<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 0-20526
------------------------
OLYMPIC FINANCIAL LTD.
(Exact name of registrant as specified in its charter)
MINNESOTA 41-1664848
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
7825 WASHINGTON AVENUE SOUTH, MINNEAPOLIS, MINNESOTA 55439-2435
(Address of principal executive offices)
Registrant's telephone number, including area code: (612) 942-9880
------------------------
Securities registered pursuant to Section 12(b) of the Act:
COMMON STOCK ($.01 PAR VALUE)
CLASS A PREFERRED STOCK ($.01 PAR VALUE)
RIGHTS
(Title of Class)
Securities registered pursuant to Section 12(g) of the Act: NONE
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 / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. / /
The aggregate market value of the voting stock held by non-affiliates of the
registrant based on the closing sale price of the Common Stock as quoted on the
New York Stock Exchange on January 14, 1997 was approximately $614.7 million.
The number of shares of the registrant's Common Stock outstanding as of
January 14, 1997 was 37,431,189.
DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of the documents listed below have been incorporated by
reference into the indicated part of this Form 10-K.
<TABLE>
<CAPTION>
DOCUMENT INCORPORATED PART OF FORM 10-K
- ----------------------------------------------------------------- --------------------------
<S> <C>
Proxy Statement for 1997 Annual Meeting of Shareholders Items 10, 11, 12 and 13
to be held April 28, 1997 of Part III
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
FORM 10-K INDEX
<TABLE>
<S> <C> <C>
PART I
Item 1. Business........................................................................ 3
Item 2. Properties...................................................................... 19
Item 3. Legal Proceedings............................................................... 19
Item 4. Submission of Matters to a Vote of Security Holders............................. 19
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters........... 20
Item 6. Selected Financial Data......................................................... 21
Item 7. Management's Discussion and Analysis of Financial Condition and Results of
Operations.................................................................... 23
Item 8. Financial Statements and Supplementary Data..................................... 38
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure.................................................................... 60
PART III
Item 10. Directors and Executive Officers of the Registrant.............................. 60
Item 11. Executive Compensation.......................................................... 60
Item 12. Security Ownership of Certain Beneficial Owners and Management.................. 60
Item 13. Certain Relationships and Related Transactions.................................. 60
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K................ 60
</TABLE>
2
<PAGE>
PART I.
ITEM 1. BUSINESS
GENERAL
The Company purchases, securitizes and services consumer automobile loans
originated primarily by car dealers affiliated with major foreign and domestic
manufacturers. At December 31, 1996, the Company had purchased loans from more
than 7,700 dealers in 39 states, a substantial majority of which sell loans to
the Company on a regular basis. Loans are purchased through 17 regional buying
centers serving as "hubs" in 14 states, supplemented by a network of dealer
development representatives ("DDRs"). DDRs generate loans in their assigned
markets, or "spokes," while credit approval and loan processing are generally
performed at the "hub" or at the Company's headquarters in Minneapolis,
Minnesota. As a result of this strategy, the Company has expanded the number of
dealers in its network and has significantly increased its annual volume of
automobile loans purchased, from $743.3 million in 1994 to $2.8 billion in 1996,
without incurring the additional costs that would be associated with
establishing a proportionate number of new buying centers. The Company services
loans primarily through four regional servicing and collection centers.
The Company purchases each loan in accordance with its underwriting
procedures, which focus on a borrower's qualifications and collateral value. The
Company's underwriting criteria do not distinguish between new and used
vehicles, which represented approximately 28.7% and 71.3%, respectively, of the
Company's loan purchases in 1996. The Company seeks to maximize gross interest
rate spreads relative to expected net losses by maintaining a tiered pricing
system based on the borrower's credit characteristics as measured by the
Company's underwriting and proprietary credit scoring criteria. The Company
markets its loan products to dealers under two programs, designated Premier and
Classic. "Premier" and "Classic" are proprietary trademarks of the Company.
Premier borrowers generally have stronger credit characteristics than those of
Classic borrowers. At December 31, 1996, the Company was purchasing
approximately 50% of its aggregate loans under each of the Classic and the
Premier programs. The Company may change its loan purchase mix at any time and
from time to time. The Company considers substantially all of the loans it
purchases under both the Premier and Classic programs to be in the "prime" or
"non-prime" loan categories, but does not consider the loans it purchases to be
in the "sub-prime" loan category. In accordance with prevailing industry
practice, the Company pays an up-front dealer participation to the originating
dealer for each loan purchased. These dealer participations vary in amount among
the Company's loan products and are generally greater under the Premier program
than under the Classic program.
The Company primarily uses warehouse facilities to fund the initial purchase
of loans. The Company securitizes purchased loans as asset-backed securities,
generally on a quarterly or more frequent basis. In its securitizations, the
Company, through a special purpose subsidiary, transfers loans to newly-formed
securitization trusts which issue one or more classes of asset-backed
securities. The asset-backed securities are simultaneously sold to investors and
the Company recognizes a gain on the sale of the loans. Each month, collections
of principal and interest on the securitized loans are used by the trustee to
pay the holders of the related asset-backed securities, to establish and
maintain spread accounts as a source of cash to cover shortfalls in collections
and to pay expenses associated with the securitizations and subsequent
servicing. After such application by the trustee, amounts in excess of those
necessary to satisfy requirements associated with the asset-backed securities
are generally distributed to the Company, subject to its agreements with
Financial Security Assurance Inc. ("FSA"). All of the Company's securitization
trusts and one of the Company's warehouse facilities are credit-enhanced through
financial guaranty insurance policies, issued by FSA, which insure payments of
principal and interest due on the related asset-backed securities. Asset-backed
securities insured by FSA have been rated AAA by Standard & Poor's and Aaa by
Moody's Investors Service, Inc.
3
<PAGE>
The Company acts as the servicer of all loans originated by it and
securitized in return for a monthly servicing fee. Until October 1996, servicing
and collection functions were provided through the Company's national servicing
and collections center located in Minneapolis, Minnesota, and in each of its 17
"hubs." In response to the rapid growth of its servicing portfolio, continued
expansion of its Classic program (which generally requires greater collection
efforts than its Premier program), and increases in delinquencies and default
rates on its servicing portfolio, the Company substantially increased its
servicing and collection staff, and in October 1996, implemented a strategy to
regionalize its servicing and collection capabilities into four new locations:
Charlotte, North Carolina; Dallas, Texas; Denver, Colorado and Minneapolis,
Minnesota.
STRATEGIES
The Company's business objective is to maximize the volume and profitability
of loans it purchases, securitizes and services. To achieve this objective, the
Company employs the following strategies:
- EMPHASIS ON DEALER RELATIONSHIPS -- The Company believes that one of its
key competitive advantages is its ability to identify and meet a dealer's
financing needs. When presented with a loan application, the Company
attempts to notify the dealer within one hour or less whether it will
approve, conditionally approve or deny the automobile loan for purchase
from the dealer. The Company's business hours generally coincide with
those of the dealership and, in some cases, the Company will provide loan
processing on the dealer's premises during dealer promotions. When the
Company considers a borrower's credit quality to be adequate, the Company
may provide the dealer with flexibility in developing loan structures to
accommodate a borrower's needs, such as extended payment terms or low
down-payment requirements. To further assist the dealer, the Company may
perform more in-depth underwriting analysis when warranted by special
circumstances. A DDR maintains frequent contacts with the dealer and
recommends service enhancements from time to time. By employing consistent
loan underwriting and purchasing procedures, the Company believes that it
provides the dealer with a reliable and consistent source of financing.
- TIERED PRICING STRATEGY -- The Company maintains a tiered pricing system,
allowing it to price different loan products according to the profiles of
borrowers' credit characteristics as measured by the Company's proprietary
credit scoring system. The Company's tiered pricing system seeks to (i)
maximize gross interest rate spreads relative to expected net losses
within each credit tier, (ii) provide a greater opportunity to expand its
automobile loan market share through loan products
that address a greater variety of customer needs, and (iii) reduce initial
cash requirements relative to the Premier program because the Company
offers lower dealer participations on Classic loans.
- MAINTENANCE OF UNDERWRITING PROCEDURES -- The Company has developed a
proprietary credit scoring system designed to maintain consistent
underwriting procedures for its loan authorizations. The Company's credit
scoring system monitors six evaluation criteria, including debt-to-income,
payment-to-income, loan-to-value, bankruptcy score, credit score and loan
size. Based on the results of the credit scoring system, each loan
application is reviewed by one of the Company's credit specialists and, as
appropriate under the Company's underwriting procedures, one or more
credit managers, to determine whether the loan should be approved. To
monitor the integrity of the underwriting procedures, management tracks on
a daily basis the approval rates and delinquency and loss rates by credit
specialist, buying center and dealer.
- SERVICING -- The Company has regionalized its servicing and collection
functions and in 1996 established four regional centers located in
Charlotte, North Carolina; Dallas, Texas; Denver, Colorado and
Minneapolis, Minnesota. These centers are staffed with trained personnel
responsible for various servicing, collection and repossession activities.
They are assisted by highly automated telephone dialing systems which
improve the Company's ability to make early contact with delinquent
obligors. In addition the Company utilizes a computerized collection
system to aid its servicing and collection centers. The Company regularly
monitors and periodically evaluates its
4
<PAGE>
servicing and collection resources with a view to improving their
procedures and anticipating expansion of purchase volume or changes in
product mix.
- FUNDING AND LIQUIDITY THROUGH WAREHOUSING AND SECURITIZATIONS -- The
Company funds the acquisition of automobile loans principally through
several warehouse facilities including a bank credit facility and two
facilities with asset-backed commercial paper programs. Currently, these
facilities provide sufficient capacity to handle the Company's loan
purchases. The Company securitizes purchased loans as asset-backed
securities and uses such securitizations as a cost competitive source of
capital compared to traditional sources of corporate debt financing.
Securitization enables the Company to sell automobile loans on a regular
basis, while retaining the right to receive future servicing fees and
excess cash flows. Securitization also allows the Company to use the net
proceeds from such sales to fund the purchase of additional automobile
loans.
- RETAILING OF REPOSSESSED AUTOMOBILES -- The Company channels a substantial
majority of its repossession inventory through retail markets, primarily
retail used car consignment lots. The Company believes that the greater
recoveries available from the retail market justify the costs of
maintaining unsold repossession inventory and managing the retail program.
In addition, the use of retail markets provides the Company with an
opportunity to finance the sale of repossessed automobiles to new buyers.
AUTOMOBILE DEALER PROGRAM
OVERVIEW. The following table describes the growth in the number of dealers
with whom the Company has entered into a dealer agreement during the three years
ended December 31, 1996. A substantial majority of these dealers sell loans to
the Company on a regular basis.
<TABLE>
<CAPTION>
OPENING
REGIONAL BUYING CENTER DATE 1994 1995 1996
- ---------------------------------------------------------- ----------- --------- --------- ---------
<S> <C> <C> <C> <C>
Minnesota................................................. 6/90 340 645 823
Colorado.................................................. 4/92 240 414 500
North Texas............................................... 11/92 334 467 534
Washington................................................ 3/93 248 409 532
Arizona................................................... 7/93 136 266 344
Florida................................................... 8/93 169 332 477
Georgia................................................... 11/93 250 395 499
South Texas (1)........................................... 2/94 175 333 311
Northern California....................................... 6/94 115 286 424
Missouri.................................................. 6/94 163 403 547
Massachusetts............................................. 8/94 123 400 581
Tennessee................................................. 10/94 51 218 300
Ohio...................................................... 3/95 -- 208 395
North Carolina............................................ 5/95 -- 309 513
Southern California....................................... 12/95 -- 25 303
New York.................................................. 3/96 -- -- 339
West Texas (1)............................................ 7/96 -- -- 305
--------- --------- ---------
Totals................................................ 2,344 5,110 7,727
--------- --------- ---------
--------- --------- ---------
</TABLE>
- ------------------------
(1) Prior to July 1996, the West Texas region was included in the South Texas
region.
The Company believes that the volume and quality of the loans it acquires
depends upon its ability to establish and maintain satisfactory relationships
with automobile dealers. The Company's DDRs and other loan purchasing personnel
emphasize dealer service. The Company attempts to identify the particular
service
5
<PAGE>
needs of dealers and to provide a reliable source of financing for qualified
automobile buyers. DDRs are the Company's primary contact with its dealers and
are responsible for prospecting new dealerships, selling the Company's programs,
and cultivating dealer relationships. DDRs train dealer personnel in the
Company's programs and meet with dealer management periodically in an effort to
ensure the dealer's needs and expectations are being satisfied. DDRs serving in
the Company's "spokes" typically operate within a 200-mile radius of a regional
buying center. The Company's cost in maintaining DDRs is limited to compensation
determined solely on the basis of loan volume generated in their respective
territories.
LOAN PURCHASES AND UNDERWRITING
LOAN PURCHASES. Retail automobile buyers are customarily directed to a
dealer's finance and insurance department to finalize their purchase agreement
and to review potential financing sources and rates available from the dealer.
If the customer elects to pursue financing through the dealer, an application is
taken for submission to the dealer's financing sources. The Company's agreements
with its dealers are non-exclusive and, typically, a dealer will submit the
purchaser's application to more than one financing source for review. The dealer
in consultation with the borrower will decide which source will finance the
automobile purchase based upon the rates being offered, the terms for approval,
dealer participations or certain incentives offered from time to time in
accordance with captive wholesale financing arrangements with the dealer's
primary supplier of automobiles.
When presented with a loan application, the Company attempts to notify the
dealer within an hour or less whether it will approve, conditionally approve or
deny the loan for purchase from the dealer. A loan purchase by the Company
generally occurs simultaneously with the purchase by the buyer of the related
automobile and the making of the loan to the buyer by the dealer. The buyer's
purchase generally is not completed until the Company or another financing
source approves a loan. If the application is approved by the Company and the
buyer accepts the terms of the financing, the buyer enters into an installment
contract or secured note with the dealer on a form prepared and provided to the
dealer by the Company. At the bottom or reverse of the contract or note is an
assignment of the loan to the Company which is signed by the dealer.
UNDERWRITING. The Company purchases each loan in accordance with its
established underwriting procedures. The Company's underwriting procedures
include scoring the borrower's loan application in accordance with the Company's
proprietary credit scoring system and comparing such credit scores to
established underwriting criteria. For borrowers with credit scores falling
outside predetermined criteria, the Company requires additional review and
approval by supervisory personnel in order to determine whether to approve such
loans. These procedures are intended to assess the applicant's ability to repay
the amounts due on the loan and the adequacy of the financed vehicle as
collateral. The Company's underwriting procedures do not distinguish between new
and used vehicles. The Company maintains a tiered pricing system, allowing it to
price loans according to the borrower's credit characteristics. The Company
markets its loan products to automobile dealers through its Premier and Classic
programs. Premier borrowers generally have stronger credit characteristics than
those of Classic borrowers.
Each applicant for a loan is required to complete and sign an application
which lists the applicant's assets, liabilities, income, credit and employment
history and other personal information. Upon receipt of the completed loan
application, the Company's administrative personnel order a credit bureau report
on the applicant to document the applicant's credit history. The application and
the credit bureau report are given to one of the Company's credit specialists
for analysis under the Company's proprietary credit scoring system.
The Company's credit scoring system evaluates the credit applicant with an
emphasis on cash flow as a principal indicator of repayment capability and
provides credit scores which are utilized by the Company as a basis to determine
if the applicant initially falls within the parameters of the Company's
underwriting criteria for a particular loan product. Assuming that the applicant
qualifies, the Company will expand its credit review by preparing an analysis of
the applicant's debt-to-income and payment-to-income ratios, and
6
<PAGE>
purchasing from a credit bureau an additional credit score which attempts to
assess the likelihood of borrower bankruptcies. If the applicant meets the
Company's underwriting standards, the Company generally will approve the
application. For Classic borrowers (and, if certain scoring criteria are not
satisfied, for Premier borrowers), this data is subject to further
investigation. This investigation typically consists of direct telephone
confirmations, when feasible, of the applicant's employment and may also include
direct credit references from banks and financial institutions noted on the
application.
Once scoring and verifications have been completed, one of the Company's
credit specialists reviews the application to ensure that it meets the
requirements of the Company's internal system and also reviews the various
banking and employment verifications obtained. The credit specialist also
considers the amount to be financed in relation to the purchase price and market
value of the automobile. If the vehicle is used, the Company determines market
value based upon the Kelly Blue Book value or the National Automobile Dealers
Association's ("NADA") Guide on Retail and Wholesale Values. Consistent with
industry standards, this assessment does not include inspection of the
automobile. The Company does not reject an applicant solely because of the age
of the automobile.
Objective credit scoring criteria provide the factual background for lending
decisions, but such decisions frequently require the credit judgment of the
Company's credit specialists. To the extent an applicant fails to meet one or
more of the scoring benchmarks for the proposed loan, the Company requires
higher levels of management scrutiny before such loans are approved. In 1996, a
substantial majority of Classic loans and a substantial number of Premier loans
purchased by the Company failed to meet at least one applicable scoring
benchmark and required additional management review before approval of these
loans.
Upon completion of the credit analysis, the Company decides whether it will
approve, conditionally approve or deny the loan application as submitted.
Conditioning approval of the application involves amending the dealer's proposed
terms of the loan to qualify the application according to Company procedures.
Typical conditions include, but are not limited to, requiring a co-applicant,
amending the length of the proposed term, requiring additional down payment,
substantiating certain credit information, or requiring proof of resolution of
certain credit deficiencies as noted on the applicant's credit history.
Approved, declined or conditioned application decisions are promptly
communicated to the dealer by phone or facsimile. Additionally, the applicant is
informed by the Company of any credit denial or other adverse action by mail, in
compliance with applicable statutory requirements.
The Company regularly reviews the quality of the loans it purchases and
conducts internal compliance reviews on a monthly basis.
