaction, (C) seeking any determination or ruling that
might materially and adversely affect the validity or enforceability of this
Agreement or any other Transaction Document to which either Class GP
Certificateholder is a party, (D) which might result in a Material Adverse
Change with respect to such Class GP Certificateholder or (E) which might
adversely affect the federal or state tax attributes of the Notes, the
Certificates or of the Trust.
(f) VALID AND BINDING OBLIGATIONS. Each of the Transaction Documents
to which each Class GP Certificateholder is a party, when executed and delivered
by such Class GP Certificateholder, and assuming due authorization, execution
and delivery by the other parties thereto, will constitute the legal, valid and
binding obligation of such Class GP Certificateholder enforceable in accordance
with its terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
creditors' rights generally and general equitable principles.
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(g) NO CONSENTS. No consent, license, approval or authorization
from, or registration, filing or declaration with, any regulatory body,
administrative agency, or other governmental instrumentality, nor any consent,
approval, waiver or notification of any creditor, lessor or other
non-governmental person, is required in connection with the execution, delivery
and performance by each Class GP Certificateholder of this Agreement or of any
other Transaction Document to which either Class GP Certificateholder is a
party, except (in each case) such as have been obtained and are in full force
and effect.
(h) COMPLIANCE WITH LAW, ETC. No practice, procedure or policy
employed or proposed to be employed by either Class GP Certificateholder in the
conduct of its business violates any law, regulation, judgment, agreement, order
or decree applicable to such Class GP Certificateholder which, if enforced,
would result in a Material Adverse Change with respect to such Class GP
Certificateholder.
(i) SPECIAL PURPOSE ENTITY.
(i) The capital of each Class GP Certificateholder is adequate
for the business and undertakings of such Class GP Certificateholder.
(ii) Other than with respect to the ownership by OFL of the stock
of each Class GP Certificateholder, the issuance of the Demand Notes
by OFL to each Class GP Certificateholder, and except for its
ownership of the Series 1993-C Class B Certificates, the Series 1993-D
Class B Certificates, the Series 1994-A Class B Certificates, the
Series 1994-B Class B-GP and Class I-GP Certificates, the
Series 1995-B Class GP Certificates, the Series 1995-C Class GP
Certificates, the Series 1995-D Class B-GP and Class I-GP
Certificates, the Series 1995-E Class GP Certificates, the
Series 1996-A Class GP Certificates, the Series 1996-B Class GP
Certificates and the Series 1996-C Class GP Certificates, it is not
engaged in any business transactions with OFL or any Affiliate of OFL.
(iii) At least one executive officer and one director of each
Class GP Certificateholder shall be a person who is not, and will not
be, a director, officer, employee or holder of any equity securities
of OFL, the Seller, or any Affiliate of either of them.
(iv) Each Class GP Certificateholder's funds and assets are not,
and will not be, commingled with the funds of any other Person.
(v) The by-laws of each Class GP Certificateholder require it to
maintain (A) correct and complete minute books and records of account,
and (B) minutes of the meetings and other proceedings of its
shareholders and board of directors.
(j) SOLVENCY; FRAUDULENT CONVEYANCE. Each Class GP Certificateholder
is solvent and will not be rendered insolvent by the Transaction and, after
giving effect to such Transaction, such Class GP Certificateholder will not be
left with an unreasonably small amount of capital with which to engage in its
business. Neither Class GP Certificateholder intends to
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incur, or believes that it has incurred, debts beyond its ability to pay such
debts as they mature. Neither Class GP Certificateholder contemplates the
commencement of insolvency, bankruptcy, liquidation or consolidation
proceedings or the appointment of a receiver, liquidator, conservator,
trustee or similar official in respect of such Class GP Certificateholder or
any of its assets.
(k) CAPITAL STRUCTURE. The shares of stock of each Class GP
Certificateholder which have been pledged pursuant to the Stock Pledge Agreement
constitute all of the issued and outstanding shares of such Class GP
Certificateholder. All of the outstanding equity securities of the Trust in
which each Class GP Certificateholder owns an interest are owned by such Class
GP Certificateholder free and clear of any Lien.
(l) ERISA. Each Class GP Certificateholder is in compliance with
ERISA and has not incurred and does not reasonable expect to incur any liability
to any Plan or to PBGC in connection with any Plan or to contribute now or in
the future in respect of any Plan.
(m) SECURITIES LAWS COMPLIANCE. Neither Class GP Certificateholder
is required to be registered as an "investment company" under the Investment
Company Act of 1940. Neither Class GP Certificateholder is subject to the
information reporting requirements of the Exchange Act.
(n) TRANSACTION DOCUMENTS. All of the representations and warranties
made by each Class GP Certificateholder in the Transaction Documents are
incorporated by reference herein as if set forth herein and each such
representation and warranty is true and correct as of the Closing Date.
Section 2.05. AFFIRMATIVE COVENANTS OF OFL AND EACH CLASS GP
CERTIFICATEHOLDER. OFL and each Class GP Certificateholder (with respect to
itself) hereby agrees that during the Term of the Agreement, unless Financial
Security shall otherwise expressly consent in writing:
(a) COMPLIANCE WITH AGREEMENTS AND APPLICABLE LAWS. Such Class GP
Certificateholder will comply with all terms and conditions of this Agreement
and each other Transaction Document to which it is a party and with all material
requirements of any law, rule or regulation applicable to it. Each Class GP
Certificateholder will not cause or permit to become effective any amendment to
or modification of any of the Transaction Documents to which it is a party
unless (i) (so long as no Insurer Default shall have occurred and be continuing)
Financial Security shall have previously approved in writing the form of such
amendment or modification or (ii) if an Insurer Default shall have occurred and
be continuing, such amendment would not adversely affect the interests of
Financial Security. Each Class GP Certificateholder shall not take any action
or fail to take any action that would interfere with the enforcement of any
rights under this Agreement or the other Transaction Documents.
(b) CORPORATE EXISTENCE. Each Class GP Certificateholder shall
maintain its corporate existence and shall at all times continue to be duly
organized under the laws of Delaware and duly qualified and duly authorized (as
described in Sections 2.04(a), (b) and (c)
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hereof) and shall conduct its business in accordance with the terms of its
corporate charter and bylaws.
(c) FINANCIAL STATEMENTS; ACCOUNTANTS' REPORTS; OTHER INFORMATION.
Each Class GP Certificateholder shall keep or cause to be kept in reasonable
detail books and records of account of such Class GP Certificateholder's assets
and business. Each Class GP Certificateholder shall furnish to Financial
Security as soon as available, and in any event within 90 days after the close
of each fiscal year of such Class GP Certificateholder, the unaudited balance
sheet of such Class GP Certificateholder as of the end of such fiscal year and
the unaudited statements of income, changes in shareholders' equity and cash
flows of such Class GP Certificateholder for such fiscal year, all in reasonable
detail and stating in comparative form the respective figures for the preceding
fiscal year, prepared in accordance with generally accepted accounting
principles, consistently applied.
(d) COMPLIANCE CERTIFICATE. Each Class GP Certificateholder shall
deliver to Financial Security, within 90 days after the close of each fiscal
year of such Class GP Certificateholder, a certificate signed by an Authorized
Officer of such Class GP Certificateholder stating that (i) a review of such
Class GP Certificateholder's performance under the Transaction Documents during
such period has been made under such officer's supervision; (ii) to the best of
such individual's knowledge following reasonable inquiry, no Default or Event of
Default has occurred, or if a Default or Event of Default has occurred,
specifying the nature thereof and, if such Class GP Certificateholder has or had
a right to cure pursuant to Section 5.01, stating in reasonable detail the
steps, if any, taken or being taken by such Class GP Certificateholder to cure
such Default or Event of Default or to otherwise comply with the terms of the
Transaction Document to which such Default or Event of Default relates; and
(iii) the financial statements submitted in accordance with Section 2.05(c)
hereof, as applicable, are complete and correct in all material respects and
present fairly the financial condition and results of operations of such Class
GP Certificateholder as of the dates and for the periods indicated, in
accordance with generally accepted accounting principles consistently applied.
(e) ACCESS TO RECORDS; DISCUSSIONS WITH OFFICERS AND ACCOUNTANTS.
Each Class GP Certificateholder shall, upon the request of Financial Security,
permit Financial Security or its authorized agents (i) to inspect the books and
records of such Class GP Certificateholder as they may relate to the obligations
of such Class GP Certificateholder under the Transaction Documents, such Class
GP Certificateholder's business and the Transaction and (ii) to discuss the
affairs, finances and accounts of such Class GP Certificateholder with any of
its officers, directors and representatives, including its Independent
Accountants. Each inspections and discussions shall be conducted during normal
business hours and shall not unreasonably disrupt the business of such Class GP
Certificateholder. The books and records of each Class GP Certificateholder
will be maintained at the address designated herein for receipt of notices,
unless such Class GP Certificateholder shall otherwise advise the parties hereto
in writing.
(f) NOTICE OF MATERIAL EVENTS. OFL and each Class GP
Certificateholder shall promptly inform Financial Security in writing of the
occurrence of any of the following:
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(i) the submission of any claim or the initiation of any legal
process, litigation or administrative or judicial investigation
against such Class GP Certificateholder involving potential damages or
penalties in an uninsured amount in excess of $5,000 in any one
instance or $25,000 in the aggregate;
(ii) any change in the location of such Class GP
Certificateholder's principal office or any change in the location of
such Class GP Certificateholder's books and records;
(iii) the occurrence of any Default or Event of Default;
(iv) the commencement or threat of any rule making or
disciplinary proceedings or any proceedings instituted by or against
such Class GP Certificateholder in any federal, state or local court
or before any governmental body or agency, or before any arbitration
board, or the promulgation of any proceeding or any proposed or final
rule which, if adversely determined, would result in a Material
Adverse Change with respect to such Class GP Certificateholder or the
Trust;
(v) the commencement of any proceedings by or against such Class
GP Certificateholder under any applicable bankruptcy, reorganization,
liquidation, rehabilitation, insolvency or other similar law now or
hereafter in effect or of any proceeding in which a receiver,
liquidator, conservator, trustee or similar official shall have been,
or may be, appointed or requested for such Class GP Certificateholder
or any of its assets;
(vi) the receipt of notice that (A) such Class GP
Certificateholder is being placed under regulatory supervision, (B)
any license, permit, charter, registration or approval necessary for
the conduct of such Class GP Certificateholder's business is to be, or
may be, suspended or revoked, or (C) such Class GP Certificateholder
is to cease and desist any practice, procedure or policy employed by
such Class GP Certificateholder in the conduct of its business, and
such cessation may result in a Material Adverse Change with respect to
such Class GP Certificateholder or the Trust; or
(vii) any other event, circumstance or condition that has
resulted, or has a material possibility of resulting, in a Material
Adverse Change in respect of such Class GP Certificateholder or the
Trust.
(g) MAINTENANCE OF LICENSES. Such Class GP Certificateholder shall
maintain all licenses, permits, charters and registrations which are material to
the performance by such Class GP Certificateholder of its obligations under this
Agreement and each other Transaction Document to which the Seller is a party or
by which such Class GP Certificateholder is bound.
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(h) SPECIAL PURPOSE ENTITY.
(i) Such Class GP Certificateholder shall conduct its business
solely in its own name through its duly authorized officers or agents
so as not to mislead others as to the identity of the entity with
which those others are concerned, and particularly will use its best
efforts to avoid the appearance of conducting business on behalf of
the Trust, OFL, the Seller or any other Affiliate of any of them or
that, except as expressly provided in the Transaction Documents, the
assets of such Class GP Certificateholder are available to pay the
creditors of OFL, the Seller or any Affiliate of any of them. Without
limiting the generality of the foregoing, all oral and written
communications, including, without limitation, letters, invoices,
purchase orders, contracts, statements and loan applications, will be
made solely in the name of such Class GP Certificateholder.
(ii) Such Class GP Certificateholder shall maintain corporate
records and books of account separate from those of OFL, the Trust,
the Seller and any Affiliate of any of them.
(iii) Such Class GP Certificateholder shall obtain proper
authorization from its board of directors of all corporate action
requiring such authorization, meetings of the board of directors of
such Class GP Certificateholder shall be held not less frequently than
three times per annum and copies of the minutes of each such board
meeting shall be delivered to Financial Security within two weeks of
such meeting.
(iv) Such Class GP Certificateholder shall obtain proper
authorization from its shareholders of all corporate action requiring
shareholder approval, meetings of the shareholders of such Class GP
Certificateholder shall be held not less frequently than one time per
annum and copies of each such authorization and the minutes of each
such shareholder meeting shall be delivered to Financial Security
within two weeks of such authorization or meeting, as the case may be.
(v) Although the organizational expenses of such Class GP
Certificateholder have been paid by OFL, operating expenses and
liabilities of such Class GP Certificateholder shall be paid from its
own funds.
(vi) The annual financial statements of such Class GP
Certificateholder shall disclose the effects of such Class GP
Certificateholder's transactions in accordance with generally accepted
accounting principles and shall disclose that the assets of such Class
GP Certificateholder are not available except as expressly provided in
the Transaction Agreements to pay creditors of OFL, the Seller or any
Affiliate of either of them.
(vii) The resolutions, agreements and other instruments of such
Class GP Certificateholder underlying the transactions described in
this Agreement and in the other Transaction Documents shall be
continuously maintained by such Class
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GP Certificateholder as official records of such Class GP
Certificateholder separately identified and held apart from
the records of OFL, the Seller, the Trust and any Affiliate of
any of them.
(viii) Except as expressly provided in the Transaction Documents
such Class GP Certificateholder shall maintain an arm's-length
relationship with OFL, the Seller and any Affiliate of either of them
and will not hold itself out as being liable for the debts of OFL, the
Seller or any Affiliate of either of them.
(ix) Such Class GP Certificateholder shall keep its assets and
its liabilities wholly separate from those of all other entities,
including, but not limited to, OFL, the Seller and any Affiliate of
either of them except, in each case, as contemplated by the
Transaction Documents.
(i) RETIREMENT OF NOTES AND CERTIFICATES. Such Class GP
Certificateholder shall cause the Trust, upon retirement of the Notes or
Certificates, to furnish to Financial Security a notice of such retirement, and,
upon such retirement and the expiration of the term of the Note Policy or
Certificate Policy, to surrender such Note Policy or Certificate Policy, as
applicable, to Financial Security for cancellation.
(j) INCORPORATION OF COVENANTS. Each Class GP Certificateholder
agrees to comply with each of the covenants of such Class GP Certificateholder
set forth in the Transaction Documents and hereby incorporates such covenants by
reference as if each were set forth herein.
(k) TAX MATTERS. As of the Closing Date, the Trust is, and shall
remain during the Term of this Agreement, taxable as a partnership for federal
and state income tax purposes and not as an association (or publicly traded
partnership) taxable as a corporation.
Section 2.06. NEGATIVE COVENANTS OF OFL AND EACH CLASS GP
CERTIFICATEHOLDER. Each of OFL and each Class GP Certificateholder (with
respect to itself) hereby agrees that during the Term of this Agreement, unless
Financial Security shall otherwise give its prior express written consent:
(a) WAIVER, AMENDMENTS, ETC. Each Class GP Certificateholder shall
not waive, modify, amend, supplement or consent to any waiver, modification,
amendment of or supplement to, any of the provisions of any of the Transaction
Documents or of its certificate of incorporation or by-laws (i) unless, if no
Insurer Default shall have occurred and be continuing, Financial Security shall
have consented thereto in writing or (ii) if an Insurer Default shall have
occurred and be continuing, which would adversely affect the interests of
Financial Security.
(b) CREATION OF INDEBTEDNESS; GUARANTEES. Neither Class GP
Certificateholder shall create, incur, assume or suffer to exist any
indebtedness or assume, guarantee, endorse or otherwise be or become directly or
contingently liable for the obligations of any Person by, among other things,
agreeing to purchase any obligation of another Person, agreeing to advance
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funds to such Person or causing or assisting such Person to maintain any
amount of capital, except as contemplated by the Transaction Documents or,
with the prior written consent of Financial Security, as permitted by its
certificate of incorporation.
(c) SUBSIDIARIES. Neither Class GP Certificateholder shall form, or
cause to be formed, any Subsidiaries.
(d) NO LIENS. Neither Class GP Certificateholder shall, except as
contemplated by the Transaction Documents, create, incur, assume or suffer to
exist any Lien of any nature upon or with respect to any of its properties or
assets, now owned or hereafter acquired, or sign or file under the Uniform
Commercial Code of any jurisdiction any financing statement that names such
Class GP Certificateholder as debtor, or sign any security agreement authorizing
any secured party thereunder to file such a financing statement.
(e) ISSUANCE OF STOCK. Neither Class GP Certificateholder shall
issue any shares of capital stock or rights, warrants or options in respect of
its capital stock or securities convertible into or exchangeable for its capital
stock, other than the shares of common stock which have been pledged to
Financial Security under the Stock Pledge Agreement.
(f) IMPAIRMENT OF RIGHTS. Neither Class GP Certificateholder shall
take any action, or fail to take any action, if such action or failure to take
action may interfere with the enforcement of any rights under the Transaction
Documents that are material to the rights, benefits or obligations of the Trust,
the Indenture Trustee, the Certificateholders, the Noteholders or Financial
Security.
(g) NO MERGERS. Neither Class GP Certificateholder shall consolidate
with or merge into any Person or transfer all or any material amount of its
assets to any Person (except as contemplated by the Transaction Documents) or
liquidate or dissolve.
(h) ERISA. Neither Class GP Certificateholder shall contribute or
incur any obligation to contribute to, or incur any liability in respect of, any
Plan or Multiemployer Plan.
(i) OTHER ACTIVITIES. Neither Class GP Certificateholder shall:
(i) sell, pledge, transfer, exchange or otherwise dispose of any
of its assets except as permitted under the Transaction Documents;
(ii) engage in any business or activity except as contemplated by
the Transaction Documents and as permitted by its certificate of
incorporation; or
(iii) declare or make payment of (a) any divided or other
distribution on any shares of its capital stock or (b) any payment on
account of the purchase, redemption, retirement or acquisition of (1)
any shares of its capital stock or (2) any option, warrant or other
right to acquire shares of its capital stock unless (in each case) at
the time of such declaration or payment (and after giving effect
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thereto) the aggregate net worth of the two Class GP
Certificateholders would be greater than the Minimum Net Worth.
(j) INSOLVENCY. Neither Class GP Certificateholder shall commence
any case, proceeding or other action (A) under any existing or future law of
any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking to have an order for relief
entered with respect to it, or seeking reorganization, arrangement,
adjustment, winding-up, liquidation, dissolution, consolidation or other
relief with respect to it or the Trust or (B) seeking appointment of a
receiver, trustee, custodian or other similar official for it or for the
Trust or for all or any substantial part of its assets or make a general
assignment for the benefit of its creditors. Neither Class GP
Certificateholder shall take any action in furtherance of, or indicating the
consent to, approval of, or acquiescence in any of the acts set forth above.
Neither Class GP Certificateholder shall admit in writing its inability to
pay its debts.
Section 2.07. REPRESENTATIONS AND WARRANTIES OF OFL AND THE SELLER.
Each of OFL and the Seller represent and warrant as of the date hereof and as of
the Closing Date, as follows:
(a) DUE ORGANIZATION AND QUALIFICATION. The Seller is a corporation
duly organized and validly 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. The Seller is duly qualified to do business, is in good standing
and has obtained all necessary licenses, permits, charters, registrations and
approvals (together, "approvals") necessary for the conduct of its business as
currently conducted and as described in the Prospectus and the performance of
its obligations under the Transaction Documents, in each jurisdiction in which
the failure to be so qualified or to obtain such approvals would render the
Receivables in such jurisdiction or any Transaction Document unenforceable in
any respect or would otherwise have a material adverse effect upon the
Transaction.
(b) POWER AND AUTHORITY. The Seller has all necessary corporate
power and authority to conduct its business as currently conducted and as
described in the Prospectus, to execute, deliver and perform its obligations
under this Agreement and each other Transaction Document to which the Seller is
a party and to carry out the terms of each such agreement, and has full power
and authority to sell and assign the Receivables and the Other Trust Property to
the Trust and has duly authorized such sale and assignment to the Trust by all
necessary corporate action.
(c) DUE AUTHORIZATION. The execution, delivery and performance of
this Agreement and each other Transaction Document to which the Seller is a
party has been duly authorized by all necessary corporate action on the part of
the Seller and does not require any additional approvals or consents or other
action by or any notice to or filing with any Person by or on behalf of the
Seller, including, without limitation, any governmental entity or the Seller's
stockholder.
(d) NONCONTRAVENTION. Neither the execution and delivery of this
Agreement and each other Transaction Document to which the Seller is a party,
the consummation of the
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Transaction nor the satisfaction of the terms and conditions of this
Agreement and each other Transaction Document to which the Seller is a party,
(i) conflicts with or results in any breach or violation of any
provision of the charter or bylaws of the Seller or any law, rule,
regulation, order, writ, judgment, injunction, decree, determination or
award currently in effect having applicability to the Seller or any of its
properties, including regulations issued by an administrative agency or
other governmental authority having supervisory powers over the Seller,
(ii) constitutes a default by the Seller under or a breach of any
provision of any loan agreement, mortgage, indenture or other agreement or
instrument to which the Seller is a party or by which it or any of its
properties is or may be bound or affected, or
(iii) results in or requires the creation of any Lien upon or in
respect of any of the Seller's assets except as otherwise expressly
contemplated by the Transaction Documents.
(e) PENDING LITIGATION OR OTHER PROCEEDING. There is no action,
proceeding or investigation pending, or, to the Seller's or OFL's best
knowledge, threatened, before any court, regulatory body, administrative agency,
arbitrator or governmental agency or instrumentality having jurisdiction over
the Seller or its properties: (A) asserting the invalidity of this Agreement or
any other Transaction Document to which the Seller is a party, (B) seeking to
prevent the issuance of the Notes or the Certificates or the consummation of the
Transaction, (C) seeking any determination or ruling that might materially and
adversely affect the validity or enforceability of this Agreement or any other
Transaction Document to which the Seller is a party, (D) which might result in a
Material Adverse Change with respect to the Seller or (E) which might adversely
affect the federal or state tax attributes of the Notes, the Certificates or the
Trust.
(f) VALID AND BINDING OBLIGATIONS. Each of the Transaction Documents
to which the Seller is a party, when executed and delivered by the Seller, and
assuming due authorization, execution and delivery by the other parties thereto,
will constitute the 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, moratorium or other similar
laws affecting creditors' rights generally and general equitable principles.
The Certificates, when executed, authenticated and delivered in accordance with
the Trust Agreement, will be validly issued and outstanding and entitled to the
benefits of the Trust Agreement and will evidence the entire beneficial
ownership interest in the Trust. The Notes, when executed, authenticated and
delivered in accordance with the Indenture, will be entitled to the benefits of
the Indenture and will constitute legal, valid and binding obligations of the
Trust, enforceable in accordance with their terms.
(g) NO CONSENTS. No consent, license, approval or authorization
from, or registration, filing or declaration with, any regulatory body,
administrative agency, or other governmental instrumentality, nor any consent,
approval, waiver or notification of any creditor,
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<PAGE>
lessor or other non-governmental person, is required in connection with the
execution, delivery and performance by the Seller of this Agreement or of any
other Transaction Document to which the Seller is a party, except (in each
case) such as have been obtained and are in full force and effect.
(h) COMPLIANCE WITH LAW, ETC. No practice, procedure or policy
employed or proposed to be employed by the Seller in the conduct of its business
violates any law, regulation, judgment, agreement, order or decree applicable to
the Seller which, if enforced, would result in a Material Adverse Change with
respect to the Seller.
(i) GOOD TITLE; VALID TRANSFER; ABSENCE OF LIENS; SECURITY INTEREST.
Immediately prior to the sale of the Initial Receivables and related Other Trust
Property to the Trust pursuant to the Sale and Servicing Agreement, the Seller
was the owner of, and had good and marketable title to, such property free and
clear of all Liens and Restrictions on Transferability, and had full right,
corporate power and lawful authority to assign, transfer and pledge the Initial
Receivables and the related Other Trust Property. The Sale and Servicing
Agreement constitutes a valid sale, transfer and assignment of the Other Trust
Property to the Trust enforceable against creditors of and purchasers of the
Seller. In the event that, in contravention of the intention of the parties,
the transfer of the Other Trust Property by the Seller to the Trust is
characterized as other than a sale, such transfer shall be characterized as a
secured financing, and the Trust shall have a valid and perfected first priority
security interest in the Other Trust Property free and clear of all Liens and
Restrictions on Transferability.
(j) ACCURACY OF INFORMATION. Neither the Transaction Documents nor
any documents, agreements, instruments, schedules, certificates, statements,
cash flow schedules, number runs or other writings or data (collectively, the
"Documents") furnished to Financial Security by the Seller or OFL with respect
to either of them, their Subsidiaries, the Receivables or the Transaction
contain any statement of a material fact which was untrue or misleading in any
material respect when made (except insofar as any Document was corrected or
superseded by a subsequent Document and Financial Security has not detrimentally
relied on the original Document). There is no fact known to the Seller or OFL
which has a material possibility of causing a Material Adverse Change with
respect to the Seller or OFL, or which has a material possibility of impairing
the value or marketability of the Receivables, taken as a whole, or decreasing
the probability that amounts due in respect of the Receivables will be collected
as due. Since the furnishing of the Transaction Documents, there has been no
change or any development or event involving a prospective change known to the
Seller or OFL which would render any representation or warranty or other
statement made by either of them in any of the Transaction Documents untrue or
misleading in a material respect.
(k) COMPLIANCE WITH INVESTMENT COMPANY ACT. The Seller is not
required to be registered as an "investment company" under the Investment
Company Act.
(l) INCORPORATION OF CERTAIN REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the Seller set forth in the Transaction
Documents are (in each case) true and correct as if set forth herein.
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(m) SPECIAL PURPOSE ENTITY.
(i) The capital of the Seller is adequate for the business and
undertakings of the Seller.
(ii) Other than with respect to the ownership by OFL of the stock
of the Seller and as provided in the Previous Series Transaction Documents,
the Purchase Agreement, the Sale and Servicing Agreement, and the Spread
Account Agreement, the Seller is not engaged in any business transactions
with OFL or any Affiliate of OFL.
(iii) At least one director of the Seller shall be a person who is
not, and will not be, a director, officer, employee or holder of any equity
securities of OFL or any of its Affiliates or Subsidiaries.
(iv) The Seller's funds and assets are not, and will not be,
commingled with the funds of any other Person, except as provided in the
Transaction Documents.
(v) The by-laws of the Seller require it to maintain (A) correct
and complete minute books and records of account, and (B) minutes of the
meetings and other proceedings of its shareholders and board of directors.
(n) SOLVENCY; FRAUDULENT CONVEYANCE. The Seller is solvent and will
not be rendered insolvent by the Transaction and, after giving effect to such
Transaction, the Seller will not be left with an unreasonably small amount of
capital with which to engage in its business. The Seller does not intend to
incur, or believe that it has incurred, debts beyond its ability to pay such
debts as they mature. The Seller does not contemplate the commencement of
insolvency, bankruptcy, liquidation or consolidation proceedings or the
appointment of a receiver, liquidator, conservator, trustee or similar official
in respect of the Seller or any of its assets. The amount of consideration
being received by the Seller upon the sale of the Initial Receivables and
related Other Trust Property and contemplated to be received upon the Sale of
the Subsequent Receivables and related Other Trust Property constitutes
reasonably equivalent value and fair consideration for interest in such
Receivables and such Other Trust Property. The Seller is not transferring the
Other Trust Property to the Trust, or selling the Certificates, as provided in
the Transaction Documents, with any intent to hinder, delay or defraud any of
the Seller's creditors.
(o) REGISTRATION STATEMENT; PROSPECTUS. The Seller has filed with
the Securities and Exchange Commission (the "Commission") a registration
statement on Form S-3 (No. 33-97608), including a preliminary prospectus and
prospectus supplement for the registration of the Certificates and the Notes
under the Securities Act, has filed such amendments thereto, and such amended
preliminary prospectuses and prospectus supplements as may have been required to
the date hereof, and will file such additional amendments thereto and such
amended prospectuses and prospectus supplements as may hereafter be required.
Such registration statement (as amended, if applicable) and the prospectus,
together with the prospectus supplement relating to the Certificates and the
Notes, constituting a part thereof (including in each case all documents, if
any, incorporated by reference therein and the
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information, if any, deemed to be part thereof pursuant to the rules and
regulations of the Commission under the Securities Act (the "Rules and
Regulations"), as from time to time amended or supplemented pursuant to the
Securities Act or otherwise, are hereinafter referred to as the "Registration
Statement" and the "Prospectus," respectively, except that if any revised
prospectus or prospectus supplement shall be provided by the Seller for use
in connection with the offering of the Certificates and the Notes which
differs from the Prospectus filed with the Commission pursuant to Rule 424 of
the Rules and Regulations (whether or not such revised prospectus is required
to be filed by the Seller pursuant to Rule 424 of the Rules and Regulations),
the term "Prospectus" shall refer to such revised prospectus and prospectus
supplement from and after the time it is first provided to the Underwriter
for such use. The Registration Statement at the time it became effective
complied, and at each time that the Prospectus is provided to the
Underwriters for use in connection with the offering or sale of any
Certificate or Note will comply, in all material respects with the
requirements of the Securities Act and the Rules and Regulations. The
Registration Statement and the Prospectus at the time the Registration
Statement became effective did not and on the date hereof does not, contain
an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading and the Prospectus at the time it was first provided to the
Underwriters for use in connection with the offering of the Certificates and
the Notes did not, and on the date hereof does not, contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements therein in light of the circumstances under which they
were made not misleading, except that the representations and warranties in
this subparagraph shall not apply to statements in or omissions from the
Registration Statement or the Prospectus or any preliminary prospectus made
in reliance upon information furnished to the Seller in writing by Financial
Security expressly for use therein or the financial statements (including the
related notes thereto) of Financial Security.
(p) ERISA. The Seller is in compliance with ERISA and has not
incurred and does not reasonably expect to incur any liabilities to the PBGC
under ERISA in connection with any Plan or Multiemployer Plan or to contribute
now or in the future in respect of any Plan or Multiemployer Plan.
(q) PLEDGE OF SHARES. The shares of stock of the Seller which have
been pledged pursuant to the Stock Pledge Agreement constitute all of the issued
and outstanding shares of the Seller.
(r) PERFECTION OF LIENS AND SECURITY INTEREST. On the Closing Date,
the Lien and security interest in favor of the Indenture Collateral Agent with
respect to Indenture Property will be perfected by the filing of financing
statements on Form UCC-1 in each jurisdiction where such recording or filing is
necessary for the perfection thereof, the delivery of the Receivable Files for
the Receivables to the Custodian, and the establishment of the Collection
Account, the Subcollection Account, the Lockbox Account, the Pre-Funding
Account, the Reserve Account and the Note Distribution Account in accordance
with the provisions of the Transaction Documents, and no other filings in any
jurisdiction or any other actions (except as expressly provided herein) are
necessary to perfect the Collateral Agent's Lien on and security interest in the
Collateral as against any third parties.
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(s) SECURITY INTEREST IN FUNDS AND INVESTMENTS. Assuming the
retention of funds in the Accounts (other than the Certificate Account) and the
acquisition of Eligible Investments in accordance with the Transaction
Documents, such funds and Eligible Investments will be subject to a valid and
perfected, first priority security interest in favor of the Collateral Agent on
behalf of the Indenture Trustee (on behalf of the Noteholders) and Financial
Security.
Section 2.08. AFFIRMATIVE COVENANTS OF OFL AND THE SELLER. Each of
OFL and the Seller hereby agree that during the Term of the Agreement, unless
Financial Security shall otherwise expressly consent in writing:
(a) COMPLIANCE WITH AGREEMENTS AND APPLICABLE LAWS. The Seller will
comply with all terms and conditions of this Agreement and each other
Transaction Document to which it is a party and with all material requirements
of any law, rule or regulation applicable to it. The Seller will not cause or
permit to become effective any amendment to or modification of any of the
Transaction Documents to which it is a party unless (i) (so long as no Insurer
Default shall have occurred and be continuing) Financial Security shall have
previously approved in writing the form of such amendment or modification or
(ii) if an Insurer Default shall have occurred and be continuing, such amendment
would not adversely affect the interests of Financial Security. The Seller
shall not take any action or fail to take any action that would interfere with
the enforcement of any rights under this Agreement or the other Transaction
Documents.
(b) CORPORATE EXISTENCE. The Seller shall maintain its corporate
existence and shall at all times continue to be duly organized under the laws of
Delaware and duly qualified and duly authorized (as described in Sections
2.07(a), (b) and (c) hereof) and shall conduct its business in accordance with
the terms of its corporate charter and bylaws.
(c) FINANCIAL STATEMENTS; ACCOUNTANTS' REPORTS; OTHER INFORMATION.
The Seller shall keep or cause to be kept in reasonable detail books and records
of account of the Seller's assets and business, and shall clearly reflect
therein the transfer of the Receivables and the Other Trust Property to the
Trust and the sale of the Receivables as a sale to the Trust of the Seller's
interest in the Receivables and the Other Trust Property. The Seller shall
furnish to Financial Security, simultaneously with the delivery of such
documents to the Trustee, the Noteholders or the Certificateholders, as the
case may be, copies of all reports, certificates, statements, financial
statements or notices furnished to the Trustee, the Noteholders or the
Certificateholders, as the case may be, pursuant to the Transaction Documents.
The Seller shall furnish to Financial Security as soon as available, and in any
event within 90 days after the close of each fiscal year of the Seller, the
unaudited balance sheet of the Seller as of the end of such fiscal year and the
unaudited statements of income, changes in shareholders' equity and cash flows
of the Seller for such fiscal year, all in reasonable detail and stating in
comparative form the respective figures for the preceding fiscal year, prepared
in accordance with generally accepted accounting principles, consistently
applied.
(d) COMPLIANCE CERTIFICATE. The Seller shall deliver to Financial
Security, within 90 days after the close of each fiscal year of the Seller, a
certificate signed by an Authorized Officer of the Seller stating that:
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(i) a review of the Seller's performance under the Transaction
Documents during such period has been made under such officer's
supervision; and
(ii) to the best of such individual's knowledge following
reasonable inquiry, no Default or Event of Default has occurred, or if a
Default or Event of Default has occurred, specifying the nature thereof
and, if the Seller has or had a right to cure pursuant to Section 5.01,
stating in reasonable detail the steps, if any, taken or being taken by the
Seller to cure such Default or Event of Default or to otherwise comply with
the terms of the Transaction Document to which such Default or Event of
Default relates.
(iii) the financial reports submitted in accordance with Section
2.08(c) hereof, are complete and correct in all material respects and
present fairly the financial condition and results of operations of the
Seller as of the dates and for the periods indicated, in accordance with
generally accepted accounting principles consistently applied.
(e) ACCESS TO RECORDS; DISCUSSIONS WITH OFFICERS AND ACCOUNTANTS.
The Seller shall, upon the request of Financial Security, permit Financial
Security or its authorized agents (i) to inspect the books and records of the
Seller as they may relate to the Notes, the Certificates, the Receivables and
the Other Trust Property, the obligations of the Seller under the Transaction
Documents, the Seller's business and the Transaction and (ii) to discuss the
affairs, finances and accounts of the Seller with any of its officers, directors
and representatives, including its Independent Accountants. Such inspections
and discussions shall be conducted during normal business hours and shall not
unreasonably disrupt the business of the Seller. The books and records of the
Seller will be maintained at the address of the Seller designated herein for
receipt of notices, unless the Seller shall otherwise advise the parties hereto
in writing.