RESALE AND FINANCING OF REPOSSESSIONS. The Company channels a substantial
majority of its repossession inventory through retail markets, primarily retail
used car consignment lots. The Company believes that the greater recoveries
available from the retail market justify the costs of maintaining higher levels
of unsold repossession inventory and managing the retail program. In addition,
the use of retail markets provides the Company with an opportunity to finance
the repossessed vehicles with new buyers. During 1996, the Company sold
approximately 70% of its repossession inventory through retail markets and the
Company financed approximately 90% of these sales. At December 31, 1996, the
Company had arrangements with 67 smaller consignment lots compared with ten
large retail consignment lots at December 31, 1995. The Company also sells
repossessed automobiles in the wholesale auction markets from time to time to
maintain its repossession inventory at acceptable levels as determined by
management.
The Company applies the same underwriting methodology and procedures to the
financing of repossessed automobiles as it applies to the purchase of other loan
products, but it allows credit specialists and managers greater latitude in the
financed repossession product to approve exceptions (with appropriate management
authorization) to underwriting criteria as compared to other products in the
Premier and Classic programs. The principal amount of retail repossession sales
financed by the Company increased from $25.7 million (1.13% of the total
servicing portfolio) at December 31, 1995 to $96.9 million (2.56% of the
7
<PAGE>
total servicing portfolio) at December 31, 1996. Principally as a result of an
inventory reduction effort in the fourth quarter of 1995 and the first quarter
of 1996, together with improper practices by certain of the initial consignment
dealers (with which the Company has since terminated its business
relationships), the delinquency, default and loss rates of the Company's
portfolio of repossessed automobile loans have significantly exceeded the rates
of the Company's other loan products, accounting for a disproportionate amount
of the Company's overall delinquencies, defaults and losses in 1996. The Company
has instituted more comprehensive controls over its financed repossession
product for the purpose of reducing delinquency, default and loss rates to
acceptable levels. Acceptable levels of delinquencies, defaults and losses in
the repossession loan portfolio, as determined by management, may exceed levels
typically experienced in the Company's other loan products. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
DEALER PARTICIPATIONS. The Company remits to the dealer the amount financed
pursuant to the terms of the loan and, consistent with industry practice, a
dealer participation for selling such loan to the Company. The Company computes
the dealer participation by calculating the amount of cash flow arising from the
rate differential between the interest rate charged by the automobile dealer to
the borrower and the rate offered by the Company to the dealer. The Company
generally offers two alternative methods for payment of the dealer
participation. Under the "shared participation" method, the dealer generally
receives a percentage of the total participation at the time of sale in exchange
for a shorter charge back period. During the charge-back period the Company is
entitled to recover the upfront percentage received by the dealer in the event
of a prepayment or default during the first 90 to 180 days. Under an alternative
method, the Company pays the full participation to the dealer less approximately
1% of the outstanding loan balance which is held in reserve to allow for future
charges to the dealer in the event of early prepayment or default. Under the
alternative method, the Company is entitled to recover from the dealer the
unearned portion of the dealer participation in the event of a prepayment or
default in excess of the amount withheld at any point prior to contractual
maturity and the entire reserve amount if the loan defaults within its first 12
months. A substantial majority of the Company's dealers elect the "shared
participation" method.
8
<PAGE>
MARKETS AND EXPANSION
The following table illustrates the loan purchasing volume and percentage of
total loan purchases by regional buying center during the three years ended
December 31, 1996:
<TABLE>
<CAPTION>
(Dollars in thousands)
REGIONAL BUYING CENTER 1994 1995 1996
- --------------------------------------- ------------------------ ------------------------ ------------------------
<S> <C> <C> <C> <C> <C> <C>
Minnesota.............................. $ 61,135 8.23% $ 117,253 5.71% $ 160,376 5.83%
Colorado............................... 77,982 10.49 145,552 7.09 161,880 5.89
North Texas............................ 109,624 14.75 260,775 12.71 299,673 10.90
Washington............................. 75,218 10.12 176,241 8.59 198,580 7.22
Arizona................................ 71,936 9.68 124,921 6.09 204,717 7.44
Florida................................ 79,598 10.71 123,308 6.01 144,042 5.24
Georgia................................ 95,123 12.80 143,289 6.98 189,346 6.88
South Texas (1)........................ 98,699 13.28 335,317 16.34 278,457 10.12
Northern California.................... 23,822 3.21 149,291 7.27 192,794 7.01
Missouri............................... 33,267 4.48 172,569 8.41 173,381 6.30
Massachusetts.......................... 12,359 1.66 108,090 5.27 131,794 4.79
Tennessee.............................. 4,493 0.59 99,951 4.87 141,491 5.15
Ohio................................... -- -- 9,844 0.48 57,267 2.08
North Carolina......................... -- -- 85,978 4.18 202,255 7.35
Southern California.................... -- -- 34 -- 57,858 2.10
New York............................... -- -- -- -- 44,516 1.62
West Texas (1)......................... -- -- -- -- 112,126 4.08
------------ --------- ------------ --------- ------------ ---------
Totals............................. $ 743,256 100.00% $ 2,052,413 100.00% $ 2,750,553 100.00%
------------ --------- ------------ --------- ------------ ---------
------------ --------- ------------ --------- ------------ ---------
</TABLE>
- ------------------------
(1) Prior to July 1996, the West Texas region was included in the South Texas
region.
The Company regularly evaluates its "hub and spoke" strategy and from time
to time has expanded into new markets through the establishment of additional
regional buying centers and "spoke" operations. The Company's expansion program
is directed by personnel with backgrounds in credit administration, finance and
operations, information systems, facilities development, sales and marketing and
human resources. In considering potential markets for expansion, the Company
reviews such factors as population, income per capita, retail sales per capita,
city work force, number of households, average annual income, automobile
registrations, driver licenses issued and number of dealerships in the state and
standard metropolitan statistical areas and the competitive environment for
automobile financing. The Company also considers other general expansion
criteria, including but not limited to, recruiting and staffing, training,
compensation and benefits, policies and procedures, demographics, and legal and
licensing requirements. The Company also reviews the performance of existing
buying centers to evaluate their continuing contribution to the Company's
strategy.
FINANCING
WAREHOUSE FACILITIES. The Company uses warehouse facilities to finance its
purchase of loans on a short-term basis pending securitization. At December 31,
1996, the Company had an aggregate borrowing capacity of $800.0 million under
three primary warehouse facilities, of which $688.9 million was available. The
Company may borrow, on a revolving basis, up to $170.0 million pursuant to a
credit agreement (the "Credit Agreement") with a syndicate of banking
institutions (the "Banks") led by Bank of America National Trust and Savings
Association (the "Agent"). In addition, the Company, through a wholly-owned
9
<PAGE>
special purpose subsidiary, Olympic Receivables Finance Corp. ("ORFC"), has a
$300.0 million receivables warehouse facility (the "BofA Facility") with
Receivables Capital Corporation ("RCC"), a commercial paper conduit sponsored by
Bank of America. At December 31, 1996, the Company, through another wholly-owned
special purpose subsidiary, Olympic Receivables Finance Corp. II ("ORFC II"),
had a $330.0 million receivables warehouse facility (the "J.P. Morgan Facility"
and, together with the Credit Agreement and the BofA Facility, the "Warehouse
Facilities") with Delaware Funding Corporation ("DFC"), a commercial paper
conduit sponsored by J.P. Morgan.
Amounts outstanding under the Credit Agreement are secured by the automobile
loans pledged to the Agent as collateral for borrowings under the Credit
Agreement. Under the Credit Agreement, the Company may borrow 95% of the
outstanding principal amount of eligible automobile loans pledged to secure the
indebtedness. The Company pays a commitment fee to the Banks on the unused
portion of the facility and pays an annual agent's fee to the Agent. The notes
issued to the Banks in respect of borrowings under the Credit Agreement bear
interest at rates determined by reference to the reserve-adjusted interbank
offered rates or the base rate of Bank of America Illinois in effect from time
to time, depending upon the type of advance the Company elects under the Credit
Agreement. The Company's notes issued under the Credit Agreement mature no later
than July 10, 1997. Under the Credit Agreement, the Company is subject to
certain financial and other covenants customary in such financings, including a
minimum capital base requirement and loss ratio and delinquency ratio
requirements for the automobile loans serviced by the Company.
In connection with the BofA Facility, the Company, through ORFC, sells loans
to another wholly-owned special purpose subsidiary, Arcadia Receivables Conduit
Corp. ("ARCC"), and ARCC purchases the loans from ORFC and agrees to transfer
the loans back to ORFC on ORFC's demand (at the time, and for the purpose, of
securitization). ORFC is also obligated to repurchase loans from ARCC on or
before the date which is twelve months following their conveyance to ARCC and
upon the occurrence of a default or certain other events. The BofA Facility
provides for the purchase of loans for an aggregate purchase price outstanding
at any time not to exceed $300.0 million. ARCC finances its purchase of loans
from ORFC by issuing asset-backed notes (the "ARCC Notes"). FSA provides credit
enhancement with respect to the BofA Facility in the form of a financial
guaranty insurance policy guaranteeing certain payments on the ARCC Notes. The
BofA Facility will continue until the earlier of December 2, 1999 or the
occurrence of certain events, subject to early termination as described below.
The purchase price payable to ORFC by ARCC is 98% of the principal balance of
each loan except in the case of loans used to finance the purchase of vehicles
previously repossessed by the Company, in which the case the purchase price is
85% of the principal balance of the loan. Proceeds of the loans, the loan
purchase price payable to ORFC and the repurchase price payable by ORFC are
deposited in a collection account. The collection account is pledged to secure
payment of the ARCC Notes. Any excess in the collection account over certain
amounts required to be retained in the account is released to a spread account.
The spread account is cross-collateralized with the spread accounts established
in connection with the Company's securitization trusts. If no default exists
with respect to the BofA Facility, all amounts deposited into the spread account
in excess of 1% of the outstanding balance of loans in the BofA Facility are
released to ORFC.
RCC's purchase of the ARCC Notes and concurrent issuance of commercial paper
is supported by a liquidity facility provided by financial institutions (the
"BofA liquidity banks"). This liquidity facility is a revolving obligation that
must be renewed annually. Failure by the BofA liquidity banks to renew this
liquidity facility would lead to an early termination of the BofA Facility. The
BofA Facility also includes eligibility criteria for loans warehoused, normal
and customary representations, warranties, covenants and portfolio performance
triggers designed to protect RCC, FSA and the BofA liquidity banks from various
risks relating to the pool of automobile loans supporting the BofA Facility.
The Company pays a usage fee to FSA, and usage and non-usage fees to Bank of
America, in connection with the BofA Facility. The ARCC Notes bear an interest
rate equal to the rate at which funds are obtained by RCC from time to time in
the commercial paper market plus a margin. In the event the
10
<PAGE>
ARCC Notes are funded by the BofA liquidity banks, the rate of interest will be
the reserve-adjusted interbank offered rate in effect from time to time plus a
margin.
Under the JP Morgan Facility, the Company, through ORFC II, may from time to
time warehouse automobile loans by selling them to an owner trust (the "Owner
Trust"). The Company may obtain up to 99.9% of the principal balance of the
receivables sold to the Owner Trust, but must deposit 4% of such principal
balance (subject to increase upon the occurrence of certain events) into a
spread account. The Owner Trust simultaneously issues a Variable Funding Note
("VFN") to DFC, representing 91% of the outstanding principal balance of the
receivables, and issues investor certificates (the "Investor Certificates") to
institutional investors, representing 8.9% of the outstanding principal balance
of the receivables. The purchase of the VFN is funded through the issuance of
commercial paper by DFC. The JP Morgan Facility will continue until the earlier
of December 19, 1997 or the occurrence of certain events, subject to early
termination as described below. At the time the Company accesses the public
asset-backed securitization market, the Company's securitization subsidiary
(currently ORFC) purchases the loans using the proceeds from the securitization
and the VFN and the Investor Certificates are redeemed by the Owner Trust. The
Company may use the JP Morgan Facility as a source of permanent funding for a
designated pool of automobile loans, but the pricing on the facility would be
increased under those circumstances.
DFC's purchase of the VFNs and concurrent issuance of commercial paper is
supported by a liquidity facility provided by financial institutions (the "JP
Morgan liquidity banks"). The liquidity facility is a revolving obligation that
must be renewed annually. In addition, the JP Morgan liquidity banks or the
institutional investors that have committed to purchase the Investor
Certificates may terminate the JP Morgan Facility, effective as of June 30,
1997, upon prior written notice to the Company. In addition to credit
enhancement through the subordination of the Investor Certificates, the spread
account and the liquidity facility, the JP Morgan Facility includes eligibility
criteria for loans warehoused, normal and customary representations and
warranties, covenants, and portfolio triggers designed to protect DFC, the
liquidity providers, and the private investors purchasing the Investor
Certificates from various risks relating to the automobile loans supporting the
warehouse facility. In addition, the JP Morgan Facility contains a capital base
covenant with respect to the Company, which is identical to the covenant in the
Credit Agreement.
The Company pays a commitment fee on the daily unused portion of the JP
Morgan Facility. The VFNs bear an interest rate equal to the rate at which funds
are obtained by DFC from time to time in the commercial paper market plus a
margin. The Investor Certificates require a higher market rate. In the event the
VFN is purchased by the JP Morgan liquidity banks, the rate of interest will be
the applicable adjusted Eurodollar rate or base rate (as defined) plus a margin,
if applicable.
SECURITIZATION OF LOANS. The Company pursues a strategy of securitizing
loans through the sale of asset-backed securities on a quarterly or more
frequent basis, based on the availability of loans, profitability and other
relevant factors. Securitization is used as a cost-competitive source of capital
compared to traditional corporate debt financing alternatives. The Company
utilizes the net proceeds from securitizations to purchase additional automobile
loans and to pay down outstanding warehouse facilities, thereby making such
short-term sources available for future loan purchases.
In its securitizations, the Company (through its special purpose subsidiary,
ORFC) transfers automobile loans to newly-formed securitization trusts which
issue one or more classes of asset-backed securities. The asset-backed
securities are simultaneously sold to investors. To ensure that the
securitization trust is not itself a taxable entity, the Company typically
retains 1% of the subordinated class of securities through wholly-owned
subsidiaries of the Company. Such investments, included in other assets in the
Company's Consolidated Financial Statements, totaled $4.3 million at December
31, 1996 compared with $2.8 million at December 31, 1995. Each month,
collections of principal and interest on the automobile loans are used by the
trustee to pay the holders of the related asset-backed securities, to fund
spread accounts as a source
11
<PAGE>
of cash to cover shortfalls in collections, if any, and to pay expenses. The
Company continues to act as the servicer of the automobile loans held by the
trust in return for a monthly fee.
To improve the level of profitability from the sale of securitized loans,
the Company uses credit enhancement to achieve a desired credit rating on the
asset-backed securities issued. The credit enhancement for the Company's
securitizations has generally taken the form of subordinated tranches of asset-
backed securities and financial guaranty insurance policies issued by FSA. FSA
insures payments of principal and interest due on the asset-backed securities.
Asset-backed securities insured by FSA have been rated AAA by Standard & Poor's
and Aaa by Moody's Investors Service, Inc. The Company has limited reimbursement
obligations to FSA related only to violations of representations and warranties
and not credit performance. However, spread accounts established in connection
with the securitizations provide a source of cash to cover shortfalls in
collections (as described below) and to reimburse FSA for claims made under the
policies issued with respect to the Company's securitizations.
The Company's agreements with FSA provide that the Company must maintain
specified levels of excess cash in a spread account for each insured
securitization trust during the life of the trust. The spread account for any
securitization trust is generally funded with the interest collected on the
loans that exceeds the sum of the interest payable to holders of asset-backed
securities and certain other amounts. In certain securitization trusts, the
spread account is also funded in part through initial deposits by the Company.
Funds may be withdrawn from the spread account to cover any shortfalls in
amounts payable on insured asset-backed securities or to reimburse FSA for draws
or advances under its financial guaranty insurance policy. In addition, under
cross-collateralization arrangements with FSA, the funds on deposit in the
spread account for any one securitization may be used to cover shortfalls in
amounts payable or to reimburse FSA in connection with other FSA-insured
securitizations. ORFC is entitled to receive excess cash monthly from
securitization trusts to the extent that, after payments to holders of
asset-backed securities, the amounts deposited in spread accounts exceed
predetermined required minimum levels. The spread accounts cannot be accessed by
the Company or ORFC without the consent of FSA until such levels have been
reached.
Each month, excess cash from each securitization trust is used to fund the
Company's spread account obligations related to that securitization trust and to
replenish any spread account deficiencies under other securitization trusts
before distribution of any remaining excess cash flow from that securitization
to ORFC. The spread account for each securitization is cross-collateralized to
the spread accounts established in connection with the Company's other
securitization trusts and the BofA Facility such that excess cash flow from a
performing securitization trust may be used to support negative cash flow from,
or to replenish a deficient spread account in connection with, a nonperforming
securitization trust, thereby further restricting excess cash flow available to
ORFC. If excess cash flow from all insured securitization trusts in any month is
not sufficient to fund current spread account obligations or replenish any prior
deficiencies in all such spread accounts, no cash flow would be available to
ORFC for that month. Otherwise, excess cash flow from the securitization trusts
is distributed to ORFC and is available for dividends to the Company by ORFC.
Each insured securitization trust has certain portfolio performance tests
relating to the following: (i) the average delinquency ratio; (ii) the
cumulative default rate; and (iii) the cumulative net loss rate. In each case,
these portfolio performance tests will be triggered if the above ratios equal or
exceed an agreed-upon percentage of the principal balance of loans included in
the securitization trust related to such series for a given time period. For the
cumulative default rate and the cumulative net loss rate, the ratios applicable
to the securitization trusts reflect the relationship between loan delinquencies
and repossession rates at various stages of a loan repayment term, including the
fact that the probability of a loan becoming delinquent or going into default is
highest during the six- to fourteen-month period from the date of origination of
the loan. If any of these levels are exceeded, the amount required to be
retained in the related spread account, and not passed through to ORFC, may be
increased. There can be no assurance that such levels will not be exceeded in
the future or that, if exceeded, waivers will be available from FSA
12
<PAGE>
permitting such payments to ORFC. In addition, certain adverse events with
respect to the Company (including insolvency and default on certain long-term
obligations) or more adverse portfolio performance with respect to the tests
described above, would cause the Company to be in default under its insurance
agreement with FSA and distributions of cash flow to ORFC from the related
securitization trust may be suspended until the asset-backed securities have
been paid in full or redeemed. There can be no assurance that such thresholds
will not be exceeded in the future or that, if exceeded, waivers will be
available from FSA permitting such payments to ORFC. FSA also has a collateral
security interest in the stock of ORFC. If FSA were to foreclose on such
security interest following an event of default under an insurance agreement
with respect to a securitization trust, FSA could preclude payment of dividends
by ORFC to the Company, thereby eliminating the Company's right to receive
distributions of excess cash flow from all the FSA-insured securitization
trusts.
SERVICING
Under the terms of its warehouse facilities and securitizations, the Company
acts as servicer with respect to the automobile loans warehoused or securitized.
The Company receives servicing fees for servicing securitized loans and loans
held under certain warehouse facilities equal to one percent per annum of the
outstanding principal balance of the loans. The Company services the loans by
collecting payments due from the obligors and remitting these payments to the
trusts or warehouse facility in accordance with the terms of servicing
agreements for pass through to holders of asset-backed securities and holders of
warehouse debt. The Company maintains computerized records with respect to each
loan to record all receipts and disbursements. The Company is permitted to
perform servicing activities through subcontractors, but has not delegated
servicing activities, except for the repossession of automobiles. Delegation of
duties does not relieve the Company of its responsibility to the trusts with
respect to those duties.
13
<PAGE>
The following table represents the amount of the Company's servicing
portfolio and the percentage of the total servicing portfolio by state.
<TABLE>
<CAPTION>
AT DECEMBER 31,
------------------------------------------------------------------------------
(Dollars in thousands) 1994 1995 1996
------------------------ ------------------------ ------------------------
<S> <C> <C> <C> <C> <C> <C>
Arizona................... $ 74,125 8.86% $ 127,292 5.61% $ 201,965 5.33%
California................ 16,162 1.93 99,278 4.38 226,381 5.97
Colorado.................. 90,805 10.85 132,570 5.85 156,637 4.13
Connecticut............... 190 0.02 29,769 1.31 50,090 1.32
Florida................... 73,482 8.78 146,629 6.47 213,209 5.62
Georgia................... 73,555 8.79 161,260 7.12 269,600 7.11
Illinois.................. 2,149 0.26 20,741 0.91 45,209 1.19
Kentucky.................. 343 0.04 7,287 0.32 38,585 1.02
Massachusetts............. 11,668 1.39 63,752 2.81 103,221 2.72
Minnesota................. 93,752 11.20 105,386 4.65 107,971 2.85
Missouri.................. 26,780 3.20 124,541 5.49 186,624 4.92
Nevada.................... 8,270 0.99 52,683 2.32 102,734 2.71
New Mexico................ 5,410 0.65 27,760 1.22 65,641 1.73
New York.................. 532 0.06 1,970 0.09 44,806 1.18
North Carolina............ 4,321 0.52 34,035 1.50 101,957 2.69
Oklahoma.................. 10,334 1.23 88,334 3.90 173,531 4.58
Oregon.................... 8,821 1.05 61,971 2.73 106,208 2.80
South Carolina............ 10,075 1.20 54,282 2.39 118,738 3.13
Tennessee................. 4,964 0.59 81,380 3.59 160,930 4.24
Texas..................... 228,223 27.26 564,606 24.91 826,749 21.80
Washington................ 68,098 8.14 128,859 5.68 163,707 4.32
Wisconsin................. 4,226 0.50 26,497 1.17 57,035 1.50
All Other States.......... 20,810 2.49 126,225 5.58 270,329 7.14
------------ --------- ------------ --------- ------------ ---------
Total................. $ 837,095 100.00% $ 2,267,107 100.00% $ 3,791,857 100.00%
------------ --------- ------------ --------- ------------ ---------
------------ --------- ------------ --------- ------------ ---------
</TABLE>
DELINQUENCY, COLLECTION AND REPOSSESSION ACTIVITIES. As servicer, the
Company is responsible for monitoring collections, collecting delinquent
accounts and, when necessary, repossessing and selling automobiles. Delinquency
rates for all loans purchased by each loan buyer are monitored, and loan buyers
are incentivized to maintain loan quality. In response to the rapid growth of
its servicing portfolio, continued expansion of its Classic program (which
generally requires greater collection efforts than its Premier program), and
increases in delinquencies and default rates on its servicing portfolio, the
Company substantially increased its servicing and collection staff and, in
October 1996, implemented a strategy to regionalize its servicing and collection
activities into four new locations: Charlotte, North Carolina; Dallas, Texas;
Denver, Colorado and Minneapolis, Minnesota. At December 31, 1996, the Company
employed 510 service representatives and collection associates who are
responsible for various aspects of the collection and repossession procedures,
compared with 188 and 38 at December 31, 1995 and 1994, respectively. The
Company also substantially expanded the capacity of its highly automated
telephone dialing systems (the "autodialer") in connection with its
establishment of four regional servicing and collection centers. In addition,
the Company uses a computerized collection system to aid its service and
collection associates. The Company regularly evaluates its servicing staffing
needs based on anticipated growth in its servicing portfolio and estimated
delinquency and repossession rates.
The Company generally utilizes the autodialer initially to contact
delinquent obligors. Based on parameters established by the Company for each of
its loan programs, the autodialer will phone the obligor within five to ten days
after a past due date. Once the call is answered, the autodialer will
immediately
14
<PAGE>
transfer the call to an available customer service representative located in one
of the Company's four regional service and collection centers and will
automatically display the obligor's loan information on the representative's
computer screen. The autodialer will continue to follow up with obligors at
various times throughout the first 24 days after a past due date (typically
every third day) if previous efforts do not result in the account deficiency
being cured. In addition to telephone inquiries, the Company's computerized
collection system generates past due notices which are mailed to the obligor at
various intervals during the first 30 days after a past due date. The first such
correspondence is generally sent approximately 13 days after a past due date.
If the collection effort during the first 20 days after a past due date does
not result in a satisfactory resolution of the delinquent account, then the
account is forwarded to collection specialists. These collection specialists
will typically send a final demand letter to the delinquent obligor allowing the
obligor a specified number of days to bring the account current. During this
period, the collection specialist generally will make a recommendation as to
whether the automobile should be repossessed or other action, such as a contract
extension, should be taken. The Company, like other consumer finance companies,
grants extensions in the ordinary course of business, following a re-evaluation
of the obligor's creditworthiness and approval by a collection department
manager. The terms of the Company's securitization trusts restrict the number of
contract extensions that the Company may grant. When an extension is granted,
the maturity of the loan is extended for one month and the interest for the
delinquent period is added to the loan balance. Contract extensions are more
frequently granted with respect to Classic and financed repossession loans than
with respect to Premier loans, and are seasonally highest during the Christmas
holiday period. Under special circumstances, the Company, like other consumer
finance companies, may agree to contract modifications, such as lengthening the
term to maturity or adjusting interest rates, subject to limitations set forth
in securitization trusts and agreements with FSA.
The Company uses independent contractors to perform repossessions. Once an
automobile is repossessed, a letter is sent giving the obligor a specified
number of days to pay the entire loan balance in order to recover the
automobile. At the expiration of this time period, the Company will prepare the
automobile for sale and determine the method of sale. The Company has
historically sold repossessed automobiles through wholesale auto auctions and
retail consignment lots. Beginning in 1995, the Company has primarily utilized
retail consignment lots to sell its repossessed inventory. Under this method the
Company retains control of repossessed automobiles on behalf of the relevant
securitization trust until resold through independent dealers. The Company has a
remarketing department responsible for the management of its repossession
inventory, which decides whether to sell each vehicle repossessed in the retail
or wholesale market, manages reconditioning and repairs when necessary, tracks
vehicles until sold and selects and monitors the retail consignment lots used by
the Company. At December 31, 1996, the Company had arrangements with 67 smaller
retail consignment lots compared to 10 large retail consignment lots at December
31, 1995.
PROPRIETARY INFORMATION
The Company has developed a credit scoring system for evaluating loan
applications submitted by dealers. The credit scoring system ranks the credit
quality of the applicant. The system is intended by the Company to act as a
predictor of loan repayment probability or loan defaults and serves as the basis
for the Company's underwriting procedures. Although asset-based lenders utilize
a variety of scoring and credit evaluation systems, the Company considers its
credit scoring system to be proprietary and attempts to maintain the system as a
trade secret.
COMPETITION
Competition in the field of financing retail automobile sales is intense.
Competitors include banks, savings and loans, small loan companies, credit
unions, a variety of local, regional and national consumer financing
institutions and captive finance companies of automobile manufacturers, such as
Ford Motor
15
<PAGE>
Credit Company, Chrysler Credit Corp. and General Motors Acceptance Corporation.
Many of these competitors have substantially greater capital resources than the
Company and a number offer other forms of financing to automobile dealers,
including, but not limited to, vehicle floor plan financing and leasing. Captive
automobile finance companies also, from time to time, have national promotions
offering below-market interest rates on select vehicles to automobile
purchasers. The Company believes it competes on the basis of providing a high
level of service, offering flexible loan terms which meet dealers' needs and
maintaining good relationships with its dealers. From time to time, competing
finance companies may offer to refinance borrowers' loans originally purchased
by the Company. As a result of such an offer, a borrower may refinance and
prepay an existing loan, or the Company may agree to amend the terms of the
borrower's loan.
REGULATION
The Company's operations are subject to regulation, supervision and
licensing under various federal, state and local statutes, ordinances and
regulations. At December 31, 1996 the Company's business operations were
conducted in 39 states, the laws and regulations of which govern the Company's
operations conducted therein. The Company is required to be, and is, licensed as
a sales finance company in 27 states. The Company is required to be, and is,
licensed under the Ohio Mortgage Loan Act. To the extent the Company expands its
operations into additional states, it will be required to comply with the laws
of those states.
CONSUMER PROTECTION LAWS. Numerous federal and state consumer protection
laws and related regulations impose substantive disclosure requirements upon
lenders and servicers involved in consumer finance. The Federal Trade Commission
("FTC") has adopted the so-called "holder-in-due-course" rule which has the
effect of subjecting persons who finance consumer credit transactions (and
certain related lenders and their assignees) to all claims and defenses which
the purchaser could assert against the seller of the goods and services. The
FTC's Rule on Sale of Used Vehicles requires that all sellers of used vehicles
prepare, complete and display a "Buyer's Guide" which explains the warranty
coverage (if any) for such vehicles. The "Credit Practices Rule" of the FTC
imposes additional restrictions on loan provisions and credit practices.
A majority of states in which the Company operates have adopted motor
vehicle retail installment sales acts or variations thereof. These laws
regulate, among other things, the interest rate and terms and conditions of
motor vehicle retail installment loans. These laws also impose restrictions on
consumer transactions, and some require loan disclosures in addition to those
required under federal law. These requirements impose specific statutory
liabilities upon creditors who fail to comply. In addition, the laws of certain
states grant to the purchasers of vehicles certain rights of rescission under
so-called "lemon laws". Under such statutes, purchasers of motor vehicles may be
able to seek recoveries from, or assert defenses against, the Company. A number
of states impose interest rate limitations under applicable usury laws and
regulate the Company's ability to collect late fees and other charges.
SECURED PARTY RIGHTS AND OBLIGATIONS. In the event of default by an
obligor, the Company has all the remedies of a secured party under the Uniform
Commercial Code ("UCC"), except where specifically limited by other state laws.
The remedies of a secured party under the UCC include the right of repossession
by self-help means, unless such means would constitute a breach of the peace. In
the event of default by the obligor, some jurisdictions require that the obligor
be notified of the default and be given a period of time in which to cure the
default prior to repossession. In addition, courts have applied general
equitable principles to secured parties pursuing repossession or litigation
involving deficiency balances. The obligor also has the right to redeem the
collateral prior to actual sale.
The proceeds from resale of financed vehicles generally will be applied
first to the expenses of repossession and resale and then to the satisfaction of
the automobile loans. A deficiency judgment can be sought in most states subject
to satisfaction of statutory procedural requirements by the secured party and
16
<PAGE>
certain limitations as to the initial sale price of the motor vehicle. Certain
state laws require the secured party to remit the surplus to any holder of a
lien with respect to the vehicle, or, if no such lienholder exists, the UCC
requires the secured party to remit the surplus to the former owner of the
financed vehicle.
In addition to laws limiting or prohibiting deficiency judgments, numerous
other statutory provisions, including Federal bankruptcy laws and related state
laws, may interfere with or affect the ability of the Company to realize upon
collateral or enforce a deficiency judgment. The repossession process and the
costs thereof generally result in losses on the underlying automobile loans, and
such losses generally reduce the amounts available for distribution from the
related spread accounts of securitized loan pools.
SERVICE MARKS; THE NAME "OLYMPIC"
Federal law grants to the United States Olympic Committee ("USOC") the
exclusive right to use the word "Olympic" and certain variations thereof. In
September 1996, the USOC notified the Company that it must cease using Olympic
in the Company's name by June 1, 1997. In compliance with such notice, the
Company intends to change its name to, will begin operating under the name of,
Arcadia Financial Ltd. The Company currently uses the trade name "Arcadia
Financial" for its operations in 21 states. The Company has registered its
"Arcadia Financial Ltd." service mark with the United States Patent and
Trademark Office.
EMPLOYEES
The Company employs personnel experienced in all areas of loan origination,
documentation, collection and administration. The Company employs and trains
specialists in loan processing and servicing with minimal cross-over of duties.
As of December 31, 1996, the Company had 1,193 full-time employees and 37
part-time employees. None of the Company's employees is covered by a collective
bargaining agreement.
EXECUTIVE OFFICERS
On August 26, 1996, Jeffrey C. Mack resigned as President, Chief Executive
Officer and director of the Company. Warren Kantor, a director of the Company,
was appointed to the position of Chairman of the Executive Committee of the
Board of Directors and served as acting chief executive officer. Following an
executive search, on January 6, 1997 the Company entered into an employment
agreement with Richard A. Greenawalt to serve as Chief Executive Officer of the
Company. Mr. Greenawalt had served as President and Chief Operating Officer of
Advanta Corporation ("Advanta"), a consumer finance firm, since 1987. On
December 18, 1996, Warren Kantor was elected Chairman of the Board. On January
27, 1997, Mr. Greenawalt was elected President of the Company and was appointed
as a director by the Board of Directors.
17
<PAGE>
Set forth below are the names, ages and positions of the executive officers
of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION
- -------------------------- --- --------------------------------------------------------------
<S> <C> <C>
Warren Kantor 55 Chairman of the Board
Richard A. Greenawalt 53 Director, President and Chief Executive Officer
Scott H. Anderson 39 Director, Vice Chairman and Chief Credit Officer
John A. Witham 45 Executive Vice President, Chief Financial Officer
A. Mark Berlin, Jr. 40 Director and Executive Vice President, Strategic Development
Robert A. Barbee, Jr. 38 Executive Vice President, Sales and Marketing
James D. Atkinson III 48 Senior Vice President, Corporate Counsel and Secretary
</TABLE>
WARREN KANTOR, was appointed Chairman of the Board of Directors in December
1996 and has served as a Director of the Company since December 1994. From
August 1996 until January 1997, Mr. Kantor served as the Chairman of the
Executive Committee of the Company's Board of Directors and as the Company's
acting chief executive officer. Mr. Kantor is the Chief Executive Officer of
Society Hill Capital Corporation, a money management company of which he is the
sole owner. Mr. Kantor was a director of Advanta from April 1986 through
December 1996 and served as Advanta's Vice Chairman from November 1993 through
September 1994 and as Executive Vice President and Chief Financial Officer from
April 1986 through November 1993. Prior to his employment with Advanta, Mr.
Kantor was employed by Arthur Andersen & Co., in charge of the Financial
Services Division of its Philadelphia office.
RICHARD A. GREENAWALT was appointed a Director and elected President and
Chief Executive Officer of the Company on January 27, 1997 and commenced
employment with the Company on January 29, 1997. Prior to joining the Company
Mr. Greenawalt served as President, Chief Operating Officer, and a Director of
Advanta from November 1987. Prior to joining Advanta, Mr. Greenawalt served as
President of Transamerica Financial Corp. from May 1986.
SCOTT H. ANDERSON was appointed Vice Chairman in December 1995. Mr. Anderson
had previously functioned as Executive Vice President and has been the Company's
Chief Credit Officer since April 1991. From 1987 until joining the Company, he
served as Vice President, Division Manager of Loan Administration for Marquette
Bank Minneapolis, N.A. Prior thereto he served as a Regional Vice President for
First Bank System, Inc. He has held both direct lending positions and lending
supervision positions for over 15 years.
JOHN A. WITHAM was appointed Executive Vice President in December 1995 and
has served as Chief Financial Officer of the Company since February 1994. From
January 1985 to January 1994, Mr. Witham held various management positions with
subsidiaries of PHH Corporation, a diversified financial services company,
including Senior Vice President, Finance of PHH Relocation and Real Estate from
August 1992 to January 1994, Senior Vice President, Finance of PHH Europe PLC,
in Swindon, England from August 1989 to August 1992 and Senior Vice President,
Finance of PHH FleetAmerica from January 1985 to August 1989.
A. MARK BERLIN, JR. became a Director of the Company in January 1992 and was
employed by the Company as its Senior Vice President, Strategic Development in
December 1994. In December 1995, Mr. Berlin was appointed Executive Vice
President, Strategic Development. Mr. Berlin was employed by the investment
banking firm of Wessels, Arnold & Henderson LLC from March 1993 through December
1994. From June 1991 to March 1993, Mr. Berlin was a Senior Vice President of
Kidder, Peabody & Co. Incorporated. From 1980 until June 1991, Mr. Berlin was
employed by Merrill Lynch & Co., most recently as a Director in Investment
Banking.