(f) NOTICE OF MATERIAL EVENTS. The Seller shall promptly inform
Financial Security in writing of the occurrence of any of the following:
(i) the submission of any claim or the initiation of any legal
process, litigation or administrative or judicial investigation against the
Seller involving potential damages or penalties in an uninsured amount in
excess of $5,000 in any one instance or $25,000 in the aggregate;
(ii) any change in the location of Seller's principal office or
any change in the location of the Seller's books and records;
(iii) the occurrence of any Default or Event of Default;
(iv) the commencement or threat of any rule making or
disciplinary proceedings or any proceedings instituted by or against the
Seller in any federal, state or local court or before any governmental body
or agency, or before any arbitration board, or the promulgation of any
proceeding or any proposed or final rule which, if adversely determined,
would result in a Material Adverse Change with respect to the Seller or the
Trust;
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(v) the commencement of any proceedings by or against the Seller
under any applicable bankruptcy, reorganization, liquidation,
rehabilitation, insolvency or other similar law now or hereafter in effect
or of any proceeding in which a receiver, liquidator, conservator, trustee
or similar official shall have been, or may be, appointed or requested for
the Seller or any of its assets;
(vi) the receipt of notice that (A) the Seller is being placed
under regulatory supervision, (B) any license, permit, charter,
registration or approval necessary for the conduct of the Seller's business
is to be, or may be, suspended or revoked, or (C) the Seller is to cease
and desist any practice, procedure or policy employed by the Seller in the
conduct of its business, and such cessation may result in a Material
Adverse Change with respect to the Seller or the Trust; or
(vii) any other event, circumstance or condition that has
resulted, or has a material possibility of resulting, in a Material Adverse
Change in respect of the Seller or the Trust.
(g) FURTHER ASSURANCES. The Seller will file all necessary financing
statements, assignments or other instruments, and any amendments or continuation
statements relating thereto, necessary to be kept and filed in such manner and
in such places as may be required by law to preserve and protect fully the Lien
and security interest in, and all rights of the Trust with respect to Other
Trust Property, under the Sale and Servicing Agreement. In addition, the Seller
shall, upon the request of Financial Security (so long as no Insurer Default has
occurred and is continuing), from time to time, execute, acknowledge and deliver
and, if necessary, file such further instruments and take such further action as
may be reasonably necessary to effectuate the intention, performance and
provisions of the Transaction Documents to which the Seller is a party or to
protect the interest of the Trust in the Receivables under the Sale and
Servicing Agreement. The Seller agrees to cooperate with the Rating Agencies in
connection with any review of the Transaction which may be undertaken by the
Rating Agencies after the date hereof.
(h) MAINTENANCE OF LICENSES. The Seller shall maintain all licenses,
permits, charters and registrations which are material to the performance by the
Seller of its obligations under this Agreement and each other Transaction
Document to which the Seller is a party or by which the Seller is bound.
(i) DISCLOSURE DOCUMENT. Each Prospectus delivered with respect to
the Notes and Certificates shall clearly disclose that the Policies are not
covered by the property/casualty insurance security fund specified in Article 76
of the New York Insurance Law. In addition, each Prospectus delivered with
respect to the Notes and Certificates which includes financial statements of
Financial Security prepared in accordance with generally accepted accounting
principles (other than a Prospectus that only incorporates such financial
statements by reference) shall include the following statement immediately
preceding such financial statements:
The New York State Insurance Department recognizes only
statutory accounting practices for determining and
reporting the
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financial condition and results of operations of an
insurance company, for determining its solvency under the
New York Insurance Law, and for determining whether its
financial condition warrants the payment of a dividend to
its stockholders. No consideration is given by the New York
State Insurance Department to financial statements prepared
in accordance with generally accepted accounting principles
in making such determinations.
(j) SPECIAL PURPOSE ENTITY.
(i) The Seller shall conduct its business solely in its own name
through its duly authorized officers or agents so as not to mislead others
as to the identity of the entity with which those others are concerned, and
particularly will use its best efforts to avoid the appearance of
conducting business on behalf of OFL or any other Affiliate thereof or that
the assets of the Seller are available to pay the creditors of OFL or any
Affiliate thereof. Without limiting the generality of the foregoing, all
oral and written communications, including, without limitation, letters,
invoices, purchase orders, contracts, statements and loan applications,
will be made solely in the name of the Seller.
(ii) The Seller shall maintain corporate records and books of
account separate from those of OFL and the other Affiliates thereof.
(iii) The Seller shall obtain proper authorization from its board
of directors of all corporate action requiring such authorization, meetings
of the board of directors of the Seller shall be held not less frequently
than three times per annum and copies of the minutes of each such board
meeting shall be delivered to Financial Security within two weeks of such
meeting.
(iv) The Seller shall obtain proper authorization from its
shareholders of all corporate action requiring shareholder approval,
meetings of the shareholders of the Seller shall be held not less
frequently than one time per annum and copies of each such authorization
and the minutes of each such shareholder meeting shall be delivered to
Financial Security within two weeks of such authorization or meeting, as
the case may be.
(v) Although the organizational expenses of the Seller have been
paid by OFL, operating expenses and liabilities of the Seller shall be paid
from its own funds.
(vi) The annual financial statements of the Seller shall disclose
the effects of the Seller's transactions in accordance with generally
accepted accounting principles and shall disclose that the assets of the
Seller are not available to pay creditors of OFL or any other Affiliate
thereof.
(vii) The resolutions, agreements and other instruments of the
Seller underlying the transactions described in this Agreement and in the
other Transaction
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Documents shall be continuously maintained by the Seller as official
records of the Seller separately identified and held apart from the
records of OFL and each other Affiliate thereof.
(viii) The Seller shall maintain an arm's-length relationship
with OFL and the other Affiliates thereof and will not hold itself out as
being liable for the debts of OFL or any Affiliate thereof.
(ix) The Seller shall keep its assets and its liabilities wholly
separate from those of all other entities, including, but not limited to
OFL and the other Affiliates thereof except, in each case, as contemplated
by the Transaction Documents.
(k) CLOSING DOCUMENTS. The Seller shall provide or cause to be
provided to Financial Security an executed original copy of each document
executed in connection with the Transaction within 10 days after the Closing
Date, except that the Seller shall cause a copy of the Trust Agreement, the Sale
and Servicing Agreement, the Series 1996-B Supplement, the Indenture, the
Administration Agreement and each Transaction Document to which Financial
Security is a party to be provided to Financial Security on the Closing Date.
(l) SUBSEQUENT RECEIVABLES: GOOD TITLE; VALID TRANSFER; ABSENCE OF
LIENS; SECURITY INTEREST. Immediately prior to the sale to the Trust pursuant
to a Subsequent Transfer Agreement, the Seller will be the owner of, and shall
have good and marketable title to, the Subsequent Receivables transferred
thereby and the related Other Trust Property free and clear of all Liens and
Restrictions on Transferability, and shall have full right, corporate power and
lawful authority to assign, transfer and pledge such property.
(m) INCORPORATION OF COVENANTS. The Seller agrees to comply with
each of the Seller's covenants set forth in the Transaction Documents and hereby
incorporates such covenants by reference as if each were set forth herein.
Section 2.09. NEGATIVE COVENANTS OF OFL AND THE SELLER. Each of OFL
and the Seller hereby agrees that during the Term of this Agreement, unless
Financial Security shall otherwise give its prior express written consent:
(a) WAIVER, AMENDMENTS, ETC. The Seller shall not waive, modify,
amend, supplement or consent to any waiver, modification, amendment of or
supplement to, any of the provisions of any of the Transaction Documents or
Previous Series Transaction Documents or of its certificate of incorporation or
by-laws (i) unless, if no Insurer Default shall have occurred and be continuing,
Financial Security shall have consented thereto in writing or (ii) if an Insurer
Default shall have occurred and be continuing, which would adversely affect the
interests of Financial Security.
(b) CREATION OF INDEBTEDNESS; GUARANTEES. The Seller shall not
create, incur, assume or suffer to exist any indebtedness or assume, guarantee,
endorse or otherwise be or become directly or contingently liable for the
obligations of any Person by, among other things, agreeing to purchase any
obligation of another Person, agreeing to advance funds to such Person
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or causing or assisting such Person to maintain any amount of capital, except
as contemplated by the Transaction Documents or as contemplated by the
documents relating to a Series of Certificates or Notes.
(c) SUBSIDIARIES. The Seller shall not form, or cause to be formed,
any Subsidiaries.
(d) NO LIENS. The Seller shall not, except as contemplated by the
Transaction Documents or as contemplated by the documents relating to a Series
of Certificates or Notes, create, incur, assume or suffer to exist any Lien of
any nature upon or with respect to any of its properties or assets, now owned or
hereafter acquired, or sign or file under the Uniform Commercial Code of any
jurisdiction any financing statement that names the Seller as debtor, or sign
any security agreement authorizing any secured party thereunder to file such a
financing statement.
(e) ISSUANCE OF STOCK. The Seller shall not issue any shares of
capital stock or rights, warrants or options in respect of its capital stock or
securities convertible into or exchangeable for its capital stock, other than
the shares of common stock which have been pledged to Financial Security under
the Seller Stock Pledge Agreement.
(f) IMPAIRMENT OF RIGHTS. The Seller shall not take any action, or
fail to take any action, if such action or failure to take action may interfere
with the enforcement of any rights under the Transaction Documents that are
material to the rights, benefits or obligations of the Trust, the Indenture
Trustee, the Certificateholders, the Noteholders or Financial Security.
(g) NO MERGERS. The Seller shall not consolidate with or merge into
any Person or transfer all or any material amount of its assets to any Person
(except as contemplated by the Transaction Documents or the documents relating
to a Series of Certificates or Notes).
(h) ERISA. The Seller shall not contribute or incur any obligation
to contribute to, or incur any liability in respect of, any Plan or
Multiemployer Plan.
(i) OTHER ACTIVITIES. The Seller shall not:
(i) sell, pledge, transfer, exchange or otherwise dispose of any
of its assets except as permitted under the Transaction Documents or the
documents relating to a Series of Certificates or Notes; or
(ii) engage in any business or activity except as contemplated by
the Transaction Documents or as contemplated by the documents relating to a
Series of Certificates or Notes and as permitted by its certificate of
incorporation.
(j) INSOLVENCY. The Seller shall not commence any case, proceeding
or other action (A) under any existing or future law of any jurisdiction,
domestic or foreign, relating to bankruptcy, insolvency, reorganization or
relief of debtors, seeking to have an order for relief entered with respect to
it, or seeking reorganization, arrangement, adjustment, winding-up,
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liquidation, dissolution, consolidation or other relief with respect to it or
the Trust or (B) seeking appointment of a receiver, trustee, custodian or
other similar official for it or for the Trust or for all or any substantial
part of its assets or the Collateral related to any or all Series, or make a
general assignment for the benefit of its creditors. The Seller shall not
take any action in furtherance of, or indicating the consent to, approval of,
or acquiescence in any of the acts set forth above. The Seller shall not
admit in writing its inability to pay its debts.
(k) DIVIDENDS. The Seller shall not declare or make payment of
(i) any dividend or other distribution on any shares of its capital stock, or
(ii) any payment on account of the purchase, redemption, retirement or
acquisition of any option, warrant or other right to acquire shares of its
capital stock, unless (in each case) at the time of such declaration or payment
(and after giving effect thereto) no amount payable by the Seller under any
Transaction Document with respect to any Series is then due and owing but
unpaid.
Section 2.10. REPRESENTATIONS AND WARRANTIES OF OFL. OFL represents
and warrants, as of the date hereof and as of the Closing Date, as follows:
(a) DUE ORGANIZATION AND QUALIFICATION. OFL and each of its
Subsidiaries is a corporation, duly organized, validly existing and in good
standing under the laws of the State of its respective incorporation with power
and authority to own its properties and conduct its business. OFL and each of
its Subsidiaries is duly qualified to do business and is in good standing in
each jurisdiction in which the failure to be so qualified would render any of
the Receivables unenforceable in any respect or would otherwise have a material
adverse effect upon the Transaction. OFL and each of its Subsidiaries has
obtained all licenses, permits, charters, registrations and approvals necessary
for the conduct of its business as currently conducted and as described in the
Prospectus and for the performance of its obligations under the Transaction
Documents.
(b) POWER AND AUTHORITY. OFL has all necessary corporate power and
authority to conduct its business as currently conducted and as described in the
Prospectus, to execute, deliver and perform its obligations under this Agreement
and each other Transaction Document to which it is a party and to carry out the
terms of each such agreement.
(c) DUE AUTHORIZATION. The execution, delivery and performance of
this Agreement and each other Transaction Document to which OFL is a party has
been duly authorized by all necessary corporate action and does not require any
additional approvals or consents or other action by or any notice to or filing
with any Person, including, without limitation, any governmental entity or OFL's
stockholders.
(d) NONCONTRAVENTION. Neither the execution and delivery of this
Agreement and each other Transaction Document to which OFL is a party, the
consummation of the Transaction, nor the satisfaction of the terms and
conditions of this Agreement and each other Transaction Document to which OFL is
a party,
(i) conflicts with or results in any breach or violation of any
provision of the corporate charter or bylaws of OFL or any law, rule,
regulation, order, writ,
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judgment, injunction, decree, determination or award currently in
effect having applicability to OFL or any of its properties,
including regulations issued by an administrative agency or other
governmental authority having supervisory powers over OFL,
(ii) constitutes a default by OFL under or a breach of any
provision of any loan agreement, mortgage, indenture or other agreement or
instrument to which OFL or any of its Subsidiaries is a party or by which
it or any of its or their properties is or may be bound or affected, or
(iii) results in or requires the creation of any Lien upon or in
respect of any of OFL's assets, except as otherwise expressly contemplated
by the Transaction Documents.
(e) PENDING LITIGATION OR OTHER PROCEEDING. There is no action,
proceeding or investigation pending, or, to OFL's best knowledge, threatened,
before any court, regulatory body, administrative agency, or other governmental
instrumentality having jurisdiction over OFL or its properties: (A) asserting
the invalidity of this Agreement or any other Transaction Document to which OFL
is a party, (B) seeking to prevent the issuance of the Notes, the Certificates
or the consummation of the Transaction, (C) seeking any determination or ruling
that might materially and adversely affect the validity or enforceability of,
this Agreement or any other Transaction Document to which OFL is a party, (D)
which might result in a Material Adverse Change with respect to OFL or (E) which
might adversely affect the federal or state tax attributes of the Notes, the
Certificates or the Trust.
(f) VALID AND BINDING OBLIGATIONS. The Purchase Agreement
constitutes a valid sale, transfer, and assignment of the Receivables and Other
Trust Property to the Seller, enforceable against creditors of and purchasers
from OFL. Each of the other Transaction Documents to which OFL is a party when
executed and delivered by OFL, and assuming the due authorization, execution and
delivery by the other parties thereto, will constitute the legal, valid and
binding obligation of OFL enforceable in accordance with its respective terms,
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors' rights
generally and general equitable principles.
(g) NO CONSENTS. No consent, license, approval or authorization
from, or registration, filing or declaration with, any regulatory body,
administrative agency, or other governmental instrumentality, nor any consent,
approval, waiver or notification of any creditor, lessor or other
non-governmental person, is required in connection with the execution, delivery
and performance by OFL of this Agreement or of any other Transaction Document to
which OFL is a party, except (in each case) such as have been obtained and are
in full force and effect.
(h) FINANCIAL STATEMENTS. The Financial Statements of OFL, copies of
which have been furnished to Financial Security, (i) are, as of the dates and
for the periods referred to therein, complete and correct in all material
respects, (ii) present fairly the financial condition and results of operations
of OFL as of the dates and for the periods indicated and (iii) have been
prepared in accordance with generally accepted accounting principles
consistently applied, except
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as noted therein (subject as to interim statements to normal year-end
adjustments and the absence of notes). Since the date of the most recent
Financial Statements, there has been no material adverse change in such
financial condition or results of operations. Except as disclosed in the
Financial Statements, OFL is not subject to any contingent liabilities or
commitments that, individually or in the aggregate, have a reasonable
likelihood of causing a Material Adverse Change in respect of OFL.
(i) COMPLIANCE WITH LAW, ETC. No practice, procedure or policy
employed or proposed to be employed by OFL in the conduct of its business
violates any law, regulation, judgment, agreement, order or decree applicable to
OFL which, if enforced, would result in a Material Adverse Change with respect
to OFL.
(j) TAXES. OFL has, and each of its Subsidiaries have, filed all
federal and state tax returns and paid all taxes to the extent that such taxes
have become due. Any taxes, fees and other governmental charges payable by OFL
in connection with the Transaction, the execution and delivery of the
Transaction Documents and the issuance of the Notes and Certificates have been
paid or shall have been paid at or prior to the Closing Date.
(k) ERISA. OFL is in compliance with ERISA and has not incurred and
does not reasonably expect to incur any liabilities to the PBGC under ERISA in
connection with any Plan or Multiemployer Plan or to contribute now or in the
future in respect of any Plan or Multiemployer Plan except in accordance with
the provisions of Section 2.12(e) hereof.
(l) INCORPORATION OF CERTAIN REPRESENTATIONS AND WARRANTIES. OFL
represents and warrants to Financial Security that the representations and
warranties of OFL set forth in the Transaction Documents are (in each case) true
and correct as if set forth herein.
Section 2.11. AFFIRMATIVE COVENANTS OF OFL. OFL hereby agrees that
during the Term of the Agreement, unless Financial Security shall otherwise
expressly consent in writing:
(a) COMPLIANCE WITH AGREEMENTS AND APPLICABLE LAWS. OFL will comply
with all terms and conditions of this Agreement and each other Transaction
Document to which it is a party and all material requirements of any law, rule
or regulation applicable to it. OFL will not cause or permit to become
effective any amendment to or modification of any Transaction Document to which
it is a party (i) unless, so long as no Insurer Default shall have occurred and
be continuing, Financial Security shall have previously approved in writing the
form of such amendment or modification or (ii) if an Insurer Default shall have
occurred and be continuing, such amendment would not adversely affect the
interests of Financial Security. OFL shall not take any action or fail to take
any action that would interfere with the enforcement of any rights under this
Agreement or the other Transaction Documents.
(b) CORPORATE EXISTENCE. OFL shall maintain its corporate existence
and shall at all times continue to be duly organized under the laws of Minnesota
and duly qualified and duly authorized (as described in Sections 2.10(a), (b)
and (c) hereof) and shall conduct its business in accordance with the terms of
its corporate charter and bylaws.
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(c) FINANCIAL STATEMENTS; ACCOUNTANTS' REPORTS; OTHER INFORMATION.
OFL shall keep or cause to be kept in reasonable detail books and records of
account of OFL's assets and business. OFL, so long as it shall be the Servicer,
shall furnish to Financial Security, simultaneously with the delivery of such
documents to the Owner Trustee, Indenture Trustee, the Noteholders or the
Certificateholders, as the case may be, copies of all reports, certificates,
statements or notices furnished to the Owner Trustee, Indenture Trustee, the
Noteholders or the Certificateholders, as the case may be, pursuant to the
Transaction Documents. OFL shall also furnish or cause to be furnished to
Financial Security:
(i) ANNUAL FINANCIAL STATEMENTS. As soon as available, and in
any event within 90 days after the close of each fiscal year of OFL, the
audited balance sheets of OFL and its subsidiaries as of the end of such
fiscal year and the audited consolidated statements of income, changes in
shareholders' equity and cash flows of OFL for such fiscal year, all in
reasonable detail and stating in comparative form the respective figures
for the corresponding date and period in the preceding fiscal year,
prepared in accordance with generally accepted accounting principles,
consistently applied, and accompanied by the certificate of OFL's
independent accountants (which, so long as no Insurer Default shall have
occurred and be continuing, shall be acceptable to Financial Security) and
by the certificate specified in Section 2.11(d) hereof.
(ii) QUARTERLY FINANCIAL STATEMENTS. As soon as available, and
in any event within 45 days after the close of each of the first three
quarters of each fiscal year of OFL, the unaudited consolidated balance
sheets of OFL as of the end of such quarter and the unaudited consolidated
statements of income, changes in shareholders' equity and cash flows of OFL
for the portion of the fiscal year then ended, all in reasonable detail and
stating in comparative form the respective figures for the corresponding
date and period in the preceding fiscal year, prepared in accordance with
generally accepted accounting principles consistently applied (subject to
normal year-end adjustments), and accompanied by the certificate specified
in Section 2.11(d) hereof.
(iii) ACCOUNTANTS' REPORTS. Promptly upon receipt thereof, copies
of any reports submitted to OFL by its independent accountants in
connection with any examination of the financial statements of OFL.
(iv) CERTAIN INFORMATION. Promptly after the filing or sending
thereof, copies of all proxy statements, financial statements, reports and
registration statements which OFL files, or delivers to, the IRS, the
Commission, or any other federal government agency, authority or body which
supervises the issuance of securities by OFL or any national securities
exchange.
(d) COMPLIANCE CERTIFICATE. OFL shall deliver to Financial Security
within 90 days after the close of each fiscal year of OFL, a certificate signed
by an Authorized Officer of OFL stating that:
(i) a review of OFL's performance under the Transaction
Documents during such period has been made under such officer's
supervision;
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(ii) to the best of such individual's knowledge following
reasonable inquiry, no Default or Event of Default has occurred, or if a
Default or Event of Default has occurred, specifying the nature thereof
and, if OFL has or had a right to cure pursuant to Section 5.01, stating in
reasonable detail the steps, if any, taken or being taken by OFL to cure
such Default or Event of Default or to otherwise comply with the terms of
the Transaction Document to which such Default or Event of Default relates;
and
(iii) the financial statements submitted in accordance with
Section 2.11(c) hereof, as applicable, are complete and correct in all
material respects and present fairly the financial condition and results of
operations of OFL as of the dates and for the periods indicated, in
accordance with generally accepted accounting principles consistently
applied (subject as to interim statements to normal year-end adjustments
and the absence of notes).
(e) ACCESS TO RECORDS; DISCUSSIONS WITH OFFICERS AND ACCOUNTANTS.
OFL shall, upon the request of Financial Security, permit Financial Security or
its authorized agents (i) to inspect the books and records of OFL as they may
relate to the Notes, the Certificates, the Receivables, the obligations of OFL
as Servicer under the Transaction Documents, its business and the Transaction
and (ii) to discuss the affairs, finances and accounts of OFL with any of its
officers, directors and representatives, including its Independent Accountants.
Such inspections and discussions shall be conducted during normal business hours
and shall not unreasonably disrupt the business of OFL. The books and records
of OFL will be maintained at the address of OFL designated herein for receipt of
notices, unless OFL shall otherwise advise the parties hereto in writing.
(f) NOTICE OF MATERIAL EVENTS. OFL shall promptly inform Financial
Security in writing of the occurrence of any of the following:
(i) the submission of any claim or the initiation of any legal
process, litigation or administrative or judicial investigation against OFL
involving potential damages or penalties in an uninsured amount in excess
of $10,000 in any one instance or $25,000 in the aggregate;
(ii) any change in the location of OFL's principal office or any
change in the location of the OFL's books and records;
(iii) the occurrence of any Default or Event of Default;
(iv) the commencement or threat of any rule making or
disciplinary proceedings or any proceedings instituted by or against OFL in
any federal, state or local court or before any governmental body or
agency, or before any arbitration board, or the promulgation of any
proceeding or any proposed or final rule which, if adversely determined,
would result in a Material Adverse Change with respect to OFL;
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(v) the commencement of any proceedings by or against OFL under
any applicable bankruptcy, reorganization, liquidation, rehabilitation,
insolvency or other similar law now or hereafter in effect or of any
proceeding in which a receiver, liquidator, conservator, trustee or similar
official shall have been, or may be, appointed or requested for OFL or any
of its assets;
(vi) the receipt of notice that (A) OFL is being placed under
regulatory supervision, (B) any license, permit, charter, registration or
approval necessary for the conduct of OFL's business is to be, or may be,
suspended or revoked, or (C) OFL is to cease and desist any practice,
procedure or policy employed by OFL in the conduct of its business, and
such cessation may result in a Material Adverse Change with respect to OFL;
or
(vii) any other event, circumstance or condition that has
resulted, or has a material possibility of resulting, in a Material Adverse
Change in respect of OFL.
(g) MAINTENANCE OF LICENSES. OFL shall maintain all licenses,
permits, charters and registrations which are material to the performance by OFL
of its obligations under this Agreement and each other Transaction Document to
which OFL is a party or by which OFL is bound.
(h) ERISA. OFL shall give Financial Security prompt notice of each
of the following events (but in no event more than 30 days after the occurrence
of the event): (i) an Accumulated Funding Deficiency, (ii) the failure to make
a required contribution to a Plan or Multiemployer Plan, (iii) a Reportable
Event, (iv) any action by a Commonly Controlled Entity to terminate any Plan or
withdraw from any Multiemployer Plan, (v) any action by the PBGC to terminate or
appoint a trustee to administer a Plan, (vi) the reorganization or insolvency of
any Multiemployer Plan and (vii) an aggregate Underfunding for all Underfunded
Plans in excess of $100,000. In addition, OFL shall promptly (but in no case
more than 30 days following issuance or receipt by the Commonly Controlled
Entity) provide to Financial Security a copy of all correspondence between a
Commonly Controlled Entity and the PBGC, IRS, Department of Labor or the
administrators of a Multiemployer Plan relating to any of the events described
in the preceding sentence or the underfunded status, termination or possible
termination of a Plan or a Multiemployer Plan.
(i) THIRD-PARTY BENEFICIARY. OFL agrees that Financial Security
shall have all rights of a third-party beneficiary in respect of the Sale and
Servicing Agreement, it being understood that the remedies of Financial Security
with respect to the representations and warranties set forth in Section 2.4(b)
and the covenants set forth in Section 3.6(a) shall be limited to the remedies
set forth in the Sale and Servicing Agreement.
(j) INCORPORATION OF COVENANTS. OFL agrees to comply with each of
OFL's covenants set forth in the Transaction Documents and hereby incorporates
such covenants by reference as if each were set forth herein.
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Section 2.12. NEGATIVE COVENANTS OF OFL. OFL hereby agrees that
during the Term of this Agreement, unless Financial Security shall otherwise
give its express written consent:
(a) RESTRICTIONS ON LIENS. OFL shall not create, incur or suffer to
exist, or agree to create, incur or suffer to exist, or consent to cause or
permit in the future (upon the happening of a contingency or otherwise) the
creation, incurrence or existence of any Lien or Restriction on Transferability
on the Receivables and the Other Trust Property except for the Liens in favor of
the Seller, the Trust and the Indenture Collateral Agent for the benefit of the
Indenture Trustee and Financial Security contemplated by the Transaction
Documents and the Restrictions on Transferability imposed by the Purchase
Agreement and the Sale and Servicing Agreement.
(b) IMPAIRMENT OF RIGHTS. OFL shall not take any action, or fail to
take any action, if such action or failure to take action may interfere with the
enforcement of any rights under the Transaction Documents that are material to
the rights, benefits or obligations of the Seller, the Trust, the Indenture
Trustee, the Noteholders, the Certificateholders or Financial Security.
(c) LIMITATION ON MERGERS. OFL shall not consolidate with or merge
with or into any Person or transfer all or any material part of its assets to
any Person (except as contemplated by the Transaction Documents) or liquidate or
dissolve, provided that OFL may consolidate with, merge with or into, or
transfer all or a material part of its assets to, another corporation if (i) the
acquiror of its assets, or the corporation surviving such merger or
consolidation, shall be organized and existing under the laws of any state and
shall be qualified to transact business in each jurisdiction in which failure to
qualify would render any Transaction Document unenforceable or would result in a
Material Adverse Change in respect of OFL or the Trust Property; (ii) after
giving effect to such consolidation, merger or transfer of assets, no Default or
Event of Default shall have occurred or be continuing; (iii) such acquiring or
surviving entity can lawfully perform the obligations of OFL under the
Transaction Documents and shall expressly assume in writing all of the
obligations of OFL, including, without limitation, its obligations under the
Transaction Documents; and (iv) such acquiring or surviving entity and the
consolidated group of which it is a part shall each have a net worth immediately
subsequent to such consolidation, merger or transfer of assets at least equal to
the net worth of OFL immediately prior to such consolidation, merger or transfer
of assets; and OFL shall give Financial Security written notice of any such
consolidation, merger or transfer of assets on the earlier of: (A) the date
upon which any publicly available filing or release is made with respect to such
action or (B) 10 Business Days prior to the date of consummation of such action.
OFL shall furnish to Financial Security all information requested by it that is
reasonably necessary to determine compliance with this paragraph.
(d) WAIVER, AMENDMENTS, ETC. OFL shall not waive, modify, amend,
supplement or consent to any waiver, modification, amendment of or supplement
to, any of the provisions of any of the Transaction Documents without the prior
written consent of Financial Security (i) unless, so long as no Insurer Default
shall have occurred and be continuing,
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Financial Security shall have consented thereto in writing or (ii) if an
Insurer Default shall have occurred and be continuing, which would adversely
affect the interests of Financial Security.
(e) ERISA. OFL shall not contribute or incur any obligation to
contribute to, or incur any liability in respect of, any Plan or Multiemployer
Plan, except that OFL may make such a contribution or incur such a liability
provided that neither OFL nor any Commonly Controlled Entity will:
(i) terminate any Plan so as to incur any material liability to
the PBGC;
(ii) knowingly participate in any "prohibited transaction" (as
defined in ERISA) involving any Plan or Multiemployer Plan or any trust
created thereunder which would subject any of them to a material tax or
penalty on prohibited transactions imposed under Section 4975 of the Code
or ERISA;
(iii) fail to pay to any Plan or Multiemployer Plan any
contribution which it is obligated to pay under the terms of such Plan or
Multiemployer Plan, if such failure would cause such Plan to have any
material Accumulated Funding Deficiency, whether or not waived; or
(iv) allow or suffer to exist any occurrence of a Reportable
Event, or any other event or condition, which presents a material risk of
termination by the PBGC of any Plan or Multiemployer Plan, to the extent
that the occurrence or nonoccurrence of such Reportable Event or other
event or condition is within the control of it or any Commonly Controlled
Entity.
(f) INSOLVENCY. OFL shall not commence any case, proceeding or other
action (A) under any existing or future law of any jurisdiction, domestic or
foreign, relating to bankruptcy, insolvency, reorganization or relief of
debtors, seeking reorganization, arrangement, adjustment, winding-up,
liquidation, dissolution, consolidation or other relief with respect to the
Seller or either Class GP Certificateholder or (B) seeking appointment of a
receiver, trustee, custodian or other similar official for the Seller or for
either Class GP Certificateholder. OFL shall not take any action in furtherance
of, or indicating the consent to, approval of, or acquiescence in any of the
acts set forth above.
ARTICLE III
THE POLICIES; REIMBURSEMENT; INDEMNIFICATION
Section 3.01. CONDITIONS PRECEDENT TO ISSUANCE OF THE POLICIES.
Financial Security agrees to issue the Policies subject to satisfaction of the
conditions set forth below.
(a) The obligation of Financial Security to issue the Policies is
subject to the following having occurred or being true (as the case may be):
(i) Financial Security shall have received evidence satisfactory to it that the
Seller shall have assigned, conveyed and transferred,
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or caused to be assigned, conveyed and transferred, the Initial Receivables
to the Trust, (ii) the Seller shall have created a valid security interest
in, and Lien on, the Receivables in favor of the Trust, (iii) the Trust shall
have created a valid security interest in, and Lien on, the Indenture
Property in favor of the Indenture Collateral Agent on behalf of the
Indenture Trustee (on behalf of the Noteholders) and Financial Security (iv)
the initial Premium shall have been paid in accordance with Section 3.02
hereof, (v) the representations and warranties of the Trust, the Class GP
Certificateholders, the Seller and of OFL and the Servicer set forth or
incorporated by reference in this Agreement shall be true and correct on and
as of the Closing Date, and (vi) each Transaction Document shall be in full
force and effect and no Default thereunder shall have occurred and be
continuing.
(b) The obligation of Financial Security to issue the Policies is
further subject to the condition precedent that Financial Security shall have
received on the Closing Date, or, in its sole and absolute discretion, received
the opportunity to review prior to and on the Closing Date, the following, each
dated the Closing Date and in full force and effect on such date, except as
otherwise provided herein, in form and substance satisfactory to Financial
Security and its counsel:
(i) a certificate of an Authorized Officer of each of the Seller
and OFL stating that nothing has come to the attention of such entity to
indicate that the Registration Statement or the Prospectus, on the date the
Registration Statement became effective, contained an untrue statement of a
material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, or that
the Prospectus on any date on which it was forwarded to the Underwriter for
use in connection with the offering of the Notes and the Certificates
contained, or on the Closing Date contains, any untrue statement of a
material fact or omits to state a material fact necessary in order to make
the statements made therein, in light of the circumstances under which they
were made, not misleading;
(ii) copies, certified to be true copies by an Authorized Officer
of the Owner Trustee, of (i) the resolutions of the board of directors of
the Owner Trustee authorizing the execution, delivery and performance by
the Owner Trustee of this Agreement and each other Transaction Document to
which the Owner Trustee is a party and all transactions and documents
contemplated hereby and thereby, and of all other documents evidencing any
other necessary action of the Owner Trustee (which certification shall
state that such resolutions have not been modified, are in full force and
effect and constitute the only resolutions adopted by the Owner Trustee's
board of directors or any committee thereof with respect thereto and (ii)
the Certificate of Trust, certified by the Secretary of State or other
appropriate official of the State of Delaware;
(iii) with respect to each Class GP Certificateholder, copies,
certified to be true copies by an Authorized Officer of such Class GP
Certificateholder, of (i) the resolutions of the board of directors of such
Class GP Certificateholder authorizing the execution, delivery and
performance of this Agreement and each other Transaction Document to which
such Class GP Certificateholder is a party and all other transactions and
documents evidencing any other necessary action of such Class GP
Certificateholder
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(which certification shall state that such resolutions have not been
modified, are in full force and effect and constitute the only resolutions
adopted by such Class GP Certificateholder's board of directors or any
committee thereof with respect thereto), (ii) the corporate charter of such
Class GP Certificateholder and (iii) the by-laws, as amended, of such Class
GP Certificateholder.
(iv) copies, certified to be true copies by an Authorized Officer
of the Seller, of (i) the resolutions of the board of directors of the
Seller authorizing the execution, delivery and performance of this
Agreement and each other Transaction Document to which the Seller is a
party and all transactions and documents contemplated hereby and thereby,
and of all other documents evidencing any other necessary action of the
Seller (which certification shall state that such resolutions have not been
modified, are in full force and effect and constitute the only resolutions
adopted by the Seller's board of directors or any committee thereof with
respect thereto), (ii) the corporate charter of the Seller and (iii) the
by-laws, as amended, of the Seller;
(v) copies, certified to be true copies by an Authorized Officer
of OFL, of (i) the resolutions of the board of directors of OFL authorizing
the execution, delivery and performance of this Agreement and each other
Transaction Document to which OFL is a party and all other transactions and
documents contemplated hereby and thereby, and of all documents evidencing
any other necessary action of OFL (which certification shall state that
such resolutions have not been modified, are in full force and effect and
constitute the only resolutions adopted by OFL's board of directors or any
committee thereof with respect thereto), (ii) the corporate charter of OFL
and (iii) the by-laws, as amended, of OFL;
(vi) a certificate of an Authorized Officer of the Owner Trustee
stating that (i) all consents, licenses and approvals necessary for the
Owner Trustee to execute, deliver and perform this Agreement, the other
Transaction Documents to which the Owner Trustee is a party and all other
documents and instruments on the part of the Owner Trustee to be delivered
pursuant hereto or thereto have been obtained, and (ii) all such consents,
licenses and approvals are in full force and effect, the Owner Trustee has
not received any notice of any proceeding for the revocation of any such
license, charter, permit or approval, and, to the Owner Trustee's
knowledge, there is no threatened action or proceeding or any basis
therefor;
(vii) with respect to each Class GP Certificateholder, a
certificate of an Authorized Officer of such Class GP Certificateholder
stating that (i) all consents, licenses and approvals necessary for such
Class GP Certificateholder to execute, deliver and perform this Agreement,
the other Transaction Documents to which such Class GP Certificateholder is
a party and all other documents and instruments on the part of such Class
GP Certificateholder to be delivered pursuant hereto or thereto have been
obtained, and (ii) all such consents, licenses and approvals are in full
force and effect, such Class GP Certificateholder has not received any
notice of any proceeding for the revocation of any such license, charter,
permit or approval, and, to such Class GP Certificateholder's knowledge,
there is no threatened action or proceeding or any basis therefor;
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(viii) a certificate of an Authorized Officer of the Seller stating
that (i) all consents, licenses and approvals necessary for the Seller to
execute, deliver and perform this Agreement, the other Transaction
Documents to which the Seller is a party and all other documents and
instruments on the part of the Seller to be delivered pursuant hereto or
thereto have been obtained, and (ii) all such consents, licenses and
approvals are in full force and effect, the Seller has not received any
notice of any proceeding for the revocation of any such license, charter,
permit or approval, and, to the Seller's knowledge, there is no threatened
action or proceeding or any basis therefor;
(ix) a certificate of an Authorized Officer of OFL stating that
(i) all consents, licenses and approvals necessary for OFL to execute,
deliver and perform this Agreement, the other Transaction Documents to
which OFL is a party and all other documents and instruments on the part of
OFL to be delivered pursuant hereto or thereto have been obtained, and
(ii) all such consents, licenses and approvals are in full force and
effect, OFL has not received any notice of any proceeding for the
revocation of any such license, charter, permit or approval, and, to OFL'S
knowledge, there is no threatened action or proceeding or any basis
therefor;
(x) a certificate of an Authorized Officer of the Owner Trustee
certifying (i) the names and true signatures of the officers of the Owner
Trustee executing and delivering this Agreement, the other Transaction
Documents to which the Owner Trustee is a party and the other documents to
be executed and delivered by the Owner Trustee hereunder and thereunder,
(ii) that approval by the Owner Trustee's equity holders of the execution
and delivery of this Agreement, the other Transaction Documents and all
other such documents to be executed and delivered, by the Owner Trustee
hereunder, has been obtained or is not required, and (iii) that no action
for the dissolution of the Owner Trustee has been adopted or contemplated
and that no such proceedings have been commenced or are contemplated;
(xi) with respect to each Class GP Certificateholder, a
certificate of an Authorized Officer of such Class GP Certificateholder
certifying (i) the names and true signatures of the officers of such Class
GP Certificateholder executing and delivering this Agreement, the other
Transaction Documents to which such Class GP Certificateholder is party and
the other documents to be executed and delivered by such Class GP
Certificateholder hereunder and thereunder, (ii) that approval of such
Class GP Certificateholder stockholders of the execution and delivery of
this Agreement, the other Transaction Documents and all other such
documents to be executed and delivered, by such Class GP Certificateholder
hereunder, has been obtained or is not required, and (iii) that no
resolution for the dissolution of such Class GP Certificateholder has been
adopted or contemplated and that no such proceedings have been commenced or
are contemplated;
(xii) a certificate of an Authorized Officer of the Seller
certifying (i) the names and true signatures of the officers of the Seller
executing and delivering this Agreement, the other Transaction Documents to
which the Seller is a party and the other documents to be executed and
delivered by the Seller hereunder and thereunder, (ii) that
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approval by the Seller's stockholder of the execution and delivery of this
Agreement, the other Transaction Documents and all other such documents to
be executed and delivered, by the Seller hereunder, has been obtained or is
not required, and (iii) that no resolution for the dissolution of the
Seller has been adopted or contemplated and that no such proceedings have
been commenced or are contemplated;
(xiii) a certificate of an Authorized Officer of OFL certifying (i)
the names and true signatures of the officers of OFL executing and
delivering this Agreement, the other Transaction Documents to which OFL is
a party and the other documents to be executed and delivered by OFL
hereunder and thereunder, (ii) that approval by OFL's stockholders of the
execution and delivery of this Agreement, the other Transaction Documents
and all other such documents to be executed and delivered, by OFL
hereunder, has been obtained or is not required, and (iii) that no
resolution for the dissolution of OFL has been adopted or contemplated and
that no such proceedings have been commenced or are contemplated;
(xiv) a certificate of an Authorized Officer of the Trust to the
effect that (x) the representations and warranties of the Trust set forth
or incorporated by reference in this Agreement are true and correct on and
as of the Closing Date and (y) confirming that the conditions precedent set
forth herein with respect to the Trust are satisfied;
(xv) with respect to each Class GP Certificateholder, a
certificate of an Authorized Officer of such Class GP Certificateholder to
the effect that (x) the representations and warranties of such Class GP
Certificateholder set forth or incorporated by reference int his Agreement
are true and correct on and as of the Closing Date, and (y) confirming that
the conditions precedent set forth herein with respect to such Class GP
Certificateholder are satisfied;
(xvi) a certificate of an Authorized Officer of the Seller to the
effect that (x) the representations and warranties of the Seller set forth
or incorporated by reference in this Agreement are true and correct on and
as of the Closing Date and (y) confirming that the conditions precedent set
forth herein with respect to the Seller are satisfied;
(xvii) a certificate of an Authorized Officer of OFL to the effect
that (x) the representations and warranties of OFL set forth or
incorporated by reference in this Agreement are true and correct on and as
of the Closing Date, and (y) confirming that the conditions precedent set
forth herein with respect to OFL are satisfied;
(xviii) favorable opinions of counsel and special Texas counsel to
the Seller and OFL in form and substance satisfactory to Financial Security
and its counsel;
(xix) a favorable opinion of counsel to each of the Trust, the
Class GP Certificateholders, the Owner Trustee, the Indenture Trustee and
the Collateral Agent and the Indenture Collateral Agent, in form and
substance satisfactory to Financial Security and its counsel;
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(xx) evidence that amounts due and payable Financial Security
under Section 3.02 of this Agreement have been paid or that acceptable
provisions therefor have been made;
(xxi) a fully executed copy of each of the Transaction Documents;
(xxii) evidence that all actions necessary or, in the opinion of
Financial Security, desirable to perfect and protect the interests
transferred by the Sale and Servicing Agreement, the liens and security
interests created with respect to the Spread Account, the Liens and
security interest created in favor of the Indenture Collateral Agent with
respect to the Indenture Property pursuant to the Indenture, including,
without limitation, the filing of any financing statements required by
Financial Security or its counsel, have been taken;
(xxiii) a certificate or opinion of Independent Accountants
addressed to Financial Security in form and substance satisfactory to
Financial Security;
(xxiv) evidence that the Seller shall have deposited, or caused to
have been deposited, the deposits required under the Sale and Servicing
Agreement and the Spread Account Agreement, and any other deposits required
to be made on the Closing Date under the Transaction Documents to which the
Seller is a party; and
(xxv) such other documents, instruments, approvals (and, if
requested by Financial Security, certified duplicates of executed copies
thereof) or opinions as Financial Security may reasonably request.
(c) ISSUANCE OF RATINGS. Financial Security shall have received
confirmation that the risk secured by the Policies constitutes an investment
grade risk by Standard and Poor's Corporation ("S&P") and an insurable risk by
Moody's Investors Service, Inc. ("Moody's") and that the Class A-1 Notes, when
issued, will be rated "A-1+" by S&P and "P-1" by Moody's, and that the Class A-2
Notes, the Class A-3 Notes, the Class A-4 Notes, the Class A-5 Notes and the
Certificates, when issued, will be rated "AAA" by S&P and "Aaa" by Moody's.
(d) DELIVERY OF DOCUMENTS. Financial Security shall have received
evidence satisfactory to it that delivery has been made to the Trust or to a
Custodian of the Receivable Files required to be so delivered pursuant to
Section 2.2 of the Sale and Servicing Agreement.
(e) NO DEFAULT. No Default or Event of Default shall have occurred
and be continuing.
(f) NO LITIGATION, ETC. No suit, action or other proceeding,
investigation, or injunction or final judgment relating thereto, shall be
pending or threatened before any court or governmental agency in which it is
sought to restrain or prohibit or to obtain damages or other relief in
connection with any of the Transaction Documents or the consummation of the
Transaction.
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(g) LEGALITY. No statute, rule, regulation or order shall have
been enacted, entered or deemed applicable by any government or governmental
or administrative agency or court which would make the transactions
contemplated by any of the Transaction Documents illegal or otherwise prevent
the consummation thereof.
(h) SATISFACTION OF CONDITIONS OF UNDERWRITING AGREEMENT. All
conditions in the Underwriting Agreement to the Underwriter's obligation to
purchase the Notes and Certificates (other than the issuance of the Policies)
shall have been concurrently satisfied.
Section 3.02. PAYMENT OF FEES AND PREMIUM.
(a) LEGAL FEES. On the Closing Date, OFL shall pay or cause to be
paid legal fees and disbursements incurred by Financial Security in
connection with the issuance of the Policies up to an amount not to exceed
$20,000.00, plus disbursements.
(b) RATING AGENCY FEES. The initial fees of S&P and Moody's with
respect to the Notes and Certificates and the Transaction shall be paid by
OFL in full on the Closing Date. All periodic and subsequent fees of S&P or
Moody's with respect to, and directly allocable to, the Notes and
Certificates shall be for the account of, shall be billed to, and shall be
paid by OFL. The fees for any other rating agency shall be paid by the party
requesting such other agency's rating, unless such other agency is a
substitute for S&P or Moody's in the event that S&P or Moody's is no longer
rating the Notes or Certificates, in which case the cost for such agency
shall be paid by OFL.
(c) AUDITORS' FEES. In the event that Financial Security's
auditors are required to provide information or any consent in connection
with the Registration Statement fees therefor shall be paid by OFL. Any
additional fees incurred by Financial Security after the Closing Date in
respect of any additional consents shall be paid by OFL on demand.
(d) PREMIUM. In consideration of the issuance by Financial
Security of the Policies, OFL shall pay Financial Security the Premium and
Premium Supplement, if any, as and when due in accordance with the terms of
the Premium Letter. The Premium and Premium Supplement, if any, paid
hereunder or under the Sale and Servicing Agreement shall be nonrefundable
without regard to whether Financial Security makes any payment under the
Policies or any other circumstances relating to the Notes or the Certificates
or provision being made for payment of the Notes or the Certificates prior to
maturity. Although the Premium is fully earned by Financial Security as of
the Closing Date, the Premium shall be payable in periodic installments as
provided in the Premium Letter. Anything herein or in any of the Transaction
Documents notwithstanding, upon the occurrence of an Event of Default, the
entire outstanding balance of further installments of the Premium and Premium
Supplement shall be immediately due and payable. All payments of Premium and
Premium Supplement, if any, shall be made by wire transfer to an account
designated from time to time by Financial Security by written notice to the
Seller and OFL.
Section 3.03. REIMBURSEMENT AND ADDITIONAL PAYMENT OBLIGATION.
Each of OFL and the Trust agrees to pay to Financial Security as follows:
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(a) a sum equal to the total of all amounts paid by Financial
Security under the Policies;
(b) any and all charges, fees, costs and expenses which Financial
Security may reasonably pay or incur, including, but not limited to,
attorneys' and accountants' fees and expenses, in connection with (i) any
accounts established to facilitate payments under the Policies to the extent
Financial Security has not been immediately reimbursed on the date that any
amount is paid by Financial Security under the Policies, (ii) the
administration, enforcement, defense or preservation of any rights in respect
of any of the Transaction Documents, including defending, monitoring or
participating in any litigation, proceeding (including any insolvency or
bankruptcy proceeding in respect of any Transaction participant or any
Affiliate thereof), restructuring or engaging in any protective measures or
monitoring activities relating to any of the Transaction Documents, any party
to any of the Transaction Documents or the Transaction, (iii) the foreclosure
against, sale or other disposition of any collateral securing any obligations
under any of the Transaction Documents or otherwise in the discretion of
Financial Security, or pursuit of any other remedies under any of the
Transaction Documents, to the extent such costs and expenses are not
recovered from such foreclosure, sale or other disposition (iv) any
amendment, waiver or other action with respect to, or related to, any
Transaction Document whether or not executed or completed, (v) preparation of
bound volumes of the Transaction Documents, (vi) any review or investigation
made by Financial Security in those circumstances where its approval or
consent is sought under any of the Transaction Documents; (vii) any federal,
state or local tax (other than taxes payable in respect of the gross income
of Financial Security) or other governmental charge imposed in connection
with the issuance of the Policies; and (viii) Financial Security reserves the
right to charge a reasonable fee as a condition to executing any amendment,
waiver or consent proposed in respect of any of the Transaction Documents
(for the purpose of this paragraph (b), costs and expenses shall include a
reasonable allocation of compensation and overhead attributable to time of
employees of Financial Security spent in connection with the actions
described in the foregoing clauses (ii) and (iii));
(c) interest on any and all amounts described in this Section 3.03
from the date payable to or paid by Financial Security until payment thereof
in full, and interest on any and all amounts described in Section 3.02, in
each case payable to Financial Security at the Late Payment Rate per annum;
and
(d) any payments made by Financial Security on behalf of, or
advanced to, the Seller, OFL, the Indenture Trustee, the Owner Trustee or the
Trust including, without limitation, any amounts payable by OFL in its
capacity as Servicer or by the Trust, in respect of the Notes or the
Certificates and any other amounts owed pursuant to any Transaction
Documents; and any payments made by Financial Security as, or in lieu of, any
servicing, administration, management, trustee, custodial, collateral agency
or administrative fees payable, in the sole discretion of Financial Security
to third parties in connection with the Transaction.
All such amounts are to be immediately due and payable without
demand. Financial Security shall notify OFL of amounts due hereunder.
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Section 3.04. CERTAIN OBLIGATIONS NOT RECOURSE TO OFL; RECOURSE TO
TRUST PROPERTY.
(a) Notwithstanding any provision of Section 3.03 to the contrary,
the payment obligations provided in Section 3.03(a), b(iii) and (d) (to the
extent of advances to the Trust in respect of distributions on the
Certificates or to the Indenture Trustee in respect of payments on the
Notes), in each case, to the extent that such payment obligations do not
arise from any failure or default in the performance by OFL or the Seller of
any of its obligations under the Transaction Documents, and any interest on
the foregoing in accordance with Section 3.03(c), shall not be recourse to
OFL, but shall be payable in the manner and in accordance with priorities
provided in the Sale and Servicing Agreement.
(b) Financial Security covenants and agrees that it shall not be
entitled to any payment from the Trust Property with respect to amounts owed
under this Agreement other than as set forth in Section 4.6 and Section 9.1
of the Sale and Servicing Agreement and Section 5.06 of the Indenture.
Section 3.05. INDEMNIFICATION.
(a) INDEMNIFICATION BY OFL. In addition to any and all rights of
reimbursement, indemnification, subrogation and any other rights pursuant
hereto or under law or in equity, OFL agrees to pay, and to protect,
indemnify and save harmless, Financial Security and its officers, directors,
shareholders, employees, agents and each Person, if any, who controls
Financial Security within the meaning of either Section 15 of the Securities
Act or Section 20 of the Exchange Act from and against any and all claims,
losses, liabilities (including penalties), actions, suits, judgments,
demands, damages, costs or expenses (including, without limitation, fees and
expenses of attorneys, consultants and auditors and reasonable costs of
investigations) of any nature arising out of or relating to the Transaction
by reason of:
(i) any statement, omission or action (other than of or by
Financial Security) in connection with the offering, issuance, sale or
delivery of the Notes or the Certificates;
(ii) the negligence, bad faith, willful misconduct,
misfeasance, malfeasance or theft committed by any director, officer,
employee or agent of the Trust, either Class GP Certificateholder, the
Seller or OFL in connection with the Transaction;
(iii) the violation by the Trust, either Class GP
Certificateholder, the Seller or OFL of any federal, state or foreign law,
rule or regulation, or any judgment, order or decree applicable to it;
(iv) the breach by the Trust, either Class GP
Certificateholder, the Seller or OFL of any representation, warranty or
covenant under any of the Transaction Documents or the occurrence, in
respect of the Trust, either Class GP Certificateholder, the Seller or
OFL, under any of the Transaction Documents of any event of default or
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any event which, with the giving of notice or the lapse of time or both,
would constitute any event of default; or
(v) any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement or the Prospectus or
in any amendment or supplement thereto or any omission or alleged omission
to state therein a material fact required to be stated therein or necessary
to make the statements therein not misleading, except insofar as such
claims arise out of or are based upon any untrue statement or omission
(A) included in the Registration Statement or the Prospectus and furnished
by Financial Security in writing expressly for use therein (all such
information so furnished being referred to herein as "Financial Security
Information"), it being understood that the Financial Security Information
is limited to the information included under the caption "Financial
Security Assurance Inc.," and the financial statements of Financial
Security included in the Registration Statement or the Prospectus or (B)
included in the information set forth under the caption "Underwriting" in
the Prospectus.
(b) CONDUCT OF ACTIONS OR PROCEEDINGS. If any action or
proceeding (including any governmental investigation) shall be brought or
asserted against Financial Security, any officer, director, shareholder,
employee or agent of Financial Security or any Person controlling Financial
Security (individually, an "Indemnified Party" and, collectively, the
"Indemnified Parties") in respect of which indemnity may be sought from OFL
hereunder, Financial Security shall promptly notify OFL in writing, and OFL
shall assume the defense thereof, including the employment of counsel
satisfactory to Financial Security and the payment of all expenses. The
Indemnified Party shall have the right to employ separate counsel in any such
action and to participate in the defense thereof at the expense of the
Indemnified Party; PROVIDED, HOWEVER, that the fees and expenses of such
separate counsel shall be at the expense of OFL if (i) OFL has agreed to pay
such fees and expenses, (ii) OFL shall have failed to assume the defense of
such action or proceeding and employ counsel satisfactory to Financial
Security in any such action or proceeding or (iii) the named parties to any
such action or proceeding (including any impleaded parties) include both the
Indemnified Party and the Trust, the Class GP Certificateholders, the Seller
or OFL, and the Indemnified Party shall have been advised by counsel that
there may be one or more legal defenses available to it which are different
from or additional to those available to the Trust, either Class GP
Certificateholder, the Seller or OFL (in which case, if the Indemnified Party
notifies OFL in writing that it elects to employ separate counsel at the
expense of OFL, OFL shall not have the right to assume the defense of such
action or proceeding on behalf of such Indemnified Party, it being
understood, however, that OFL shall not, in connection with any one such
action or proceeding or separate but substantially similar or related actions
or proceedings in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the reasonable fees and expenses
of more than one separate firm of attorneys at any time for the Indemnified
Parties, which firm shall be designated in writing by Financial Security).
OFL shall not be liable for any settlement of any such action or proceeding
effected without its written consent to the extent that any such settlement
shall be prejudicial to it, but, if settled with its written consent, or if
there be a final judgment for the plaintiff in any such action or proceeding
with respect to which OFL shall have received notice in accordance with this
subsection (c) OFL agrees to indemnify and hold the Indemnified Parties
harmless from and against any loss or liability by reason of such settlement
or judgment.
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(c) CONTRIBUTION. To provide for just and equitable contribution
if the indemnification provided by OFL is determined to be unavailable for
any Indemnified Party (other than due to application of this Section), OFL
shall contribute to the losses incurred by the Indemnified Party on the basis
of the relative fault of OFL, on the one hand, and the Indemnified Party, on
the other hand.
Section 3.06. PAYMENT PROCEDURE. In the event of the incurrence
by Financial Security of any cost or expense or any payment by Financial
Security for which it is entitled to be reimbursed or indemnified as provided
above OFL agrees to accept the voucher or other evidence of payment as prima
facie evidence of the propriety thereof and the liability therefor to
Financial Security. All payments to be made to Financial Security under this
Agreement shall be made to Financial Security in lawful currency of the
United States of America in immediately available funds to the account number
provided in the Premium Letter before 1:00 p.m. (New York, New York time) on
the date when due or as Financial Security shall otherwise direct by written
notice to OFL. In the event that the date of any payment to Financial
Security or the expiration of any time period hereunder occurs on a day which
is not a Business Day, then such payment or expiration of time period shall
be made or occur on the next succeeding Business Day with the same force and
effect as if such payment was made or time period expired on the scheduled
date of payment or expiration date. Payments to be made to Financial Security
under this Agreement shall bear interest at the Late Payment Rate from the
date when due to the date paid.
Section 3.07. SUBROGATION. Subject only to the priority of
payment provisions of the Sale and Servicing Agreement, each of the Trust,
the Indenture Trustee, the Seller and OFL acknowledges that, to the extent of
any payment made by Financial Security pursuant to the Policies, Financial
Security is to be fully subrogated to the extent of such payment and any
additional interest due on any late payment, to the rights of the Noteholders
and the Certificateholders to any moneys paid or payable in respect of the
Notes or the Certificates respectively under the Transaction Documents or
otherwise. Each of the Trust, the Indenture Trustee, the Seller and OFL
agrees to such subrogation and, further, agrees to execute such instruments
and to take such actions as, in the sole judgment of Financial Security, are
necessary to evidence such subrogation and to perfect the rights of Financial
Security to receive any such moneys paid or payable in respect of the Notes
or the Certificates under the Transaction Documents or otherwise.
ARTICLE IV
FURTHER AGREEMENTS; MISCELLANEOUS
Section 4.01. EFFECTIVE DATE; TERM OF AGREEMENT. This Agreement
shall take effect on the Closing Date and shall remain in effect until the
later of (a) such time as Financial Security is no longer subject to a claim
under the Policies and the Policies shall have been surrendered to Financial
Security for cancellation and (b) all amounts payable to Financial Security,
the Noteholders, and the Certificateholders under the Transaction Documents
and under the Notes and the Certificates have been paid in full; PROVIDED,
HOWEVER, that the
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provisions of Sections 3.02, 3.03, 3.04, 3.05, 3.06 and 4.03 hereof shall
survive any termination of this Agreement.
Section 4.02. FURTHER ASSURANCES AND CORRECTIVE INSTRUMENTS. To
the extent permitted by law, each of the Trust, each Class GP
Certificateholder, the Seller and OFL agree that it will, from time to time,
execute, acknowledge and deliver, or cause to be executed, acknowledged and
delivered, such supplements hereto and such further instruments as Financial
Security may request and as may be required in Financial Security's judgment
to effectuate the intention of or facilitate the performance of this
Agreement.
Section 4.03. OBLIGATIONS ABSOLUTE.
(a) The obligations of the Trust, each Class GP Certificateholder,
the Seller and OFL hereunder shall be absolute and unconditional, and shall
be paid or performed strictly in accordance with this Agreement under all
circumstances irrespective of:
(i) any lack of validity or enforceability of, or any amendment
or other modifications of, or waiver with respect to any of the Transaction
Documents, the Notes, the Certificates or the Policies; PROVIDED, that
Financial Security shall not have consented to any such amendment,
modification or waiver;
(ii) any exchange or release of any other obligations hereunder;
(iii) the existence of any claim, setoff, defense, reduction,
abatement or other right which the Trust, either Class GP
Certificateholder, the Seller or OFL may have at any time against
Financial Security or any other Person;
(iv) any document presented in connection with the Policies
proving to be forged, fraudulent, invalid or insufficient in any respect
or any statement therein being untrue or inaccurate in any respect;
(v) any payment by Financial Security under the Policies against
presentation of a certificate or other document which does not strictly
comply with terms of the Policies;
(vi) any failure of the Seller or the Trust to receive the
proceeds from the Sale of the Notes to receive the proceeds from the sale
of the Certificates;
(vii) any breach by the Trust, the Class GP Certificateholders,
the Seller or OFL of any representation, warranty or covenant contained in
any of the Transaction Documents; or
(viii) any other circumstances, other than payment in full,
which might otherwise constitute a defense available to, or discharge of,
the Trust, either Class GP Certificateholder, the Seller or OFL in respect
of any Transaction Document.
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(b) The Trust, each Class GP Certificateholder, Seller and OFL and
any and all others who are now or may become liable for all or part of the
obligations of any of them under this Agreement agree to be bound by this
Agreement and (i) to the extent permitted by law, waive and renounce any and
all redemption and exemption rights and the benefit of all valuation and
appraisement privileges against the indebtedness and obligations evidenced by
any Transaction Document or by any extension or renewal thereof; (ii) waive
presentment and demand for payment, notices of nonpayment and of dishonor,
protest of dishonor and notice of protest; (iii) waive all notices in
connection with the delivery and acceptance hereof and all other notices in
connection with the performance, default or enforcement of any payment
hereunder except as required by the Transaction Documents other than this
Agreement; (iv) waive all rights of abatement, diminution, postponement or
deduction, or to any defense other than payment, or to any right of setoff or
recoupment arising out of any breach under any of the Transaction Documents,
by any party thereto or any beneficiary thereof, or out of any obligation at
any time owing to the Trust, either Class GP Certificateholder, the Seller or
OFL; (v) agree that its liabilities hereunder shall, except as otherwise
expressly provided in this Section 4.03, be unconditional and without regard
to any setoff, counterclaim or the liability of any other Person for the
payment hereof; (vi) agree that any consent, waiver or forbearance hereunder
with respect to an event shall operate only for such event and not for any
subsequent event; (vii) consent to any and all extensions of time that may be
granted by Financial Security with respect to any payment hereunder or other
provisions hereof and to the release of any security at any time given for
any payment hereunder, or any part thereof, with or without substitution, and
to the release of any Person or entity liable for any such payment; and
(viii) consent to the addition of any and all other makers, endorsers,
guarantors and other obligors for any payment hereunder, and to the
acceptance of any and all other security for any payment hereunder, and agree
that the addition of any such obligors or security shall not affect the
liability of the parties hereto for any payment hereunder.
(c) Nothing herein shall be construed as prohibiting the Trust,
either Class GP Certificateholder, Seller or OFL from pursuing any rights or
remedies it may have against any other Person in a separate legal proceeding.
Section 4.04. ASSIGNMENTS; REINSURANCE; THIRD-PARTY RIGHTS.
(a) This Agreement shall be a continuing obligation of the parties
hereto and shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns. Neither the
Trust, First Class GP Certificateholder, Second Class GP Certificateholder,
the Seller nor OFL may assign its rights under this Agreement, or delegate
any of its duties hereunder, without the prior written consent of Financial
Security. Any assignment made in violation of this Agreement shall be null
and void.
(b) Financial Security shall have the right to give participations
in its rights under this Agreement and to enter into contracts of reinsurance
with respect to the Policies upon such terms and conditions as Financial
Security may in its discretion determine; PROVIDED, HOWEVER, that no such
participation or reinsurance agreement or arrangement shall relieve Financial
Security of any of its obligations hereunder or under the Policies.
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(c) In addition, Financial Security shall be entitled to assign or
pledge to any bank or other lender providing liquidity or credit with respect
to the Transaction or the obligations of Financial Security in connection
therewith any rights of Financial Security under the Transaction Documents or
with respect to any real or personal property or other interests pledged to
Financial Security, or in which Financial Security has a security interest,
in connection with the Transaction.
(d) Except as provided herein with respect to participants and
reinsurers, nothing in this Agreement shall confer any right, remedy or
claim, express or implied, upon any Person, including, particularly, any
Noteholder or Certificateholder (except to the extent provided herein and
without limitation of their rights to receive payments with respect to the
Trust Property, including without limitation payments under the respective
Policies), other than Financial Security, against the Trust, either Class GP
Certificateholder, the Seller, OFL or the Servicer, and all the terms,
covenants, conditions, promises and agreements contained herein shall be for
the sole and exclusive benefit of the parties hereto and their successors and
permitted assigns. Neither the Trustee, the Owner Trustee nor any Noteholder
or Certificateholder shall have any right to payment from any premiums paid
or payable hereunder or from any other amounts paid by the Seller or OFL
pursuant to Section 3.02, 3.03 or 3.04 hereof (without limitation to the
rights of the Noteholders and the Certificateholders to receive payments with
respect to the Trust Property, as provided in the Indenture and the Trust
Agreement).
Section 4.05. LIABILITY OF FINANCIAL SECURITY. Neither Financial
Security nor any of its officers, directors or employees shall be liable or
responsible for: (a) the use which may be made of the Policies by the Owner
Trustee or the Indenture Trustee or for any acts or omissions of the Owner
Trustee or the Indenture Trustee in connection therewith; or (b) the
validity, sufficiency, accuracy or genuineness of documents delivered to
Financial Security (or its Fiscal Agent) in connection with any claim under
the Policies, or of any signatures thereon, even if such documents or
signatures should in fact prove to be in any or all respects invalid,
insufficient, fraudulent or forged (unless Financial Security shall have
actual knowledge thereof). In furtherance and not in limitation of the
foregoing, Financial Security (or its Fiscal Agent) may accept documents that
appear on their face to be in order, without responsibility for further
investigation.
ARTICLE V
EVENTS OF DEFAULT; REMEDIES
Section 5.01. EVENTS OF DEFAULT. The occurrence of any of the
following events shall constitute an Event of Default hereunder:
(a) any demand for payment shall be made under either of the
Policies;
(b) any representation or warranty made by the Trust, either of
the Class GP Certificateholders, the Seller, OFL or the Servicer under any of
the Related Documents, or in any certificate or report furnished under any of
the Related Documents, shall prove to be untrue or incorrect in any material
respect;
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(c) (i) the Trust, either Class GP Certificateholder, the Seller,
OFL or the Servicer shall fail to pay when due any amount payable by the
Seller, OFL or the Servicer under any of the Related Documents (other than
payments of principal and interest on the Notes and the Certificates); (ii)
the Trust, either Class GP Certificateholder, the Seller, OFL or the Servicer
shall have asserted that any of the Transaction Documents to which it is a
party is not valid and binding on the parties thereto; or (iii) any court,
governmental authority or agency having jurisdiction over any of the parties
to any of the Transaction Documents or property thereof shall find or rule
that any material provision of any of the Transaction Documents is not valid
and binding on the parties thereto.
(d) the Trust, either Class GP Certificateholder, the Seller, OFL
or the Servicer shall fail to perform or observe any other covenant or
agreement contained in any of the Related Documents (except for the
obligations described under clause (b) or (c) above) and such failure shall
continue for a period of 30 days after written notice given to the Trust,
either Class GP Certificateholder, the Seller, OFL or the Servicer (as
applicable); PROVIDED that, if such failure shall be of a nature that it
cannot be cured within 30 days, such failure shall not constitute an Event of
Default hereunder if within such 30-day period such party shall have given
notice to Financial Security of corrective action it proposes to take, which
corrective action is agreed in writing by Financial Security to be
satisfactory and such party shall thereafter pursue such corrective action
diligently until such default is cured;
(e) there shall have occurred an "Event of Default" as specified
in Section 6.01(i) or 6.01(ii) of the Senior Note Indenture or the unpaid
principal amount of, premium, if any, and accrued and unpaid interest on the
Securities (as defined in the Senior Note Indenture) shall have, upon the
declaration of the holders of the Securities, as specified in Section 6.02 of
the Senior Note Indenture, become immediately due and payable;
(f) the Trust shall adopt a voluntary plan of liquidation or shall
fail to pay its debts generally as they come due, or shall admit in writing
its inability to pay its debts generally, or shall make a general assignment
for the benefit of creditors, or shall institute any proceeding seeking to
adjudicate the Trust insolvent or seeking a liquidation, or shall take
advantage of any insolvency act, or shall commence a case or other proceeding
naming the Trust as debtor under the United States Bankruptcy Code or similar
law, domestic or foreign, or a case or other proceeding shall be commenced
against the Trust under the United States Bankruptcy Code or similar law,
domestic or foreign, or any proceeding shall be instituted against the Trust
seeking liquidation of its assets and the Trust shall fail to take
appropriate action resulting in the withdrawal or dismissal of such
proceeding within 30 days or there shall be appointed or the Trust consent
to, or acquiesce in, the appointment of a receiver, liquidator, conservator,
trustee or similar official in respect of the Trust or the whole or any
substantial part of its properties or assets, or the Trust shall take any
corporate action in furtherance of any of the foregoing or the Trust
terminates pursuant to Section 9.2 of the Trust Agreement;
(g) the Trust becomes taxable as an association (or publicly
traded partnership) taxable as a corporation for federal or state income tax
purposes;
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(h) on any Distribution Date, the sum of Available Funds with respect
to such Distribution Date and the amounts available in the Series 1996-C Spread
Account (prior to any deposits into such Spread Account from Spread Accounts
related to any other Series) and the amount that may be withdrawn from the
Reserve Account pursuant to Section 5.1 of the Sale and Servicing Agreement is
less than the sum of the amounts payable on such Distribution Date pursuant to
clauses (i) through (viii) of Section 4.6 of the Sale and Servicing Agreement;
(i) any default in the observance or performance of any covenant or
agreement of the Trust made in the Indenture (other than a default in the
payment of the interest or principal on any Note when due) or any representation
or warranty of the Trust made in the Indenture or in any certificate or other
writing delivered pursuant thereto or in connection therewith proving to have
been incorrect in any material respect as of the time when the same shall have
been made, and such default shall continue or not be cured, or the circumstance
or condition in respect of which such misrepresentation or warranty was
incorrect shall not have been eliminated or otherwise cured, for a period of 30
days after there shall have been given, by registered or certified mail, to the
Trust and the Indenture Trustee by Financial Security, a written notice
specifying such default or incorrect representation or warranty and requiring it
to be remedied;
(j) the Average Delinquency Ratio with respect to any Determination
Date shall have been equal to or greater than 7.3%.