18
<PAGE>
ROBERT A. BARBEE, JR. was employed by the Company as Senior Vice President,
Sales and Marketing in September 1994. In December 1995, Mr. Barbee was
appointed Executive Vice President, Sales and Marketing. From June 1983 to
September 1994, he was employed as a Regional Vice President for Pat Ryan &
Associates, a provider of specialty insurance products.
JAMES D. ATKINSON III was appointed Senior Vice President, Corporate Counsel
in December 1995 and Secretary of the Company in January 1995. Mr. Atkinson had
previously served as Vice President, corporate counsel since September 1994 and
as outside corporate counsel since 1990. Prior to joining the Company, Mr.
Atkinson practiced law for sixteen years, specializing in corporate legal issues
and compliance.
All executive officers of the Company hold office until they are removed or
their successors are elected and qualify.
ITEM 2. PROPERTIES
The Company's executive offices are located at Olympic Financial Place, 7825
Washington Avenue South, Minneapolis, Minnesota 55439-2435. These facilities
consist of 52,000 square feet of leased space pursuant to a lease expiring in
2002. Additionally, the Company leases a 21,000 square foot operations facility
in Eden Prairie, Minnesota (a suburb of Minneapolis) which is utilized for
customer service and loan document processing. The Company also leases offices
for its regional buying centers in Atlanta, Boston, Buffalo, Charlotte,
Cincinnati, Dallas, Denver, Houston, Minneapolis, Nashville, New York, Orlando,
Phoenix, Sacramento, San Antonio, San Diego, Seattle and St. Louis. The size of
these offices range from 5,000 square feet to 13,000 square feet. Regional
buying center leases are generally for a term of five to seven years.
Furthermore, the Company leases offices for its Regional Service and Collection
Centers in Charlotte, Dallas, Denver, and Minneapolis. The size of these centers
range from 15,000 to 37,000 square feet and have lease terms ranging from 5 to
10 years. See Note 9 of Notes to Consolidated Financial Statements for a
description of the Company's rental obligations under these leases.
ITEM 3. 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 financial condition or results of
operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders through the
solicitation of proxies or otherwise during the quarter ended December 31, 1996.
19
<PAGE>
PART II.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
The Company's Common Stock is traded on the New York Stock Exchange under
the symbol "OLM." The following table provides quarterly high and low sales
prices for the Company's Common Stock for the two years ended December 31, 1996.
The Company's Common Stock began trading on the New York Stock Exchange on March
27, 1996. The Company's Common Stock had been traded on the Nasdaq National
Market since January 30, 1992.
<TABLE>
<CAPTION>
HIGH LOW
--------- ---------
<S> <C> <C>
1995
First quarter....................................................... $ 9.38 $ 5.88
Second quarter...................................................... 17.63 8.88
Third quarter....................................................... 27.50 14.00
Fourth quarter...................................................... 30.63 14.25
1996
First quarter....................................................... 19.63 12.50
Second quarter...................................................... 26.25 18.25
Third quarter....................................................... 26.63 15.38
Fourth quarter...................................................... 25.00 13.13
</TABLE>
The Company has not paid dividends on its Common Stock and may not (except
under limited circumstances with the consent of certain of its lenders) pay any
dividend or make any other distribution on its Common Stock, nor may the Company
redeem or purchase any of its Common Stock. In addition, the current policy of
the Company's Board of Directors is to retain earnings to provide for the
Company's growth. Consequently, no cash dividends are expected to be paid on the
Company's Common Stock in the foreseeable future. The terms of each of the
Company's Warehouse Facilities and 13% Senior Notes due 2000 (the "Senior Term
Notes") prohibit the making of certain payments with respect to the Common
Stock, including cash dividends on the Common Stock, unless certain financial
tests are met. Under the most restrictive of these restrictive covenants, no
amounts were available for cash dividends on the Common Stock as of December 31,
1996. Additional indebtedness incurred by the Company in the future may include
similar restrictions.
In October 1996, the Board of Directors adopted a Shareholder Rights Plan in
which Preferred Stock Purchase Rights were distributed as a dividend at the rate
of one Right for each share of the Company's Common Stock on November 22, 1996
to shareholders of record as of such date. All shares of Common Stock issued
thereafter will be issued together with one Right per share.
At January 14, 1997, the Company had 927 shareholders of record.
20
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected consolidated financial data and
other operating information of the Company. The following selected consolidated
information, except for selected cash flow data, for each of the five years in
the period ended December 31, 1996, is derived from the consolidated financial
statements of the Company. The selected consolidated financial information
should be read in conjunction with the Consolidated Financial Statements and
Notes thereto and other financial information included herein.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------
(Dollars in thousands except per share amounts) 1992 1993 1994 1995 1996
--------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Net interest margin................................ $ 752 $ 2,525 $ 9,828 $ 31,192 $ 62,963
Gain on sale of loans.............................. 2,698 7,650 13,579 62,182 115,773
Servicing fee income............................... 408 1,685 4,502 13,987 28,284
Other non-interest income.......................... -- 24 879 1,371 6,475
--------- ----------- ----------- ----------- -----------
Total revenues................................. 3,858 11,884 28,788 108,732 213,495
Operating expenses................................. 4,390 8,691 17,342 42,727 92,298
Long term debt and other interest expense.......... 810 1,798 5,416 17,170 25,193
--------- ----------- ----------- ----------- -----------
Total expenses................................. 5,200 10,489 22,758 59,897 117,491
--------- ----------- ----------- ----------- -----------
Operating income (loss) before income taxes and
extraordinary item............................... (1,342) 1,395 6,030 48,835 96,004
Provision for income taxes......................... -- -- 1,845 19,518 35,688
--------- ----------- ----------- ----------- -----------
Net income (loss) before extraordinary items....... (1,342) 1,395 4,185 29,317 60,316
Extraordinary items (1)............................ (458) -- -- (3,856) --
--------- ----------- ----------- ----------- -----------
Net income (loss).................................. $ (1,800) $ 1,395 $ 4,185 $ 25,461 $ 60,316
--------- ----------- ----------- ----------- -----------
--------- ----------- ----------- ----------- -----------
PRIMARY EARNINGS PER SHARE:
Net income (loss) per common share before
extraordinary items.............................. $ (0.24) $ 0.11 $ 0.17 $ 1.35 $ 1.79
Extraordinary items per common share (1)........... (0.08) -- -- (0.19) --
--------- ----------- ----------- ----------- -----------
Net income (loss) per common share................. $ (0.32) $ 0.11 $ 0.17 $ 1.16 $ 1.79
--------- ----------- ----------- ----------- -----------
--------- ----------- ----------- ----------- -----------
FULLY DILUTED EARNINGS PER SHARE:
Net income (loss) per share before extraordinary
items............................................ $ (0.24) $ 0.11 $ 0.17 $ 1.11 $ 1.65
Extraordinary items per share (1).................. (0.08) -- -- (0.15) --
--------- ----------- ----------- ----------- -----------
Net income (loss) per share........................ $ (0.32) $ 0.11 $ 0.17 $ 0.96 $ 1.65
--------- ----------- ----------- ----------- -----------
--------- ----------- ----------- ----------- -----------
WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES
OUTSTANDING:
Primary............................................ 5,668,272 10,996,536 10,818,908 20,029,769 33,065,473
Fully diluted...................................... 5,668,272 11,186,033 16,683,380 26,455,876 36,449,995
FINANCIAL RATIOS AND OTHER DATA:
Ratio of earnings to fixed charges (2)............. -- 1.72x 2.06x 3.75x 4.64x
Deficiency in earnings to fixed charges............ $ 1,342 -- -- -- --
SELECTED CASH FLOW DATA:
Total cash used in operating activities............ $ (17,991) $ (51,056) $ (78,774) $ (135,659) $ (253,127)
Total cash used in investing activities............ (1,104) (455) (917) (2,588) (6,157)
Total cash provided by financing activities........ 41,372 31,040 93,572 122,970 274,001
--------- ----------- ----------- ----------- -----------
Net increase (decrease) in cash.................... $ 22,277 $ (20,471) $ 13,881 $ (15,277) $ 14,717
--------- ----------- ----------- ----------- -----------
--------- ----------- ----------- ----------- -----------
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------
(Dollars in thousands) 1992 1993 1994 1995 1996
--------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA (AT PERIOD END):
Cash and cash equivalents.......................... $ 23,207 $ 2,736 $ 16,617 $ 1,340 $ 16,507
Finance income receivable.......................... 6,133 26,247 58,540 186,001 362,916
Cash in restricted spread accounts................. 5,207 15,109 21,408 63,580 142,977
Total long-term debt............................... 15,626 33,506 46,804 161,929 206,418
Total preferred shareholders' equity............... -- 27,289 27,279 25,379 --
Total common shareholders' equity.................. 30,072 31,410 33,583 155,434 393,093
OPERATING DATA:
Automobile dealer relationships (at period end).... 339 857 2,344 5,110 7,727
Automobile loan purchases.......................... $ 97,819 $ 305,823 $ 743,256 $ 2,052,413 $ 2,750,553
Automobile loan securitizations.................... $ 79,759 $ 336,077 $ 712,211 $ 1,933,525 $ 2,787,412
Operating expenses as a percentage of average
servicing portfolio.............................. 6.52% 4.39% 3.28% 2.78% 3.06%
FIXED CHARGE COVERAGE RATIO CASH FLOW DATA (3):
Operating cash receipts:
Excess cash flow received from securitization
trusts......................................... $ -- $ 11 $ 17,737 $ 21,054 $ 43,351
Servicing fee income............................. 408 1,685 4,502 12,693 27,018
Other cash income................................ -- 24 879 2,142 7,959
--------- ----------- ----------- ----------- -----------
Total operating cash receipts.................. 408 1,720 23,118 35,889 78,328
Less cash expenses:
Payment of dealer participations................. 4,206 13,524 29,566 86,476 94,938
Cash operating expenses.......................... 5,373 11,490 21,454 48,120 98,644
Interest paid on warehouse and other debt........ 4,061 3,790 6,386 19,630 33,448
Preferred dividends.............................. -- 192 2,300 2,213 1,688
--------- ----------- ----------- ----------- -----------
Total cash expenses............................ 13,640 28,996 59,706 156,439 228,718
--------- ----------- ----------- ----------- -----------
Consolidated cash flow............................. $ (13,232) $ (27,276) $ (36,588) $ (120,550) $ (150,390)
--------- ----------- ----------- ----------- -----------
--------- ----------- ----------- ----------- -----------
SERVICING DATA:
Servicing portfolio (at period end)................ $ 103,507 $ 316,933 $ 837,095 $ 2,267,107 $ 3,791,857
Average servicing portfolio during the period...... $ 67,339 $ 198,018 $ 528,577 $ 1,534,720 $ 3,015,411
Delinquencies of more than 30 days as a percentage
of servicing portfolio (at period end)........... 0.36% 0.96% 0.82% 1.33% 2.64%
Net losses as a percentage of average servicing
portfolio........................................ 0.22% 0.52% 0.66% 0.67% 0.99%
</TABLE>
- --------------------------
(1) Extraordinary items relate to prepayment fees and charge-off of capitalized
debt financing costs in connection with early extinguishment of certain debt
obligations.
(2) For purposes of calculating the ratio of earnings to fixed charges, earnings
are defined as income before income taxes plus fixed charges. Fixed charges
consist of interest expense, amortization of debt discount and the interest
factor in rental expenses.
(3) The Company has included Fixed Charge Coverage Ratio Cash Flow Data (which
is not a measure of financial performance under generally accepted
accounting principles) because comparable criteria will be the basis for
certain debt incurrence and restricted payment tests included in the
indenture governing the Senior Term Notes. On January 21, 1997, the Company
solicited the consent of the holders of the Senior Term Notes to eliminate
the tests related to the Fixed Charge Coverage Ratio Cash Flow Data from the
governing Indenture and sought the tender of the Senior Term Notes. The
Fixed Charge Coverage Ratio Cash Flow Data should not be considered by an
investor to be an alternative to cash flows determined in accordance with
generally accepted accounting principles as a measure of liquidity. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Capital Resources."
22
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
The Company derives substantially all of its earnings from the purchase,
securitization and servicing of automobile loans. At the time of purchase of
each loan, the Company pays a portion of the annual rate of interest paid by the
obligor ("APR") to the dealer for originating the loan ("dealer participation").
To fund the purchase of loans prior to securitization, the Company utilizes its
available cash balances and short-term borrowing and repurchase arrangements
with financial institutions and institutional lenders ("warehouse facilities").
Pending securitization, automobile loans held for sale by the Company generate
net interest income resulting from the difference between the interest rate
earned on automobile loans held for sale and the interest costs associated with
the Company's short-term borrowings (the "net interest rate spread").
The Company purchases loans under a tiered pricing system, allowing it to
price loans according to the borrower's credit characteristics. The Company
prices its loan products in order to maximize gross interest rate spreads
relative to expected net losses within each tier. Classic loans purchased in
1996 represented 36% of total purchasing volume compared with 17% during 1995
and 4% during 1994 and had APRs typically ranging from 16% to 23% while loans
purchased under the Premier program had APRs typically ranging from 8% to 16%.
The higher APRs of the Classic program are intended to compensate the Company
for anticipated higher delinquency, default and loss rates associated with the
Classic program, which the Company addresses through higher reserves for loan
losses. At December 31, 1996, the Company maintained $95.0 million in loan loss
reserves, or 2.51% of its servicing portfolio, compared to $42.3 million, or
1.86%, respectively at December 31, 1995.
The Company aggregates the automobile loans it purchases and sells them to a
trust, which in turn sells asset-backed securities to investors. By securitizing
its loans, the Company is able to fix the initial difference ("gross interest
rate spread") between the APR on automobile loans purchased and the interest
rate on the asset-backed securities sold ("securitization rate"). When the
Company securitizes its automobile loans, it records a gain on sale and
establishes an asset referred to as finance income receivable. Gain on sale
represents the present value of the estimated future cash flows to be received
by the Company, discounted at a market-based rate, and takes into account the
Company's historical loan portfolio experience and its methods for disposing of
repossessed vehicles. The calculation of gain on sale takes into consideration
(i) contractual obligations of the obligors, (ii) amounts due to the investors
in asset-backed securities, (iii) amounts paid to dealers for dealer
participations, (iv) various costs of the securitizations, including the effects
of hedging transactions, and (v) adjustments to the cash flows to reflect
estimated prepayments of loans, losses incurred in connection with defaults, and
corresponding reductions in the weighted average APR of loans sold. Subsequent
to securitization, the Company continues to service the securitized loans, for
which it recognizes servicing fee income over the life of the securitization as
earned.
In addition to the present value of estimated future cash flows from
securitizations (gain on sale), finance income receivable includes (i) accrued
interest receivable on automobile loans held for sale, but not yet collected
through the date of sale, (ii) interest earned on spread and other cash accounts
established in connection with the Company's securitizations, and (iii) the
interest earned on previously discounted cash flows, calculated at the present
value discount rate used in determining gain on sale. As noted above, future
servicing fee income is recognized as earned and is not included in finance
income receivable. Finance income receivable is reduced based on distributions
to the Company of excess cash flows from spread accounts. The Company uses a
combination of its own historical experience, industry statistics and
expectations of future performance to estimate the amount and timing of
prepayments, losses upon defaults and corresponding changes in the weighted
average APR. The Company regularly reviews the carrying amount of its finance
income receivable to assess the impact of actual prepayment and loss experience
compared with the Company's estimates. In accordance with generally accepted
accounting
23
<PAGE>
principles, the Company does not increase the carrying amount of finance income
receivable for favorable variances from original estimates, but to the extent
actual prepayment or loss experience exceeds the Company's estimates, any
required decrease to the finance income receivable is reflected as a reduction
of current period earnings.
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
RESULTS OF OPERATIONS
NET INTEREST MARGIN. The Company's net interest margin represents the sum
of (i) net interest on loans held for sale based on the net interest rate
spread, (ii) investment earnings on short-term investments, spread accounts and
other cash accounts established in connection with the Company's securitizations
and (iii) the recognition of the interest component of previously discounted
cash flows, calculated at the present value discount rate used in determining
the gain on sale. The components of net interest margin for each of the three
years in the period ended December 31, 1996 were:
<TABLE>
<CAPTION>
(Dollars in thousands) 1994 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
Interest income on loans, net........................................... $ 3,544 $ 16,038 $ 29,614
Interest income on short-term investments, spread accounts and other
cash accounts......................................................... 3,620 7,942 15,233
Recognition of present value discount................................... 2,664 7,368 18,890
Provision for credit losses on loans held for sale...................... -- (156) (774)
--------- --------- ---------
Net interest margin................................................. $ 9,828 $ 31,192 $ 62,963
--------- --------- ---------
--------- --------- ---------
</TABLE>
Net interest margin increased 102% during 1996 and 217% during 1995. The
rise in net interest margin is primarily due to (i) growth in the average
balances of loans held for sale pending securitization, (ii) increased net
interest rates earned on loans held for sale pending securitization and (iii)
increases in the volume of the Company's securitization transactions.
Increased purchasing volume is primarily due to the Company's continued
geographic expansion and improved market penetration through growth in its
dealer network. As of December 31, 1996, the Company had 17 regional buying
centers, up from 15 at December 31, 1995 and 12 at December 31, 1994 and had
increased its dealer network to 7,727 dealers at December 31, 1996 from 5,110
and 2,344 dealers at December 31, 1995 and 1994, respectively. The Company's
loan purchasing and securitization volume for each of the three years ended
December 31, 1996 are set forth in the table below.