(k) the Cumulative Default Rate shall be equal to or greater than
(A) 3.69%, with respect to any Determination Date occurring prior to or during
the third calendar month succeeding the Series 1996-C Closing Date, (B) 7.06%,
with respect to any Determination Date occurring after the third, and prior to
or during the 6th, calendar month succeeding the Series 1996-C Closing Date,
(C) 9.82%, with respect to any Determination Date occurring after the 6th, and
prior to or during the 9th, calendar month succeeding the Series 1996-C Closing
Date, (D) 12.04%, with respect to any Determination Date occurring after the
9th, and prior to or during the 12th, calendar month succeeding the Series
1996-C Closing Date, (E) 13.10%, with respect to any Determination Date
occurring after the 12th, and prior to or during the 15th, calendar month
succeeding the Series 1996-C Closing Date, (F) 14.44%, with respect to any
Determination Date occurring after the 15th, and prior to or during the 18th,
calendar month succeeding the Series 1996-C Closing Date, (G) 15.68%, with
respect to any Determination Date occurring after the 18th, and prior to or
during the 21st, calendar month succeeding the Series 1996-C Closing Date,
(H) 16.65%, with respect to any Determination Date occurring after the 21st,
and prior to or during the 24th, calendar month succeeding the Series 1996-C
Closing Date, (I) 17.52%, with respect to any Determination Date occurring after
the 24th, and prior to or during the 27th, calendar month succeeding the Series
1996-C Closing Date, (J) 18.27%, with respect to any Determination Date
occurring after the 27th, and prior to or during the 30th, calendar month
succeeding the Series 1996-C Closing Date, (K) 18.81%, with respect to any
Determination Date occurring after the 30th, and prior to or during the 33rd,
calendar month succeeding the Series 1996-C Closing Date, (L) 19.23%, with
respect to any Determination Date occurring after the 33rd, and prior to or
during the 36th, calendar month succeeding the Series 1996-C Closing Date,
(M) 19.57%, with respect to any Determination Date occurring after the 36th,
and prior to or during the 39th, calendar month succeeding the Series 1996-C
Closing
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Date, (N) 19.78%, with respect to any Determination Date occurring after
the 39th, and prior to or during the 42nd, calendar month succeeding the Series
1996-C Closing Date, (O) 20.00%, with respect to any Determination Date
occurring after the 42nd, and prior to or during the 45th calendar month
succeeding the Series 1996-C Closing Date, (P) 20.16%, with respect to any
Determination Date occurring after the 45th, and prior to or during the 48th,
calendar month succeeding the Series 1996-C Closing Date, (Q) 20.25%, with
respect to any Determination Date occurring after the 48th, and prior to or
during the 51st, calendar month succeeding the Series 1996-C Closing Date,
(R) 20.34%, with respect to any Determination Date occurring after the 51st,
and prior to or during the 54th, calendar month succeeding the Series 1996-C
Closing Date, (S) 20.39%, with respect to any Determination Date occurring after
the 54th, and prior to or during the 57th, calendar month succeeding the
Series 1996-C Closing Date, (T) 20.43%, with respect to any Determination Date
occurring after the 57th, and prior to or during the 60th, calendar month
succeeding the Series 1996-C Closing Date, (U) 20.46%, with respect to any
Determination Date occurring after the 60th, and prior to or during the 63rd,
calendar month succeeding the Series 1996-C Closing Date, (V) 20.48%, with
respect to any Determination Date occurring after the 63rd, and prior to or
during the 66th, calendar month succeeding the Series 1996-C Closing Date,
(W) 20.50%, with respect to any Determination Date occurring after the 66th,
and prior to or during the 69th, calendar month succeeding the Series 1996-C
Closing Date, or (X) 20.53%, with respect to any Determination Date occurring
after the 69th calendar month succeeding the Series 1996-C Closing Date;
(l) the Cumulative Net Loss Rate shall be equal to or greater than
(A) 1.83%, with respect to any Determination Date occurring prior to or during
the third calendar month succeeding the Series 1996-C Closing Date, (B) 3.36%,
with respect to any Determination Date occurring after the third, and prior to
or during the 6th, calendar month succeeding the Series 1996-C Closing Date,
(C) 4.62%, with respect to any Determination Date occurring after the 6th, and
prior to or during the 9th, calendar month succeeding the Series 1996-C Closing
Date, (D) 5.49%, with respect to any Determination Date occurring after the 9th,
and prior to or during the 12th, calendar month succeeding the Series 1996-C
Closing Date, (E) 5.97%, with respect to any Determination Date occurring after
the 12th, and prior to or during the 15th, calendar month succeeding the Series
1996-C Closing Date, (F) 6.43%, with respect to any Determination Date occurring
after the 15th, and prior to or during the 18th, calendar month succeeding the
Series 1996-C Closing Date, (G) 6.80%, with respect to any Determination Date
occurring after the 18th, and prior to or during the 21st, calendar month
succeeding the Series 1996-C Closing Date, (H) 7.13%, with respect to any
Determination Date occurring after the 21st, and prior to or during the 24th,
calendar month succeeding the Series 1996-C Closing Date, (I) 7.37%, with
respect to any Determination Date occurring after the 24th, and prior to or
during the 27th, calendar month succeeding the Series 1996-C Closing Date,
(J) 7.62%, with respect to any Determination Date occurring after the 27th, and
prior to or during the 30th, calendar month succeeding the Series 1996-C Closing
Date, (K) 7.77%, with respect to any Determination Date occurring after the
30th, and prior to or during the 33rd, calendar month succeeding the Series
1996-C Closing Date, (L) 7.92%, with respect to any Determination Date occurring
after the 33rd, and prior to or during the 36th, calendar month succeeding the
Series 1996-C Closing Date, (M) 8.02%, with respect to any Determination Date
occurring after the 36th, and prior to or during the 39th, calendar month
succeeding the Series 1996-C Closing Date, (N) 8.12%, with respect to any
Determination Date occurring after the 39th, and prior to
61
<PAGE>
or during the 42nd, calendar month succeeding the Series 1996-C Closing Date,
(O) 8.22%, with respect to any Determination Date occurring after the 42nd,
and prior to or during the 45th calendar month succeeding the Series 1996-C
Closing Date, (P) 8.28%, with respect to any Determination Date occurring
after the 45th, and prior to or during the 48th, calendar month succeeding
the Series 1996-C Closing Date, (Q) 8.33%, with respect to any Determination
Date occurring after the 48th, and prior to or during the 51st, calendar
month succeeding the Series 1996-C Closing Date, (R) 8.37%, with respect to
any Determination Date occurring after the 51st, and prior to or during the
54th, calendar month succeeding the Series 1996-C Closing Date, (S) 8.41%,
with respect to any Determination Date occurring after the 54th, and prior to
or during the 57th, calendar month succeeding the Series 1996-C Closing Date,
(T) 8.43%, with respect to any Determination Date occurring after the 57th,
and prior to or during the 60th, calendar month succeeding the Series 1996-C
Closing Date, (U) 8.46%, with respect to any Determination Date occurring
after the 60th, and prior to or during the 63rd, calendar month succeeding
the Series 1996-C Closing Date, (V) 8.47%, with respect to any Determination
Date occurring after the 63rd, and prior to or during the 66th, calendar
month succeeding the Series 1996-C Closing Date, (W) 8.49%, with respect to
any Determination Date occurring after the 66th, and prior to or during the
69th, calendar month succeeding the Series 1996-C Closing Date, or (X) 8.51%,
with respect to any Determination Date occurring after the 69th calendar
month succeeding the Series 1996-C Closing Date;
(m) the occurrence of an Event of Servicing Termination under the
Sale and Servicing Agreement; or
(n) the occurrence of an "Event of Default" under and as defined in
any Insurance and Indemnity Agreement among Financial Security, OFL, the Seller
and any other parties thereto, which "Event of Default" is not defined as a
"Portfolio Performance Event of Default" in such Insurance and Indemnity
Agreement.
Section 5.02. REMEDIES; WAIVERS.
(a) Upon the occurrence of an Event of Default, Financial Security
may exercise any one or more of the rights and remedies set forth below:
(i) declare the Premium Supplement to be immediately due and
payable, and the same shall thereupon be immediately due and payable,
whether or not Financial Security shall have declared an "Event of Default"
or shall have exercised, or be entitled to exercise, any other rights or
remedies hereunder;
(ii) exercise any rights and remedies available under the
Transaction Documents in its own capacity or in its capacity as the Person
entitled to exercise the rights of Controlling Party under the Transaction
Documents; or
(iii) take whatever action at law or in equity as may appear
necessary or desirable in its judgment to enforce performance of any
obligation of the Trust, each Class GP Certificateholder, the Seller or OFL
under the Transaction Documents; PROVIDED, HOWEVER, that Financial Security
shall not be entitled hereunder to file any
62
<PAGE>
petition with respect to the Trust or the Trust Property under any
bankruptcy or insolvency law.
(b) Unless otherwise expressly provided, no remedy herein conferred
upon or reserved is intended to be exclusive of any other available remedy, but
each remedy shall be cumulative and shall be in addition to other remedies given
under the Transaction Documents or existing at law or in equity. No delay or
failure to exercise any right or power accruing under any Transaction Document
upon the occurrence of any Event of Default or otherwise shall impair any such
right or power or shall be construed to be a waiver thereof, but any such right
and power may be exercised from time to time and as often as may be deemed
expedient. In order to entitle Financial Security to exercise any remedy
reserved to Financial Security in this Article, it shall not be necessary to
give any notice.
(c) If any proceeding has been commenced to enforce any right or
remedy under this Agreement, and such proceeding has been discontinued or
abandoned for any reason, or has been determined adversely to Financial
Security, then and in every such case the parties hereto shall, subject to any
determination in such proceeding, be restored to their respective former
positions hereunder, and, thereafter, all rights and remedies of Financial
Security shall continue as though no such proceeding had been instituted.
(d) Financial Security shall have the right, to be exercised in its
complete discretion, to waive any covenant, Default or Event of Default by a
writing setting forth the terms, conditions and extent of such waiver signed by
Financial Security and delivered to the Seller and OFL. Any such waiver may
only be effected in writing duly executed by Financial Security, and no other
course of conduct shall constitute a waiver of any provision hereof. Unless
such writing expressly provides to the contrary, any waiver so granted shall
extend only to the specific event or occurrence so waived and not to any other
similar event or occurrence which occurs subsequent to the date of such waiver.
ARTICLE VI
MISCELLANEOUS
Section 6.01. AMENDMENTS, ETC. This Agreement may be amended,
modified or terminated only by written instrument or written instruments signed
by the parties hereto. No act or course of dealing shall be deemed to
constitute an amendment, modification or termination hereof.
Section 6.02. NOTICES. All demands, notices and other communications
to be given hereunder shall be in writing (except as otherwise specifically
provided herein) and shall be mailed by registered mail or overnight carrier,
personally delivered or telecopied (with confirmation by registered mail) to the
recipient as follows:
(a) To Financial Security:
Financial Security Assurance Inc.
63
<PAGE>
350 Park Avenue
New York, New York 10022
Attention: Surveillance Department
Confirmation: (212) 826-0100
Telecopy Nos.: (212) 339-3518
(212) 339-3529
(in each case in which notice or other communication to Financial
Security refers to an Event of Default, a claim on either Policy
or with respect to which failure on the part of Financial
Security to respond shall be deemed to constitute consent or
acceptance, then a copy of such notice or other communication
should also be sent to the attention of each of the General
Counsel and the Head--Financial Guaranty Group and shall be
marked to indicate "URGENT MATERIAL ENCLOSED.")
(b) To the Seller:
Olympic Receivables Finance Corp.
7825 Washington Avenue South, Suite 410
Minneapolis, Minnesota 55439-2435
Telephone: (612) 942-9888
Telecopier: (612) 942-6730
(c) To OFL:
Olympic Financial Ltd.
7825 Washington Avenue South
Minneapolis, Minnesota 55439-2435
Telephone: (612) 942-9880
Telecopier: (612) 942-6730
(d) To First Class GP Certificateholder:
Olympic First GP Inc.
7825 Washington Avenue South
Minneapolis, Minnesota 55439-2435
Telephone: (612) 942-9880
Telecopier: (612) 942-6730
(e) To Second Class GP Certificateholder:
Olympic Second GP Inc.
7825 Washington Avenue South
Minneapolis, Minnesota 55439-2435
Telephone: (612) 942-9880
Telecopier: (612) 942-6730
64
<PAGE>
(f) To the Trust:
Olympic Automobile Receivables Trust, 1996-B
c/o Mellon Bank (DE), National Association,
as Owner Trustee
919 North Market Street, Second Floor
Wilmington, Delaware 19801
Attention: Robert H. Bell
Telephone: (302) 421-2283
Telecopier: (302) 421-2323
with a copy to:
Mellon Bank, National Association
Two Mellon Bank Center
Room 325
Pittsburgh, Pennsylvania 15259
Attention: Kent Christman
Telephone: (412) 234-5737
Telecopier: (412) 234-9196
A party may specify an additional or different address or addresses by
writing mailed or delivered to the other party as aforesaid. All such notices
and other communications shall be effective upon receipt.
Section 6.03. SEVERABILITY. In the event that any provision of this
Agreement shall be held invalid or unenforceable by any court of competent
jurisdiction, the parties hereto agree that such holding shall not invalidate or
render unenforceable any other provision hereof. The parties hereto further
agree that the holding by any court of competent jurisdiction that any remedy
pursued by any party hereto is unavailable or unenforceable shall not affect in
any way the ability of such party to pursue any other remedy available to it.
Section 6.04. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
Section 6.05. CONSENT TO JURISDICTION.
(a) TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE PARTIES
THERETO HEREBY IRREVOCABLY SUBMIT TO THE JURISDICTION OF THE UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND ANY COURT IN THE STATE
OF NEW YORK LOCATED IN THE CITY AND COUNTY OF NEW YORK, AND ANY APPELLATE COURT
FROM ANY THEREOF, IN ANY ACTION, SUIT OR PROCEEDING BROUGHT AGAINST IT AND TO OR
IN CONNECTION WITH ANY OF THE TRANSACTION DOCUMENTS OR THE TRANSACTION OR FOR
RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT,
65
<PAGE>
AND THE PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREE THAT ALL
CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD OR DETERMINED
IN SUCH NEW YORK STATE COURT OR IN SUCH FEDERAL COURT. THE PARTIES HERETO
AGREE THAT A FINAL JUDGMENT IN ANY SUCH ACTION, SUIT OR PROCEEDING SHALL BE
CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT
OR IN ANY OTHER MANNER PROVIDED BY LAW. TO THE EXTENT PERMITTED BY APPLICABLE
LAW, THE PARTIES HERETO HEREBY WAIVE AND AGREE NOT TO ASSERT BY WAY OF
MOTION, AS A DEFENSE OR OTHERWISE IN ANY SUCH SUIT, ACTION OR PROCEEDING, ANY
CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF SUCH COURTS,
THAT THE SUIT, ACTION OR PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM, THAT
THE VENUE OF THE SUIT, ACTION OR PROCEEDING IS IMPROPER OR THAT THE RELATED
DOCUMENTS OR THE SUBJECT MATTER THEREOF MAY NOT BE LITIGATED IN OR BY SUCH
COURTS.
(b) To the extent permitted by applicable law, the parties hereto
shall not seek and hereby waive the right to any review of the judgment of any
such court by any court of any other nation or jurisdiction which may be called
upon to grant an enforcement of such judgment.
(c) Each of the Class GP Certificateholders, OFL and the Seller
hereby irrevocably appoints and designates CT Corporation System, whose address
is 1633 Broadway, New York, New York 10019, as its true and lawful attorney and
duly authorized agent for acceptance of service of legal process. Each of the
Class GP Certificateholders, the Seller and OFL agrees that service of such
process upon such Person shall constitute personal service of such process upon
it.
(d) Nothing contained in the Agreement shall limit or affect
Financial Security's right to serve process in any other manner permitted by law
or to start legal proceedings relating to any of the Transaction Documents
against the Seller or OFL or its property in the courts of any jurisdiction.
Section 6.06. CONSENT OF FINANCIAL SECURITY. In the event that
Financial Security's consent is required under any of the Transaction Documents,
the determination whether to grant or withhold such consent shall be made by
Financial Security in its sole discretion without any implied duty towards any
other Person, except as otherwise expressly provided therein.
Section 6.07. COUNTERPARTS. This Agreement may be executed in
counterparts by the parties hereto, and all such counterparts shall constitute
one and the same instrument.
Section 6.08. HEADINGS. The headings of articles and sections and
the table of contents contained in this Agreement are provided for convenience
only. They form no part of this Agreement and shall not affect its construction
or interpretation. Unless otherwise indicated, all references to articles and
sections in this Agreement refer to the corresponding articles and sections of
this Agreement.
66
<PAGE>
Section 6.09. TRIAL BY JURY WAIVED. EACH PARTY HERETO HEREBY WAIVES,
TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT TO A TRIAL BY JURY IN RESPECT
OF ANY LITIGATION ARISING DIRECTLY OR INDIRECTLY OUT OF, UNDER OR IN CONNECTION
WITH ANY OF THE TRANSACTION DOCUMENTS OR THE TRANSACTION. EACH PARTY HERETO (A)
CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY PARTY HERETO HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT IT WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT
HAS BEEN INDUCED TO ENTER INTO THE TRANSACTION DOCUMENTS TO WHICH IT IS A PARTY
BY, AMONG OTHER THINGS, THIS WAIVER.
Section 6.10. LIMITED LIABILITY. No recourse under any Transaction
Document shall be had against, and no personal liability shall attach to, any
officer, employee, director, affiliate or shareholder of any party hereto, as
such, by the enforcement of any assessment or by any legal or equitable
proceeding, by virtue of any statute or otherwise in respect of any of the
Transaction Documents, the Notes, the Certificates or the Policies, it being
expressly agreed and understood that each Transaction Document is solely a
corporate obligation of each party hereto, and that any and all personal
liability, either at common law or in equity, or by statute or constitution, of
every such officer, employee, director, affiliate or shareholder for breaches by
any party hereto of any obligations under any Transaction Document is hereby
expressly waived as a condition of and in consideration for the execution and
delivery of this Agreement.
Section 6.11. LIMITED LIABILITY OF MELLON BANK (DE), NATIONAL
ASSOCIATION. It is expressly understood and agreed by the parties hereto that
(a) this Agreement is executed and delivered by Mellon Bank (DE), National
Association, not individually or personally but solely as Owner Trustee on
behalf of the Trust, (b) each of the representations, undertakings and
agreements herein made on the part of the Trust is made and intended not as
personal representations, undertakings and agreements by Mellon Bank (DE),
National Association, but are made and intended for the purpose of binding only
the Trust Estate, (c) nothing herein contained shall be construed as creating
any liability on Mellon Bank (DE), National Association, individually or
personally, to perform any covenant of the Trust either expressed or implied
contained herein, all such liability, if any, being expressly waived by the
parties hereto and by any person claiming by, through or under such parties and
(d) under no circumstances shall Mellon Bank (DE), National Association be
personally liable for the payment of any indebtedness or expenses of the Trust
or be liable for the breach or failure of any obligation, representation,
warranty or covenant made or undertaken by the Trust under this Agreement.
Section 6.12. ENTIRE AGREEMENT. This Agreement and the Policies set
forth the entire agreement between the parties with respect to the subject
matter thereof, and this Agreement supersedes and replaces any agreement or
understanding that may have existed between the parties prior to the date hereof
in respect of such subject matter.
IN WITNESS WHEREOF, the parties hereto have duly executed and
delivered this Insurance and Indemnity Agreement, all as of the day and year
first above written.
67
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed and
delivered this Insurance and Indemnity Agreement, all as of the day and year
first above written.
FINANCIAL SECURITY ASSURANCE INC.
By:/s/ Roger K. Taylor
----------------------------------------------
Authorized Officer
OLYMPIC AUTOMOBILE RECEIVABLES
TRUST, 1996-C
By: Mellon Bank (DE), National Association,
not in its individual capacity, but solely in
its capacity as Owner Trustee under the Trust
Agreement
By:/s/ E.D. Renn
-----------------------------------------
E.D. Renn
Vice President
OLYMPIC FIRST GP INC.
By:/s/ John A. Witham
----------------------------------------------
John A. Witham
Vice President and Chief Financial Officer
OLYMPIC SECOND GP INC.
By:/s/ John A. Witham
----------------------------------------------
John A. Witham
Vice President and Chief Financial Officer
OLYMPIC FINANCIAL LTD.
By:/s/ John A. Witham
----------------------------------------------
John A. Witham
Executive Vice President and
Chief Financial Officer
OLYMPIC RECEIVABLES FINANCE CORP.
By:/s/ John A. Witham
----------------------------------------------
John A. Witham
Senior Vice President and
Chief Financial Officer
<PAGE>
AMENDMENT
dated as of September 12, 1996
among
OLYMPIC FINANCIAL LTD.
OLYMPIC RECEIVABLES FINANCE CORP.
FINANCIAL SECURITY ASSURANCE INC.
and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
as Collateral Agent
to
Series 1996-B Supplement dated as of June 14, 1996
Series 1996-A Supplement dated as of March 14, 1996
Series 1995-E Supplement dated as of December 6, 1995
Series 1995-D Supplement dated as of September 21, 1995
Series 1995-C Supplement dated as of June 15, 1995
Series 1995-B Supplement dated as of March 15, 1995
Series 1995-A Supplement dated as of February 9, 1995
Series 1994-B Supplement dated as of September 23, 1994
Series 1994-A Supplement dated as of April 5, 1994
Series 1993-D Supplement dated as of December 2, 1993
Series 1993-C Supplement dated as of August 17, 1993
Series 1993-B Supplement dated as of June 11, 1993
to
Spread Account Agreement
dated as of March 25, 1993
as amended and restated as of September 12, 1996<PAGE>
<PAGE>
Amendment dated as of September 12, 1996, among OLYMPIC FINANCIAL LTD., a
Minnesota corporation ("OFL"), OLYMPIC RECEIVABLES FINANCE CORP., a Delaware
corporation (the "Seller"), FINANCIAL SECURITY ASSURANCE INC., a New York stock
insurance company ("Financial Security") and NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Collateral Agent to the:
(i) Series 1996-B Supplement dated as of June 14, 1996 (the "Series 1996-B
Supplement");
(ii) Series 1996-A Supplement dated as of March 14, 1996, as amended by
that certain Amendment dated as of May 31, 1996 (the "May 1996 Amendment")
to certain of the Series Supplements (as hereinafter defined) (as amended,
the "Series 1996-A Supplement");
(iii) Series 1995-E Supplement dated as of December 6, 1995, as amended by
the May 1996 Amendment (as amended, the "Series 1995-E Supplement");
(iv) Series 1995-D Supplement dated as of September 21, 1995, as amended by
that certain Amendment dated as of December 6, 1995 (the "December 1995
Amendment") to certain of the Series Supplements, as further amended by the
May 1996 Amendment (as amended, the "Series 1995-D Supplement");
(v) Series 1995-C Supplement dated as of June 15, 1995, as amended by that
certain Amendment dated as of September 21, 1995 (the "September 1995
Amendment") to certain of the Series Supplements, as further amended by the
December 1995 Amendment and the May 1996 Amendment (as amended, the "Series
1995-C Supplement");
(vi) Series 1995-B Supplement dated as of March 15, 1995, as amended by
that certain Amendment dated as of June 15, 1995 (the "June 1995
Amendment") to certain Series Supplements (as hereinafter defined), as
further amended by the September 1995 Amendment, the December 1995
Amendment and the May 1996 Amendment (as amended, the "Series 1995-B
Supplement");
(vii) the Series 1995-A Supplement dated as of February 9, 1995, as amended
by the June 1995 Amendment, as further amended by the September 1995
Amendment, the December 1995 Amendment and the May 1996 Amendment (as
amended, the "Series 1995-A Supplement");
(viii) the Series 1994-B Supplement dated as of September 23, 1994, as
amended by the June 1995 Amendment, as further amended by the September
1995 Amendment and the December 1995 Amendment (as amended, the "Series
1994-B Supplement");
(ix) the Series 1994-A Supplement dated as of April 5, 1994 as amended by
the June 1995 Amendment, as further amended by the September 1995 Amendment
and the December 1995 Amendment (as amended, the "Series 1994-A
Supplement");
2
<PAGE>
(x) the Series 1993-D Supplement dated as of December 2, 1993, as amended
by the June 1995 Amendment, as further amended by the September 1995
Amendment and the December 1995 Amendment (as amended, the "Series 1993-D
Supplement");
(xi) the Series 1993-C Supplement dated as of August 17, 1993, as amended
by the June 1995 Amendment, as further amended by the September 1995
Amendment and the December 1995 Amendment (as amended, the "Series 1993-C
Supplement")
(xii) the Series 1993-B Supplement dated as of June 11, 1993, as amended by
the June 1995 Amendment, as further amended by the September 1995 Amendment
and the December 1995 Amendment (as amended, the "Series 1993-B
Supplement") (each of the supplements referred to in (i) through (xii)
herein, a "Series Supplement," and collectively, the "Series Supplements")
to the Spread Account Agreement, dated as of March 25, 1993, as amended and
restated as of September 12, 1996 among OFL, the Seller, Financial Security and
Norwest Bank Minnesota National Association as Trustee and as Collateral Agent
(the "Spread Account Agreement").
WHEREAS, Section 8.03 of the Spread Account Agreement permits amendment of
the Spread Account Agreement upon the terms and conditions specified therein.
WHEREAS, parties to the Spread Account Agreement (the "Parties") have
heretofore executed the Series Supplements;
WHEREAS, the Parties wish to amend the Series Supplements.
NOW, THEREFORE, the Parties agree that the Series Supplements are hereby
amended effective as of the date hereof as follows:
Section 1. DEFINITIONS. Each term used but not defined herein shall
have the meaning assigned to such term in the Spread Account Agreement or in
the relevant Series Supplement thereto, and when used herein with respect to a
particular Series shall have the meaning assigned to such term of such Series.
Section 2. AMENDMENT OF CERTAIN TERMS OF THE SERIES SUPPLEMENTS.
Section 1.1 of each of the Series Supplements is amended as follows:
(i) The text contained in paragraph (i) of the definition of "Trigger
Event" is deleted in each instance. Such paragraph (i) shall be reserved
in each instance and the paragraphs of the definition of "Trigger Event"
shall not be redesignated as a result of the deletion effected by this
Section 2(i).
(ii) Paragraph (ii) of the definition of "Trigger Event" is
amended by deleting the percentage specified therein and replacing such
percentage in each instance with the percentage corresponding to the
applicable Series Supplement specified under Column I of Exhibit A hereto.
3
<PAGE>
Section 3. COUNTERPARTS.
This Amendment to the Series Supplements may be executed in several
counterparts, each of which shall be deemed an original hereof and all of which,
when taken together, shall constitute one and the same Amendment to the Series
Supplements.
Section 4. RATIFICATION OF SPREAD ACCOUNT AGREEMENT.
Except as provided herein, all provisions, terms and conditions of the
Spread Account Agreement, including each Series Supplement, shall remain in full
force and effect. As amended hereby, the Spread Account Agreement, including
each Series Supplement is ratified and confirmed in all respects.
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of
the date set forth on the first page hereof.
OLYMPIC FINANCIAL LTD.
By /s/ John A. Witham
--------------------------------------------
John A. Witham
Executive Vice President
and Chief Financial Officer
OLYMPIC RECEIVABLES FINANCE CORP.
By /s/ John A. Witham
--------------------------------------------
John A. Witham
Vice President and Chief Financial Officer
FINANCIAL SECURITY ASSURANCE INC.
By /s/ Claire N. Robinson
--------------------------------------------
Authorized Officer
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Collateral Agent
By /s/ Thomas D. Wraalstad
--------------------------------------------
Thomas D. Wraalstad
Corporate Trust Officer
<PAGE>
AMENDMENT
dated as of September 12, 1996
to
Insurance and Indemnity Agreement dated as of June 14, 1996
Insurance and Indemnity Agreement dated as of March 14, 1996
Insurance and Indemnity Agreement dated as of December 6, 1995
Insurance and Indemnity Agreement dated as of September 21, 1995
Insurance and Indemnity Agreement dated as of June 15, 1995
Insurance and Indemnity Agreement dated as of March 15, 1995
Insurance and Indemnity Agreement dated as of February 9, 1995
Insurance and Indemnity Agreement dated as of September 23, 1994
Insurance and Indemnity Agreement dated as of April 5, 1994
Insurance and Indemnity Agreement dated as of December 2, 1993
Insurance and Indemnity Agreement dated as of August 17, 1993
Insurance and Indemnity Agreement dated as of June 11, 1993
Insurance and Indemnity Agreement dated as of March 25, 1993
<PAGE>
Amendment
to
Insurance and Indemnity Agreements
Amendment dated as of September 12, 1996 ("Amendment to Insurance and
Indemnity Agreements") to:
(i) Insurance and Indemnity Agreement dated as of June 14, 1996 (the
"Series 1996-B Insurance and Indemnity Agreement");
(ii) Insurance and Indemnity Agreement dated as of March 14, 1996, as
amended by that certain Amendment dated as of May 31, 1996 (the "May
Amendment") to certain of the Insurance and Indemnity Agreements (as
hereinafter defined) (as amended, the "Series 1996-A Insurance and
Indemnity Agreement");
(iii) Insurance and Indemnity Agreement dated as of December 6, 1995,
as amended by the May 1996 Amendment (as amended, the "Series 1995-E
Insurance and Indemnity Agreement");
(iv) Insurance and Indemnity Agreement dated as of September 21, 1995, as
amended by that certain Amendment dated as of December 6, 1995 (the
"December 1995 Amendment") to certain of the Insurance and Indemnity
Agreements, as further amended by the May 1996 Amendment (as amended,
the "Series 1995-D Insurance and Indemnity Agreement");
(v) Insurance and Indemnity Agreement dated as of June 15, 1995, as
amended by the December 1995 Amendment, as further amended by the May
1996 Amendment (as amended, the "Series 1995-C Insurance and Indemnity
Agreement");
(vi) Insurance and Indemnity Agreement dated as of March 15, 1995, as
amended by that certain Amendment dated as of June 15, 1995 (the "June
1995 Amendment") to certain of the Insurance and Indemnity Agreements,
as further amended by the December 1995 Amendment and the May 1996
Amendment (as amended, the "Series 1995-B Insurance and Indemnity
Agreement");
(vii) Insurance and Indemnity Agreement dated as of February 9, 1995,
as amended by the June 1995 Amendment, as further amended by the
December 1995 Amendment and May 1996 Amendment (as amended, the
"Series 1995-A Insurance and Indemnity Agreement");
(viii) Insurance and Indemnity Agreement dated as of September 23, 1994,
as amended by the June 1995 Amendment, as further amended by the
December 1995
<PAGE>
Amendment (as amended, the "Series 1994-B Insurance and
Indemnity Agreement");
(ix) Insurance and Indemnity Agreement dated as of April 5, 1994, as
amended by the June 1995 Amendment, as further amended by the December
1995 Amendment (as amended, the "Series 1994-A Insurance and Indemnity
Agreement");
(x) Insurance and Indemnity Agreement dated as of December 2, 1993, as
amended by the June 1995 Amendment, as further amended by the December
1995 Amendment (as amended, the "Series 1993-D Insurance and Indemnity
Agreement");
(xi) Insurance and Indemnity Agreement dated as of August 17, 1993, as
amended by the June 1995 Amendment, as further amended by the December
1995 Amendment (as amended, the "Series 1993-C Insurance and Indemnity
Agreement");
(xii) Insurance and Indemnity Agreement dated as of June 11, 1993, as
amended by the December 1995 Amendment (as amended, the "Series 1993-B
Insurance and Indemnity Agreement");
(xiii) Insurance and Indemnity Agreement dated as of March 25, 1993, as
amended by the December 1995 Amendment (as amended, the "Series 1993-A
Insurance and Indemnity Agreement") (each of the agreements referred
to in (i) through (xiii) herein, an "Insurance and Indemnity
Agreement," and collectively, the "Insurance and Indemnity
Agreements")
among Financial Security Assurance Inc., Olympic Automobile Receivables Trust,
1996-B, Olympic Automobile Receivables Trust, 1996-A, Olympic Automobile
Receivables Trust, 1995-E, Olympic Automobile Receivables Trust, 1995-D, Olympic
Automobile Receivables Trust, 1995-C, Olympic Automobile Receivables Trust,
1995-B, Olympic Automobile Receivables Trust, 1994-B, Olympic Automobile
Receivables Trust, 1994-A, Olympic Automobile Receivables Trust, 1993-D, Olympic
Automobile Receivables Trust, 1993-C, Olympic First GP Inc., Olympic Second
GP Inc., Olympic Receivables Finance Corp., and Olympic Financial Ltd, in each
case with respect to each Insurance and Indemnity Agreement with respect to
which such person is a party.
WHEREAS, the respective parties to each Insurance and Indemnity
Agreement (the "Respective Parties") have heretofore executed such Insurance and
Indemnity Agreement;
WHEREAS, the Respective Parties to each Insurance and Indemnity
Agreement wish to amend such Agreement.
NOW, THEREFORE, the Respective Parties to each Insurance and Indemnity
Agreement agree that such Agreement is hereby amended as follows:
2
<PAGE>
Section 1. AMENDMENT TO THE SERIES 1993-A INSURANCE AND INDEMNITY
AGREEMENT AND SERIES 1993-B INSURANCE AND INDEMNITY AGREEMENT.
(a) The text contained in paragraph (f) of Section 5.01 in each of
the Series 1993-A Insurance and Indemnity Agreement and the Series 1993-B
Insurance and Indemnity Agreement is deleted in its entirety. Such paragraph
(f) shall be reserved in each instance and the paragraphs of Section 5.01 shall
not be redesignated as a result of the deletion effected by this Section 1.
(b) Paragraph (g) of Section 5.01 in each of the Series 1993-A
Insurance and Indemnity Agreement and the Series 1993-B Insurance and Indemnity
Agreement is amended by deleting the percentage specified therein and replacing
such percentage in each instance with the percentage corresponding to the
applicable Series specified under Column I of Exhibit A hereto.
Section 2. AMENDMENT TO THE SERIES 1993-C INSURANCE AND INDEMNITY
AGREEMENT.
(a) The text contained in paragraph (j) of Section 5.01 in the
Series 1993-C Insurance and Indemnity Agreement is deleted in its entirety.
Such paragraph (j) shall be reserved and the paragraphs of Section 5.01 shall
not be redesignated as a result of the deletion effected by this Section 2.
(b) Paragraph (k) of Section 5.01 in the Series 1993-C Insurance and
Indemnity Agreement is amended by deleting the percentage specified therein and
replacing such percentage with the percentage corresponding to such Series
specified under Column I of Exhibit A hereto.
Section 3. AMENDMENT TO THE SERIES 1993-D INSURANCE AND INDEMNITY
AGREEMENT, SERIES 1994-A INSURANCE AND INDEMNITY AGREEMENT AND SERIES 1994-B
INSURANCE AND INDEMNITY AGREEMENT.
(a) The text contained in paragraph (k) of Section 5.01 in each of
the Series 1993-D Insurance and Indemnity Agreement, Series 1994-A Insurance and
Indemnity Agreement and Series 1994-B Insurance and Indemnity Agreement is
deleted in its entirety. Such paragraph (j) shall be reserved in each instance
and the paragraphs of Section 5.01 shall not be redesignated as a result of the
deletion effected by this Section 3.
(b) Paragraph (l) of Section 5.01 in each of the Series 1993-D
Insurance and Indemnity Agreement, Series 1994-A Insurance and Indemnity
Agreement and Series 1994-B Insurance and Indemnity Agreement is amended by
deleting the percentage specified therein and replacing such percentage in each
instance with the percentage corresponding to such Series specified under
Column I of Exhibit A hereto.
3
<PAGE>
Section 4. AMENDMENT TO THE SERIES 1995-B INSURANCE AND INDEMNITY
AGREEMENT.
(a) The text contained in paragraph (l) of Section 5.01 in the
Series 1995-B Insurance and Indemnity Agreement is deleted in its entirety.
Such paragraph (j) shall be reserved and the paragraphs of Section 5.01 shall
not be redesignated as a result of the deletion effected by this Section 4.
(b) Paragraph (m) of Section 5.01 in the Series 1995-B Insurance and
Indemnity Agreement is amended by deleting the percentage specified therein and
replacing such percentage with the percentage corresponding to such Series
specified under Column I of Exhibit A hereto.
Section 5. AMENDMENT TO THE SERIES 1995-A INSURANCE AND INDEMNITY
AGREEMENT, SERIES 1995-C INSURANCE AND INDEMNITY AGREEMENT, SERIES 1995-D
INSURANCE AND INDEMNITY AGREEMENT, SERIES 1995-E INSURANCE AND INDEMNITY
AGREEMENT, SERIES 1996-A INSURANCE AND INDEMNITY AGREEMENT AND SERIES 1996-B
INSURANCE AND INDEMNITY AGREEMENT.
(a) The text contained in paragraph (j) of Section 5.01 in each of
the Series 1995-A Insurance and Indemnity Agreement, Series 1995-C Insurance and
Indemnity Agreement, Series 1995-D Insurance and Indemnity Agreement,
Series 1995-E Insurance and Indemnity Agreement, Series 1996-A Insurance and
Indemnity Agreement and Series 1996-B Insurance and Indemnity Agreement is
deleted in its entirety. Such paragraph (j) shall be reserved in each instance
and the paragraphs of Section 5.01 shall not be redesignated as a result of the
deletion effected by this Section 5.
(b) Paragraph (k) of Section 5.01 in each of the Series 1995-A
Insurance and Indemnity Agreement, Series 1995-C Insurance and Indemnity
Agreement, Series 1995-D Insurance and Indemnity Agreement, Series 1995-E
Insurance and Indemnity Agreement, Series 1996-A Insurance and Indemnity
Agreement and Series 1996-B Insurance and Indemnity Agreement is amended by
deleting the percentage specified therein and replacing such percentage in each
instance with the percentage corresponding to the applicable Series specified
under Column I of Exhibit A hereto.
Section 6. COUNTERPARTS.
This Amendment to the Insurance and Indemnity Agreements may be
executed in several counterparts, each of which shall be deemed an original
hereof and all of which, when taken together, shall constitute one and the same
Amendment to the Insurance and Indemnity Agreements.
Section 7. INSURANCE AND INDEMNITY AGREEMENTS.
Except as provided herein, all provisions, terms and conditions of the
Insurance and Indemnity Agreements shall remain in full force and effect. As
amended hereby, the Insurance and Indemnity Agreements are ratified and
confirmed in all respects.
4
<PAGE>
Section 8. AUTHORIZATION. By its execution hereof, Financial
Security Assurance Inc. hereby instructs the Owner Trustee of each of Olympic
Automobile Receivables Trust 1996-B, Olympic Automobile Receivables
Trust 1996-A, Olympic Automobile Receivables Trust 1995-E, Olympic Automobile
Receivables Trust 1995-D, Olympic Automobile Receivables Trust 1995-C, Olympic
Automobile Receivables Trust 1995-B, Olympic Automobile Receivables
Trust 1994-B, Olympic Automobile Receivables Trust 1994-A, Olympic Automobile
Receivables Trust 1993-D and Olympic Automobile Receivables Trust 1993-C, each
in accordance with Section 6.3 of the respective Trust Agreements, to execute
this Amendment.
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment to the
respective Insurance and Indemnity Agreements specified below as of the date set
forth on the first page hereof.
With respect to each Insurance and Indemnity
Agreement:
FINANCIAL SECURITY ASSURANCE INC.
By: /s/ CLAIRE M. ROBINSON
-----------------------------------------
Authorized Officer
OLYMPIC RECEIVABLES FINANCE CORP.
By: /s/ JOHN A. WITHAM
-----------------------------------------
John A. Witham
Senior Vice President
and Chief Financial Officer
OLYMPIC FINANCIAL LTD.
By: /s/ JOHN A. WITHAM
-----------------------------------------
John A. Witham
Executive Vice President
and Chief Financial Officer
With respect to Series 1996-B Insurance and
Indemnity Agreement, Series 1996-A Insurance
and Indemnity Agreement, Series 1995-E
Insurance and Indemnity Agreement, Series
1995-D Insurance and Indemnity Agreement,
Series 1995-C Insurance and Indemnity
Agreement, Series 1995-B Insurance and
Indemnity Agreement Series 1994-B Insurance
and Indemnity Agreement, Series 1994-A
Insurance and Indemnity Agreement,
Series 1993-D Indemnity Agreement,
Series 1993-C Insurance and Indemnity
Agreement:
OLYMPIC FIRST GP INC.
By: /s/ JOHN A. WITHAM
-----------------------------------------
John A. Witham
Vice President
and Chief Financial Officer
OLYMPIC SECOND GP INC.
By: /s/ JOHN A. WITHAM
-----------------------------------------
John A. Witham
Vice President
and Chief Financial Officer
<PAGE>
With respect to Series 1996-B Insurance
and Indemnity Agreement only:
OLYMPIC AUTOMOBILE RECEIVABLES TRUST, 1996-B
By: Mellon Bank (DE), National Association,
not in its individual capacity, but
solely in its capacity as Owner Trustee
By: /s/ E.D. RENN
-----------------------------------------
E.D. Renn
Vice President
With respect to Series 1996-A Insurance and
Indemnity Agreement only:
OLYMPIC AUTOMOBILE RECEIVABLES TRUST, 1996-A
By: Mellon Bank (DE), National Association,
not in its individual capacity, but
solely in its capacity as Owner Trustee
By: /s/ E.D. RENN
-----------------------------------------
E.D. Renn
Vice President
With respect to Series 1995-E Insurance and
Indemnity Agreement only:
OLYMPIC AUTOMOBILE RECEIVABLES TRUST, 1995-E
By: Wilmington Trust Company,
not in its individual capacity, but solely
in its capacity as Owner Trustee
By: /s/ DENISE M. GERAN
-----------------------------------------
Name: DENISE M. GERAN
Title: Financial Services Officer
<PAGE>
With respect to Series 1995-D Insurance and
Indemnity Agreement only:
OLYMPIC AUTOMOBILE RECEIVABLES TRUST, 1995-D
By: Wilmington Trust Company,
not in its individual capacity, but solely
in its capacity as Owner Trustee
By: /s/ DENISE M. GERAN
-----------------------------------------
Name: DENISE M. GERAN
Title: Financial Services Officer
With respect to Series 1995-C Insurance and
Indemnity Agreement only:
OLYMPIC AUTOMOBILE RECEIVABLES TRUST, 1995-C
By: Wilmington Trust Company,
not in its individual capacity, but solely
in its capacity as Owner Trustee
By: /s/ DENISE M. GERAN
-----------------------------------------
Name: DENISE M. GERAN
Title: Financial Services Officer
With respect to Series 1995-B Insurance and
Indemnity Agreement only:
OLYMPIC AUTOMOBILE RECEIVABLES TRUST, 1995-B
By: Wilmington Trust Company,
not in its individual capacity, but solely
in its capacity as Owner Trustee
By: /s/ DENISE M. GERAN
-----------------------------------------
Name: DENISE M. GERAN
Title: Financial Services Officer
<PAGE>
With respect to Series 1994-B Insurance and
Indemnity Agreement only:
OLYMPIC AUTOMOBILE RECEIVABLES TRUST, 1994-b
By: Wilmington Trust Company,
not in its individual capacity, but solely
in its capacity as Owner Trustee
By: /s/ DENISE M. GERAN
-----------------------------------------
Name: DENISE M. GERAN
Title: Financial Services Officer
With respect to Series 1994-A Insurance and
Indemnity Agreement only:
OLYMPIC AUTOMOBILE RECEIVABLES TRUST, 1994-A
By: Wilmington Trust Company,
not in its individual capacity, but solely
in its capacity as Owner Trustee
By: /s/ DENISE M. GERAN
-----------------------------------------
Name: DENISE M. GERAN
Title: Financial Services Officer
<PAGE>
With respect to Series 1993-D Insurance and
Indemnity Agreement only:
OLYMPIC AUTOMOBILE RECEIVABLES TRUST, 1993-D
By: Wilmington Trust Company,
not in its individual capacity, but solely
in its capacity as Owner Trustee
By: /s/ DENISE M. GERAN
-----------------------------------------
Name: DENISE M. GERAN
Title: Financial Services Officer
With respect to Series 1993-C Insurance and
Indemnity Agreement only:
OLYMPIC AUTOMOBILE RECEIVABLES TRUST, 1993-C
By: Wilmington Trust Company,
not in its individual capacity, but solely
in its capacity as Owner Trustee
By: /s/ DENISE M. GERAN
-----------------------------------------
Name: DENISE M. GERAN
Title: Financial Services Officer
<PAGE>
EXHIBIT A
SERIES DESIGNATION COLUMN I
Series 1993-A 5.50%
Series 1993-B 5.50%
Series 1993-C 5.50%
Series 1993-D 5.50%
Series 1994-A 5.50%
Series 1994-B 5.50%
Series 1995-A 6.52%
Series 1995-B 6.67%
Series 1995-C 6.61%
Series 1995-D 6.65%
Series 1995-E 6.77%
Series 1996-A 6.95%
Series 1996-B 7.05%
<PAGE>
EXH. 10.5
SPREAD ACCOUNT AGREEMENT,
dated as of March 25, 1993,
as amended and restated
as of September 12, 1996
among
OLYMPIC FINANCIAL LTD.,
OLYMPIC RECEIVABLES FINANCE CORP.,
FINANCIAL SECURITY ASSURANCE INC.
and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
as Trustee and as Collateral Agent
<PAGE>
TABLE OF CONTENTS
PAGE
----
ARTICLE I
DEFINITIONS
Section 1.01. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.02. Rules of Interpretation . . . . . . . . . . . . . . . . . . . 12
ARTICLE II
CREDIT ENHANCEMENT FEE; SERIES SUPPLEMENTS; THE COLLATERAL
Section 2.01. Series 1993-A Credit Enhancement Fee . . . . . . . . . . . . . 12
Section 2.02. Series Supplements . . . . . . . . . . . . . . . . . . . . . . 13
Section 2.03. Grant of Security Interest by OFL and the Seller . . . . . . . 13
Section 2.04. Priority . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 2.05. Seller and OFL Remain Liable . . . . . . . . . . . . . . . . . 14
Section 2.06. Maintenance of Collateral. . . . . . . . . . . . . . . . . . . 15
Section 2.07. Termination and Release of Rights. . . . . . . . . . . . . . . 15
Section 2.08. Non-Recourse Obligations of Seller . . . . . . . . . . . . . . 16
ARTICLE III
SPREAD ACCOUNTS
Section 3.01. Establishment of Spread Accounts; Initial Deposits into
Spread Accounts. . . . . . . . . . . . . . . . . . . . . . . . 16
Section 3.02. Investments. . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 3.03. Distributions: Priority of Payments. . . . . . . . . . . . . . 19
Section 3.04. General Provisions Regarding Spread Accounts . . . . . . . . . 22
Section 3.05. Reports by the Collateral Agent. . . . . . . . . . . . . . . . 23
ARTICLE IV
THE COLLATERAL AGENT
Section 4.01. Appointment and Powers . . . . . . . . . . . . . . . . . . . . 23
Section 4.02. Performance of Duties. . . . . . . . . . . . . . . . . . . . . 24
Section 4.03. Limitation on Liability. . . . . . . . . . . . . . . . . . . . 24
Section 4.04. Reliance upon Documents. . . . . . . . . . . . . . . . . . . . 24
Section 4.05. Successor Collateral Agent . . . . . . . . . . . . . . . . . . 25
Section 4.06. Indemnification. . . . . . . . . . . . . . . . . . . . . . . . 26
Section 4.07. Compensation and Reimbursement . . . . . . . . . . . . . . . . 27
i
<PAGE>
Section 4.08. Representations and Warranties of the Collateral Agent . . . . 27
Section 4.09. Waiver of Setoffs. . . . . . . . . . . . . . . . . . . . . . . 27
Section 4.10. Control by the Controlling Party . . . . . . . . . . . . . . . 28
ARTICLE V
COVENANTS OF THE SELLER
Section 5.01. Preservation of Collateral . . . . . . . . . . . . . . . . . . 28
Section 5.02. Opinions as to Collateral. . . . . . . . . . . . . . . . . . . 28
Section 5.03. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 5.04. Waiver of Stay or Extension Laws; Marshalling of Assets. . . . 29
Section 5.05. Noninterference, etc.. . . . . . . . . . . . . . . . . . . . . 29
Section 5.06. Seller Changes . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE VI
CONTROLLING PARTY; INTERCREDITOR PROVISIONS
Section 6.01. Appointment of Controlling Party . . . . . . . . . . . . . . . 30
Section 6.02. Controlling Party's Authority. . . . . . . . . . . . . . . . . 30
Section 6.03. Rights of Secured Parties. . . . . . . . . . . . . . . . . . . 32
Section 6.04. Degree of Care . . . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE VII
REMEDIES UPON DEFAULT
Section 7.01. Remedies upon a Default. . . . . . . . . . . . . . . . . . . . 33
Section 7.02. Waiver of Default. . . . . . . . . . . . . . . . . . . . . . . 33
Section 7.03. Restoration of Rights and Remedies . . . . . . . . . . . . . . 33
Section 7.04. No Remedy Exclusive. . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE VIII
MISCELLANEOUS
Section 8.01. Further Assurances . . . . . . . . . . . . . . . . . . . . . . 34
Section 8.02. Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 8.03. Amendments; Waivers. . . . . . . . . . . . . . . . . . . . . . 34
Section 8.04. Severability . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 8.05. Nonpetition Covenant . . . . . . . . . . . . . . . . . . . . . 35
Section 8.06. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 8.07. Term of this Agreement . . . . . . . . . . . . . . . . . . . . 37
ii
<PAGE>
Section 8.08. Assignments: Third-Party Rights; Reinsurance . . . . . . . . . 37
Section 8.09. Consent of Controlling Party . . . . . . . . . . . . . . . . . 38
Section 8.10. Trial by Jury Waived . . . . . . . . . . . . . . . . . . . . . 38
Section 8.11. Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 8.12. Consents to Jurisdiction . . . . . . . . . . . . . . . . . . . 38
Section 8.13. Limitation of Liability. . . . . . . . . . . . . . . . . . . . 39
Section 8.14. Determination of Adverse Effect. . . . . . . . . . . . . . . . 39
Section 8.15. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 8.16. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
EXHIBIT A Form of Pooling and Servicing Agreement
iii
<PAGE>
SPREAD ACCOUNT AGREEMENT, dated as of March 25, 1993, as amended and restated as
of September 12, 1996 (the "Agreement"), by and among OLYMPIC FINANCIAL LTD., a
Minnesota corporation ("OFL"), OLYMPIC RECEIVABLES FINANCE CORP., a Delaware
corporation (the "Seller"), FINANCIAL SECURITY ASSURANCE INC., a New York stock
insurance company ("Financial Security") and NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, a national banking association in its capacities as Trustee under
each Pooling and Servicing Agreement referred to below and as Trustee under each
Indenture referred to below, in such capacity as agent for the Noteholders and
Certificateholders with respect to the related Series (in each such capacities
the "Trustee") and as Collateral Agent (as defined below).
RECITALS
1. Olympic Automobile Receivables Trust, 1993-A (the "Series 1993-A
Trust") was formed pursuant to a Pooling and Servicing Agreement, dated as of
March 1, 1993 (the "Series 1993-A Pooling and Servicing Agreement"), among OFL,
as Servicer, the Seller, the Trustee and the Backup Servicer.
2. Pursuant to the Series 1993-A Pooling and Servicing Agreement,
the Seller sold to the Series 1993-A Trust all of its right, title and interest
in and to the Receivables and certain other Trust Property in exchange for the
Series 1993-A Certificates.
3. The Seller has requested that Financial Security issue the
Series 1993-A Policy to the Trustee to guarantee payment of the Guaranteed
Distributions (as defined in such Policy) on each Distribution Date in respect
of the Series 1993-A Certificates.
4. In partial consideration of the issuance of the Series 1993-A
Policy, the Seller has agreed that Financial Security shall have certain rights
as Controlling Party, to the extent set forth herein with respect to the
Series 1993-A Trust.
5. The Seller is a wholly owned special purpose subsidiary of OFL.
The Series 1993-A Trust has agreed to pay a certain Credit Enhancement Fee to
the Seller in consideration of the obligations of the Seller and OFL pursuant
hereto in respect of the Series 1993-A Certificates and in consideration of the
obligations of OFL pursuant to the Series 1993-A Insurance Agreement (such
obligations forming part of the Series 1993-A Insurer Secured Obligations
referred to herein). The Series 1993-A Insurer Secured Obligations form part of
the consideration to Financial Security for its issuance of the Series 1993-A
Policy.
6. In order to secure the performance of the Series 1993-A Secured
Obligations, to further effect and enforce the subordination provisions to which
the Credit Enhancement Fee is subject, and in consideration of the receipt of
the Credit Enhancement Fee, OFL and the Seller agreed to pledge the
Series 1993-A Collateral as Collateral to the Collateral Agent for the benefit
of Financial Security and for the benefit of the Trustee on behalf of the Trust,
upon the terms and conditions set forth herein.
7. It is contemplated (A) that the Seller and OFL may enter into one
or more additional Pooling and Servicing Agreements with the Trustee and the
Backup Servicer pursuant
<PAGE>
to which the Seller will sell all of its right, title and interest in pools
of Receivables, and that Financial Security in its discretion may issue one
or more Policies with respect to certain guaranteed distributions on the
corresponding Series of Certificates and (B) that the Seller and OFL may
enter into one or more Sale and Servicing Agreements with the related Trust
and the Backup Servicer pursuant to which the Seller will sell all of its
right, title and interest in pools of Receivables (each, a "Sale and
Servicing Agreement"), that the Trust will issue one or more classes of
Certificates pursuant to a Trust Agreement among the Seller, Financial
Security, an Owner Trustee and certain other parties specified therein (each,
a "Trust Agreement"), and will issue one or more classes of Notes pursuant to
an Indenture among the related Trust, the Indenture Trustee and the
Collateral Agent, and that Financial Security in its discretion may issue one
or more Policies with respect to certain guaranteed distributions on the
corresponding Series of Certificates and may issue one or more Policies with
respect to certain scheduled payments on the corresponding Series of Notes.
In connection with any such issuance of additional Policies, it is
contemplated that Financial Security will obtain certain Controlling Party
rights with respect to the related Series, and that, in connection with each
such additional Series, the parties hereto will enter into a Series
Supplement hereto pursuant to which the Seller will pledge additional
Collateral pursuant to the terms hereof.
8. The Seller has entered into a Repurchase Agreement dated as of
August 1, 1994 with Telluride Funding Corp. (the "Issuer") (the "Repurchase
Agreement") pursuant to which the Seller has sold or will sell all of its right,
title and interest in Receivables, and that the Issuer will issue one or more
classes or tranches of Notes pursuant to an Indenture among the Issuer, the
Indenture Trustee and the Collateral Agent, and that Financial Security in its
discretion may issue one or more Policies with respect to certain scheduled
payments on the corresponding Notes.
9. The parties have previously executed, amended and restated this
Agreement, and now wish to further amend and restate this Agreement to
supplement certain provisions therein in order to reflect the intent of the
parties.
AGREEMENTS
In consideration of the premises, and for other good and valuable
consideration, the adequacy, receipt and sufficiency of which are hereby
acknowledged the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. DEFINITIONS. All terms defined in the document
entitled "OFL Grantor Trusts Standard Terms and Conditions of Agreement
Effective March 1, 1993" (the "Standard Terms and Conditions") shall have the
same meaning with respect to each Series in this Agreement. If the related
Series was issued pursuant to a Pooling and Servicing Agreement, all terms
defined in Section 1.01 of such Pooling and Servicing Agreement shall
2
<PAGE>
have the same meaning with respect to the related Series in this Agreement.
If the related Series was issued pursuant to a Trust Agreement, Sale and
Servicing Agreement and Indenture, all terms defined in the related Sale and
Servicing Agreement shall have the same meaning with respect to the related
Series in this Agreement. If the related Series was issued pursuant to an
Indenture and the related Receivables were sold to the Issuer pursuant to a
Repurchase Agreement, all terms defined in the related Servicing Agreement
and Repurchase Agreement shall have the same meaning with respect to the
related Series in this Agreement. If a term is defined herein with respect
to Series 1993-A, if applicable, such term shall be defined with respect to
any other Series in the Series Supplement related thereto. The following
terms shall have the following respective meanings:
"AUTHORIZED OFFICER" means, (i) with respect to Financial Security,
the Chairman of the Board, the President, the Executive Vice President or any
Managing Director of Financial Security, (ii) with respect to the Trustee or the
Collateral Agent, any Vice President or Trust Officer thereof, (iii) with
respect to OFL, the President or any Vice President thereof, and (iv) with
respect to the Seller, the President or any Vice President thereof.
"AVERAGE DELINQUENCY RATIO" means, with respect to any Series and any
Determination Date, the arithmetic average of the Delinquency Ratios for such
Determination Date and the two immediately preceding Determination Dates.
"CAPTURE EVENT" means the occurrence of an "Event of Default," as
defined in the Indenture, dated as of April 28, 1995, between OFL and Norwest
Bank Minnesota, National Association, as amended or supplemented, relating to
OFL's $145,000,000 13% Senior Notes due 2000, with respect to which a permanent
waiver has not been effected in accordance with the terms of such agreement.
"COLLATERAL" means the Series 1993-A Collateral and, with respect to
any other Series, all collateral delivered hereunder with respect to each of the
Series, as specified in the related Series Supplement.
"COLLATERAL AGENT" means, initially, Norwest Bank Minnesota, National
Association, in its capacity as collateral agent on behalf of the Secured
Parties, including its successors in interest, until a successor Person shall
have become the Collateral Agent pursuant to Section 4.05 hereof, and thereafter
"Collateral Agent" shall mean such successor Person.
"COLLECTION ACCOUNT SHORTFALL" means (A), with respect to any Series
created pursuant to a Pooling and Servicing Agreement, any Distribution Date,
and a time of determination, the excess, if any, of the amount required to be
distributed on such Distribution Date pursuant to subsections (i) through (vi)
of Section 4.6(a) of the Standard Terms and Conditions over the amount on
deposit in and available for distribution (or, for the purposes of
Section 3.03(a), calculated on a pro forma basis to be on deposit in and
available for distribution) on such Distribution Date from the Collection
Account related to such Series, and (B) with respect to any Series created
pursuant to a Trust Agreement, Sale and Servicing Agreement and Indenture, or
with respect to any Series issued by the Issuer, the meaning assigned in the
related Series Supplement.
3
<PAGE>
"CONTROLLING PARTY" means with respect to a Series, at any time, the
Person designated as the Controlling Party at such time pursuant to Section 6.01
hereof.
"CRAM DOWN LOSS" means, if a court of appropriate jurisdiction in an
insolvency proceeding shall have issued an order reducing the Principal Balance
of a Receivable, the amount of such reduction. A "Cram Down Loss" shall be
deemed to have occurred on the date of issuance of such order.
"CUMULATIVE DEFAULT RATE" means, with respect to any Determination
Date and any Series, the fraction, expressed as a percentage, the numerator of
which is equal to the sum of (a) the Principal Balance of all Receivables which
became Spread Account Liquidated Receivables since the Cutoff Date as of the
related Accounting Date plus (b) the Principal Balance of all Receivables with
respect to which all or any portion of a Scheduled Payment has become 91 or more
days delinquent as of the related Accounting Date (not including those
Receivables included in clause (a) above) and the denominator of which is equal
to the sum of (i) the original Aggregate Principal Balance as of the Initial
Cutoff Date plus (ii) the Prefunded Amount as of the Series Closing Date.
"CUMULATIVE NET LOSS RATE" means, with respect to any Determination
Date and any Series, the fraction, expressed as a percentage, the numerator of
which is equal to the sum of (a) Net Losses for such Determination Date plus
(b) 40% of the Principal Balance of all Receivables with respect to which all or
any portion of a Scheduled Payment has become 91 or more days delinquent (not
including Receivables included under the definition of Net Losses in clause
(a) above) as of the related Accounting Date and the denominator of which is
equal to the sum of (i) the original Aggregate Principal Balance as of the
Initial Cutoff Date plus (ii) the Prefunded Amount as of the Series Closing
Date.
"DEEMED CURED" means, (a) with respect to a Trigger Event that has
occurred pursuant to clause (i) or (ii) of the definition thereof, as of a
Determination Date with respect to Series 1994-B, Series 1994-A, Series 1993-D,
Series 1993-C, Series 1993-B or Series 1993-A, that no such clause (i) or clause
(ii) Trigger Event with respect to such Series shall have occurred as of such
Determination Date or as of any of the five consecutively preceding
Determination Dates, and (b) with respect to a Trigger Event that has occurred
pursuant to clause (iii) or clause (iv) of the definition thereof, as of the
next Determination Date which occurs in a calendar month which is a multiple of
three months succeeding the Closing Date with respect to Series 1994-B,
Series 1994-A, Series 1993-D, Series 1993-C, Series 1993-B or Series 1993-A,
that no such clause (iii) or clause (iv) Trigger Event with respect to such
Series shall have occurred as of such Determination Date.
"DEFAULT" means, with respect to any Series, at any time, (i) if
Financial Security is then the Controlling Party with respect to such Series,
any Insurance Agreement Event of Default with respect to such Series, and
(ii) if the Trustee is then the Controlling Party with respect to such Series,
any Servicer Termination Event with respect to such Series.
"DELINQUENCY RATIO" means, with respect to any Determination Date and
any Series, the fraction, expressed as a percentage, the numerator of which is
equal to the sum of
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the Principal Balances (as of the related Accounting Date) of all Receivables
that were delinquent with respect to all or any portion of a Scheduled
Payment more than 30 days as of the related Accounting Date or that became a
Purchased Receivable as of the related Accounting Date and that were
delinquent with respect to all or any portion of a Scheduled Payment more
than 30 days as of such Accounting Date and the denominator of which is equal
to the Aggregate Principal Balance as of the related Accounting Date.
"ELIGIBLE ACCOUNT" means a segregated trust account that (i) is either
(x) maintained with a depository institution or trust company the long-term
unsecured debt obligations of which are rated "AA" or higher by Standard &
Poor's and "Aa2" or higher by Moody's, or (y) maintained with a depository
institution or trust company the commercial paper or other short-term unsecured
debt obligations of which are rated "A-l+" by Standard & Poor's and "P-l" by
Moody's and (ii) in either case, such depository institution or trust company
shall have been specifically approved by the Controlling Party, acting in its
discretion, by written notice to the Collateral Agent.
"FINAL TERMINATION DATE" means, with respect to a Series, the date
that is the later of (i) the Insurer Termination Date with respect to such
Series and (ii) the Trustee Termination Date with respect to such Series.
"FINANCIAL SECURITY DEFAULT" means, with respect to any Series, any
one of the following events shall have occurred and be continuing:
(a) Financial Security shall have failed to make a payment required
under a related Policy;
(b) Financial Security shall have (i) filed a petition or commenced
any case or proceeding under any provision or chapter of the United States
Bankruptcy Code, the New York State Insurance Law or any other similar
federal or state law relating to insolvency, bankruptcy, rehabilitation,
liquidation or reorganization, (ii) made a general assignment for the
benefit of its creditors, or (iii) had an order for relief entered against
it under the United States Bankruptcy Code, the New York State Insurance
Law, or any other similar federal or state law relating to insolvency,
bankruptcy, rehabilitation, liquidation or reorganization which is final
and nonappealable; or
(c) a court of competent jurisdiction, the New York Department of
Insurance or other competent regulatory authority shall have entered a
final and nonappealable order, judgment or decree (i) appointing a
custodian, trustee, agent or receiver for Financial Security or for all or
any material portion of its property or (ii) authorizing the taking of
possession by a custodian, trustee, agent or receiver of Financial Security
(or the taking of possession of all or any material portion of the property
of Financial Security).
"INITIAL PRINCIPAL AMOUNT" means $59,222,640.38 with respect to
Series 1993-A.
"INITIAL SPREAD ACCOUNT DEPOSIT" means $2,368,906 for Series 1993-A.
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"INITIAL SPREAD ACCOUNT MAXIMUM AMOUNT" means, with respect to
Series 1993-A and any Distribution Date, an amount equal to the greater of
(i) 7% of the Certificate Balance as of such Distribution Date (after giving
effect to the distribution in respect of principal made on such Distribution
Date) and (ii) the Spread Account Minimum Amount as of such Distribution Date.
"INSURANCE AGREEMENT" means, with respect to any Series, the Insurance
and Indemnity Agreement among Financial Security, the Seller, OFL and such other
parties as may be named therein, pursuant to which Financial Security issued
(A) a Policy to the Trustee or (B) one or more Note Policies to the Trustee
and/or one or more Certificate Policies to the Owner Trustee.
"INSURER SECURED OBLIGATIONS" means, with respect to a Series, all
amounts and obligations which OFL, the Seller and such other parties as may be
named therein may at any time owe or be required to perform to or on behalf of
Financial Security (or any agents, accountants or attorneys for Financial
Security) under the Insurance Agreement related to such Series or under any
Transaction Document in respect of such Series, regardless of whether such
amounts are owed or performance is due now or in the future, whether liquidated
or unliquidated, contingent or non-contingent.
"INSURER TERMINATION DATE" means, with respect to any Series, the date
which is the latest of (i) the date of the expiration of all Policies issued in
respect of such Series, (ii) the date on which Financial Security shall have
received payment and performance in full of all Insurer Secured Obligations with
respect to such Series and (iii) the latest date on which any payment referred
to above could be avoided as a preference or otherwise under the United States
Bankruptcy Code or any other similar federal or state law relating to
insolvency, bankruptcy, rehabilitation, liquidation or reorganization, as
specified in an Opinion of Counsel delivered to the Collateral Agent and the
Trustee.
"ISSUER" means Telluride Funding Corp.
"LIEN" means, as applied to the property or assets (or the income,
proceeds, products, rents or profits therefrom) of any Person, in each case
whether the same is consensual or nonconsensual or arises by contract, operation
of law, legal process or otherwise: (a) any mortgage, lien, pledge, attachment,
charge, lease, conditional sale or other title retention agreement, or other
security interest or encumbrance of any kind; or (b) any arrangement, express or
implied, under which such property or assets (and/or such income, proceeds,
products, rents or profits) are transferred, sequestered or otherwise identified
for the purpose of subjecting or making available the same for payment of debt
or performance of any other obligation in priority to the payment of the
general, unsecured creditors of such Person.
"NET LOSSES" means, with respect to any Determination Date and any
Series, the positive difference of (A) the sum of (i) the aggregate of the
Principal Balances as of the related Accounting Date (plus accrued and unpaid
interest to the end of the related Monthly Period, at the applicable APR) of all
Receivables that became Spread Account Liquidated Receivables since the Cutoff
Date, plus (ii) the Purchase Amount of all Receivables that became Purchased
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Receivables as of the related Accounting Date and that were delinquent with
respect to all or any portion of a Scheduled Payment more than 30 days as of
such Accounting Date, plus (iii) the aggregate of all Cram Down Losses as of the
related Accounting Date that occurred since the Cutoff Date, over (B) the
Liquidation Proceeds received by the Trust as of the related Accounting Date
since the Cutoff Date.
"NON-CONTROLLING PARTY" means, with respect to a Series, at any time,
the Secured Party that is not the Controlling Party at such time.
"OBLIGOR" means, with respect to any Receivable, the purchaser or the
co-purchasers of the Financed Vehicle and any other Person or Persons who are
primarily or secondarily obligated to make payments under a Receivable.
"OFL" means Olympic Financial Ltd., a Minnesota corporation.
"OPINION OF COUNSEL" means a written opinion of counsel acceptable, as
to form, substance and issuing counsel, to the Controlling Party.
"PAYMENT PRIORITIES" means the priority of PRO RATA distributions
described in clause (iii) of priority THIRD of Section 3.03(a).
"POLICY" means the Series 1993-A Policy and any insurance policy
subsequently issued by Financial Security with respect to a Series.
"POOLING AND SERVICING AGREEMENT" means, with respect to
Series 1993-A, the Series 1993-A Pooling and Servicing Agreement and, for each
other Series created pursuant to a Pooling and Servicing Agreement, the Pooling
and Servicing Agreement related to such Series.
"SECURED OBLIGATIONS" means, with respect to each Series, the Insurer
Secured Obligations with respect to such Series and the Trustee Secured
Obligations with respect to such Series.
"SECURED PARTIES" means, with respect to a Series and the related
Collateral, each of the Trustee, in respect of the Trustee Secured Obligations
with respect to such Series, and Financial Security, in respect of the Insurer
Secured Obligations with respect to such Series.
"SECURITY INTERESTS" means, with respect to Series 1993-A
Certificates, the security interests and Liens in the Series 1993-A Collateral
granted pursuant to Section 2.03 hereof, and, with respect to any other Series,
the security interests and Liens in the related Collateral granted pursuant to
the related Series Supplement.
"SERIES 1993-A CERTIFICATES" means the Series of Certificates issued
on the date hereof pursuant to the Series 1993-A Pooling and Servicing
Agreement.
"SERIES 1993-A COLLATERAL" has the meaning specified in
Section 2.03(a) hereof.
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"SERIES 1993-A CREDIT ENHANCEMENT FEE" means the amount distributable
on each Distribution Date pursuant to Section 4.6(a)(vi) and (vii) of the
Standard Terms and Conditions as incorporated by reference in the Series 1993-A
Pooling and Servicing Agreement.
"SERIES 1993-A POOLING AND SERVICING AGREEMENT" means the Pooling and
Servicing Agreement, dated as of the date hereof, among OFL, in its individual
capacity and as Servicer, the Seller, the Trustee and the Backup Servicer, as
such agreement may be supplemented, amended or modified from time to time.
"SERIES 1993-A RECEIVABLE" means each Receivable referenced on the
Schedule of Receivables attached to the Series 1993-A Pooling and Servicing
Agreement.
"SERIES OF SECURITIES" or "SERIES" means the Series 1993-A
Certificates or, as the context may require, any other series of Certificates
and/or Notes issued as described in Section 2.02 hereof, or collectively, all
such series; PROVIDED, HOWEVER, Series, as used collectively shall not include
any Series of Warehousing Notes when such term is used in, or with respect to,
the definitions "Average Default Rate," "Average Delinquency Ratio," "Average
Net Loss Rate," "Deemed Cured," "Delinquency Ratio," "Net Loss Rate," "Spread
Account Shortfall" and "Spread Account Default Level."
"SERIES SUPPLEMENT" means a supplement hereto executed by the parties
hereto in accordance with Section 2.02 hereof.
"SPREAD ACCOUNT" has the meaning specified in Section 3.01(a) hereof.
"SPREAD ACCOUNT ADDITIONAL DEPOSIT" with respect to any Series created
pursuant to a Trust Agreement, Sale and Servicing Agreement and Indenture, has
the meaning assigned in the related Series Supplement.
"SPREAD ACCOUNT LIQUIDATED RECEIVABLE" means, with respect to any
Monthly Period, a Receivable as to which (i) 91 days have elapsed since the
Servicer repossessed the related Financed Vehicle, (ii) the Servicer has
determined in good faith that all amounts it expects to recover have been
received, or (iii) all or any portion of a Scheduled Payment shall have become
more than 180 days past due.