<TABLE>
<CAPTION>
(Dollars in thousands) 1994 1995 1996
---------- ------------ ------------
<S> <C> <C> <C>
Premier............................................... $ 716,308 $ 1,699,874 $ 1,768,933
Classic............................................... 26,948 352,539 981,620
---------- ------------ ------------
Total automobile loan purchases................... $ 743,256 $ 2,052,413 $ 2,750,553
---------- ------------ ------------
---------- ------------ ------------
Automobile loans securitized.......................... $ 712,211 $ 1,933,525 $ 2,787,412
</TABLE>
In 1995, the Company initiated a program to increase the proportion of
Classic loans in its loan purchase mix in order to maximize gross interest rate
spreads relative to expected net losses within each credit tier, to expand its
share of the automobile loan market and to reduce initial cash requirements
relative to the Premier program because the Company offers lower dealer
participations on Classic loans. At December 31, 1996, approximately half of the
Company's aggregate loan purchases were being made under the Classic program.
The Company may change its loan purchase mix at any time and from time to time.
24
<PAGE>
The rise in loan purchasing volume resulted in an increase in the average
monthly balance of loans held for sale to $219.5 million during 1996, up from
$162.7 million and $41.1 million during 1995 and 1994, respectively, on which
the Company earns net interest rate spread until such loans are securitized. The
weighted average net interest rate spread earned during 1996 rose to 7.84%
compared with 6.71% and 6.59% during 1995 and 1994, respectively. The rise in
net interest spread earned on loans held for sale is principally due to higher
average annual percentage rates ("APR") paid by obligors resulting from
expansion of the Company's higher rate Classic loan program.
Interest income on short-term investments, spread accounts and other cash
accounts established in connection with securitization transactions increased
92% between 1995 and 1996 and 119% between 1994 and 1995. This increase is
primarily due to growth in the average balances of spread accounts and other
securitization related cash accounts resulting form higher securitization
volume. Income from the recognition of present value discount also grew due to
the increased volume of securitizations.
GAIN ON SALE OF LOANS. Gain on sale of loans provided net revenues of
$115.8 million, $62.2 million and $13.6 million during 1996, 1995 and 1994,
respectively, representing increases of 86.2% between 1995 and 1996 and 357%
between 1994 and 1995. The rise in gain on sale of loans primarily resulted from
growth in the volume of loans securitized as discussed above, increased gross
interest rate spreads, and a decline in the participation rate paid to dealers
for loan originations but was offset in part by an increase in the reserve for
loan losses.
The following table summarizes the Company's gross interest rate spreads for
each of the three years in the period ended December 31, 1996.
<TABLE>
<CAPTION>
1994 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
Weighted average APR of loans securitized................................... 12.50% 14.22% 14.56%
Weighted average securitization rate........................................ 6.32 6.38 6.31
--------- --------- ---------
Gross interest rate spread (1).......................................... 6.18% 7.84% 8.25%
--------- --------- ---------
--------- --------- ---------
</TABLE>
- ------------------------
(1) Before gains/losses on hedge transactions.
The rise in the gross interest rate spread during 1995 and 1996 is primarily
due to an increased proportion of higher-yielding Classic loans, resulting in an
increased APR earned on loans purchased and subsequently securitized. The
increase in the weighted average APR resulting from the growth in the Classic
loan volume during 1996 was partially offset by a general market decline in
consumer interest rates during the first few months of the year.
The unamortized balance of participations paid to dealers is expensed at the
time the related loans are securitized and recorded as a reduction to the gain
on sale. Due to the increased proportion of Classic loan purchases, which
generally require lower participation rates, and a reduction of the maximum
participation rate allowable under the Premier program, participations paid as a
percentage of the principal balance of loan purchases declined to 3.45% during
1996 from 4.21% and 3.98% during 1995 and 1994, respectively, resulting in
increased gain on sale.
Gains on sale of loans were further increased by $4.7 million and $1.4
million of gross realized gains on hedging transactions during 1996 and 1994,
respectively, and decreased by $5.0 million, $11.7 million and $0.5 million of
gross realized losses on hedging transactions during 1996, 1995 and 1994,
respectively. There were no gross realized hedging gains during 1995. See
"--Capital Resources--Hedging and Pre-funding Strategy."
SERVICING FEE INCOME. The Company earns servicing fee income for servicing
loans sold to investors through securitizations. The stated percent for
servicing fees (1% per annum on the remaining balance of
25
<PAGE>
loans serviced) is consistent with the industry standard for servicing
automobile loans. Servicing fee income increased to $28.3 million in 1996 from
$14.0 million in 1995 and $4.5 million in 1994.
The following table reflects the growth in the Company's servicing portfolio
from 1994 to 1996.
<TABLE>
<CAPTION>
AT DECEMBER 31,
--------------------------------------
(Dollars in thousands, except as noted) 1994 1995 1996
---------- ------------ ------------
<S> <C> <C> <C>
Principal balance of automobile loans held for sale....................... $ 22,918 $ 113,840 $ 35,365
Principal balance of loans serviced under securitizations................. 814,177 2,153,267 3,756,492
---------- ------------ ------------
Servicing portfolio................................................... $ 837,095 $ 2,267,107 $ 3,791,857
---------- ------------ ------------
---------- ------------ ------------
Average outstanding principal balance (actual dollars).................... $ 11,271 $ 12,239 $ 12,537
Number of loans serviced.................................................. 74,267 185,241 302,450
</TABLE>
The Company's servicing portfolio increased 67% from 1995 to 1996 and 171%
between 1994 and 1995, reflecting continued growth in the volume of the
Company's loan purchases and subsequent securitizations. The rise in average
outstanding principal balance of loans reflects general price increases in the
automobile industry.
OTHER NON-INTEREST INCOME. Other non-interest income rose to $6.5 million
during 1996 from $1.4 million and $0.9 million during 1995 and 1994,
respectively, representing increases of 372% during 1996 and 56% during 1995.
The rise in other non-interest income is principally due to increases in income
from late fees and insufficient fund charges reflecting the increase in
delinquency rates. See "--Delinquency, Loan Loss and Repossession Experience."
SALARIES AND BENEFITS EXPENSE. Salaries and benefits increased to $40.8
million during 1996 from $20.1 million and $9.1 million during 1995 and 1994,
respectively, representing an increase of 103% during 1996 and 122% during 1995.
This increase is primarily due to growth in number of associates. The Company
employed 1,230 associates at December 31, 1996, compared with 650 and 304 at
December 31, 1995 and 1994, respectively. These increases are in response to,
and in anticipation of, continued growth in loan purchasing volume and related
servicing portfolio. The Company expects these expenses to continue to increase
in 1997 compared with 1996 due in part to the Company's opening of four regional
servicing and collection centers in October 1996.
The rapid growth of the Company's servicing portfolio and the decision to
expand the proportion of loans purchased through its Classic program have
resulted in increased demands on the Company's personnel and systems. The
Company's ability to support, manage and control continued growth is dependent
upon, among other things, its ability to hire, train, supervise and manage its
larger work force. Furthermore, the Company's ability to manage portfolio
delinquency and loss rates is dependent upon the maintenance of efficient
collection and repossession procedures and adequate staffing. See
"--Delinquency, Loan Loss and Repossession Experience."
GENERAL AND ADMINISTRATIVE AND OTHER OPERATING EXPENSES ("OTHER OPERATING
EXPENSES"). Other operating expenses increased during 1996 to $51.5 million up
from $22.6 million in 1995 and $8.3 million in 1994. Other operating expenses
include occupancy and equipment leasing charges, depreciation, outside
professional fees, communication costs, servicing and collection expenses,
marketing expenses, recruiting and staffing fees, travel, office supplies and
other. Many of these expenses, such as communications, service and collection
and office supplies, increase incrementally with growth in loan purchasing
volume and the Company's servicing portfolio. Occupancy and equipment charges
increased due to continued geographic expansion through the opening of
additional regional buying centers during 1995 and 1996 and the regionalization
of the Company's servicing and collection operations during 1996. The Company
also experienced significant increases in outside professional fees during 1996
primarily related to development costs associated with a potential leasing
product and various information system enhancements. During
26
<PAGE>
1996 the Company incurred increases in recruiting and staffing fees in
connection with its search for various key collection, servicing and management
personnel. As a result of the items noted above, total operating expenses,
including salaries and benefits, rose to 3.06% of average servicing portfolio
compared with 2.78% in 1995, but remained lower than 3.28% in 1994.
LONG TERM DEBT AND OTHER INTEREST EXPENSE. Long-term debt and other
interest expense rose 46.7% during 1996 and 217% in 1995. These increases are
primarily due to the issuance of $145.0 million of 13.0% Senior Term Notes in
April 1995 and $30.0 million of 10.125% Subordinated Notes in March 1996.
INCOME TAX EXPENSE. During the third quarter of 1994, the Company fully
utilized its book net operating loss carryforwards and incurred income tax
expense for book purposes. No income tax expense was incurred in earlier
periods. Because of the difference in the basis of the finance income receivable
for financial reporting purposes and income tax purposes, the Company continues
to have available $74.1 million of net tax operating loss carryforwards, a
portion of which may be available to offset against income taxes in 1997 and
future years, subject to applicable limitations. The $35.7 million income tax
expense during 1996 primarily reflects the Company's estimated addition to its
deferred tax liability as of December 31, 1996.
EXTRAORDINARY ITEMS. In February 1995, the Company entered into a temporary
financing facility under which it was able to borrow up to $70.0 million through
the issuance of Senior Notes. Of the $50.0 million in gross proceeds from the
Company's initial issuance of Senior Notes, $34.6 million was used to retire
$30.0 million of 11.75% Senior Secured Notes, including accrued interest of $0.5
million and prepayment fees of approximately $4.1 million. The Company issued an
additional $5.0 million in Senior Notes in April 1995.
On April 28, 1995, the Company received aggregate net proceeds from the
issuance of Common Stock and Senior Term Notes of approximately $231.0 million
and applied $56.2 million of such proceeds to retire its Senior Notes at par
plus accrued interest and $15.6 million to retire the Company's 9.875% Senior
Subordinated Notes including accrued interest of $0.1 million and prepayment
fees of $0.5 million.
The prepayment fees for the early extinguishment of debt and the charge-off
of capitalized debt financing costs associated with the 11.75% Senior Secured
Notes and the 9.875% Senior Subordinated Notes were accounted for as
extraordinary items.
The Company has commenced a tender offer for the Senior Term Notes and a
related consent solicitation for elimination of substantially all of the
financial covenants in the indenture under which such Senior Term Notes were
issued. See "--Capital Resources."
PREFERRED DIVIDENDS. The Company paid dividends on its outstanding
preferred stock (which was converted to Common Stock in December 1996) of $1.2
million, $2.2 million and $2.3 million for 1996, 1995 and 1994, respectively.
The decrease in dividends paid from 1995 to 1996 is due to the conversion of
preferred shares into common stock of the Company. As of December 31, 1996, all
preferred shares had been redeemed or converted.
FINANCIAL CONDITION
DUE FROM SECURITIZATION TRUST. At December 31, 1996, the Company had
delivered $177.1 million of loans into a securitization trust for which the
Company received cash from the trust concurrent with the legal closing of the
transaction in January 1997. There were no loans delivered into securitization
trusts pending legal closing at December 31, 1995.
AUTOMOBILE LOANS HELD FOR SALE. The Company holds automobile loans for sale
in its portfolio prior to securitization. The Company's portfolio of loans held
for sale decreased to $36.3 million at December 31, 1996 from $118.6 million at
December 31, 1995, due to the timing in delivery of loans associated with the
Company's securitizations.
27
<PAGE>
FINANCE INCOME RECEIVABLE. Finance income receivable increased to $362.9
million at December 31, 1996 from $186.0 million at December 31, 1995. This 95%
increase represents amounts capitalized upon completion of securitization
transactions during 1996 related to the present value of estimated cash flows.
The amounts capitalized were offset by excess cash flows released from the
securitization trusts to the Company through its wholly-owned subsidiary,
Olympic Receivables Finance Corp. ("ORFC"). Reserve for losses on securitized
loans is included as a component of finance income receivable.
FURNITURE, FIXTURES AND EQUIPMENT. Furniture, fixtures and equipment
increased 115% to $13.6 million at December 31, 1996 from $6.3 million at
December 31, 1995, primarily due to the opening of two additional regional
buying centers and relocation of the Company's servicing and collection
operations into four regional facilities during 1996 to enhance the Company's
collection activities.
CAPITAL LEASE OBLIGATIONS. Capital lease obligations increased 97% to $7.7
million at December 31, 1996, from $3.9 million at December 31, 1995, primarily
due to continued geographic expansion as discussed above.
DEFERRED INCOME TAXES. The Company began recording income tax expense in
the third quarter of 1994 as the net tax benefit of net operating loss
carryforwards for financial reporting purposes was fully utilized. Deferred
income tax assets and liabilities reflect the tax effect of temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and income tax purposes principally net operating loss
carryforwards for income tax purposes and the finance income receivable,
respectively. The Company's estimated net deferred tax liability at December 31,
1996, was $54.4 million, compared to $18.7 million at December 31, 1995.
OTHER LIABILITIES. Accounts payable and accrued liabilities increased to
$13.2 million at December 31, 1996 compared to $9.8 million at December 31,
1995. This 34% increase is primarily due to increased trade payables and other
operating accruals reflecting the growth in the Company's operations and related
operating expenses.
DELINQUENCY, LOAN LOSS AND REPOSSESSION EXPERIENCE
The Company's operating performance, financial condition and liquidity are
materially affected by the performance of the automobile loans purchased and
securitized by the Company. In connection with the servicing of automobile
loans, the Company is responsible for managing delinquent loans, repossessing
the underlying collateral in the event of default and selling repossessed
collateral. The Company provides an allowance for automobile loan credit losses
at a rate which, in the opinion of management, provides adequately for current
and probable future losses that may be incurred by the Company. The Company
provides an allowance for credit losses for sold loans in accordance with
Emerging Issues Task Force 92-2, Measuring Loss Accounts by Transferors for
Transfers of Receivables with Recourse, at the time of securitization. The
provision for credit losses is netted against the calculated gain on sale amount
for loans sold. The related allowance for these credit losses is a component of
the finance income receivable.
28
<PAGE>
The following tables describe the delinquency and credit loss and
repossession experience, respectively, of the Company's servicing portfolio for
the three years in the period ended December 31, 1996. A delinquent loan may
result in the repossession and foreclosure of the collateral for the loan.
Losses resulting from repossession and disposition of automobiles are charged
against applicable allowances, which management reviews on a monthly basis.
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------------------------------------------------
DELINQUENCY EXPERIENCE (1): 1994 1995 1996
------------------------- ------------------------- -------------------------
NUMBER OF NUMBER OF NUMBER OF
LOANS BALANCES LOANS BALANCES LOANS BALANCES
----------- ----------- ----------- ----------- ----------- -----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Servicing portfolio at end of
period........................ 74,267 $ 837,095 185,241 $ 2,267,107 302,450 $ 3,791,857
Delinquencies:
31-60 days.................... 393 $ 4,142 1,536 $ 17,667 3,884 $ 47,225
61-90 days.................... 129 1,557 520 5,694 1,255 15,877
91 days or more............... 113 1,197 614 6,881 2,911 37,019
----------- ----------- ----------- ----------- ----------- -----------
Total automobile loans
delinquent 31 or more days.... 635 $ 6,896 2,670 $ 30,242 8,050 $ 100,121
Delinquencies as a percentage of
number of loans and amount
outstanding at end of period
(2)........................... 0.86% 0.82% 1.44% 1.33% 2.66% 2.64%
Amount in repossession (3)...... 102 $ 570 1,489 $ 17,676 4,651 $ 64,929
----------- ----------- ----------- ----------- ----------- -----------
Total delinquencies and amount
in repossession (2)........... 737 $ 7,466 4,159 $ 47,918 12,701 $ 165,050
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
</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.
29
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------
CREDIT LOSS/REPOSSESSION EXPERIENCE (1): 1994 1995 1996
------------ ------------ ------------
(Dollars in thousands)
<S> <C> <C> <C>
Average servicing portfolio outstanding during the
period................................................. $ 528,577 $ 1,534,720 $ 3,015,411
Average number of loans outstanding during the period.... 49,566 128,783 242,419
Number of repossessions.................................. 1,005 5,020 14,403
Repossessions as a percentage of average number of loans
outstanding............................................ 2.03% 3.90% 5.94%
Gross charge-offs (2).................................... $ 4,446 $ 11,247 $ 35,642
Recoveries (3)........................................... 974 911 5,653
------------ ------------ ------------
Net losses............................................... $ 3,472 $ 10,336 $ 29,989
------------ ------------ ------------
------------ ------------ ------------
Gross charge-offs as a percentage of average servicing
portfolio.............................................. 0.84% 0.73% 1.18%
Net losses as a percentage of average servicing
portfolio.............................................. 0.66% 0.67% 0.99%
</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 previously charged off loans.
The increase in the rate of delinquencies, gross charge-offs, net losses and
repossessions during 1996, experienced by both the Premier and Classic programs,
was primarily due to (i) increased demands on the Company's servicing and
collection resources as the result of rapid growth in its servicing portfolio
and as a result of continued expansion of the Classic loan program (which
generally required greater collection efforts than the Premier program), (ii)
the performance of the Company's discontinued Classic product for first time
automobile buyers and the Company's financed repossession program, which
experienced significantly higher delinquencies, repossessions and losses than
the Company's other products and programs and (iii) the continued seasoning of
the Company's servicing portfolio to include a greater proportion of loans,
particularly Classic loans, in the period of highest probability for
delinquencies and defaults (generally six to 14 months from the origination
date).
To handle the increased demands on its servicing and collection operations,
the Company began to take steps in 1996 to enhance its servicing and collection
capabilities. Since December 1995, the Company has more than doubled its
servicing and collection staff and, in October 1996, regionalized its servicing
and collection operations into four locations across the United States.
Additionally, the Company has engaged outside consultants to evaluate the
Company's current collection strategy and assist in the design and
implementation of a new collection system.