"SPREAD ACCOUNT MAXIMUM AMOUNT" means, with respect to Series 1993-A
and any Distribution Date:
(i) if no Insurance Agreement Event of Default with respect to
such Series has occurred and is continuing as of the related Determination
Date, no Capture Event has occurred and is continuing as of the related
Determination Date, no Trigger Event has occurred as of the related
Determination Date, and any Trigger Event with respect to such Series is
Deemed Cured as of the related Determination Date, then the Initial Spread
Account Maximum Amount with respect to such Series and such Distribution
Date;
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(ii) if (A) a Trigger Event with respect to Series 1993-A has
occurred as of the Determination Date or (B) a Trigger Event with respect
to Series 1993-A has occurred as of a prior Distribution Date and is not
Deemed Cured as of the related Determination Date, and no Insurance
Agreement Event of Default with respect to Series 1993-A has occurred and
is continuing and no Capture Event has occurred and is continuing, the
Spread Account Maximum Amount shall be equal to the greater of (i) 10% of
the Series 1993-A Balance as of the close of business on such Distribution
Date and (ii) the Spread Account Minimum Amount as of the close of business
on such Distribution Date; or
(iii) if (A) an Insurance Agreement Event of Default with respect
to such Series has occurred and is continuing or (B) a Capture Event has
occurred and is continuing as of the related Determination Date, the Spread
Account Maximum Amount shall be equal to the greater of (i) 25% of the
Series 1993-A Balance as of the close of business on such Distribution Date
and (ii) the Spread Account Minimum Amount as of the close of business on
such Distribution Date.
"SPREAD ACCOUNT MINIMUM AMOUNT" means, with respect to Series 1993-A
and any Distribution Date, an amount equal to the greater of:
(i) $100,000, and
(ii) the lesser of:
(A) 1% of the Initial Principal Amount of such Series, but
in no event less than $500,000, and
(B) the Certificate Balance as of such Distribution Date
(after giving effect to the distribution in respect of
principal made on such Distribution Date).
"SPREAD ACCOUNT SHORTFALL" means, with respect to any Distribution
Date and any Series with respect to which an Insurance Agreement Event of
Default has occurred and is continuing, or a Capture Event has occurred and is
continuing, the excess, if any, of the Spread Account Maximum Amount for such
Series and such Distribution Date and the amount on deposit in such Spread
Account as of such Distribution Date after giving effect to distributions made
on such Distribution Date pursuant to priority SECOND of Section 3.03(b).
"STOCK PLEDGE AGREEMENT" means the Second Amended and Restated Stock
Pledge Agreement, dated as of August 26, 1994, between OFL, Financial Security
and the Collateral Agent.
"TRANSACTION DOCUMENTS" means, with respect to a Series, this
Agreement, each of the Pooling and Servicing Agreement or Trust Agreement, Sale
and Servicing Agreement and Indenture, or Servicing Agreement, Repurchase
Agreement, Indenture and Security Agreement, as applicable, the Insurance
Agreement, the Custodian Agreement, the Purchase Agreement, any
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Subsequent Purchase Agreements and Subsequent Transfer Agreements, any
Underwriting Agreement, the Lockbox Agreement, and the Stock Pledge Agreement
related to such Series.
"TRIGGER EVENT" means, with respect to Series 1993-A and as of a
Determination Date the occurrence of any of the following event:
(i) [RESERVED];
(ii) the Average Delinquency Ratio for such Determination Date shall
be equal to or greater than 4.50%;
(iii) the Cumulative Default Rate shall be equal to or greater
than (A) 3.15%, with respect to any Determination Date
occurring prior to or during the sixth calendar month
succeeding the Series 1993-A Closing Date, (B) 5.50%, with
respect to any Determination Date occurring after the sixth,
and prior to or during the 12th, calendar month succeeding
the Series 1993-A Closing Date, (C) 7.0%, with respect to
any Determination Date occurring after the 12th, and prior
to or during the 18th, calendar month succeeding the
Series 1993-A Closing Date, (D) 7.5%, with respect to any
Determination Date occurring after the 18th, and prior to or
during the 24th, calendar month succeeding the Series 1993-A
Closing Date, (E) 8.15%, with respect to any Determination
Date occurring after the 24th, and prior to or during the
30th, calendar month succeeding the Series 1993-A Closing
Date, (F) 8.75%, with respect to any Determination Date
occurring after the 30th, and prior to or during the 36th,
calendar month succeeding the Series 1993-A Closing Date,
(G) 9.0%, with respect to any Determination Date occurring
after the 36th, and prior to or during the 42nd, calendar
month succeeding the Series 1993-A Closing Date, (H) 9.25%,
with respect to any Determination Date occurring after the
42nd, and prior to or during the 48th, calendar month
succeeding the Series 1993-A Closing Date, (I) 9.50%, with
respect to any Determination Date occurring after the 48th,
and prior to or during the 54th, calendar month succeeding
the Series 1993-A Closing Date, (J) 9.75%, with respect to
any Determination Date occurring after the 54th, and prior
to or during the 60th calendar month succeeding the
Series 1993-A Closing Date, (K) 9.9%, with respect to any
Determination Date occurring after the 60th, and prior to or
during the 66th, calendar month succeeding the Series 1993-A
Closing Date, or (L) 10.0%, with respect to any
Determination Date occurring after the 66th, and prior to or
during the 72nd, calendar month succeeding the Series 1993-A
Closing Date; or
(iv) the Cumulative Net Loss Rate shall be equal to or greater than
(A) 1.25%, with respect to any Determination Date occurring
prior to or during the sixth calendar month succeeding the
Series 1993-A Closing
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Date, (B) 2.0%, with respect to any Determination Date occurring
after the sixth, and prior to or during the 12th, calendar month
succeeding the Series 1993-A Closing Date, (C) 2.75%, with
respect to any Determination Date occurring after the 12th, and
prior to or during the 18th, calendar month succeeding the
Series 1993-A Closing Date, (D) 3.0%, with respect to any
Determination Date occurring after the 18th, and prior to or
during the 24th, calendar month succeeding the Series 1993-A
Closing Date, (E) 3.25%, with respect to any Determination Date
occurring after the 24th, and prior to or during the 30th,
calendar month succeeding the Series 1993-A Closing Date,
(F) 3.5%, with respect to any Determination Date occurring after
the 30th, and prior to or during the 36th, calendar month
succeeding the Series 1993-A Closing Date, (G) 3.6%, with respect
to any Determination Date occurring after the 36th, and prior to
or during the 42nd, calendar month succeeding the Series 1993-A
Closing Date, (H) 3.7%, with respect to any Determination Date
occurring after the 42nd, and prior to or during the 48th,
calendar month succeeding the Series 1993-A Closing Date,
(I) 3.8%, with respect to any Determination Date occurring after
the 48th, and prior to or during the 54th, calendar month
succeeding the Series 1993-A Closing Date, (J) 3.9%, with respect
to any Determination Date occurring after the 54th, and prior to
or during the 60th, calendar month succeeding the Series 1993-A
Closing Date, (K) 3.95%, with respect to any Determination Date
occurring after the 60th, and prior to or during the 66th,
calendar month succeeding the Series 1993-A Closing Date, or
(L) 4.0%, with respect to any Determination Date occurring after
the 66th, and prior to or during the 72nd, calendar month
succeeding the Series 1993-A Closing Date.
"TRUST" means a trust formed pursuant to a Pooling and Servicing
Agreement or a Trust Agreement, as the case may be.
"TRUST PROPERTY," with respect to any Series, has the meaning
specified in the related Pooling and Servicing Agreement or Trust Agreement, as
the case may be.
"TRUSTEE" means (A) with respect to any Series created pursuant to a
Pooling and Servicing Agreement, the Trustee named in such Pooling and Servicing
Agreement, or (B) with respect to any Series issued pursuant to an Indenture,
the Trustee named in such Indenture in its capacity as agent for the Noteholders
and, if applicable, the Certificateholders.
"TRUSTEE SECURED OBLIGATIONS" means, with respect to a Series, all
amounts and obligations which OFL or the Seller may at any time owe or be
required to perform to or on behalf of (i) the Trustee, the Trust or the
Certificateholders under the Pooling and Servicing Agreement with respect to
such Series, or (ii) the Trustee, the Owner Trustee, the Trust, the
Certificateholders or the Noteholders under the Trust Agreement, the Sale and
Servicing Agreement or the Indenture with respect to such Series.
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"TRUSTEE TERMINATION DATE" means, with respect to any Series, the
date which is the latest of (i) the date on which the Trustee shall have
received, as Trustee for the holders of the Certificates of such Series, or
as Indenture Trustee on behalf of (and as agent for) the Noteholders and/or
Certificateholders of such Series, payment and performance in full of all
Trustee Secured Obligations arising out of or relating to such Series and
(ii) the date on which all payments in respect of the Certificates shall have
been made and the related Trust shall have been terminated pursuant to the
terms of the related Pooling and Servicing Agreement or Trust Agreement.
"UNDERWRITING AGREEMENT" means, with respect to any Series, the
Underwriting Agreement among OFL, the Seller and the Underwriters named
therein.
"UNIFORM COMMERCIAL CODE" or "UCC" means the Uniform Commercial
Code in effect in the relevant jurisdiction, as the same may be amended from
time to time.
"WAREHOUSING SERIES" means all notes issued by the Issuer.
Section 1.02. RULES OF INTERPRETATION. The terms "hereof,"
"herein" or "hereunder," unless otherwise modified by more specific
reference, shall refer to this Agreement in its entirety. Unless otherwise
indicated in context, the terms "Article," "Section," "Appendix," "Exhibit"
or "Annex" shall refer to an Article or Section of, or Appendix, Exhibit or
Annex to, this Agreement. The definition of a term shall include the
singular, the plural, the past, the present, the future, the active and the
passive forms of such term. A term defined herein and used herein preceded by
a Series designation, shall mean such term as it relates to the Series
designated.
ARTICLE II
CREDIT ENHANCEMENT FEE; SERIES SUPPLEMENTS; THE COLLATERAL
Section 2.01. SERIES 1993-A CREDIT ENHANCEMENT FEE. The Series
1993-A Pooling and Servicing Agreement provides for the payment to the Seller
of a Series 1993-A Credit Enhancement Fee, to be paid to the Seller by
distribution of such amounts to the Collateral Agent for deposit and
distribution pursuant to this Agreement. The Seller and OFL hereby agree that
payment of the Series 1993-A Credit Enhancement Fee in the manner and subject
to the conditions set forth herein and in the Series 1993-A Pooling and
Servicing Agreement is adequate consideration and the exclusive consideration
to be received by the Seller or OFL for the obligations of the Seller
pursuant hereto and the obligations of OFL pursuant hereto (including,
without limitation, the transfer by the Seller to the Collateral Agent of the
Initial Spread Account Deposit) and pursuant to the Series 1993-A Insurance
Agreement. The Seller and OFL hereby agree with the Trustee and with
Financial Security that payment of the Series 1993-A Credit Enhancement Fee
to the Seller is expressly conditioned on subordination of the Series 1993-A
Credit Enhancement Fee to payments on the Certificates of any Series,
payments on the Notes of any Series, payments of amounts due to Financial
Security and the other obligations of the Trusts, in each case to the extent
provided in Section 4.6 of the Standard
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Terms and Conditions and Section 3.03 hereof; and the Security Interest of
the Secured Parties in the Series 1993-A Collateral is intended to effect and
enforce such subordination and to provide security for the Series 1993-A
Secured Obligations and the Secured Obligations with respect to each other
Series.
Section 2.02. SERIES SUPPLEMENTS. The parties hereto intend to
enter into a Series Supplement hereto with respect to any Series other than
the Series 1993-A Certificates. The parties will enter into a Series
Supplement only if the following conditions shall have been satisfied:
(i) The Seller shall have sold Receivables to a Trust or to a
corporation pursuant to (A) a Pooling and Servicing Agreement under which
the Trustee shall act as trustee, (B) a Sale and Servicing Agreement in
form and substance satisfactory to Financial Security, with respect to
which the Trustee shall act as Indenture Trustee, and which Sale and
Servicing Agreement may provide for the sale of Subsequent Receivables to
the related Trust or (C) a Repurchase Agreement in form and substance
satisfactory to Financial Security, with respect to which the Trustee shall
act as Indenture Trustee with respect to the related Notes;
(ii) Financial Security shall have issued (A) one or more
Policies in respect of the Guaranteed Distributions on Certificates issued
pursuant to the related Pooling and Servicing Agreement or Trust Agreement,
and/or (B) one or more Note Policies in respect of the Scheduled Payments
on the Notes issued pursuant to the related Indenture; and
(iii) Pursuant to the related Series Supplement any and all
right, title and interest of the Seller, OFL or any affiliate of either of
them in the Collateral specified herein shall be pledged to the Secured
Parties substantially on the terms set forth in Section 2.03 hereof.
Section 2.03. GRANT OF SECURITY INTEREST BY OFL AND THE SELLER.
(a) In order to secure the performance of the Secured Obligations
with respect to each Series, the Seller (and OFL, to the extent it may have
any rights therein) hereby pledges, assigns, grants, transfers and conveys to
the Collateral Agent, on behalf of and for the benefit of the Secured Parties
to secure the Secured Obligations with respect to each Series, a lien on and
security interest in (which lien and security interest is intended to be
prior to all other liens, security interest or other encumbrances), all of
its right, title and interest in and to the following (all being collectively
referred to herein as the "Series 1993-A Collateral"):
(i) the Series 1993-A Credit Enhancement Fee and all rights and
remedies that the Seller may have to enforce payment of the Series 1993-A
Credit Enhancement Fee whether under the Series 1993-A Pooling and
Servicing Agreement or otherwise;
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(ii) the Series 1993-A Spread Account established pursuant to
Section 3.01 hereof, and each other account owned by the Seller and
maintained by the Collateral Agent (including, without limitation, all
monies, checks, securities, investments and other documents from time to
time held in or evidencing any such accounts);
(iii) all of the Seller's right, title and interest in and to
investments made with proceeds of the property described in clauses (i) and
(ii) above, or made with amounts on deposit in the Series 1993-A Spread
Account; and
(iv) all distributions, revenues, products, substitutions,
benefits, profits and proceeds, in whatever form, of any of the foregoing.
(b) In order to effectuate the provisions and purposes of this
Agreement, including for the purpose of perfecting the security interests
granted hereunder, the Seller represents and warrants that it has, prior to the
execution of this Agreement, executed and filed an appropriate Uniform
Commercial Code financing statement in Minnesota sufficient to assure that the
Collateral Agent, as agent for the Secured Parties, has a first priority
perfected security interest in all Series 1993-A Collateral which can be
perfected by the filing of a financing statement.
Section 2.04. PRIORITY. The Seller (and OFL, to the extent it may
have any rights in the Collateral) intends the security interests in favor of
the Secured Parties to be prior to all other Liens in respect of the Collateral,
and OFL and the Seller shall take all actions necessary to obtain and maintain,
in favor of the Collateral Agent, for the benefit of the Secured Parties, a
first lien on and a first priority, perfected security interest in the
Collateral. Subject to the provisions hereof specifying the rights and powers of
the Controlling Party from time to time to control certain specified matters
relating to the Collateral, each Secured Party shall have all of the rights,
remedies and recourse with respect to the Collateral afforded a secured party
under the Uniform Commercial Code of the State of New York and all other
applicable law in addition to, and not in limitation of, the other rights,
remedies and recourse granted to such Secured Parties by this Agreement or any
other law relating to the creation and perfection of liens on, and security
interests in, the Collateral.
Section 2.05. SELLER AND OFL REMAIN LIABLE. The Security Interests
are granted as security only and shall not (i) transfer or in any way affect or
modify, or relieve either the Seller or OFL from, any obligation to perform or
satisfy, any term, covenant, condition or agreement to be performed or satisfied
by the Seller or OFL under or in connection with this Agreement, the Insurance
Agreement or any other Transaction Document to which it is a party or (ii)
impose any obligation on any of the Secured Parties or the Collateral Agent to
perform or observe any such term, covenant, condition or agreement or impose any
liability on any of the Secured Parties or the Collateral Agent for any act or
omission on its part relative thereto or for any breach of any representation or
warranty on its part contained therein or made in connection therewith, except,
in each case, to the extent provided herein and in the other Transaction
Documents.
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Section 2.06. MAINTENANCE OF COLLATERAL.
(a) SAFEKEEPING. The Collateral Agent agrees to maintain the
Collateral received by it (or evidence thereof, in the case of book-entry
securities in the name of the Collateral Agent) and all records and documents
relating thereto at the office of the Collateral Agent specified in Section
8.06 hereof or such other address within the State of Minnesota (unless all
filings have been made to continue the perfection of the security interest in
the Collateral to the extent such security interest can be perfected by
filing a financing statement, as evidenced by an Opinion of Counsel delivered
to the Controlling Party), as may be approved by the Controlling Party. The
Collateral Agent shall keep all Collateral and related documentation in its
possession separate and apart from all other property that it is holding in
its possession and from its own general assets and shall maintain accurate
records pertaining to the Eligible Investments and Spread Accounts included
in the Collateral in such a manner as shall enable the Collateral Agent and
the Secured Parties to verify the accuracy of such record-keeping. The
Collateral Agent's books and records shall at all times show that the
Collateral is held by the Collateral Agent as agent of the Secured Parties
and is not the property of the Collateral Agent. The Collateral Agent will
promptly report to each Secured Party and the Seller any failure on its part
to hold the Collateral as provided in this Section 2.06(a) and will promptly
take appropriate action to remedy any such failure.
(b) ACCESS. The Collateral Agent shall permit each of the Secured
Parties, or their respective duly authorized representatives, attorneys,
auditors or designees, to inspect the Collateral in the possession of or
otherwise under the control of the Collateral Agent pursuant hereto at such
reasonable times during normal business hours as any such Secured Party may
reasonably request upon not less than one Business Day's prior written notice.
Section 2.07. TERMINATION AND RELEASE OF RIGHTS.
(a) On the Insurer Termination Date relating to a Series, the
rights, remedies, powers, duties, authority and obligations conferred upon
Financial Security pursuant to this Agreement in respect of the Collateral
related to such Series shall terminate and be of no further force and effect
and all rights, remedies, powers, duties, authority and obligations of
Financial Security with respect to such Collateral shall be automatically
released; PROVIDED that any indemnity provided to or by Financial Security
herein shall survive such Insurer Termination Date. If Financial Security is
acting as Controlling Party with respect to a Series on the related Insurer
Termination Date, Financial Security agrees, at the expense of the Seller, to
execute and deliver such instruments as the successor Controlling Party may
reasonably request to effectuate such release, and any such instruments so
executed and delivered shall be fully binding on Financial Security and any
Person claiming by, through or under Financial Security.
(b) On the Trustee Termination Date related to a Series, the rights,
remedies, powers, duties, authority and obligations, if any, conferred upon the
Trustee pursuant to this Agreement in respect of the Collateral related to such
Series shall terminate and be of no further force and effect and all such
rights, remedies, powers, duties, authority and obligations of the Trustee with
respect to such Collateral shall be automatically released; PROVIDED that any
indemnity provided to the Trustee herein shall survive such Trustee Termination
Date. If the
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Trustee is acting as Controlling Party with respect to a Series on the
related Trustee Termination Date, the Trustee agrees, at the expense of the
Seller, to execute and deliver such instruments as the Seller may reasonably
request to effectuate such release, and any such instruments so executed and
delivered shall be fully binding on the Trustee.
(c) On the Final Termination Date with respect to a Series, the
rights, remedies, powers, duties, authority and obligations conferred upon
the Collateral Agent and each Secured Party pursuant to this Agreement with
respect to such Series shall terminate and be of no further force and effect
and all rights, remedies, powers, duties, authority and obligations of the
Collateral Agent and each Secured Party with respect to the Collateral
related to such Series shall be automatically released. On the Final
Termination Date with respect to a Series, the Collateral Agent agrees, and
each Secured Party agrees, at the expense of the Seller, to execute such
instruments of release, in recordable form if necessary, in favor of the
Seller as the Seller may reasonably request, to deliver any Collateral in its
possession to the Seller, and to otherwise release the lien of this Agreement
and release and deliver to the Seller the Collateral related to such Series.
Section 2.08. NON-RECOURSE OBLIGATIONS OF SELLER. Notwithstanding
anything herein or in the other Transaction Documents to the contrary, the
parties hereto agree that the obligations of the Seller hereunder (without
limiting the obligation to apply distributions of the respective Credit
Enhancement Fees in accordance with Section 3.03(b)) shall be recourse only to
the extent of amounts released to the Seller pursuant to priority EIGHTH of
Section 3.03(b) and retained by the Seller in accordance with the next sentence.
The Seller agrees that it shall not declare or make payment of (i) any dividend
or other distribution on or in respect of any shares of its capital stock or
(ii) any payment on account of the purchase, redemption, retirement or
acquisition of (x) any shares of its capital stock or (y) any option, warrant or
other right to acquire shares of its capital stock, or (iii) any payment of any
loan made by OFL to the Seller, unless (in each case) at the time of such
declaration or payment (and after giving effect thereto) no amount payable by
Seller under any Transaction Document is then due and owing but unpaid. Nothing
contained herein shall be deemed to limit the rights of the Certificateholders
(or Certificate Owners) or Noteholders (or Note Owners) under any other
Transaction Document.
ARTICLE III
SPREAD ACCOUNTS
Section 3.01. ESTABLISHMENT OF SPREAD ACCOUNTS; INITIAL DEPOSITS INTO
SPREAD ACCOUNTS.
(a) On or prior to the Closing Date relating to a Series, the
Collateral Agent shall establish with respect to such Series, at its office or
at another depository institution or trust company an Eligible Account,
designated, "Spread Account -- Series [insert Series designation] -- Norwest
Bank Minnesota, National Association, as Collateral Agent for Financial Security
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Assurance Inc. and another Secured Party" (the "Spread Account"). All Spread
Accounts established under this Agreement from time to time shall be
maintained at the same depository institution (which depository institution
may be changed from time to time in accordance with this Agreement). If any
Spread Account established with respect to a Series ceases to be an Eligible
Account, the Collateral Agent shall, within five Business Days, establish a
new Eligible Account for such Series.
(b) No withdrawals may be made of funds in any Spread Account
except as provided in Section 3.03 of this Agreement. Except as specifically
provided in this Agreement, funds in a Spread Account established with
respect to a Series shall not be commingled with funds in a Spread Account
established with respect to another Series or with any other moneys. All
moneys deposited from time to time in such Spread Account and all investments
made with such moneys shall be held by the Collateral Agent as part of the
Collateral with respect to such Series.
(c) On the Closing Date with respect to a Series, the Collateral
Agent shall deposit the Initial Spread Account Deposit with respect to such
Series, if any, received from the Seller into the related Spread Account. On
each Subsequent Transfer Date (if any) with respect to a Series, the
Collateral Agent shall deposit the Spread Account Additional Deposit
delivered by the related Trust on behalf of the Seller into the related
Spread Account.
(d) Each Spread Account shall be separate from each respective
Trust or Issuer and amounts on deposit therein will not constitute a part of
the Trust Property of any Trust or the assets of any Issuer. Except as
specifically provided herein, each Spread Account shall be maintained by the
Collateral Agent at all times separate and apart from any other account of
the Seller, OFL, the Servicer or the Trust or the Issuer, as the case may be.
All income or loss on investments of funds in any Spread Account shall be
reported by the Seller as taxable income or loss of the Seller.
Section 3.02. INVESTMENTS.
(a) Funds which may at any time be held in the Spread Account
established with respect to a Series shall be invested and reinvested by the
Collateral Agent, at the written direction (which may include, subject to the
provisions hereof, general standing instructions) of the Seller (unless a
Default shall have occurred and be continuing, in which case at the written
direction of the Controlling Party) or its designee received by the
Collateral Agent by 1:00 P.M. New York City time on the Business Day prior to
the date on which such investment shall be made, in one or more Eligible
Investments in the manner specified in Section 3.02(c). If no written
direction with respect to any portion of such Spread Account is received by
the Collateral Agent, the Collateral Agent shall invest such funds overnight
in such Eligible Investments as the Collateral Agent may select, provided
that the Collateral Agent shall not be liable for any loss or absence of
income resulting from such investments.
(b) Each investment made pursuant to this Section 3.02 on any date
shall mature not later than the Business Day immediately preceding the
Distribution Date next succeeding the day such investment is made, except
that any investment made on the day
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preceding a Distribution Date shall mature on such Distribution Date;
PROVIDED that any investment of funds in any Account maintained with the
Collateral Agent in any investment as to which the Collateral Agent is the
obligor, if otherwise qualified as an Eligible Investment (including any
repurchase agreement on which the Collateral Agent in its commercial capacity
is liable as principal), may mature on the Distribution Date next succeeding
the date of such investment.
(c) Any investment of funds in the Spread Account shall be made in
Eligible Investments held by a financial institution in accordance with the
following requirements: (a) all Eligible Investments shall be held in an
account with such financial institution in the name of the Collateral Agent,
(b) with respect to securities held in such account, such securities shall be
(i) certificated securities (as such term is used in N.Y. U.C.C. Section
8-313(d)(i), securities deemed to be certificated securities under applicable
regulations of the United States government, or uncertificated securities
issued by an issuer organized under the laws of the State of New York or the
State of Delaware, (ii) either (A) in the possession of such institution,
(b) in the possession of a clearing corporation (as such term is used in
Minn. Stat. Section 336.8-313(g)) in the State of New York, registered in the
name of such clearing corporation or its nominee, not endorsed for collection
or surrender or any other purpose not involving transfer, not containing any
evidence of a right or interest inconsistent with the Collateral Agent's
security interest therein, and held by such clearing corporation in an
account of such institution, (C) held in an account of such institution with
the Federal Reserve Bank of New York or the Federal Reserve Bank of
Minneapolis, or (D) in the case of uncertificated securities, issued in the
name of such institution, and (iii) identified, by book entry or otherwise,
as held for the account of, or pledged to, the Collateral Agent on the
records of such institution, and such institution shall have sent the
Collateral Agent a confirmation thereof, (c) with respect to repurchase
obligations held in such account, such repurchase obligations shall be
identified by such institution, by book entry or otherwise, as held for the
account of, or pledged to, the Collateral Agent on the records of such
institution, and the related securities shall be held in accordance with the
requirements of clause (b) above, and (d) with respect to other Eligible
Investments other than securities and repurchase agreements, such Eligible
Investments shall be held in a manner acceptable to the Collateral Agent.
Subject to the other provisions hereof, the Collateral Agent shall have sole
control over each such investment and the income thereon, and any certificate
or other instrument evidencing any such investment, if any, shall be
delivered directly to the Collateral Agent or its agent, together with each
document of transfer, if any, necessary to transfer title to such investment
to the Collateral Agent in a manner which complies with Section 2.06 and this
subsection.
(d) If amounts on deposit in any Spread Account are at any time
invested in an Eligible Investment payable on demand, the Collateral Agent
shall (i) consistent with any notice required to be given thereunder, demand
that payment thereon be made on the last day such Eligible Investment is
permitted to mature under the provisions hereof and (ii) demand payment of
all amounts due thereunder promptly upon receipt of written notice from the
Controlling Party to the effect that such investment does not constitute an
Eligible Investment.
(e) All moneys on deposit in a Spread Account, together with any
deposits or securities in which such moneys may be invested or reinvested,
and any gains from such
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investments, shall constitute Collateral hereunder with respect to the
related Series subject to the Security Interests of the Secured Parties.
(f) Subject to Section 4.03 hereof, the Collateral Agent shall not
be liable by reason of any insufficiency in any Spread Account resulting from
any loss on any Eligible Investment included therein except for losses
attributable to the Collateral Agent's failure to make payments on Eligible
Investments as to which the Collateral Agent, in its commercial capacity, is
obligated.
Section 3.03. DISTRIBUTIONS: PRIORITY OF PAYMENTS.
(a) On or before each Deficiency Claim Date, the Collateral Agent
will make the following calculations on the basis of information (including,
without limitation, the amount of any Collection Account Shortfall with
respect to any Series) received pursuant to (x) Section 3.9 of the Standard
Terms and Conditions, Section 5.03 of the Pooling and Servicing Agreements,
or (y) Section 3.9 of the Sale and Servicing Agreements, or (z) Section 4.1
of the Servicing Agreement, as applicable, with respect to each Series;
PROVIDED, HOWEVER, that if the Collateral Agent receives notice from
Financial Security of the occurrence of an Insurance Agreement Event of
Default with respect to any Series, or of the occurrence of a Capture Event,
such notice shall be determinative for the purposes of determining the Spread
Account Default Level and Spread Account Maximum Amount for such Series:
FIRST, determine the amounts to be on deposit in the respective Spread
Accounts (taking into account amounts in respect of the respective Credit
Enhancement Fees to be deposited into the related Spread Accounts) on the
next succeeding Distribution Date which will be available to satisfy any
Collection Account Shortfall and any Warehousing Shortfall;
SECOND, determine (i) the amounts, if any, to be distributed from each
Spread Account related to each Series with respect to which there exists a
Collection Account Shortfall and (ii) whether, following distribution from
the related Spread Accounts to the respective Trustees for deposit into the
respective Collection Accounts with respect to which there exist Collection
Account Shortfalls, a Collection Account Shortfall will continue to exist
with respect to one or more Series;
THIRD, (i) if a Collection Account Shortfall will continue to exist
with respect to one or more Series (excluding the Warehousing Series)
following the distributions from the related Spread Accounts contemplated
by paragraph SECOND above, determine the amount, if any, to be distributed
to the Trustee with respect to each Series from unrelated Spread Accounts
(including the Warehousing Series Spread Account) in respect of such
Collection Account Shortfall(s) and (ii) if a Warehousing Shortfall will
exist with respect to the Warehousing Series, determine the amount, if any,
to be distributed to the Trustee with respect to such Series from unrelated
Spread Accounts in respect of such Warehousing Shortfall. This
determination shall be made as follows: (i) of the aggregate of the
amounts to be on deposit in the respective Spread Accounts for such
Distribution Date (as determined pursuant to paragraph FIRST above, after
making the
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withdrawals pursuant to paragraph SECOND above), up to the
aggregate of the Collection Account Shortfalls (excluding any Collection
Account Shortfall with respect to the Warehousing Series) and any
Warehousing Shortfall for such Distribution Date, (ii) drawn from each
Spread Account PRO RATA in accordance with amounts on deposit therein, and
(iii) distributed to the respective Trustees in the following order of
priority and PRO RATA within each priority (1) in the same priority as
amounts are to be distributed pursuant to Section 4.6 of the Standard Terms
and Conditions included in the respective Pooling and Servicing Agreements
and pursuant to Section 4.6 of the respective Sale and Servicing
Agreements, and pursuant to Section 3.6(a) or 3.6(b)(II) of the Servicing
Agreement, as applicable, so that any shortfalls with respect to priority
(i) of each such Section are to be covered first, any shortfalls with
respect to priority (ii) of each such Section are to be covered second, and
so forth, until priority (v) of such Section, so that priority (v) of
Section 4.6 of the Standard Terms and Conditions and of the Sale and
Servicing Agreement and priority (v)(B) of Section 3.6(a) or priority
(v) of Section 3.6(b)(II) of the Servicing Agreement are to be covered
fifth, (2) if Section 4.6 of one or more Sale and Servicing Agreements
provides for distribution in respect of interest or principal on Notes or
Certificates with priorities numerically greater than (v), in the same
priority as amounts are to be distributed pursuant to each such Section
4.6, so that any shortfalls with respect to priority (vi) of each such
Section 4.6 are covered first, and so forth through all priorities relating
to interest or principal on Notes or Certificates and (3) amounts to be
distributed to the Security Insurer;
On such Deficiency Claim Date, the Collateral Agent shall deliver a
certificate to each Trustee in respect of which the Collateral Agent has
received notice pursuant to (i) Section 3.9 of the Standard Terms and
Conditions of a Collection Account Shortfall or (ii) Section 3.9 of the Sale
and Servicing Agreement of a Collection Account Shortfall or (iii) Section
4.1 of the Servicing Agreement of a Collection Account Shortfall or
Warehousing Shortfall stating the amount (which, in the case of (i) and (ii)
above, shall be the sum of the amount, if any, to be withdrawn from the
related Spread Account, as calculated pursuant to paragraph SECOND of this
Section 3.03(a), plus, the amount, if any, to be withdrawn from unrelated
Spread Accounts, as calculated pursuant to paragraph THIRD of this Section
3.03(a), and which, in the case of a Warehousing Shortfall or Collection
Account Shortfall referred to in clause (iii) shall be the respective
amounts, if any, withdrawn from unrelated Spread Accounts, as calculated
pursuant to paragraph THIRD of this Section 3.03(a) or calculated to be
available pursuant to priority SEVENTH of Section 3.03(b)), if any, to be
distributed to such Trustee on the next Distribution Date in respect of such
Collection Account Shortfall or Warehousing Shortfall, as the case may be.
(b) On each Distribution Date, following delivery by the Trustee
of the respective Credit Enhancement Fees for deposit into the respective
Spread Accounts pursuant to Section 4.6 of the Standard Terms and Conditions
included in the respective Pooling and Servicing Agreements or Section 4.6 of
the respective Sale and Servicing Agreements, or Section 3.6 of the
respective Servicing Agreement, as applicable, and upon receipt of a
Deficiency Notice with respect to one or more such Series, or with respect to
priorities FIFTH and SIXTH to the extent the amounts referred to therein are
due and owing the Collateral Agent shall make the following distributions in
the following order of priority:
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FIRST, if with respect to any Series there exists a Collection
Account Shortfall from the Spread Account related to such Series, to the
Trustee for deposit in the related Collection Account the amount of such
Collection Account Shortfall;
SECOND, if with respect to any Series (excluding the Warehousing
Series) there exists a Collection Account Shortfall after deposit into the
Collection Account of amounts distributed pursuant to priority FIRST, or if
with respect to the Warehousing Series there exists a Warehousing Shortfall
from each Spread Account (including the Warehousing Series Spread Account),
pro rata in accordance with amounts on deposit therein (but in no event shall
a withdrawal from a Spread Account pursuant to this priority SECOND cause the
amount on deposit in such Spread Account to be below the Spread Account
Withdrawal Floor for such Spread Account if a Spread Account Withdrawal Floor
is specified in the Series Supplement establishing such Spread Account), an
amount up to the aggregate of the Collection Account Shortfalls for all
Series (excluding the Warehousing Series) and any Warehousing Shortfall, to
the respective Trustees in accordance with the Payment Priorities for deposit
in the respective Collection Accounts with respect to which there exist
Collection Account Shortfalls or a Warehousing Shortfall;
THIRD, if with respect to one or more Series (excluding the
Warehousing Series) there exists a Spread Account Shortfall, from amounts, if
any, on deposit in each Spread Account in excess of the related Spread
Account Maximum Amount (after making any withdrawals therefrom required by
priority FIRST or SECOND of this Section 3.03(b)), an amount in the aggregate
up to the aggregate of the Spread Account Shortfalls for all Series for
deposit into each Spread Account PRO RATA in accordance with their respective
Spread Account Shortfalls;
FOURTH, if with respect to one or more Series (excluding the
Warehousing Series), amounts have been withdrawn from the related Spread
Account pursuant to priority FIRST or SECOND of this Section 3.03(b) on such
Distribution Date and/or on prior Distribution Dates and such amounts have
not been redeposited in full into such Spread Account pursuant to this
priority FOURTH (such amounts in the aggregate for a Series "Unreimbursed
Amounts"), from amounts, if any, on deposit in each Spread Account in excess
of the related Spread Account Maximum Amount (after making any withdrawals
therefrom required by priority FIRST, SECOND or THIRD of this Section
3.03(b)), an amount up to the aggregate of the Unreimbursed Amounts for all
such Series for deposit into each Spread Account with respect to which there
exist Unreimbursed Amounts PRO RATA in accordance with the excess of the
Spread Account Maximum Amount of each such Spread Account over the amount on
deposit in such Spread Account;
FIFTH, if any amounts are owed to a successor Servicer pursuant to
Section 9.3(c) of the Standard Terms and Conditions included in a Pooling and
Servicing Agreement or Section 8.3(c) of a Sale and Servicing Agreement or
Section 6.2 of a Servicing Agreement and such amounts are not payable
pursuant to Section 4.6(a)(i) of the Standard Terms and Conditions included
in such Pooling and Servicing Agreement or Section 4.6(i) of such Sale and
Servicing Agreement or Section 3.6 of a Servicing Agreement, as applicable,
from amounts on deposit in the related Spread Account, an amount up to the
amount so owed, to such Servicer;
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SIXTH, if any amounts are owed by OFL or the Seller to a Trustee,
Indenture Trustee, Owner Trustee, Lockbox Bank, Custodian, Backup Servicer,
Administrator, Collateral Agent, the Indenture Collateral Agent or other
service provider to either the Trust or the Issuer for expenses that have not
been reimbursed by OFL or the Seller, from amounts on deposit in the related
Spread Account, an amount up to the amount so owed, to such Person;
SEVENTH, if with respect to the Warehousing Series there exists a
Collection Account Shortfall, from the aggregate of all amounts on deposit in
each Spread Account in excess of the related Spread Account Maximum Amount,
an amount up to the amount of such Collection Account Shortfall (to the
extent not distributed on such Distribution Date pursuant to a prior priority
of this Section 3.03(b)), to the Trustee for the Warehousing Series for
deposit in the Warehousing Series Collection Account; and
EIGHTH, any funds in a Spread Account in excess of the applicable
Spread Account Maximum Amount, and any funds in a Spread Account with respect
to a Series for which the Final Termination Date shall have occurred, to the
Seller.