During 1996, loans made under the Company's financed repossession program
and its Classic product for first time automobile buyers (discontinued in March
1996) had significantly higher rates of delinquencies, gross charge-offs, net
losses and repossessions than other products within the Company's servicing
portfolio. These programs aggregated 4.3% of the total servicing portfolio at
December 31, 1996, but accounted for approximately 20% of delinquencies, gross
charge-offs and net losses in 1996. Management believes that the performance of
the financed repossession loans is primarily attributable to an inventory
reduction program during the fourth quarter of 1995 and the first quarter of
1996 and improper practices
30
<PAGE>
at certain of the Company's initial consignment dealers, with which the Company
has since terminated its business relationships. The Company has instituted more
comprehensive management of its financed repossession program, including the
dedication of trained staff located in the Company's four regional servicing and
collection centers for the underwriting and purchasing of such loans.
The significant rise in repossession inventory levels shown on the
Delinquency Experience table was the result of the growth in the Company's
servicing portfolio and due to changes to the Company's approach to retailing
its repossessed automobiles. During 1995 and early 1996, the Company relied
heavily on a few large retail consignment lots to sell its inventory. Turnover
of repossession inventory was not at levels deemed acceptable by the Company
under this approach. In early 1996 the Company terminated its relationship with
certain consignment lots and decided to expand its repossession distribution
channels to multiple smaller locations throughout the United States. The Company
expanded its remarketing department in order to develop and manage relationships
with additional retail outlets and to expedite disposition of repossessed
vehicles. At December 31, 1996, the Company had arrangements with 67 smaller
retail consignment lots to dispose of its repossessions compared with 10 large
retail consignment lots at December 31, 1995. It is actively pursuing additional
relationships to further increase its remarketing capacity. During 1996, the
Company sold approximately 70% of its repossession inventory through retail
markets and the Company financed approximately 90% of these sales. The Company
may dispose of repossession inventory at wholesale auctions from time to time.
Increases in loan delinquency and repossession rates may cause the Company
to exceed certain pool performance tests established in agreements governing the
Company's outstanding Senior Term Notes. If at any month-end the amount of
charge-offs (net of recoveries) of automobile loans in the Company's servicing
portfolio during the preceding six month periods, times two, exceeds 1.65% of
the average servicing portfolio in the preceding seven months ("Portfolio Loss
Ratio"), the Company will be prohibited from purchasing new automobile loans in
excess of 20% of the Company's Adjusted Consolidated Cash Flow (as defined in
the indenture governing the Senior Term Notes) plus proceeds of warehouse
facilities and certain other available cash. If the Portfolio Loss Ratio exceeds
1.65% for two consecutive months, then 50% of such Adjusted Consolidated Cash
Flow (as defined in the indenture governing the Senior Term Notes) must be used
to offer to repurchase Senior Term Notes at par. In addition, if at the end of
any month the Portfolio Loss Ratio exceeds 2.5% or the Company's delinquency
level exceeds 3.5%, an event of default will occur under two of the Company's
outstanding warehouse facilities. The delinquency level is calculated as a
percentage, by outstanding principal balance, of all automobile loans owned or
securitized by the Company as to which a payment is more than thirty days past
due. Upon the occurrence of an event of default under such warehouse facilities,
the lending banks under such facilities may accelerate the payment of amounts
outstanding thereunder and would have no further obligation to extend additional
credit. Furthermore, any such event of default may trigger cross-defaults under
other outstanding indebtedness of the Company and may result in the acceleration
of amounts due thereunder. On January 21, 1997 the Company made a tender offer
to purchase all of its outstanding Senior Term Notes. See Note 14 to the
Company's Consolidated Financial Statements.
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 warehouse facilities and other securitization
expenses, (iv) interest advances to securitization trusts, (v) repossession
inventory, and (vi) interest expense. The Company also uses significant amounts
of cash for operating expenses. The Company receives cash principally from
interest on loans held pending securitization, excess cash flow received from
securitization trusts and 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 for so long as the Company continues to experience
significant
31
<PAGE>
growth in its volume of loan purchases. 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 requirement. The Company funds the
purchase price of loans primarily through the use of warehouse facilities.
However, because advance rates under the warehouse facilities generally provide
funds ranging from 95% to 97% 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 $2.8 billion of loans in 1996, compared with
$2.1 billion in 1995 and $743.3 million in 1994. Amounts borrowed under
warehouse facilities are repaid upon securitization of the loans. The Company
regularly completes securitizations to optimize its use of available warehouse
facilities and the Company's cash investment in loans held for sale.
DEALER PARTICIPATIONS. Consistent with industry practice, the Company pays
dealers participations for selling loans to the Company. When loans are
securitized, the related dealer participation is expensed and subsequently
recovered over the estimated life of the underlying loans through the return to
the Company of excess cash flow from securitization trusts. Participations paid
by the Company to dealers in 1996 were $94.9 million, compared with $86.5
million in 1995 and $29.6 million in 1994. These participations typically
require the Company to advance an up-front amount to dealers, which represented
3.45% of the principal balance of loans purchased during 1996 compared to 4.21%
in 1995 and 3.98% in 1994. The decrease in percentage of dealer participations
paid reflects the growth in volume of loans purchased under the Classic program,
which generally requires a lower participation rate and a reduction in the cap
on participation rates paid on Premier loans implemented during 1995. The
Company has some limited ability to recover these amounts from the dealers by
offset against future participations in the event of prepayment or default on
the loan within a specified period of time. However, to the extent the loan does
not prepay or default within that period of time, the Company expects to recover
the cash used to pay dealer commissions over the estimated life of the
underlying loans through the return to the Company of excess cash flows from
securitization spread accounts. This relationship between the up-front payment
of cash to the dealers and the deferred recovery through collection of excess
cash flow will continue to represent a significant demand on capital resources
to the extent the Company continues to expand the volume of loan purchases.
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 (generally within 14
months of the formation of the securitization trust). In certain
securitizations, the Company also has been required to provide initial cash
deposits into such accounts. The amount of time required to initially fund each
spread account varies depending on numerous factors, including, but not limited
to (i) the size of the initial deposit, (ii) the gross interest rate spread,
(iii) defaults, (iv) delinquencies, (v) losses and (vi) turnover of repossession
inventory. The Company had $143.0 million of restricted cash in spread accounts
at December 31, 1996, compared with $63.6 million at December 31, 1995. The
Company also incurs certain expenses in connection with securitizations,
including underwriting fees, credit enhancement fees, trustee fees and other
costs, which approximate 0.55% per annum of the principal amount of the
asset-backed securities.
32
<PAGE>
NET INTEREST MARGIN. Although the Company records net interest margin as it
is earned, the interest income component is generally received in cash from
excess cash flow over the life of the securitization trust, 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 that it expects to recover such advances through the ultimate
payments from the obligor over the life of the loan. Beginning in December 1996,
the Company's servicing agreements were modified to require interest advances
only when the related loan is 31 days delinquent or greater.
REPOSSESSION INVENTORY. At December 31, 1996, the Company's inventory of
repossessed automobiles held for resale was $64.9 million, compared with $17.7
million at December 31, 1995. The rate of repossession inventory turnover
impacts cash available for spread accounts under securitization trusts and,
consequently, the excess cash available for distribution to ORFC. At December
31, 1996, repossessed inventory was 1.7% of total servicing portfolio compared
with 0.8% at December 31, 1995.
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
participation, and the recovery of accrued interest receivable earned, but not
yet collected, on loans held for sale. Recovery of dealer participation 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 1996, the Company received $43.4 million of excess cash flow,
compared with $21.1 million in 1995 and $17.7 million in 1994. The rate of
increase in excess cash flow during 1996 exceeded the rate of increase in loans
securitized principally because spread accounts related to 1995 securitizations
have reached required reserve levels and have begun releasing cash during the
current year. These obligations generally reach pre-determined spread account
levels within 14 months following the formation of the securitization trust. The
excess cash flow released from securitization trusts during 1996 was reduced by
the slower turnover of the Company's repossession inventory resulting from the
utilization of its retail repossession strategy.
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. The Company received cash for such services in the amount of
$27.0 million, $12.7 million and $4.5 million during 1996, 1995 and 1994,
respectively, and 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.
WAREHOUSE FACILITIES. Automobile loans held for sale are funded on a
short-term basis primarily through warehouse facilities. At December 31, 1996,
the Company had three warehouse facilities in place with various financial
institutions and institutional lenders with an aggregate capacity of $800
million, of which $688.9 million was unused. These facilities are subject to
renewal or extension, at various times in 1997 at the option of the lenders.
Proceeds from securitizations, generally received within seven to ten days
following the cut-off date established for the securitization transaction, are
utilized to invest in additional loan purchases and applied to repay amounts
outstanding under warehouse facilities.
33
<PAGE>
SECURITIZATION PROGRAM. An 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 securitizations
during the three years ended December 31, 1996, all of which have been publicly
issued and were rated "AAA/Aaa".
<TABLE>
<CAPTION>
REMAINING REMAINING
BALANCE AS BALANCE AS A CURRENT WEIGHTED GROSS
OF PERCENTAGE WEIGHTED AVERAGE INTEREST
ORIGINAL DECEMBER 31, OF ORIGINAL AVERAGE SECURITIZATION RATE
DATE BALANCE 1996 BALANCE APR RATE SPREAD
- -------------------- ------------ ------------ --------------- ----------- ----------------- -----------
<S> <C> <C> <C> <C> <C> <C>
March 94 $ 260,000 $ 72,580 27.92% 11.13% 5.66% 5.47%
September 94 430,000 165,351 38.45 12.80 6.81 5.99
February 95 158,400 68,650 43.34 13.87 7.88 5.99
March 95 300,000 134,341 44.78 14.41 7.31 7.10
June 95 470,000 242,987 51.70 14.19 6.20 7.99
September 95 525,000 307,926 58.65 13.77 6.03 7.74
December 95 600,000 389,884 64.98 13.77 5.88 7.89
March 96 600,000 437,653 72.94 13.72 5.81 7.91
June 96 650,000 540,368 83.13 14.46 6.62 7.84
September 96 725,000 664,248 91.62 14.83 6.75 8.08
December 96 (1) 730,000 683,333 93.61 15.19 6.08 9.11
------------ ------------
$ 5,448,400 $ 3,707,321
------------ ------------
------------ ------------
</TABLE>
- ------------------------------
(1) At December 31, 1996, $692.6 million of automobile loans had been delivered
to the trust and $37.4 million cash remained in the pre-funded portion of
the trust. In January 1997, the Company delivered sufficient loans to the
trust and obtained the release of the remaining cash in the pre-funded
portion of the trust. See "--Hedging and Pre-funding Strategy" below.
The Company utilizes net proceeds from securitizations to invest in
additional loan purchases and to repay warehouse indebtedness, thereby making
its warehouse facilities available for further purchases of automobile loans. At
December 31, 1996, the Company had securitized approximately $5.8 billion of
automobile loans since its inception in 1990 with remaining balances of
approximately $3.8 billion.
All of the Company's securitization trusts and the BofA Facility are
credit-enhanced through financial guaranty insurance policies, issued by FSA
which insure payment of principal and interest due on the related asset-backed
securities. Asset-backed securities insured by FSA have been rated AAA by
Standard & Poor's and Aaa by Moody's Investors Service, Inc. At December 31,
1996, FSA had insured approximately $5.8 billion original principal amount of
Company-sponsored asset-backed securities. During 1996, the Company agreed to
use FSA as insurer of the asset-backed securities issued in its insured
securitizations through December 1998 in consideration for certain limitations
on FSA insurance premiums. FSA is not obligated to provide insurance for the
Company's future securitizations. In order to obtain FSA insurance, the Company
is obligated to establish spread accounts, and to maintain such spread accounts
at pre-determined levels, in connection with each insured securitization through
the collection and restriction of excess cash flow from the loans securitized.
These spread accounts are funded through initial deposits, when required, and
out of excess cash flow from the related securitization trust. Thereafter,
during each month excess cash flow due to ORFC from all insured securitization
trusts is first used to replenish spread accounts to predetermined levels and is
then distributed to the Company. If excess cash flow from all insured
securitization trusts is not sufficient to replenish all spread accounts, no
cash flow would be available to the Company from ORFC for that month. Spread
accounts are also replenished through cash received from the liquidation of
repossessions under defaulted receivables. However, such cash is generally
received in months subsequent to default and can therefore result in timing
differences as to when excess cash flows are released to the Company. The spread
account for each insured securitization trust is cross-collateralized with the
spread accounts established for the Company's other insured securitization
trusts. Excess cash flow from performing securitization trusts insured by FSA
may be used to support negative cash flow from, or to replenish a deficit spread
account in connection with, non-performing securitization trusts insured by FSA.
The Company's obligations to FSA in respect of insured securitizations and the
BofA Facility are limited to the amounts on deposit in the spread accounts and
excess cash flow.
34
<PAGE>
In connection with its securitizations, the Company continually seeks to
improve its structures to reduce up-front costs and to maximize excess cash flow
available to the Company. The Company may consider alternative securitization
structures, including senior/subordinated tranches, and alternative forms of
credit enhancement, such as letters of credit and surety bonds. For example,
during 1995 and 1994, the Company realized a portion of its finance income
receivable by selling an interest-only strip in its September 1995 and September
1994 securitizations. Proceeds from the sale of the interest-only strips were
approximately $6.1 million in 1995 and approximately $7.0 million in 1994. There
were no interest-only strips sold during 1996. The structure of each securitized
sale of loans will depend on market conditions, costs of securitization and the
availability of credit enhancement options to the Company.
HEDGING AND PRE-FUNDING STRATEGY. The Company employs hedging strategies to
manage its gross interest rate spread. Through the use of these hedging
strategies, the Company is able to determine its approximate financing cost
prior to, or near to, the purchase of loans and thereby maintain its gross
interest rate spread within a desired range. Because interest rates on
asset-backed securities for automobile loans generally tend to rise or fall when
other short-term interest rates fluctuate, a material increase in interest rates
prior to securitization could adversely affect the profitability of such
securitization to the Company in the absence of a hedging strategy.
The Company also mitigates its exposure to interest rate risk through a
pre-funding strategy in which it securitizes a portion of its loans held for
sale while selling future loans in a pre-funded securitization. In a pre-funded
securitization, the principal amount of the asset-backed securities issued in
the securitization exceeds the principal balance of loans initially delivered to
the securitization trust. The proceeds from the pre-funded portion are held in
trust earning money market yields until released upon delivery of additional
loans. The Company agrees to deliver additional loans into the securitization
trust from time to time (generally monthly) equal in the aggregate to the amount
by which the principal balance of the asset-backed securities exceeds the
principal balance of the loans initially delivered. In pre-funded
securitizations, the Company predetermines the borrowing costs with respect to
loans it subsequently purchases and delivers into the securitization trust.
However, the Company incurs an expense in pre-funding securitizations equal to
the difference between the money market yields earned on the proceeds held in
trust prior to the subsequent delivery of loans and the interest rate paid on
the asset-backed securities.
The Company also has some interest rate exposure to falling interest rates
to the extent that the Company's offered rates decline after the Company has
engaged in a pre-funded securitization, although the Company's offered rates
generally respond less rapidly to rate fluctuations than financing costs.
The Company also sells forward U.S. Treasuries that most closely parallel
the average life of its portfolio of loans held for sale. By doing so, the
Company is able to obtain an inverse relationship between the loans being hedged
and the U.S. Treasury market. The hedging gain or loss is netted against the
gain on sale of loans. Such hedges include certain risks created by the cash
versus non-cash relationship of the hedging instrument and the related
securitization. This relationship arises because U.S. Treasury forward contracts
are settled with current cash payments and the gain on sale of loans represents
the present value of estimated future cash flows. To the extent hedging gains or
losses resulting from U.S. Treasury forward contracts are significant, the
resulting cash payments or receipts may impact the Company's liquidity. Hedging
transactions required a net use of cash of $0.3 million and $11.7 million during
1996 and 1995, respectively, and provided cash of $0.8 million in 1994.
Management has controls and policies in place to assess and monitor its risk
from hedging activities. Management follows its policy of hedging loan amounts
purchased or expected to be delivered within the next 120 days. Management
reviews the interest rate movements in the U.S. Treasury markets and receives a
daily internal report tracking such movements. Monthly, management receives an
interest rate report that describes not only interest rate movements, but also
the amount of corresponding increase or decrease in the value of its hedged
securitizations. Most of the Company's hedging transactions have been for a
period of 75 days or less. The amount and timing of hedging transactions are
determined by members of
35
<PAGE>
the Company's senior management, and subject to approval by the Company's Chief
Executive Officer. Management assesses factors including the interest rate
environment, loan production levels and open positions of current hedging
positions.
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 dollar amount of dealer participations, securitizations and
general operating expenses.
During 1996, the Company completed a public offering of 8,050,000 shares of
Common Stock and received net proceeds of approximately $146.0 million. In March
1996, the Company issued to the public $30.0 million aggregate principal amount
of 10.125% Subordinated Notes Series 1996-A, due 2001 and received net proceeds
of approximately $29.0 million. Proceeds from the 1996 offerings were available
as working capital for loan purchases and general operations.
In February 1995, the Company entered into a temporary financing facility
(the "Facility") in order to provide cash pending completion of the common stock
and senior debt offerings described below and to repay $30.0 million of
outstanding Senior Secured Notes. Under the Facility, the Company borrowed $55.0
million through the issuance of Senior Unsecured Increasing Rate Notes. In April
1995, proceeds from the common stock and senior term debt offerings described
below were used to retire the notes issued under the Facility at par plus
accrued interest.
In April 1995, the Company issued to the public 9,849,900 shares of Common
Stock and $145.0 million principal amount of Senior Term Notes. The Company
received aggregate net proceeds from the issuance of the Common Stock and Senior
Term Notes of approximately $231.0 million and applied $56.2 million of such
proceeds to retire its temporary financing facility plus accrued interest, $15.6
million to retire the Company's 9.875% Senior Subordinated Notes (including a
prepayment fee of $0.5 million and accrued interest of $0.1 million), and $9.4
million to fund a reserve account established for future payment of interest on
the Senior Term Notes. The remaining proceeds of $149.8 million were available
as working capital for loan purchases and general operations.