Section 3.04. GENERAL PROVISIONS REGARDING SPREAD ACCOUNTS.
(a) Promptly upon the establishment (initially or upon any
relocation) of a Spread Account hereunder, the Collateral Agent shall advise
the Seller and each Secured Party in writing of the name and address of the
depository institution or trust company where such Spread Account has been
established (if not Norwest Bank Minnesota, National Association or any
successor Collateral Agent in its commercial banking capacity), the name of
the officer of the depository institution who is responsible for overseeing
such Spread Account, the account number and the individuals whose names
appear on the signature cards for such Spread Account. The Seller shall cause
each such depository institution or trust company to execute a written
agreement, in form and substance satisfactory to the Controlling Party,
waiving, and the Collateral Agent by its execution of this Agreement hereby
waives (except to the extent expressly provided herein), in each case to the
extent permitted under applicable law, (i) any banker's or other statutory or
similar Lien, and (ii) any right of set-off or other similar right under
applicable law with respect to such Spread Account and any other Spread
Account and agreeing, and the Collateral Agent by its execution of this
Agreement hereby agrees, to notify the Seller, the Collateral Agent, and each
Secured Party of any charge or claim against or with respect to such Spread
Account. The Collateral Agent shall give the Seller and each Secured Party at
least ten Business Days' prior written notice of any change in the location
of such Spread Account or in any related account information. If the
Collateral Agent changes the location of any Spread Account, it shall change
the location of the other Spread Accounts, so that all Spread Accounts shall
at all times be located at the same depository institution. Anything herein
to the contrary notwithstanding, unless otherwise consented to by the
Controlling Party in writing, the Collateral Agent shall have no right to
change the location of any Spread Account.
(b) Upon the written request of the Controlling Party or the Seller
and at the expense of the Seller, the Collateral Agent shall cause, at the
expense of the Seller, the
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depository institution at which any Spread Account is located to forward to
the requesting party copies of all monthly account statements for such Spread
Account.
(c) If at any time any Spread Account ceases to be an Eligible
Account, the Collateral Agent shall notify the Controlling Party of such fact
and shall establish within 5 Business Days of such determination, in
accordance with paragraph (a) of this Section, a successor Spread Account
thereto, which shall be an Eligible Account, at another depository
institution acceptable to the Controlling Party and shall establish successor
Spread Accounts with respect to all other Spread Accounts, each of which
shall be an Eligible Account at the same depository institution.
(d) No passbook, certificate of deposit or other similar
instrument evidencing a Spread Account shall be issued, and all contracts,
receipts and other papers, if any, governing or evidencing a Spread Account
shall be held by the Collateral Agent.
Section 3.05. REPORTS BY THE COLLATERAL AGENT. The Collateral Agent
shall report to the Seller, Financial Security, the Trustee and the Servicer on
a monthly basis no later than each Distribution Date with respect to the amount
on deposit in each Spread Account and the identity of the investments included
therein as of the last day of the related Monthly Period, and shall provide
accountings of deposits into and withdrawals from the Spread Accounts, and of
the investments made therein, to the independent accountants upon their request
for purposes of their reports pursuant to Section 3.11 of the Pooling and
Servicing Agreements and Section 3.11 of the Sale and Servicing Agreements.
ARTICLE IV
THE COLLATERAL AGENT
Section 4.01. APPOINTMENT AND POWERS. Subject to the terms and
conditions hereof, each of the Secured Parties hereby appoints Norwest Bank
Minnesota, National Association as the Collateral Agent with respect to the
Series 1993-A Collateral and the related Collateral subsequently specified in a
Series Supplement, and Norwest Bank Minnesota, National Association hereby
accepts such appointment and agrees to act as Collateral Agent with respect to
the Series 1993-A Collateral, and upon execution of any Series Supplement, shall
be deemed to accept such appointment, and agree to act as Collateral Agent with
respect to such Collateral, in each case, for the Secured Parties, to maintain
custody and possession of such Collateral (except as otherwise provided
hereunder) and to perform the other duties of the Collateral Agent in accordance
with the provisions of this Agreement. Each Secured Party hereby authorizes the
Collateral Agent to take such action on its behalf, and to exercise such rights,
remedies, powers and privileges hereunder, as the Controlling Party may direct
and as are specifically authorized to be exercised by the Collateral Agent by
the terms hereof, together with such actions, rights, remedies, powers and
privileges as are reasonably incidental thereto. The Collateral Agent shall act
upon and in compliance with the written instructions of the Controlling Party
delivered pursuant to this Agreement promptly following receipt of such written
instructions; provided that the Collateral Agent shall not act in accordance
with any
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instructions (i) which are not authorized by, or in violation of the
provisions of, this Agreement, (ii) which are in violation of any applicable
law, rule or regulation or (iii) for which the Collateral Agent has not
received reasonable indemnity. Receipt of such instructions shall not be a
condition to the exercise by the Collateral Agent of its express duties
hereunder, except where this Agreement provides that the Collateral Agent is
permitted to act only following and in accordance with such instructions.
Section 4.02. PERFORMANCE OF DUTIES. The Collateral Agent shall
have no duties or responsibilities except those expressly set forth in this
Agreement and the other Transaction Documents to which the Collateral Agent
is a party or as directed by the Controlling Party in accordance with this
Agreement. The Collateral Agent shall not be required to take any
discretionary actions hereunder except at the written direction and with the
indemnification of the Controlling Party.
Section 4.03. LIMITATION ON LIABILITY. Neither the Collateral Agent
nor any of its directors, officers or employees, shall be liable for any
action taken or omitted to be taken by it or them hereunder, or in connection
herewith, except that the Collateral Agent shall be liable for its
negligence, bad faith or willful misconduct; nor shall the Collateral Agent
be responsible for the validity, effectiveness, value, sufficiency or
enforceability against the Seller or OFL of this Agreement or any of the
Collateral (or any part thereof). Notwithstanding any term or provision of
this Agreement, the Collateral Agent shall incur no liability to the Seller,
OFL or the Secured Parties for any action taken or omitted by the Collateral
Agent in connection with the Collateral, except for the negligence or willful
misconduct on the part of the Collateral Agent, and, further, shall incur no
liability to the Secured Parties except for negligence or willful misconduct
in carrying out its duties to the Secured Parties. Subject to Section 4.04,
the Collateral Agent shall be protected and shall incur no liability to any
such party in relying upon the accuracy, acting in reliance upon the
contents, and assuming the genuineness of any notice, demand, certificate,
signature, instrument or other document reasonably believed by the Collateral
Agent to be genuine and to have been duly executed by the appropriate
signatory, and (absent actual knowledge to the contrary) the Collateral Agent
shall not be required to make any independent investigation with respect
thereto. The Collateral Agent shall at all times be free independently to
establish to its reasonable satisfaction, but shall have no duty to
independently verify, the existence or nonexistence of facts that are a
condition to the exercise or enforcement of any right or remedy hereunder or
under any of the Transaction Documents. The Collateral Agent may consult with
counsel, and shall not be liable for any action taken or omitted to be taken
by it hereunder in good faith and in accordance with the written advice of
such counsel. The Collateral Agent shall not be under any obligation to
exercise any of the remedial rights or powers vested in it by this Agreement
or to follow any direction from the Controlling Party unless it shall have
received reasonable security or indemnity satisfactory to the Collateral
Agent against the costs, expenses and liabilities which might be incurred by
it.
Section 4.04. RELIANCE UPON DOCUMENTS. In the absence of bad faith or
negligence on its part, the Collateral Agent shall be entitled to rely on any
communication, instrument, paper or other document reasonably believed by it to
be genuine and correct and to have been signed or sent by the proper Person or
Persons and shall have no liability in acting,
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or omitting to act, where such action or omission to act is in reasonable
reliance upon any statement or opinion contained in any such document or
instrument.
Section 4.05. SUCCESSOR COLLATERAL AGENT.
(a) MERGER. Any Person into which the Collateral Agent may be
converted or merged, or with which it may be consolidated, or to which it may
sell or transfer its trust business and assets as a whole or substantially as
a whole, or any Person resulting from any such conversion, merger,
consolidation, sale or transfer to which the Collateral Agent is a party,
shall (provided it is otherwise qualified to serve as the Collateral Agent
hereunder) be and become a successor Collateral Agent hereunder and be vested
with all of the title to and interest in the Collateral and all of the
trusts, powers, discretions, immunities, privileges and other matters as was
its predecessor without the execution or filing of any instrument or any
further act, deed or conveyance on the part of any of the parties hereto,
anything herein to the contrary notwithstanding, except to the extent, if
any, that any such action is necessary to perfect, or continue the perfection
of, the security interest of the Secured Parties in the Collateral.
(b) RESIGNATION. The Collateral Agent and any successor Collateral
Agent may resign only (i) upon a determination that by reason of a change in
legal requirements the performance of its duties under this Agreement would
cause it to be in violation of such legal requirements in a manner which
would result in a material adverse effect on the Collateral Agent, and the
Controlling Party does not elect to waive the Collateral Agent's obligation
to perform those duties which render it legally unable to act or elect to
delegate those duties to another Person, or (ii) with the prior written
consent of the Controlling Party. The Collateral Agent shall give not less
than 60 days' prior written notice of any such permitted resignation by
registered or certified mail to the other Secured Party and the Seller;
PROVIDED, that such resignation shall take effect only upon the date which is
the latest of (i) the effective date of the appointment of a successor
Collateral Agent and the acceptance in writing by such successor Collateral
Agent of such appointment and of its obligation to perform its duties
hereunder in accordance with the provisions hereof, (ii) delivery of the
Collateral to such successor to be held in accordance with the procedures
specified in Article II hereof, and (iii) receipt by the Controlling Party of
an Opinion of Counsel to the effect described in Section 5.02.
Notwithstanding the preceding sentence, if by the contemplated date of
resignation specified in the written notice of resignation delivered as
described above no successor Collateral Agent or temporary successor
Collateral Agent has been appointed Collateral Agent or becomes the
Collateral Agent pursuant to subsection (d) hereof, the resigning Collateral
Agent may petition a court of competent jurisdiction in New York, New York
for the appointment of a successor.
(c) REMOVAL. The Collateral Agent may be removed by the Controlling
Party at any time, with or without cause, by an instrument or concurrent
instruments in writing delivered to the Collateral Agent, the other Secured
Party and the Seller. A temporary successor may be removed at any time to allow
a successor Collateral Agent to be appointed pursuant to subsection (d) below.
Any removal pursuant to the provisions of this subsection (c) shall take effect
only upon the date which is the latest of (i) the effective date of the
appointment of a successor Collateral Agent and the acceptance in writing by
such successor Collateral Agent of such appointment and of its obligation to
perform its duties hereunder in accordance with the
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provisions hereof, (ii) delivery of the Collateral to such successor to be
held in accordance with the procedures specified in Article II hereof and
(iii) receipt by the Controlling Party of an Opinion of Counsel to the effect
described in Section 5.02.
(d) ACCEPTANCE BY SUCCESSOR. The Controlling Party shall have the
sole right to appoint each successor Collateral Agent. Every temporary or
permanent successor Collateral Agent appointed hereunder shall execute,
acknowledge and deliver to its predecessor and to each Secured Party and the
Seller an instrument in writing accepting such appointment hereunder and the
relevant predecessor shall execute, acknowledge and deliver such other
documents and instruments as will effectuate the delivery of all Collateral
to the successor Collateral Agent to be held in accordance with the
procedures specified in Article II hereof, whereupon such successor, without
any further act, deed or conveyance, shall become fully vested with all the
estates, properties, rights, powers, duties and obligations of its
predecessor. Such predecessor shall, nevertheless, on the written request of
either Secured Party or the Seller, execute and deliver an instrument
transferring to such successor all the estates, properties, rights and powers
of such predecessor hereunder. In the event that any instrument in writing
from the Seller or a Secured Party is reasonably required by a successor
Collateral Agent to more fully and certainly vest in such successor the
estates, properties, rights, powers, duties and obligations vested or
intended to be vested hereunder in the Collateral Agent, any and all such
written instruments shall, at the request of the temporary or permanent
successor Collateral Agent, be forthwith executed, acknowledged and delivered
by the Seller. The designation of any successor Collateral Agent and the
instrument or instruments removing any Collateral Agent and appointing a
successor hereunder, together with all other instruments provided for herein,
shall be maintained with the records relating to the Collateral and, to the
extent required by applicable law, filed or recorded by the successor
Collateral Agent in each place where such filing or recording is necessary to
effect the transfer of the Collateral to the successor Collateral Agent or to
protect or continue the perfection of the security interests granted
hereunder.
(e) Any resignation or removal of a Collateral Agent and
appointment of a successor Collateral Agent shall be effected with respect to
this Agreement and all Series Supplements simultaneously, so that at no time
is there more than one Collateral Agent acting hereunder and under all Series
Supplements.
Section 4.06. INDEMNIFICATION. The Seller and OFL shall indemnify
the Collateral Agent, its directors, officers, employees and agents for, and
hold the Collateral Agent, its directors, officers, employees and agents
harmless against, any loss, liability or expense (including the costs and
expenses of defending against any claim of liability) arising out of or in
connection with the Collateral Agent's acting as Collateral Agent hereunder,
except such loss, liability or expense as shall result from the negligence,
bad faith or willful misconduct of the Collateral Agent or its officers or
agents. The obligation of the Seller and OFL under this Section shall survive
the termination of this Agreement and the resignation or removal of the
Collateral Agent. The Collateral Agent covenants and agrees that the
obligations of the Seller hereunder and under Section 4.07 shall be limited
to the extent provided in Section 2.08, and further covenants not to take any
action to enforce its rights to indemnification hereunder with respect to the
Seller and to payment under Section 4.07 except in accordance with the
provisions
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of Section 8.05, or otherwise to assert any Lien or take any other action in
respect of the Collateral or the Trust Property of a Series until the
applicable Final Termination Date.
Section 4.07. COMPENSATION AND REIMBURSEMENT. The Seller agrees for
the benefit of the Secured Parties and as part of the Secured Obligations (a)
to pay to the Collateral Agent, from time to time, reasonable compensation
for all services rendered by it hereunder (which compensation shall not be
limited by any provision of law in regard to the compensation of a collateral
trustee); and (b) to reimburse the Collateral Agent upon its request for all
reasonable expenses, disbursements and advances incurred or made by the
Collateral Agent in accordance with any provision of, or carrying out its
duties and obligations under, this Agreement (including the reasonable
compensation and fees and the expenses and disbursements of its agents, any
independent certified public accountants and independent counsel), except any
expense, disbursement or advances as may be attributable to negligence, bad
faith or willful misconduct on the part of the Collateral Agent.
Section 4.08. REPRESENTATIONS AND WARRANTIES OF THE COLLATERAL
AGENT. The Collateral Agent represents and warrants to the Seller and to each
Secured Party as follows:
(a) DUE ORGANIZATION. The Collateral Agent is a national banking
association, duly organized, validly existing and in good standing under the
laws of the United States and is duly authorized and licensed under
applicable law to conduct its business as presently conducted.
(b) CORPORATE POWER. The Collateral Agent has all requisite right,
power and authority to execute and deliver this Agreement and to perform all
of its duties as Collateral Agent hereunder.
(c) DUE AUTHORIZATION. The execution and delivery by the
Collateral Agent of this Agreement and the other Transaction Documents to
which it is a party, and the performance by the Collateral Agent of its
duties hereunder and thereunder, have been duly authorized by all necessary
corporate proceedings and no further approvals or filings, including any
governmental approvals, are required for the valid execution and delivery by
the Collateral Agent, or the performance by the Collateral Agent, of this
Agreement and such other Transaction Documents.
(d) VALID AND BINDING AGREEMENT. The Collateral Agent has duly
executed and delivered this Agreement and each other Transaction Document to
which it is a party, and each of this Agreement and each such other
Transaction Document constitutes the legal, valid and binding obligation of
the Collateral Agent, enforceable against the Collateral Agent in accordance
with its terms, except as (i) such enforceability may be limited by
bankruptcy, insolvency, reorganization and similar laws relating to or
affecting the enforcement of creditors' rights generally and (ii) the
availability of equitable remedies may be limited by equitable principles of
general applicability.
Section 4.09. WAIVER OF SETOFFS. The Collateral Agent hereby
expressly waives any and all rights of setoff that the Collateral Agent may
otherwise at any time have
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under applicable law with respect to any Spread Account and agrees that
amounts in the Spread Accounts shall at all times be held and applied solely
in accordance with the provisions hereof.
Section 4.10. CONTROL BY THE CONTROLLING PARTY. The Collateral
Agent shall comply with notices and instructions given by the Seller only if
accompanied by the written consent of the Controlling Party, except that if
any Default shall have occurred and be continuing, the Collateral Agent shall
act upon and comply with notices and instructions given by the Controlling
Party alone in the place and stead of the Seller.
ARTICLE V
COVENANTS OF THE SELLER
Section 5.01. PRESERVATION OF COLLATERAL. Subject to the rights,
powers and authorities granted to the Collateral Agent and the Controlling
Party in this Agreement, the Seller shall take such action as is necessary
and proper with respect to the Collateral in order to preserve and maintain
such Collateral and to cause (subject to the rights of the Secured Parties)
the Collateral Agent to perform its obligations with respect to such
Collateral as provided herein. The Seller will do, execute, acknowledge and
deliver, or cause to be done, executed, acknowledged and delivered, such
instruments of transfer or take such other steps or actions as may be
necessary, or required by the Controlling Party, to perfect the Security
Interests granted hereunder in the Collateral, to ensure that such Security
Interests rank prior to all other Liens and to preserve the priority of such
Security Interests and the validity and enforceability thereof. Upon any
delivery or substitution of Collateral, the Seller shall be obligated to
execute such documents and perform such actions as are necessary to create in
the Collateral Agent for the benefit of the Secured Parties a valid first
Lien on, and valid and perfected, first priority security interest in, the
Collateral so delivered and to deliver such Collateral to the Collateral
Agent, free and clear of any other Lien, together with satisfactory
assurances thereof, and to pay any reasonable costs incurred by any of the
Secured Parties or the Collateral Agent (including its agents) or otherwise
in connection with such delivery.
Section 5.02. OPINIONS AS TO COLLATERAL. Not more than 90 days nor
less than 30 days prior to (i) each anniversary of the date hereof during the
term of this Agreement and (ii) each date on which the Seller proposes to
take any action contemplated by Section 5.06, the Seller shall, at its own
cost and expense, furnish to each Secured Party and the Collateral Agent an
Opinion of Counsel with respect to each Series either (a) stating that, in
the opinion of such counsel, such action has been taken with respect to the
execution and filing of any financing statements and continuation statements
and other actions as are necessary to perfect, maintain and protect the lien
and security interest of the Collateral Agent (and the priority thereof), on
behalf of the Secured Parties, with respect to such Collateral against all
creditors of and purchasers from the Seller or OFL and reciting the details
of such action, or (b) stating that, in the opinion of such counsel, no such
action is necessary to maintain such perfected lien and security interest.
Such Opinion of Counsel shall further describe each execution and filing of
any financing statements and continuation statements and such other actions
as will, in the opinion of such counsel, be required to perfect, maintain and
protect the lien and security
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interest of the Collateral Agent, on behalf of the Secured Parties, with
respect to such Collateral against all creditors of and purchasers from the
Seller or OFL for a period, specified in such Opinion, continuing until a
date not earlier than eighteen months from the date of such Opinion.
Section 5.03. NOTICES. In the event that OFL or the Seller acquires
knowledge of the occurrence and continuance of any Insurance Agreement Event
of Default or Servicer Termination Event or of any event of default or like
event, howsoever described or called, under any of the Transaction Documents,
the Seller shall immediately give notice thereof to the Collateral Agent and
each Secured Party.
Section 5.04. WAIVER OF STAY OR EXTENSION LAWS; MARSHALLING OF
ASSETS. The Seller covenants, to the fullest extent permitted by applicable
law, that it will not at any time insist upon, plead, or in any manner
whatsoever claim or take the benefit or advantage of, any appraisement,
valuation, stay, extension or redemption law wherever enacted, now or at any
time hereafter in force, in order to prevent or hinder the enforcement of
this Agreement or any absolute sale of the Collateral or any part thereof, or
the possession thereof by any purchaser at any sale under Article VII of this
Agreement; and the Seller, to the fullest extent permitted by applicable law,
for itself and all who may claim under it, hereby waives the benefit of all
such laws, and covenants that it will not hinder, delay or impede the
execution of any power herein granted to the Collateral Agent, but will
suffer and permit the execution of every such power as though no such law had
been enacted. The Seller, for itself and all who may claim under it, waives,
to the fullest extent permitted by applicable law, all right to have the
Collateral marshalled upon any foreclosure or other disposition thereof.
Section 5.05. NONINTERFERENCE, ETC. The Seller shall not (i) waive
or alter any of its rights under the Collateral (or any agreement or
instrument relating thereto) without the prior written consent of the
Controlling Party; or (ii) fail to pay any tax, assessment, charge or fee
levied or assessed against the Collateral, or to defend any action, if such
failure to pay or defend may adversely affect the priority or enforceability
of the Seller's right, title or interest in and to the Collateral or the
Collateral Agent's lien on, and security interest in, the Collateral for the
benefit of the Secured Parties; or (iii) take any action, or fail to take any
action, if such action or failure 'to take action will interfere with the
enforcement of any rights under the Transaction Documents.
Section 5.06. SELLER CHANGES.
(a) CHANGE IN NAME, STRUCTURE, ETC. The Seller shall not change
its name, identity or corporate structure unless it shall have given each
Secured Party and the Collateral Agent at least 60 days' prior written notice
thereof, shall have effected any necessary or appropriate assignments or
amendments thereto and filings of financing statements or amendments thereto,
and shall have delivered to the Collateral Agent and each Secured Party an
Opinion of Counsel of the type described in Section 5.02.
(b) RELOCATION OF THE SELLER. Neither OFL nor the Seller shall change
its principal executive office unless it gives each Secured Party and the
Collateral Agent at least 90 days' prior written notice of any relocation of its
principal executive office. If the Seller
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relocates its principal executive office or principal place of business from
Minnesota, the Seller shall give prior notice thereof to the Controlling
Party and the Collateral Agent and shall effect whatever appropriate
recordations and filings are necessary and shall provide an Opinion of
Counsel to the Controlling Party and the Collateral Agent, to the effect
that, upon the recording of any necessary assignments or amendments to
previously-recorded assignments and filing of any necessary amendments to the
previously filed financing or continuation statements or upon the filing of
one or more specified new financing statements, and the taking of such other
actions as may be specified in such opinion, the security interests in the
Collateral shall remain, after such relocation, valid and perfected.
ARTICLE VI
CONTROLLING PARTY; INTERCREDITOR PROVISIONS
Section 6.01. APPOINTMENT OF CONTROLLING PARTY. From and after the
Closing Date of a Series until the Insurer Termination Date related to such
Series, Financial Security shall be the Controlling Party with respect to
such Series and shall be entitled to exercise all the rights given the
Controlling Party hereunder with respect to such Series. From and after the
Insurer Termination Date related to such Series until the Trustee Termination
Date related to such Series, the Trustee shall be the Controlling Party with
respect to such Series. Notwithstanding the foregoing, in the event that a
Financial Security Default shall have occurred and be continuing, the Trustee
shall be the Controlling Party with respect to such Series until the
applicable Trustee Termination Date. If prior to an Insurer Termination Date
the Trustee shall have become the Controlling Party with respect to a Series
as a result of the occurrence of a Financial Security Default and either such
Financial Security Default is cured or for any other reason ceases to exist
or the Trustee Termination Date with respect to a Series occurs, then upon
such cure or other cessation or on such Trustee Termination Date, as the case
may be, Financial Security shall, upon notice thereof being duly given to the
Collateral Agent, again be the Controlling Party with respect to such Series.
Section 6.02. CONTROLLING PARTY'S AUTHORITY.
(a) Each of OFL and the Seller hereby irrevocably appoint the
Controlling Party, and any successor to the Controlling Party appointed
pursuant to Section 6.01, its true and lawful attorney, with full power of
substitution, in the name of OFL, the Seller, the Secured Parties or
otherwise, but (subject to Section 2.08) at the expense of the Seller, to the
extent permitted by law to exercise, at any time and from time to time while
any Insurance Agreement Event of Default has occurred and is continuing, any
or all of the following powers with respect to all or any of the Collateral
related to the relevant Series: (i) to demand, sue for, collect, receive and
give acquittance for any and all monies due or to become due upon or by
virtue thereof, (ii) to settle, compromise, compound, prosecute or defend any
action or proceeding with respect thereto, (iii) to sell, transfer, assign or
otherwise deal with the same or the proceeds thereof as fully and effectively
as if the Collateral Agent were the absolute owner thereof, and (iv) to
extend the time of payment of any or all thereof and to make any allowance or
other
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adjustments with respect thereto; PROVIDED that the foregoing powers and
rights shall be exercised in accordance with the provisions of Article VII
hereof.
(b) With respect to each Series of Certificates and the related
Collateral, each Secured Party hereby irrevocably and unconditionally
constitutes and appoints the Controlling Party with respect to such Series,
and any successor to such Controlling Party appointed pursuant to Section
6.01 from time to time, as the true and lawful attorney-in-fact of such
Secured Party for so long as such Secured Party is the Non-Controlling Party,
with full power of substitution, to execute, acknowledge and deliver any
notice, document, certificate, paper, pleading or instrument and to do in the
name of the Controlling Party as well as in the name, place and stead of such
Secured Party such acts, things and deeds for and on behalf of and in the
name of such Secured Party under this Agreement with respect to such Series
which such Secured Party could or might do or which may be necessary,
desirable or convenient in such Controlling Party's sole discretion to effect
the purposes contemplated hereunder and, without limitation, exercise full
right, power and authority to take, or defer from taking, any and all acts
with respect to the administration of the Collateral related to such Series,
and the enforcement of the rights of the Secured Parties hereunder with
respect to such Series, on behalf of and for the benefit of such Controlling
Party and such Non-Controlling Party, as their interests may appear.
(c) So long as Financial Security shall be the Controlling Party
with respect to a Series, the Trustee hereby agrees, that if there exists an
Insurance Agreement Event of Default with respect to such Series:
(i) Financial Security shall have the exclusive right to direct
the Trustee as to any and all actions to be taken under the related
Transaction Documents, including without limitation all actions with
respect to the giving of directions to the Servicer and any subservicer
with respect to the servicing of the Receivables of such Series;
enforcement of any rights of the Trustee under such Transaction Documents;
and the giving or withholding of any other consents, requests, notices,
directions, approvals, extensions or waivers under or in respect of any
such Transaction Documents; and
(ii) Financial Security shall have the right to control the time,
method and place of conducting any proceeding for any remedy available to
the Trustee, or exercising any trust or power conferred upon the Trustee
under the related Pooling and Servicing Agreement or under any other
Transaction Document, including the remedies provided in Article VII.
PROVIDED, HOWEVER, that the Trustee may decline to follow any of the above
directions from Financial Security, if the Trustee, in accordance with an
opinion of counsel to the Trustee, that is independent of the Trustee,
determines that the action or proceeding so directed may not lawfully be
taken or if the Trustee in good faith determines that the action or
proceeding so directed would involve it in personal liability for which
adequate indemnity is not reasonably assured to it or, in the case of actions
or directions not specifically permitted to be taken by Financial Security so
long as no Financial Security Default has occurred and is continuing, would
adversely affect the interests of the Certificateholders in any material
respect.
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(d) So long as Financial Security shall be the Controlling
Party with respect to a Series, the Trustee shall not, without the prior
written consent of Financial Security:
(i) appoint new independent accountants with respect to the
Series;
(ii) consent to the amendment of or supplement to any of the
Transaction Documents related to the Series; or
(iii) waive a Servicer Termination Event under the related Pooling
and Servicing Agreement or Sale and Servicing Agreement, as applicable.
(e) So long as Financial Security shall be the Controlling Party with
respect to a Series:
(i) Financial Security shall have the rights provided in Section
5.3 of each Pooling and Servicing Agreement, Section 5.4 of each Sale and
Servicing Agreement and Section 5.19 of each Indenture in respect of the
direction of insolvency proceedings.
(ii) Financial Security shall have the right to direct the
Trustee as to any and all actions to be taken in the event of the
occurrence of a Servicer Termination Event under the related Pooling and
Servicing Agreement and shall have such other rights in respect of the
appointment of a successor servicer as are provided in such Pooling and
Servicing Agreement.
Section 6.03. RIGHTS OF SECURED PARTIES. With respect to each Series
of Certificates and the related Collateral, the Non-Controlling Party at any
time expressly agrees that it shall not assert any rights that it may
otherwise have, as a Secured Party with respect to the Collateral, to direct
the maintenance, sale or other disposition of the Collateral or any portion
thereof, notwithstanding the occurrence and continuance of any Default with
respect to such Series or any non-performance by OFL or the Seller of any
obligation owed to such Secured Party hereunder or under any other
Transaction Document, and each party hereto agrees that the Controlling Party
shall be the only Person entitled to assert and exercise such rights.
Section 6.04. DEGREE OF CARE.
(a) CONTROLLING PARTY. Notwithstanding any term or provision of this
Agreement, the Controlling Party shall incur no liability to OFL or the
Seller for any action taken or omitted by the Controlling Party in connection
with the Collateral, except for any gross negligence, bad faith or willful
misconduct on the part of the Controlling Party and, further, shall incur no
liability to the Non-Controlling Party except for a breach of the terms of
this Agreement or for gross negligence, bad faith or willful misconduct in
carrying out its duties, if any, to the Non-Controlling Party. The
Controlling Party shall be protected and shall incur no liability to any such
party in relying upon the accuracy, acting in reliance upon the contents and
assuming the genuineness of any notice, demand, certificate, signature,
instrument or other document believed by the Controlling Party to be genuine
and to have been duly executed by
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the appropriate signatory, and (absent manifest error or actual knowledge to
the contrary) the Controlling Party shall not be required to make any
independent investigation with respect thereto. The Controlling Party shall,
at all times, be free independently to establish to its reasonable
satisfaction the existence or nonexistence, as the case may be, of any fact
the existence or nonexistence of which shall be a condition to the exercise
or enforcement of any right or remedy under this Agreement or any of the
Transaction Documents.
(b) THE NON-CONTROLLING PARTY. The Non-Controlling Party shall not be
liable to the Seller for any action or failure to act by the Controlling
Party or the Collateral Agent in exercising, or failing to exercise, any
rights or remedies hereunder.
ARTICLE VII
REMEDIES UPON DEFAULT
Section 7.01. REMEDIES UPON A DEFAULT. If a Default with respect to a
Series has occurred and is continuing, the Collateral Agent shall, at the
direction of the Controlling Party, take whatever action at law or in equity
as may appear necessary or desirable in the judgment of the Controlling Party
to collect and satisfy all Insurer Secured Obligations (including, but not
limited to, foreclosure upon the Collateral and all other rights available to
secured parties under applicable law) or to enforce performance and
observance of any obligation, agreement or covenant under any of the
Transaction Documents related to such Series. Notwithstanding the foregoing,
the Collateral Agent shall not be entitled to take any action and the
Controlling Party shall not be entitled to give any direction with respect to
the Trust Property, except to the extent provided in the Pooling and
Servicing Agreement or other Transaction Documents and Sections 6.02(a), (c),
(d) and (e) hereof.
Section 7.02. WAIVER OF DEFAULT. The Controlling Party shall have the
sole right, to be exercised in its complete discretion, to waive any Default
by a writing setting forth the terms, conditions and extent of such waiver
signed by the Controlling Party and delivered to the Collateral Agent, the
other Secured Party and the Seller. Any such waiver shall be binding upon the
Non-Controlling Party and the Collateral Agent. Unless such writing expressly
provides to the contrary, any waiver so granted shall extend only to the
specific event or occurrence which gave rise to the Default so waived and not
to any other similar event or occurrence which occurs subsequent to the date
of such waiver.
Section 7.03. RESTORATION OF RIGHTS AND REMEDIES. If the Collateral
Agent has instituted any proceeding to enforce any right or remedy under this
Agreement, and such proceeding has been discontinued or abandoned for any
reason, or has been determined adversely to such Collateral Agent, then and
in every such case the Seller, the Collateral Agent and each of the Secured
Parties shall, subject to any determination in such proceeding, be restored
severally and respectively to their former positions hereunder, and
thereafter all rights and remedies of the Secured Parties shall continue as
though no such proceeding had been instituted.
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Section 7.04. NO REMEDY EXCLUSIVE. No right or remedy herein conferred
upon or reserved to the Collateral Agent, the Controlling Party or either of
the Secured Parties is intended to be exclusive of any other right or remedy,
and every right or remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given hereunder or
now or hereafter existing at law, in equity or otherwise (but, in each case,
shall be subject to the provisions of this Agreement limiting such remedies),
and each and every right, power and remedy whether specifically herein given
or otherwise existing may be exercised from time to time and as often and in
such order as may be deemed expedient by the Controlling Party, and the
exercise of or the beginning of the exercise of any right or power or remedy
shall not be construed to be a waiver of the right to exercise at the same
time or thereafter any other right, power or remedy.
ARTICLE VIII
MISCELLANEOUS
Section 8.01. FURTHER ASSURANCES. Each party hereto shall take such
action and deliver such instruments to any other party hereto, in addition to
the actions and instruments specifically provided for herein, as may be
reasonably requested or required to effectuate the purpose or provisions of
this Agreement or to confirm or perfect any transaction described or
contemplated herein.