The Company pays interest on the Senior Term Notes semi-annually on November
1 and May 1 of each year. The Senior Term Notes are not callable prior to May 1,
1998. Thereafter, the Senior Term Notes are redeemable, in whole or in part, at
the option of the Company, at 108.5% and 104.25% if redeemed during the twelve
month periods beginning May 1, 1998, and 1999, respectively, together with
accrued and unpaid interest to the date of redemption. The Company will be
obligated to make an offer to purchase all outstanding Senior Term Notes at a
price of 101% of the principal amount thereof, together with accrued and unpaid
interest to the date of purchase if certain covenants (as defined within the
Senior Term Note indenture) regarding sales of assets, change in control or
annualized net losses are violated. The Senior Term Notes are unsecured
obligations of the Company (except for a reserve fund equal to one interest
payment on the outstanding principal balance of the Senior Term Notes) and rank
senior to all outstanding subordinated notes of the Company and pari passu in
right of payment with all unsecured and unsubordinated indebtedness of the
Company. On January 21, 1997 the Company made a tender offer to purchase all of
its outstanding Senior Term Notes. See Note 14 to the Company's Consolidated
Financial Statements.
Pursuant to demand registration rights of certain holders of warrants issued
by the Company between 1992 and 1994 in connection with its issuance of Senior
Secured and Senior Subordinated Notes, the Company filed separate registration
statements during April and October 1995 covering 213,000 and 3,871,364 shares
of Common Stock, respectively, issuable upon exercise of the warrants for
secondary sale at market should the holders decide to do so. The Company would
receive aggregate proceeds of approximately $17.0 million assuming exercise of
all of the warrants. As of December 31, 1996, 2,405,089
36
<PAGE>
shares of Common Stock had been issued in connection with exercise of such
warrants for aggregate proceeds of $10.0 million.
In September 1994, the Company began a program to sell up to $50.0 million
of unsecured subordinated notes (the "Junior Subordinated Notes") to be offered
to the public from time to time (the "Note Program"). Issuance of Junior
Subordinated Notes under the Note Program is subject to restrictions under the
Senior Term Note indenture. The Note Program includes Junior Subordinated Notes
extendible by the investor having maturities of 30, 60, 90 and 180 days and one
year after the date of issue and fixed-term Junior Subordinated Notes having
maturities of one, two, three, four, five and 10 years after the date of issue.
Interest rates on any unsold Junior Subordinated Notes are subject to change by
the Company from time to time based on market conditions. Interest rates on
extendible Junior Subordinated Notes may be adjusted at any roll-over date. At
December 31, 1996, the Company had $23.7 million of Junior Subordinated Notes
outstanding.
The terms of the Senior Term Note indenture, among other things, limit,
subject to certain other requirements and with certain exceptions, certain
payments, including dividends on common or preferred stock, to 50% of
Consolidated Cash Flow (as defined). Consolidated Cash Flow is defined as
Operating Cash Receipts less Cash Expenses for the four quarterly periods
preceding a proposed restricted payment. The Company has had and expects to
continue to have negative Consolidated Cash Flow for so long as the rapid growth
of its loan purchase volume continues.
Consolidated Cash Flow for the four-quarter period ended December 31, 1996,
is as follows:
<TABLE>
<CAPTION>
FOR THE
FOUR QUARTERS
ENDED
DECEMBER 31, 1996
-----------------
(IN THOUSANDS)
<S> <C>
Operating Cash Receipts:
Excess cash flows received from securitization trusts............................ $ 43,351
Servicing fee income............................................................. 27,018
Other cash income................................................................ 7,959
-----------------
Total Operating Cash Receipts.................................................. 78,328
Less Cash Expenses:
Payment of dealer commissions.................................................... 94,938
Cash operating expenses.......................................................... 98,644
Interest paid on warehouse and other debt........................................ 33,448
Preferred dividends.............................................................. 1,688
-----------------
Total Cash Expenses............................................................ 228,718
-----------------
Consolidated Cash Flow............................................................. $ (150,390)
-----------------
-----------------
</TABLE>
At December 31, 1996 the Company's Portfolio Loss Ratio (as defined in the
Senior Term Note indenture) was 1.12% and the Company's Consolidated Net Worth
(as defined in the Senior Term Note indenture) was $388.7 million.
FORWARD LOOKING STATEMENTS
The preceding Management's Discussion and Analysis of the Company's
Financial Condition and Results of Operations contain certain "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995, which can be identified by the use of forward-looking terminology such
as "may," "will," "expect," "anticipate," "estimate," "should" or "continue" or
the negative thereof or other variations thereon or comparable terminology. The
matters set forth under the caption "Cautionary Statements" in Exhibit 99.1 to
this Annual Report on Form 10-K constitute cautionary statements identifying
important factors with respect to such forward-looking statements, including
certain risks and uncertainties, that could cause actual results to differ
materially from those in such forward-looking statements.
37
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Olympic Financial Ltd.
We have audited the accompanying consolidated balance sheets of Olympic
Financial Ltd. as of December 31, 1996 and 1995 and the related consolidated
statements of income, shareholders' equity, and cash flows for each of the three
years in the period ended December 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Olympic
Financial Ltd. at December 31, 1996 and 1995 and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Minneapolis, Minnesota
January 21, 1997
38
<PAGE>
OLYMPIC FINANCIAL LTD.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
AT DECEMBER 31,
--------------------
(Dollars in thousands, except share amounts) 1995 1996
--------- ---------
<S> <C> <C>
ASSETS
Cash and cash equivalents............................................... $ 1,340 $ 16,057
Due from securitization trust........................................... -- 177,076
Auto loans held for sale................................................ 118,556 36,285
Finance income receivable............................................... 186,001 362,916
Restricted cash in spread accounts...................................... 63,580 142,977
Furniture, fixtures and equipment....................................... 6,346 13,630
Other assets............................................................ 21,971 29,289
--------- ---------
Total assets........................................................ $ 397,794 $ 778,230
--------- ---------
--------- ---------
LIABILITIES AND SHAREHOLDERS' EQUITY
Amounts due under warehouse facilities.................................. $ 26,530 $ 111,140
Senior term notes....................................................... 145,000 145,000
Subordinated notes...................................................... 13,005 53,689
Capital lease obligations............................................... 3,924 7,729
Deferred income taxes................................................... 18,700 54,387
Accounts payable and accrued liabilities................................ 9,822 13,192
--------- ---------
Total liabilities................................................... 216,981 385,137
Commitments and contingencies
Shareholders' equity:
Capital stock, $.01 par value, 100,000,000 shares authorized:
8% Cumulative Convertible Exchangeable Preferred Stock, 1,071,036
shares issued and outstanding....................................... 11 --
Common Stock 22,038,567 and 36,416,802 shares, respectively, issued and
outstanding........................................................... 220 364
Additional paid-in capital.............................................. 157,204 310,187
Retained earnings....................................................... 23,378 82,542
--------- ---------
Total shareholders' equity.......................................... 180,813 393,093
--------- ---------
$ 397,794 $ 778,230
--------- ---------
--------- ---------
</TABLE>
See notes to consolidated financial statements.
39
<PAGE>
OLYMPIC FINANCIAL LTD.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------
(Dollars in thousands, except per share amounts) 1994 1995 1996
------------- ------------- -------------
<S> <C> <C> <C>
REVENUES:
Net interest margin...................................... $ 9,828 $ 31,192 $ 62,963
Gain on sale of loans.................................... 13,579 62,182 115,773
Servicing fee income..................................... 4,502 13,987 28,284
Other non-interest income................................ 879 1,371 6,475
------------- ------------- -------------
Total revenues....................................... 28,788 108,732 213,495
EXPENSES:
Salaries and benefits.................................... 9,060 20,079 40,751
General and administrative and other operating expense... 8,282 22,648 51,547
------------- ------------- -------------
Total operating expenses............................. 17,342 42,727 92,298
Long-term debt and other interest expense................ 5,416 17,170 25,193
------------- ------------- -------------
Total expenses....................................... 22,758 59,897 117,491
------------- ------------- -------------
Operating income before income taxes and extraordinary
items.................................................. 6,030 48,835 96,004
Provision for income taxes............................... 1,845 19,518 35,688
------------- ------------- -------------
Income before extraordinary items........................ 4,185 29,317 60,316
Extraordinary items...................................... -- (3,856) --
------------- ------------- -------------
Net income............................................... $ 4,185 $ 25,461 $ 60,316
------------- ------------- -------------
------------- ------------- -------------
PRIMARY EARNINGS PER SHARE:
Net income per common share before extraordinary items... $ 0.17 $ 1.35 $ 1.79
Extraordinary items per common share..................... -- (0.19) --
------------- ------------- -------------
Net income per common share.......................... $ 0.17 $ 1.16 $ 1.79
------------- ------------- -------------
------------- ------------- -------------
FULLY DILUTED EARNINGS PER SHARE:
Net income per share before extraordinary items.......... $ 0.17 $ 1.11 $ 1.65
Extraordinary items per share............................ -- (0.15) --
------------- ------------- -------------
Net income per share................................. $ 0.17 $ 0.96 $ 1.65
------------- ------------- -------------
------------- ------------- -------------
Weighted average common and common equivalent shares
outstanding:
Primary................................................ 10,818,908 20,029,769 33,065,473
Fully diluted.......................................... 16,683,380 26,455,876 36,449,995
</TABLE>
See notes to consolidated financial statements.
40
<PAGE>
OLYMPIC FINANCIAL LTD.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF
PREFERRED COMMON PREFERRED COMMON
(Dollars in thousands, except share amounts) SHARES SHARES PAR VALUE PAR VALUE
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
BALANCES AT DECEMBER 31, 1993................... 1,150,000 9,816,434 $ 12 $ 98
Cost of issuance of 8% Convertible Preferred
Stock.......................................... -- -- -- --
Exercise of warrants by shareholders............ -- 71,429 -- 1
Issuance of Common Stock through the Employee
Stock Purchase Plan............................ -- 32,847 -- --
Payment of dividends on 8% Convertible Preferred
Stock.......................................... -- -- -- --
Net income...................................... -- -- -- --
------------ ------------ --- -----
BALANCES AT DECEMBER 31, 1994................... 1,150,000 9,920,710 12 99
Issuance of Common Stock:
Public offering............................... -- 9,849,900 -- 98
Benefit plans................................. -- 163,094 -- 2
Amortization of deferred compensation........... -- -- -- --
Exercise of options and warrants................ -- 1,736,735 -- 17
Preferred Stock conversion to Common Stock...... (78,964) 368,128 (1) 4
Payment of dividends on 8% Convertible Preferred
Stock.......................................... -- -- -- --
Net income...................................... -- -- -- --
------------ ------------ --- -----
BALANCES AT DECEMBER 31, 1995 1,071,036 22,038,567 11 220
Exercise of options and warrants................ -- 1,101,269 -- 11
Issuance of Common Stock:
Public offering............................... -- 8,050,000 -- 81
Benefit plans................................. -- 234,752 -- 2
Amortization of deferred compensation........... -- -- -- --
Preferred Stock redemption and conversion to
Common Stock................................... (1,071,036) 4,992,214 (11) 50
Payment of dividends on 8% Convertible Preferred
Stock.......................................... -- -- -- --
Net income...................................... -- -- -- --
------------ ------------ --- -----
BALANCES AT DECEMBER 31, 1996................... -- 36,416,802 $ -- $ 364
------------ ------------ --- -----
------------ ------------ --- -----
<CAPTION>
ADDITIONAL RETAINED
PAID IN EARNINGS
(Dollars in thousands, except share amounts) CAPITAL (DEFICIT) TOTAL
------------ ------------ ------------
<S> <C> <C> <C>
BALANCES AT DECEMBER 31, 1993................... $ 60,344 $ (1,755) $ 58,699
Cost of issuance of 8% Convertible Preferred
Stock.......................................... (10) -- (10)
Exercise of warrants by shareholders............ 137 -- 138
Issuance of Common Stock through the Employee
Stock Purchase Plan............................ 150 -- 150
Payment of dividends on 8% Convertible Preferred
Stock.......................................... -- (2,300) (2,300)
Net income...................................... -- 4,185 4,185
------------ ------------ ------------
BALANCES AT DECEMBER 31, 1994................... 60,621 130 60,862
Issuance of Common Stock:
Public offering............................... 87,559 -- 87,657
Benefit plans................................. 934 -- 936
Amortization of deferred compensation........... 837 -- 837
Exercise of options and warrants................ 7,256 -- 7,273
Preferred Stock conversion to Common Stock...... (3) -- --
Payment of dividends on 8% Convertible Preferred
Stock.......................................... -- (2,213) (2,213)
Net income...................................... -- 25,461 25,461
------------ ------------ ------------
BALANCES AT DECEMBER 31, 1995 157,204 23,378 180,813
Exercise of options and warrants................ 4,902 -- 4,913
Issuance of Common Stock:
Public offering............................... 145,925 -- 146,006
Benefit plans................................. 1,163 -- 1,165
Amortization of deferred compensation........... 1,038 -- 1,038
Preferred Stock redemption and conversion to
Common Stock................................... (45) -- (6)
Payment of dividends on 8% Convertible Preferred
Stock.......................................... -- (1,152) (1,152)
Net income...................................... -- 60,316 60,316
------------ ------------ ------------
BALANCES AT DECEMBER 31, 1996................... $ 310,187 $ 82,542 $ 393,093
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
See notes to consolidated financial statements.
41
<PAGE>
OLYMPIC FINANCIAL LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------
(Dollars in thousands) 1994 1995 1996
------------- ------------- -------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................................. $ 4,185 $ 25,461 $ 60,316
Adjustments to reconcile net income to net cash used in operating
activities:
Depreciation and amortization............................................ 553 1,881 4,286
Loss on sale of furniture, fixtures and equipment........................ -- 153 119
(Increase) decrease in assets:
Automobile loans held for sale:
Purchases of automobile loans.......................................... (743,256) (2,052,413) (2,750,553)
Sales of automobile loans.............................................. 712,211 1,933,525 2,787,412
Repayments of automobile loans......................................... 7,849 24,200 45,412
Finance income receivable................................................ (32,293) (127,461) (176,916)
Restricted cash in spread accounts....................................... (6,299) (42,172) (79,397)
Due from securitization trusts........................................... (22,095) 88,481 (177,076)
Prepaid expenses and other assets........................................ (3,121) (10,402) (5,787)
Increase (decrease) in liabilities:
Deferred income taxes.................................................. 1,845 16,947 35,688
Accounts payable and accrued liabilities............................... 1,647 6,141 3,369
------------- ------------- -------------
Total cash used in operating activities......................... (78,774) (135,659) (253,127)
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of furniture, fixtures and equipment................... 68 37 26
Purchase of furniture, fixtures and equipment.............................. (362) (1,089) (5,108)
Purchase of subordinated certificates...................................... (962) (2,046) (2,596)
Collections on subordinated certificates................................... 339 510 1,078
------------- ------------- -------------
Total cash used in investing activities......................... (917) (2,588) (6,600)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of Common Stock................................. 288 95,866 152,079
Net proceeds from issuance of 8% Convertible Preferred Stock............... (10) -- --
Payment of dividends on 8% Convertible Preferred Stock..................... (2,300) (2,213) (1,152)
Proceeds from borrowings under warehouse facilities........................ 426,161 1,605,583 2,159,523
Repayment of borrowings under warehouse facilities......................... (342,082) (1,685,241) (2,074,913)
Unsecured subordinated notes, net.......................................... 306 12,699 40,684
Proceeds from issuance of long-term debt................................... 12,000 -- --
Repayments 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 --
Repayments of Senior Subordinated Notes.................................... -- (15,000) --
Deferred debt issuance cost, net........................................... (259) (2,541) (13)
Reduction of capital lease obligations..................................... (532) (1,183) (1,764)
------------- ------------- -------------
Total cash provided by financing activities..................... 93,572 122,970 274,444
------------- ------------- -------------
Net increase (decrease) in cash and cash equivalents....................... 13,881 (15,277) 14,717
Cash and cash equivalents at beginning of period........................... 2,736 16,617 1,340
------------- ------------- -------------
Cash and cash equivalents at end of period................................. $ 16,617 $ 1,340 $ 16,057
------------- ------------- -------------
------------- ------------- -------------
Supplemental disclosures of cash flow information:
Non cash activities:
Additions to capital leases............................................ $ 1,524 $ 3,609 $ 5,569
Cash paid for:
Interest............................................................... 6,386 19,630 33,448
Taxes.................................................................. -- 92 --
</TABLE>
See notes to consolidated financial statements.
42
<PAGE>
OLYMPIC FINANCIAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Olympic Financial Ltd. (the "Company") operates in a single industry,
purchases, securitizes and services consumer automobile retail installment loans
originated primarily by car dealers affiliated with major foreign and domestic
manufacturers. The Company provides a competitive and consistent alternative
source of retail financing to more than 7,700 automobile dealers for their
customers' purchases of new and used automobiles and light trucks. The Company
does not purchase more than 1.0% of its loans from any one dealer. Since its
founding in March 1990, the Company has established 17 regional buying centers
in Arizona, Northern and Southern California, Colorado, Florida, Georgia,
Massachusetts, Minnesota, Missouri, New York, North Carolina, Ohio, Tennessee,
North, South and West Texas, and Washington. The Company's dealer network
includes dealers in 39 states. At December 31, 1996, the Company's only
significant geographic concentration in its servicing portfolio was to borrowers
in the state of Texas which consisted of approximately 22% of the total
servicing portfolio. Management does not believe that the Company has any
current material exposures to geographic or dealer concentrations.
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated. The consolidated financial statements have
been prepared in conformity with generally accepted accounting principles.
Certain reclassifications have been made to the December 31, 1995 and 1994
balances to conform to current period presentation.