Section 8.02. WAIVER. Any waiver by any party of any provision of this
Agreement or any right, remedy or option hereunder shall only prevent and
estop such party from thereafter enforcing such provision, right, remedy or
option if such waiver is given in writing and only as to the specific
instance and for the specific purpose for which such waiver was given. The
failure or refusal of any party hereto to insist in any one or more
instances, or in a course of dealing, upon the strict performance of any of
the terms or provisions of this Agreement by any party hereto or the partial
exercise of any right, remedy or option hereunder shall not be construed as a
waiver or relinquishment of any such term or provision, but the same shall
continue in full force and effect.
Section 8.03. AMENDMENTS; WAIVERS. No amendment, modification, waiver
or supplement to this Agreement or any provision of this Agreement shall in
any event be effective unless the same shall have been made or consented to
in writing by each of the parties hereto and each Rating Agency shall have
confirmed in writing that such amendment will not cause a reduction or
withdrawal of a rating on any Series; PROVIDED, HOWEVER, that, for so long as
Financial Security shall be the Controlling Party with respect to a Series,
amendments, modifications, waivers or supplements hereto relating to such
Series, the related Collateral or Spread Account or any requirement hereunder
to deposit or retain any amounts in such Spread Account or to distribute any
amounts therein as provided in Section 3.03 shall be effective if made or
consented to in writing by Financial Security, the Seller, OFL and the
Collateral Agent (the consent of which shall not be withheld or delayed with
respect to any amendment that does not adversely affect the Collateral Agent)
but shall in no circumstances require the consent of the Trustee or the
Certificateholders related to such Series or any other Series.
34
<PAGE>
Section 8.04. SEVERABILITY. In the event that any provision of this
Agreement or the application thereof to any party hereto or to any
circumstance or in any jurisdiction governing this Agreement shall, to any
extent, be invalid or unenforceable under any applicable statute, regulation
or rule of law, then such provision shall be deemed inoperative to the extent
that it is invalid or unenforceable and the remainder of this Agreement, and
the application of any such invalid or unenforceable provision to the
parties, jurisdictions or circumstances other than to whom or to which it is
held invalid or unenforceable, shall not be affected thereby nor shall the
same affect the validity or enforceability of any other provision of this
Agreement. The parties hereto further agree that the holding by any court of
competent jurisdiction that any remedy pursued by the Collateral Agent, or
any of the Secured Parties, hereunder is unavailable or unenforceable shall
not affect in any way the ability of the Collateral Agent or any of the
Secured Parties to pursue any other remedy available to it or them (subject,
however, to the provisions of this Agreement limiting such remedies).
Section 8.05. NONPETITION COVENANT. Notwithstanding any prior
termination of this Agreement, each of the parties hereto agrees that it
shall not, prior to one year and one day after the Final Scheduled
Distribution Date with respect to each Series, acquiesce, petition or
otherwise invoke or cause the Seller or OFL to invoke the process of the
United States of America, any State or other political subdivision thereof or
any entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government for the purpose of
commencing or sustaining a case by or against the Seller, OFL or the Trust
under a Federal or state bankruptcy, insolvency or similar law or appointing
a receiver, liquidator, assignee, trustee, custodian, sequestrator or other
similar official of the Seller, OFL or the Trust or all or any part of its
property or assets or ordering the winding up or liquidation of the affairs
of the Seller, OFL or the Trust. The parties agree that damages will be an
inadequate remedy for breach of this covenant and that this covenant may be
specifically enforced.
Section 8.06. NOTICES. All notices, demands, certificates, requests
and communications hereunder ("notices") shall be in writing and shall be
effective (a) upon receipt when sent through the U.S. mails, registered or
certified mail, return receipt requested, postage prepaid, with such receipt
to be effective the date of delivery indicated on the return receipt, or (b)
one Business Day after delivery to an overnight courier, or (c) on the date
personally delivered to an Authorized Officer of the party to which sent, or
(d) on the date transmitted by legible telecopier transmission with a
confirmation of receipt, in all cases addressed to the recipient as follows:
(i) If to OFL:
Olympic Financial Ltd.
7825 Washington Avenue South, Suite 410
Minneapolis, Minnesota 55439-2435
Attention: Chief Financial Officer
Telecopier No.: (612) 942-6730
35
<PAGE>
(ii) If to the Seller:
Olympic Receivables Finance Corp.
7825 Washington Avenue South, Suite 410
Minneapolis, Minnesota 55439-2435
Attention: President
Telecopier No.: (612) 942-6730
(iii) If to Financial Security:
Financial Security Assurance Inc.
350 Park Avenue - 13th Floor
New York, New York 10022
Attention: Surveillance Department
Telecopier No.: (212) 339-3518
(212) 339-3529
(in each case in which notice or other communication to Financial
Security refers to a Default or a claim on the Policy or in which
failure on the part of Financial Security to respond shall be deemed
to constitute consent or acceptance, then with a copy to the attention
of the Senior Vice President Surveillance)
(iv) If to the Trustee:
Norwest Bank Minnesota, National Association
6th Street and Marquette Avenue
Minneapolis, Minnesota 55479-0070
Attention: Corporate Trust Services - Asset Backed
Administration
Telecopier No.: (612) 667-3539
(v) If to the Collateral Agent:
Norwest Bank Minnesota, National Association
6th Street and Marquette Avenue
Minneapolis, Minnesota 55479-0070
Attention: Corporate Trust Services - Asset Backed
Administration
Telecopier No.: (612) 667-3539
36
<PAGE>
(vi) If to Moody's:
Moody's Investor's Service, Inc.
99 Church Street
New York, New York 10007
Telecopier No.: (212) 553-0344
(vii) If to Standard & Poor's:
Standard & Poor's Ratings Group
26 Broadway
New York, New York 10004
Telecopier No.: (212) 208-1582
A copy of each notice given hereunder to any party hereto shall also be given
to (without duplication) Financial Security, the Seller, the Trustee and the
Collateral Agent. Each party hereto may, by notice given in accordance
herewith to each of the other parties hereto, designate any further or
different address to which subsequent notices shall be sent.
Section 8.07. TERM OF THIS AGREEMENT. This Agreement shall take effect
on the Closing Date of the Series 1993-A Certificates and shall continue in
effect until the last Final Termination Date to occur with respect to each
Series. On such Final Termination Date, this Agreement shall terminate, all
obligations of the parties hereunder shall cease and terminate and the
Collateral, if any, held hereunder and not to be used or applied in discharge
of any obligations of the Seller or OFL in respect of the Secured Obligations
or otherwise under this Agreement, shall be released to and in favor of the
Seller, PROVIDED that the provisions of Sections 4.06, 4.07 and 8.05 shall
survive any termination of this Agreement and the release of any Collateral
upon such termination.
Section 8.08. ASSIGNMENTS: THIRD-PARTY RIGHTS; REINSURANCE.
(a) This Agreement shall be a continuing obligation of the parties
hereto and shall (i) be binding upon the parties and their respective
successors and assigns, and (ii) inure to the benefit of and be enforceable
by each Secured Party and the Collateral Agent, and by their respective
successors, transferees and assigns. Neither the Seller nor OFL may assign
this Agreement, or delegate any of its duties hereunder, without the prior
written consent of the Controlling Party.
(b) Financial Security shall have the right (unless a Financial
Security Default shall have occurred and be continuing) to give
participations in its rights under this Agreement and to enter into contracts
of reinsurance with respect to any Policy issued in connection with a Series
of Certificates and each such participant or reinsurer shall be entitled to
the benefit of any representation, warranty, covenant and obligation of each
party (other than Financial Security) hereunder as if such participant or
reinsurer was a party hereto and, subject
37
<PAGE>
only to such agreement regarding such reinsurance or participation, shall
have the right to enforce the obligations of each such other party directly
hereunder; PROVIDED, HOWEVER, that no such reinsurance or participation
agreement or arrangement shall relieve Financial Security of its obligations
hereunder, under the Transaction Documents to which it is a party or under
any such Policy. In addition, nothing contained herein shall restrict
Financial Security from assigning to any Person pursuant to any liquidity
facility or credit facility any rights of Financial Security under this
Agreement or with respect to any real or personal property or other interests
pledged to Financial Security, or in which Federal Security has a security
interest, in connection with the transactions contemplated hereby. The terms
of any such assignment or participation shall contain an express
acknowledgment by such Person of the condition of this Section and the
limitations of the rights of Financial Security hereunder.
Section 8.09. CONSENT OF CONTROLLING PARTY. In the event that the
Controlling Party's consent is required under the terms hereof or under the
terms of any Transaction Document, it is understood and agreed that, except
as otherwise provided expressly herein, the determination whether to grant or
withhold such consent shall be made solely by the Controlling Party in its
sole discretion.
Section 8.10. TRIAL BY JURY WAIVED. Each of the parties hereto
waives, to the fullest extent permitted by law, any right it may have to a
trial by jury in respect of any litigation arising directly or indirectly out
of, under or in connection with this Agreement, any of the other Transaction
Documents or any of the transactions contemplated hereunder or thereunder.
Each of the parties hereto (a) certifies that no representative, agent or
attorney of any other party has represented, expressly or otherwise, that
such other party would not, in the event of litigation, seek to enforce the
foregoing waiver and (b) acknowledges that it has been induced to enter into
this Agreement and the other Transaction Documents to which it is a party, by
among other things, this waiver.
Section 8.11. GOVERNING LAW. This Agreement shall be governed by and
construed, and the obligations, rights and remedies of the parties hereunder
shall be determined, in accordance with the laws of the State of New York.
Section 8.12. CONSENTS TO JURISDICTION. Each of the parties hereto
irrevocably submits to the jurisdiction of the United States District Court
for the Southern District of New York, any court in the state of New York
located in the city and county of New York, and any appellate court from any
thereof, in any action, suit or proceeding brought against it and related to
or in connection with this Agreement, the other Transaction Documents or the
transactions contemplated hereunder or thereunder or for recognition or
enforcement of any judgment and each of the parties hereto irrevocably and
unconditionally agrees that all claims in respect of any such suit or action
or proceeding may be heard or determined in such New York State court or, to
the extent permitted by law, in such federal court. Each of the parties
hereto agrees that a final judgment in any such action, suit or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law. To the extent permitted by
applicable law, each of the parties hereby waives and agrees not to assert by
way of motion, as a defense or otherwise in any such suit, action or
proceeding, any claim that it is not personally subject to the jurisdiction
of such courts, that the suit, action
38
<PAGE>
or proceeding is brought in an inconvenient forum, that the venue of the
suit, action or proceeding is improper or that this Agreement or any of the
other Transaction Documents or the subject matter hereof or thereof may not
be litigated in or by such courts. Each of OFL and the Seller hereby
irrevocably appoints and designates Norwest Bank Minnesota, National
Association, as its true and lawful attorney and duly authorized agent for
acceptance of service of legal process. Each of OFL and the Seller agrees
that service of such process upon such Person shall constitute personal
service of such process upon it. Nothing contained in this Agreement shall
limit or affect the rights of any party hereto to serve process in any other
manner permitted by law or to start legal proceedings relating to any of the
Transaction Documents against OFL or the Seller or their respective property
in the courts of any jurisdiction.
Section 8.13. LIMITATION OF LIABILITY. It is expressly understood and
agreed by the parties hereto that (a) Norwest Bank Minnesota, National
Association is executing this Agreement not in its individual capacity but
solely in its capacity as trustee of the Trusts pursuant to the Pooling and
Servicing Agreements and (b) in no case whatsoever shall Norwest Bank
Minnesota, National Association be personally liable on, or for any loss in
respect of, any of the statements, representations, warranties, covenants,
agreements or obligations of the Trust hereunder, all such liability, if any,
being expressly waived by the parties hereto.
Section 8.14. DETERMINATION OF ADVERSE EFFECT. Any determination of
an adverse effect on the interest of the Secured Parties or the
Certificateholders shall be made without consideration of the availability of
funds under the Policies.
Section 8.15. COUNTERPARTS. This Agreement may be executed in two or
more counterparts by the parties hereto, and each such counterpart shall be
considered an original and all such counterparts shall constitute one and the
same instrument.
Section 8.16. HEADINGS. The headings of sections and paragraphs and
the Table of Contents contained in this Agreement are provided for
convenience only. They form no part of this Agreement and shall not affect
its construction or interpretation.
39
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement, as amended and restated, as of the date set forth on the first
page hereof.
OLYMPIC FINANCIAL LTD.
By /s/John A. Whitham
----------------------------------------
John A. Witham
Executive Vice President and Chief
Financial Officer
OLYMPIC RECEIVABLES FINANCE CORP.
By /s/John A. Whitham
----------------------------------------
John A. Witham
Senior Vice President and Chief
Financial Officer
FINANCIAL SECURITY ASSURANCE INC.
By /s/Illegible
----------------------------------------
Authorized Officer
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Trustee
By /s/Thomas D. Wraalstad
---------------------------------------
Thomas D. Wraalstad
Corporate Trust Officer
<PAGE>
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Collateral Agent
By /s/Thomas D. Wraalstad
---------------------------------------
Thomas D. Wraalstad
Corporate Trust Officer
42
<PAGE>
EXHIBIT 10.6
OLYMPIC FINANCIAL LTD.
EMPLOYEE BONUS PLAN
(EFFECTIVE SEPTEMBER 12, 1996)
Olympic Financial Ltd. (the "Company") believes that the best interests
of the Company and its shareholders will be served if certain key employees
of the Company are encouraged to continue their employment with the Company
during any Change of Control (as hereinafter defined) and thereafter.
Accordingly, the Company hereby establishes this "Olympic Financial Ltd.
Employee Bonus Plan" (the "Plan") for the benefit of such key employees.
SECTION 1. DEFINITIONS
In addition to the terms defined in the preceding paragraph, the
following definitions shall apply for purposes of the Plan.
1.1. "Bonus" means respective amounts set forth for the names of the
Eligible Employees set forth on Schedule A attached hereto subject to
amendment thereof from time to time by the Plan Administrator pursuant to
Section 4.2 hereof.
1.2. "Annual Salary" means an Eligible Employee's annual rate of
regular base salary as in effect on the Effective Date, excluding bonuses.
1.3. "Board" means the Board of Directors of the Company.
1.4. "Bonus Period" means the period commencing on the Effective Date
and continuing for a period of twelve months.
1.5. "Cause" means the Board's good faith determination that an
Eligible Employee has committed any of the following, other than due to an
Eligible Employee's Permanent Disability or death:
(a) failed to adequately perform substantially all his or her duties
with the Company;
(b) engaged in conduct that is materially injurious to the Company;
(c) engaged in theft or embezzlement from the Company or any other
material act of dishonesty;
(d) engaged in repeated acts of insubordination respecting reasonable
orders or directions of an officer to whom he or she reports; or
1
<PAGE>
(e) been convicted of a crime (other than a traffic violation or
minor misdemeanor).
1.6. "Change of Control" means the occurrence of any of the following
events: (i) any person (as defined in Section 3(a)(9) of the Securities
Exchange Act of 1934, as amended from time to time (the "Exchange Act"), and
as used in Sections 13(d) and 14(d) thereof), excluding the Company, any
majority owned subsidiary of the Company (a "Subsidiary") and any employee
benefit plan sponsored or maintained by the Company or any Subsidiary
(including any trustee of such plan acting as trustee), but including a
"group" as defined in Section 13(d)(3) of the Exchange Act (a "Person"),
becomes the beneficial owner of shares of the Company having at least 50% of
the total number of votes that may be cast for the election of directors of
the Company (the "Voting Shares"); (ii) the shareholders of the Company shall
approve any merger or other business combination of the Company, sale of the
Company's assets or combination of the foregoing transactions (a
"Transaction") other than a Transaction involving only the Company and one or
more of its Subsidiaries, or a Transaction immediately following which the
shareholders of the Company immediately prior to the Transaction, excluding
for this purpose any shareholder owning directly or indirectly more than 10%
of the shares of the other company involved in the Transaction, continue to
have a majority of the voting power in the resulting entity; or (iii) within
any 12-month period beginning on or after September 12, 1996, the persons who
were directors of the Company immediately before the beginning of such period
(the "Incumbent Directors") shall cease (for any reason other than death) to
constitute at least a majority of the Board or the board of directors of any
successor to the Company, provided that any director who was not a director
as of September 12, 1996 shall be deemed to be an Incumbent Director if such
director was elected to the Board by, or on the recommendation of or with the
approval of, at least two-thirds of the directors who then qualified as
Incumbent Directors either actually or by prior operation of this subsection
1.4 (iii).
1.7. "Code" means the Internal Revenue Code of 1986, as amended from
time to time.
1.8. "Committee" means the Compensation Committee of the Board.
1.9. "Common Stock" means the common stock of the Company, "$.01 par
value per share.
1.10. "Company" means Olympic Financial Ltd. and any successor or
successors thereto.
1.11. "Eligible Employee" means each full time employee of the Company
whose name appears on Schedule A hereto subject to amendment thereof from
time to time by the Plan Administrator pursuant to Section 4.2 hereof.
2
<PAGE>
1.12. "Eligible Termination" means an involuntary termination of
employment without Cause, or a resignation for Good Reason, which occurs as
of or within the one-year period following the Effective Date.
1.13. "Good Reason" means any one or more of the following events, which
occurs without an Eligible Employee's express prior written consent or
approval, other than due to an Eligible Employee's Permanent Disability or
death:
(i) a good faith determination by the Eligible Employee that the
Company or any of its officers has taken or failed to take any action
(including, without limitation, (a) a pattern of discrimination against or
harassment of the Eligible Employee, and (b) the subjection of the Eligible
Employee to procedures not generally applicable to other similarly situated
employees which changes the Eligible Employee's position, authority or
responsibilities or reduces the Eligible Employee's ability to carry out
his or her duties and responsibilities;
(ii) any reduction in an Eligible Employee's Annual Salary or any
material reduction in his or her employee benefits from the level in effect
immediately prior to the Effective Date, other than an insubstantial or
inadvertent failure remedied by the Company promptly after receipt of
notice thereof from the Eligible Employee; or
(iii) the Company's requiring the Eligible Employee to be employed
at any location more than 35 miles further from his or her principal
residence than the location at which the Eligible Employee was employed
immediately preceding the Effective Date.
1.14. "Olympic Companies" means the Company and its subsidiaries and
affiliates, and any successor or successors thereto.
1.15. "Permanent Disability" means an Eligible Employee's inability, by
reason of any physical or mental impairment, to substantially perform the
significant aspects of his or her regular duties, which inability is
reasonably contemplated to continue for at least one (1) year from its
occurrence.
1.16. "Plan" means Olympic Financial Ltd. Employee Bonus Plan, as set
forth herein and as amended from time to time.
1.17. "Vesting Date" means the first to occur of the following dates:
(a) the date of an Eligible Termination of the Eligible Employee's
employment; or
(b) the date six (6) months after the closing of a Change of
Control; or
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<PAGE>
(c) the date of the Eligible Employee's death or Permanent
Disability; or
(d) the first anniversary of the Effective Date.
SECTION 2. BONUS PAYMENT
2.1. BONUS. Subject to the provisions hereof, in the event the
Eligible Employee is a full time employee of the Company on the Vesting Date
(or immediately prior to the Vesting Date in the case of an Eligible
Employee's Eligible Termination), the Company shall pay to him or her the
Bonus. The Bonus shall be paid in a lump sum, in cash, within thirty (30)
days of the Vesting Date. No Bonus shall be payable to an Eligible Employee
whose employment with the Company has been terminated prior to the Vesting
Date due to the Eligible Employee's voluntary resignation without Good Reason
or discharge by the Company with Cause.
2.2. WITHHOLDING: The Company may, to the extent required by law,
withhold applicable federal and state income, employment and other taxes from
any payments due to any Eligible Employee hereunder.
SECTION 3. LIMITS ON AMENDMENT OR TERMINATION
3.1. The Board may amend or terminate this Plan at any time; provided,
however, that upon occurrence of a Change of Control, this Plan (expressly
including, but not limited to, this Section 3) shall remain in effect, and
may not be altered or amended in any way which would adversely affect the
rights of any Eligible Employee hereunder, for at least seven (7) months
following the Change of Control, and for such additional time as may be
necessary to give effect to the terms of the Plan as in effect at the Change
of Control. Thereafter, the Board may amend or terminate this Plan in any
manner which does not adversely affect the rights of any Eligible Employee
who has incurred an Eligible Termination.
SECTION 4. ADMINISTRATION OF THE PLAN
4.1. The Plan shall be administered by the Company's Vice Chairman (the
"Plan Administrator").
4.2. The Plan Administrator shall have full and final discretion to
select additional Eligible Employees and to establish the amount of each
additional Eligible Employee's Bonus. There is no requirement that the
amount of any Bonus for any Eligible Employee be uniform as to particular
individuals or as to one or more classes of Eligible Employees.
4.3. Notwithstanding any other provision of this Plan, the aggregate
payments made under this Plan shall not exceed $750,000.00.
4
<PAGE>
4.4. Subject to the express provisions of this Plan, and to resolutions
adopted by the Board, the Plan Administrator shall have authority to
interpret the Plan, to prescribe, amend and rescind rules and regulations
relating thereto and to make all other determinations deemed necessary or
advisable for the administration of the Plan, and shall have and may exercise
such other powers and authority as may be delegated to it by the Board of
Directors from time to time. All determinations and interpretations of the
Plan Administrator, and the Board of Directors made with respect to the Plan
Administrator, shall be final, binding and conclusive as to all persons.
4.5. The Plan Administrator shall not be personally liable by reason of
any action taken in his capacity as Plan Administrator nor for any mistake of
judgment made in good faith, and the Company shall indemnify and hold
harmless each employee, officer or director of the Company, including the
Plan Administrator, to whom any duty or power relating to the administration
or interpretation of the Plan may be allocated or delegated, against any
reasonable cost or expense (including counsel fees) or liability (including
any sum paid in settlement of a claim with the approval of the Board of
Directors) arising out of any act or omission to act in connection with the
Plan unless arising out of such person's own fraud or bad faith.
4.6. The Company shall pay all costs and expenses, including attorneys'
fees and disbursements, at least monthly, of any Eligible Employee in
connection with any legal proceeding (including arbitration), whether or not
instituted by a member of the Olympic Companies or an Eligible Employee,
relating to the interpretation or enforcement of any provision of the Plan;
except that if such Eligible Employee instituted the proceeding and the
judge, arbitrator or other individual presiding over the proceeding
affirmatively finds that the Eligible Employee instituted the proceeding in
bad faith, the Eligible Employee shall pay all costs and expenses, including
attorneys' fees and disbursements, of such Eligible Employee.
SECTION 5. MISCELLANEOUS
5.1. Neither the establishment of the Plan nor any action of the
Company, any other member of the Olympic Companies, the Committee, or any
fiduciary shall be held or construed to confer upon any person any legal
right to continued employment with the Company or with any member of the
Olympic Companies, nor to affect the Company's right to dismiss any employee
at will. Nothing in the Plan shall be construed to prevent the Company or
any member of the Olympic Companies from terminating an Eligible Employee's
employment for Cause. If an Eligible Employee is terminated for Cause, the
Company shall have no obligation to make any payments under this Plan.
5.2. Benefits payable under the Plan shall be paid out of the general
assets of the Company. The Company is not required to fund the benefits
payable under this Plan; PROVIDED, HOWEVER, nothing in this Section 5.2 shall
be interpreted as precluding the
5
<PAGE>
Company from funding or setting aside amounts in anticipation of paying any
such benefits.
5.3. Benefits payable under the Plan shall not be subject to
assignment, alienation, transfer, pledge, encumbrance, commutation or
anticipation by any Eligible Employee. Any attempt to assign, alienate,
transfer, pledge, encumber, commute or anticipate Plan benefits shall be
void. In addition, no rights or interest under the Plan shall be in any
manner subject to levy, attachment or other legal process to enforce payment
of any claim against any Eligible Employee except to the extent required by
law.
5.4. Except as otherwise provided herein, the Plan shall be binding
upon, inure to the benefit of and be enforceable by the Company and the
Eligible Employees and their respective heirs, legal representatives,
successors and assigns. If the Company shall be merged into or consolidated
with another entity, the provisions of this Plan shall be binding upon and
inure to the benefit of the entity surviving such merger or resulting from
such consolidation, and such provisions shall also be binding upon and inure
to the benefit of any successor (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially all of the
business or assets of the Company, and such successor shall assume and
perform the obligations, responsibilities and liabilities to which the
Company or any member of the Olympic Companies is subject under this Plan in
the same manner and to the same extent that the Company or any member of the
Olympic Companies would be required to perform if no such succession had
taken place. The provisions of this Section 5.4 shall continue to apply to
each subsequent employer of any Eligible Employee in the event of any
subsequent merger, consolidation or transfer of assets of any such subsequent
employer.
5.5. This Plan shall be governed by and construed in accordance with
the laws of the State of Minnesota (without reference to rules relating to
conflicts of laws), except to the extent superseded by applicable federal law.
5.6. Any action required or permitted to be taken by the Company under
this Plan shall be taken by the Board or by the Plan Administrator, or any
designee of the Plan Administrator pursuant to Section 4, in each case
subject to the limits on amendment and termination contained in Section 3
hereof.
6
<PAGE>
EXHIBIT 11.1
OLYMPIC FINANCIAL LTD.
COMPUTATION OF EARNINGS PER SHARE
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------------- ----------------------
PRIMARY: 1996 1995 1996 1995
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
Income before extraordinary item and preferred dividends..... $ 17,157 $ 9,010 $ 42,950 $ 19,088
Less preferred dividends..................................... (345) (554) (1,152) (1,677)
------------ ----------- ----------- -----------
Net income before extraordinary item applicable to common
stock...................................................... 16,812 8,456 41,798 17,411
Less extraordinary item...................................... ---- ---- ---- (3,856)
------------ ----------- ----------- -----------
Net income applicable to common stock...................... $ 16,812 $ 8,456 $ 41,798 $ 13,555
------------ ----------- ----------- -----------
------------ ----------- ----------- -----------
Weighted average number of commons shares outstanding 33,478,304 20,347,535 29,231,401 15,850,651
Net effect of assumed exercise of stock options and warrants 2,417,845 4,180,584 2,332,818 3,631,010
------------ ----------- ----------- -----------
Weighted average primary shares............................ 35,896,149 24,528,119 31,564,219 19,481,661
------------ ----------- ----------- -----------
------------ ----------- ----------- -----------
Net income per common share before extraordinary item........ $ 0.47 $ 0.34 $ 1.32 $ 0.89
Extraordinary item per common share.......................... ---- ---- ---- (0.19)
------------ ----------- ----------- -----------
Net income per common share................................ $ 0.47 $ 0.34 $ 1.32 $ 0.70
------------ ----------- ----------- -----------
------------ ----------- ----------- -----------
FULLY DILUTED:
Income before extraordinary item and preferred dividends..... $ 17,157 $ 9,010 $ 42,950 $ 19,088
Less extraordinary item...................................... ---- ---- ---- (3,856)
------------ ----------- ----------- -----------
Net income as adjusted..................................... $ 17,157 $ 9,010 $ 42,950 $ 15,232
------------ ----------- ----------- -----------
------------ ----------- ----------- -----------
Weighted average number of common shares outstanding......... 33,478,304 20,347,535 29,231,401 15,850,651
Net effect of assumed exercise of stock options and warrants 2,618,135 4,890,703 2,852,736 4,870,497
Net effect of assumed conversion of 8% Cumulative Convertible
Exchangeable Preferred stock............................... 3,327,007 5,167,827 3,767,796 5,167,827
------------ ----------- ----------- -----------
Weighted average fully diluted shares...................... 39,423,446 30,406,065 35,851,933 25,888,975
------------ ----------- ----------- -----------
------------ ----------- ----------- -----------
Net income per share before extraordinary item............... $ 0.44 $ 0.30 $ 1.20 $ 0.74
Extraordinary item per share................................. ---- ---- ---- (0.15)
------------ ----------- ----------- -----------
Net income per share....................................... $ 0.44 $ 0.30 $ 1.20 $ 0.59
------------ ----------- ----------- -----------
------------ ----------- ----------- -----------
</TABLE>
26
<PAGE>
EXHIBIT 12.1
OLYMPIC FINANCIAL LTD.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PERIOD FROM
MARCH 8, 1990
NINE MONTHS ENDED SIX MONTHS (DATE OF
SEPTEMBER 30, YEAR ENDED DECEMBER 31, ENDED INCORPORATION)
-------------------- ------------------------------------ DECEMBER 31, TO JUNE 30,
1996 1995 1995 1994 1993 1992 1991 1991
COMPUTATION OF INCOME: --------- ---------- -------- -------- -------- ------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Income (loss) before income taxes and
extraordinary item........................ $ 68,656 $ 31,786 $ 48,835 $ 6,030 $ 1,395 ($1,342) ($1,158) ($1,525)
Capitalized interest........................ ---- ---- ---- ---- ---- ---- ---- ----
--------- ---------- -------- -------- -------- ------- ----------- ---------------
Income before income taxes and
capitalized interest...................... 68,656 31,786 48,835 6,030 1,395 (1,342) (1,158) (1,525)
Fixed charges............................... 19,434 12,049 17,789 5,670 1,946 896 96 191
--------- ---------- -------- -------- -------- ------- ----------- ---------------
Total income (loss) for computation......... $ 88,090 $ 43,835 $ 66,624 $ 11,700 $ 3,341 ($446) ($1,062) ($1,334)
--------- ---------- -------- -------- -------- ------- ----------- ---------------
--------- ---------- -------- -------- -------- ------- ----------- ---------------
COMPUTATION OF FIXED CHARGES:
Portion of rentals deemed
representative of interest (a)............ $ 826 $ 425 $ 614 $ 284 $ 129 $ 68 $ 24 $ 30
INTEREST:
Interest on long-term debt.................. 15,681 10,660 15,529 5,254 1,734 740 ---- ----
Interest other than funding of purchase
of auto loans............................. 2,030 446 945 112 63 70 70 58
Amortization of debt
placement................................. 897 518 701 20 20 18 2 103
Capitalized interest........................ ---- ---- ---- ---- ---- ---- ---- ----
--------- ---------- -------- -------- -------- ------- ----------- ---------------
Total fixed charges......................... $ 19,434 $ 12,049 $ 17,789 $ 5,670 $ 1,946 $ 896 $ 96 $ 191
--------- ---------- -------- -------- -------- ------- ----------- ---------------
--------- ---------- -------- -------- -------- ------- ----------- ---------------
Ratio of earnings to fixed
charges................................... 4.53x 3.64x 3.75x 2.06x 1.72x ---- ---- ----
Deficiency in earnings to fixed charges..... ---- ---- ---- ---- ---- ($1,342) ($1,158) ($1,525)
ADDITIONAL INFORMATION:
Net rental expense.......................... $ 2,479 $ 1,274 $ 1,842 $ 861 $ 391 $ 207 $ 73 $ 91
--------- ---------- -------- -------- -------- ------- ----------- ---------------
--------- ---------- -------- -------- -------- ------- ----------- ---------------
</TABLE>
(a) Portion of rental deemed representative of interest equals one third of
rental expense.
<PAGE>
EXHIBIT 12.2
OLYMPIC FINANCIAL LTD.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PERIOD FROM
MARCH 8, 1990
NINE MONTHS ENDED SIX MONTHS (DATE OF
SEPTEMBER 30, YEAR ENDED DECEMBER 31, ENDED INCORPORATION)
-------------------- ------------------------------------ DECEMBER 31, TO JUNE 30,
1996 1995 1995 1994 1993 1992 1991 1991
COMPUTATION OF INCOME: --------- ---------- -------- -------- -------- ------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Income (loss) before income taxes and
extraordinary item........................ $ 68,656 $ 31,786 $ 48,835 $ 6,030 $ 1,395 ($1,342) ($1,158) ($1,525)
Capitalized interest........................ ---- ---- ---- ---- ---- ---- ---- ----
--------- ---------- -------- -------- -------- ------- ----------- ---------------
Income before income taxes and
capitalized interest...................... 68,656 31,786 48,835 6,030 1,395 (1,342) (1,158) (1,525)
Fixed charges............................... 19,434 12,049 17,789 5,670 1,946 896 96 191
--------- ---------- -------- -------- -------- ------- ----------- ---------------
Total income (loss) for computation......... $ 88,090 $ 43,835 $ 66,624 $ 11,700 $ 3,341 ($446) ($1,062) ($1,334)
--------- ---------- -------- -------- -------- ------- ----------- ---------------
--------- ---------- -------- -------- -------- ------- ----------- ---------------
COMPUTATION OF FIXED CHARGES:
Portion of rentals deemed
representative of interest (a)............ $ 826 $ 425 $ 614 $ 284 $ 129 $ 68 $ 24 $ 30
INTEREST:
Interest on long-term debt.................. 15,681 10,660 15,529 5,254 1,734 740 ---- ----
Interest other than funding of purchase
of auto loans............................. 2,030 446 945 112 63 70 70 58
Amortization of debt
placement................................. 897 518 701 20 20 18 2 103
Capitalized interest........................ ---- ---- ---- ---- ---- ---- ---- ----
--------- ---------- -------- -------- -------- ------- ----------- ---------------
Total fixed charges......................... $ 19,434 $ 12,049 $ 17,789 $ 5,670 $ 1,946 $ 896 $ 96 $ 191
Preferred stock dividends in a pre-tax basis 1,921 2,795 3,688 3,286 192 ---- ---- ----
--------- ---------- -------- -------- -------- ------- ----------- ---------------
Total combined fixed charges and preferred
stock dividends $ 21,355 $ 14,844 $ 21,477 $ 8,956 $ 2,138 $ 896 $ 96 $ 191
--------- ---------- -------- -------- -------- ------- ----------- ---------------
--------- ---------- -------- -------- -------- ------- ----------- ---------------
Ratio of earnings to combined fixed charges
and preferred stock dividends 4.13x 2.95x 3.10x 1.31x 1.56x ---- ---- ----
Dificiency in earnings to combined fixed
charges and preferred stock dividends .. $ ---- ---- ---- ---- ---- $(1,342) $ ($1,58) $ ($1,525)
ADDITIONAL INFORMATION:
Net rental expense.......................... $ 2,479 $ 1,274 $ 1,842 $ 861 $ 391 $ 207 $ 73 $ 91
--------- ---------- -------- -------- -------- ------- ----------- ---------------
--------- ---------- -------- -------- -------- ------- ----------- ---------------
</TABLE>
(a) Portion of rental deemed representative of interest equals one third of
rental expense.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE 9/30/96
FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 3,593
<SECURITIES> 0
<RECEIVABLES> 637,322
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 30,281
<PP&E> 15,809
<DEPRECIATION> 3,180
<TOTAL-ASSETS> 683,825
<CURRENT-LIABILITIES> 102,950
<BONDS> 206,612
7
0
<COMMON> 330
<OTHER-SE> 373,926
<TOTAL-LIABILITY-AND-EQUITY> 683,825
<SALES> 0
<TOTAL-REVENUES> 150,611
<CGS> 0
<TOTAL-COSTS> 63,346
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 18,609
<INCOME-PRETAX> 68,656
<INCOME-TAX> 25,706
<INCOME-CONTINUING> 42,950
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 42,950
<EPS-PRIMARY> 1.32
<EPS-DILUTED> 1.20
</TABLE>