CASH AND CASH EQUIVALENTS
The Company considers all significant investments with an original maturity
of three months or less to be cash equivalents.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
DUE FROM SECURITIZATION TRUST
Under Olympic's securitization structures, the Company delivers loans to a
securitization trust and subsequently receives cash from the trust for such
loans concurrent with the legal closing of the transaction typically six to 10
days after delivery. All terms of the transfer of assets to the trust are fixed
and determinable at the time of delivery.
AUTOMOBILE LOANS HELD FOR SALE
Loans are carried at the lower of their principal amount outstanding
(amortized cost), including related unearned dealer participations, or market
value. Market value is estimated based on the characteristics of the loans held
for sale and the terms of recent sales of similar loans completed by the
Company.
43
<PAGE>
OLYMPIC FINANCIAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Interest on these loans is accrued and credited to interest income based upon
the daily principal amount outstanding.
In accordance with Emerging Issues Task Force ("EITF") Issue 92-10, LOAN
ACQUISITIONS INVOLVING TABLE FUNDING ARRANGEMENTS, the EITF set forth specific
criteria providing the distinction between purchasers and originators of loans.
For financial reporting purposes, the Company is in substance an originator of
automobile loans. Therefore, participations paid to dealers are deferred and
amortized over the life of the underlying loan in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 91, "Accounting for Nonrefundable
Fees and Costs Associated with Originating or Acquiring Loans and Initial Direct
Costs of Leases." Any unamortized deferred costs remaining at the time the loan
is sold is considered a portion of the basis of loans held for sale and charged
to expense as a component of any subsequent gain or loss on sale.
Dealer participations are calculated by amortizing the customer loan at the
interest rate charged by the automobile dealer to the automobile purchaser and
at the rate offered by the Company to the dealer and recognizing the difference
between these two aggregate interest amounts as the dealer participation. This
amount is paid to the dealer at or near the original purchase date of the loan.
A portion of this amount is generally recoverable from the dealer in the event
of a default or prepayment within a time period specified in the dealer
agreement. The balance is recovered over time as a portion of excess cash flows
released from securitization trusts.
FINANCE INCOME RECEIVABLE
Finance income receivable includes (i) the estimated present value of future
cash flows from securitization transactions ("gain on sale of loans"), (ii)
accrued interest receivable on loans held for sale, but not yet collected
through the date of sale, (iii) interest earned on spread accounts and other
cash accounts established in connection with the Company's securitizations and
(iv) interest earned on previously discounted cash flows. The components of
finance income receivable are recovered by the Company, and finance income
receivable is reduced, over the life of the securitized loans through the return
of cash flows in excess of spread account requirements.
Finance income receivable excludes deferred service fee income which
represents the amount of future cash flows to be recognized as earned over the
period for which the Company services the securitized loans.
Reserve for loan losses included in finance income receivable represents the
estimated amount of loan losses expected to be incurred over the life of the
underlying loans included in the securitization transactions.
The carrying amount of finance income receivable is reviewed periodically to
determine if differences exist between estimated and actual credit losses,
prepayment rates and weighted average APR at each balance sheet date using the
discount factor applied in the original determination of the receivable. In
addition, at the same dates, the Company assesses the effect of changes in
estimates, if any, on the carrying amount of the finance income receivable. The
Company's analysis determines that the finance income receivable is not recorded
in excess of the present value of the estimated remaining excess cash flows. The
Company does not increase the carrying amount of finance income receivable for
favorable variances from original estimates, but to the extent that actual
results exceed the Company's prepayment or loss estimates, or there is a greater
than anticipated decline in the weighted average APR of loans sold, any required
44
<PAGE>
OLYMPIC FINANCIAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
decrease to finance income receivable is reflected as a reduction of current
period earnings. There were no material adjustments to the carrying amount of
finance income receivable during the three years ended December 31, 1996.
Adjustments due to modification of future estimates are determined on a
disaggregated basis according to each asset securitization transaction.
CASH RESTRICTED IN SPREAD ACCOUNTS
The Company is required to maintain spread accounts to protect investors in
securitization transactions and credit enhancers against credit losses. The
initial deposit, if required, and excess cash flows from securitization
transactions are retained for each securitization until the spread account
balance increases to a specified percentage of the underlying loans included in
the securitization. Funds in excess of specified percentages are remitted to the
Company, through its wholly-owned subsidiary Olympic Receivables Finance Corp.
("ORFC"), over the remaining life of the securitization. For each securitization
trust, there is no recourse to the Company beyond the balance in the spread
accounts or the trust's future earnings.
FURNITURE, FIXTURES AND EQUIPMENT
Furniture, fixtures and equipment are stated at cost less accumulated
depreciation and amortization. Owned properties are depreciated on a
straight-line basis over their useful lives. Capital lease assets are amortized
over their lease terms on a straight line basis.
ADVANCES DUE TO SERVICER
As 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
the Company's 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.
DEFERRED DEBT ISSUANCE COSTS
The Company capitalizes costs incurred related to the issuance of long-term
debt. These costs are deferred and amortized on a straight-line basis over the
contractual maturity of the related debt and recognized as a component of
interest expense.
SERVICING FEE RECEIVABLE
The Company earns a servicing fee for servicing loans sold to investors
through securitization. These fees are paid to the Company by the securitization
trust on a monthly basis.
INCOME TAXES
Deferred tax assets and liabilities are recognized for future tax
consequences related to differences between the current carrying amounts of
assets and liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured based on enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled.
45
<PAGE>
OLYMPIC FINANCIAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
NET INTEREST MARGIN
The Company's net interest margin represents the sum of (i) net interest on
loans held for sale based on the net interest rate spread, (ii) investment
earnings on short-term investments and spread accounts and other cash accounts
established in connection with the Company's securitizations and (iii) the
recognition of the interest component of previously discounted cash flows,
calculated at the present value discount rate used in determining the gain on
sale.
NET INCOME PER SHARE
Income for primary earnings per share is adjusted for dividends on 8%
Convertible Preferred Stock and is computed based on the weighted average number
of common and dilutive common stock equivalents arising from the assumed
exercise of outstanding warrants and stock options (calculated using the
treasury stock method). Fully diluted earnings per share data for annual periods
prior to 1996, is computed by using such weighted average common stock and
common stock equivalents increased by the assumed conversion of the 8%
Convertible Preferred Stock into shares of Common Stock. All of the Company's 8%
Convertible Preferred Stock had been redeemed or converted at December 31, 1996.
If all of the Company's 8% Convertible Preferred Stock had converted at the
beginning of 1996, primary earnings per share for the year ended December 31,
1996 would have been $1.67. The effect on quarterly primary earnings per share
would have been immaterial. For the purpose of computing the net income per
common share equivalent data, all warrants and options issued are treated as if
exercised for shares of Common Stock on their respective date of original
issuance.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments as defined by SFAS No. 107, "Disclosures
about Fair Value of Financial Instruments," including cash and cash equivalents,
due from securitization trusts, finance income receivable, restricted cash in
spread accounts, amounts due under warehouse facilities and Junior Subordinated
Notes are accounted for on a historical cost basis which, due to the nature of
these financial instruments, approximates fair value. Automobile loans held for
sale are accounted for at the lower of amortized cost or market value. Fair
value of the Company's Senior Term Notes and 10.125% Senior Subordinated Notes
is determined using available market quotes. At December 31, 1996 and 1995, the
Company had $145.0 million of Senior Term Notes outstanding with an estimated
fair value of $161.0 million at December 31, 1996 and $158.1 million at December
31, 1995. The Company also had $30.0 million of Senior Subordinated Notes issued
during 1996 and outstanding at December 31, 1996. The carrying amount of the
Senior Subordinated Notes approximates fair value.
2. ACCOUNTING CHANGES
STOCK BASED COMPENSATION PLANS
SFAS No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"), was
issued by the Financial Accounting Standards Board in October 1995 and is
effective for fiscal years beginning after December 15, 1995. SFAS 123 provides
for companies to recognize compensation expense associated with stock based
compensation plans over the anticipated service period based on the fair value
of the award on the date of grant. As allowed by SFAS 123, however, the Company
has elected to continue to measure compensation costs as prescribed by APB
Opinion No. 25 "Accounting for Stock Issued to Employees."
46
<PAGE>
OLYMPIC FINANCIAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. ACCOUNTING CHANGES (CONTINUED)
See Footnote No. 11, for pro forma disclosures of net income and earnings per
share, as if SFAS 123 had been adopted.
TRANSFERS AND SERVICING OF FINANCIAL ASSETS AND EXTINGUISHMENT OF
LIABILITIES
Statement of Financial Accounting Standards No. 125, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishment of Liabilities"
("SFAS 125"), was issued by the Financial Accounting Standards Board in June
1996 and is effective on a prospective basis for all transactions after December
31, 1996. SFAS 125 was issued to clarify certain aspects of previously issued
statements regarding transfers of financial assets and to create guidance on a
wider spectrum of financial assets. The Company will adopt the provisions of
SFAS 125 on January 1, 1997 and does not believe that this statement will have a
material effect on its statement of operations or financial position.
3. AUTOMOBILE LOANS HELD FOR SALE
The weighted average interest rate on automobile loans held for sale was
15.22% and 14.04% at December 31, 1996 and 1995, respectively. Accrued interest
receivable on automobile loans held for sale aggregated $0.2 million and $0.6
million as of December 31, 1996 and 1995, respectively.
4. FINANCE INCOME RECEIVABLE
The following table sets forth the components of finance income receivable
as of December 31:
<TABLE>
<CAPTION>
(Dollars in thousands) 1995 1996
---------- ----------
<S> <C> <C>
Estimated cash flows on loans sold, net of estimated prepayments.............. $ 285,517 $ 549,876
Deferred servicing income..................................................... (37,780) (59,473)
Reserve for loan losses....................................................... (42,270) (95,005)
---------- ----------
Undiscounted cash flows on loans sold, net of estimated prepayments......... 205,467 395,398
Discount to present value..................................................... (19,466) (32,482)
---------- ----------
$ 186,001 $ 362,916
---------- ----------
---------- ----------
Reserve for loan losses as a percentage of servicing portfolio................ 1.86% 2.51%
</TABLE>
47
<PAGE>
OLYMPIC FINANCIAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. FINANCE INCOME RECEIVABLE (CONTINUED)
The following represents the roll-forward of the finance income receivable
balance for the two years ended December 31, 1996:
<TABLE>
<CAPTION>
(Dollars in thousands)
<S> <C>
Balance, December 31, 1994.................................................................. $ 58,540
Excess cash flows on loans sold, net of estimated prepayments............................... 141,147
Return of excess cash flows............................................................... (21,054)
Recognition of present value effect of cash flows......................................... 7,368
----------
Balance, December 31, 1995.................................................................. 186,001
Excess cash flows on loans sold, net of estimated prepayments............................. 201,376
Return of excess cash flows............................................................... (43,351)
Recognition of present value effect of cash flows......................................... 18,890
----------
Balance, December 31, 1996.................................................................. $ 362,916
----------
----------
</TABLE>
5. FURNITURE, FIXTURES AND EQUIPMENT
Furniture, fixtures and equipment, as of December 31, consists of the
following:
<TABLE>
<CAPTION>
(Dollars in thousands) 1995 1996
--------- ----------
<S> <C> <C>
OWNED
Office furniture and equipment.................................................... $ 2,385 $ 6,637
Automobiles....................................................................... 220 313
Computer equipment................................................................ 319 1,003
--------- ----------
Total......................................................................... 2,924 7,953
CAPITALIZED LEASES
Office furniture and equipment.................................................... 2,677 4,280
Computer equipment................................................................ 2,621 5,545
--------- ----------
Total......................................................................... 5,298 9,825
--------- ----------
Total furniture, fixtures and equipment (at cost)................................. 8,222 17,778
Less:
Accumulated depreciation and amortization....................................... (1,876) (4,148)
--------- ----------
Furniture, fixtures and equipment, net............................................ $ 6,346 $ 13,630
--------- ----------
--------- ----------
</TABLE>
Depreciation expense including amortization of assets under capital lease
obligations for the years ended December 31, 1996, 1995 and 1994 was $3.2
million, $1.0 million and $0.5 million, respectively.
48
<PAGE>
OLYMPIC FINANCIAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. OTHER ASSETS
Other assets, as of December 31, consists of the following:
<TABLE>
<CAPTION>
(Dollars in thousands) 1995 1996
--------- ---------
<S> <C> <C>
Advances due to servicer.......................................................... $ 9,046 $ 8,140
Deferred debt issuance costs...................................................... 4,444 4,438
Investment in subordinated certificates........................................... 2,811 4,329
Servicing fee receivable.......................................................... 1,855 3,121
Prepaid expenses.................................................................. 1,545 2,755
Repossessed assets................................................................ 431 1,577
Other assets...................................................................... 1,839 4,929
--------- ---------
$ 21,971 $ 29,289
--------- ---------
--------- ---------
</TABLE>
7. AMOUNTS DUE UNDER WAREHOUSE FACILITIES
At December 31, 1996, the Company had three warehouse facilities with an
aggregate capacity of $800.0 million in place with various financial
institutions and institutional lenders of which $688.9 million was available.
Borrowings under these facilities are collateralized by certain loans held for
sale. The weighted average interest rate on outstanding borrowings under the
warehouse facilities was 6.27% and 7.23% at December 31, 1996 and 1995,
respectively.
In December 1996, the Company entered into a commercial paper conduit
facility sponsored by Bank of America. Under this facility, the Company's
wholly-owned special purpose subsidiary, may sell up to $300.0 million in retail
automobile contracts to Arcadia Receivables Conduit Corporation ("ARCC"), a
special purpose corporation owned by the Company. The purchase price to ARCC is
funded through borrowings from Receivables Capital Corporation ("RCC"), a
special purpose corporation administered by Bank of America, which in turn funds
such borrowings through the issuance of commercial paper. This facility is
subject to annual renewals through December 1999.
Also during 1996, the Company entered into a Credit Agreement with banks led
by Bank of America. Under this agreement, the Company may borrow up to $170.0
million. The Company may borrow an amount equal to 95% of the outstanding
principal amount of eligible automobile loans pledged to secure the indebtedness
depending on certain portfolio performance tests. The Company's Credit Agreement
matures in July, 1997.
Additionally, the Company, through its special purpose subsidiary, Olympic
Receivables Finance Corp. II ("ORFC II"), participates in a $330.0 million
receivables warehouse facility which utilizes a commercial paper conduit
sponsored by J.P. Morgan. Under a receivables purchase agreement between the
Company and ORFC II, the Company has agreed to sell automobile loans to ORFC
which funds the purchase by selling the automobile loans to an owner trust (the
"Owner Trust") under repurchase agreements. The Owner Trust is funded through
borrowings from Delaware Funding Corporation ("DFC"), a J.P. Morgan commercial
paper company which in turn funds such borrowers through the issuance of
commercial paper. In January 1997, the Company agreed to reduce the capacity of
the J.P. Morgan Facility from $300 million to approximately $250 million and to
extend such facility through December 1997 with annual renewal options through
December 1998.
49
<PAGE>
OLYMPIC FINANCIAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. LONG-TERM DEBT
SENIOR TERM NOTES
In April 1995, the Company issued to the public $145.0 million principal
amount of 13% Senior Notes due 2000 (the "Senior Term Notes"). Interest on the
Senior Term Notes is payable semi-annually on November 1 and May 1 of each year,
commencing November 1, 1995. The Senior Term Notes are not callable prior to May
1, 1998. Thereafter, the Senior Term Notes are redeemable, in whole or in part,
at the option of the Company, at 108.5% and 104.25% if redeemed during the
twelve month periods beginning May 1, 1998, and 1999, respectively, together
with accrued and unpaid interest to the date of redemption. The Company will be
obligated to make an offer to purchase all outstanding Senior Term Notes at a
price of 101% of the principal amount thereof, together with accrued and unpaid
interest to the date of purchase if certain covenants (as defined within the
Senior Term Note Indenture) regarding sales of assets, change in control or
annualized net losses are not met.
Except for a reserve fund equal to one interest payment on the outstanding
principal balance of the Senior Term Notes, the Senior Term Notes are unsecured
obligations to the Company and will rank senior to all outstanding subordinated
notes of the Company and PARI PASSU in right of payment with all unsecured and
unsubordinated indebtedness of the Company. The reserve fund may be used by the
Company to purchase automobile loans at an advance rate of 90% of principal
balance of the loans purchased which are pledged against the Senior Term Notes.
See Note No. 14, Subsequent Events.
SUBORDINATED NOTES
Subordinated notes outstanding as of December 31, are as follows:
<TABLE>
<CAPTION>
(Dollars in thousands) 1995 1996
--------- ---------
<S> <C> <C>
Senior subordinated notes, Series 1996-A................................ $ -- $ 30,000
Junior subordinated notes............................................... 13,005 23,689
--------- ---------
$ 13,005 $ 53,689
--------- ---------
--------- ---------
</TABLE>
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 Senior 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).
In September 1994, the Company completed a shelf registration to issue up to
$50.0 million of Junior Subordinated Notes. The Junior Subordinated Notes are
issued in minimum denominations of $1,000 and include extendible notes having
maturities ranging from 30 days to one year from the date of issue and fixed
term notes having maturities of one to ten years from date of issue. The Company
may adjust interest rates on unsold notes prior to sale and on extendible notes
at any roll-over date based on current market conditions. As of December 31,
1996, the weighted average maturity and interest rate of the Unsecured
Subordinated Notes were 14.2 months and 9.50%, respectively.
50
<PAGE>
OLYMPIC FINANCIAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. LONG-TERM DEBT (CONTINUED)
Maturities of long-term debt outstanding at December 31, 1996 were:
<TABLE>
<CAPTION>
(Dollars in thousands)
<S> <C>
YEAR ENDING
1997........................................................................ $ 12,516
1998........................................................................ 7,747
1999........................................................................ 522
2000........................................................................ 145,616
2001........................................................................ 32,018
2002 and thereafter......................................................... 270
----------
Total................................................................... $ 198,689
----------
----------
</TABLE>
9. COMMITMENTS AND CONTINGENCIES
The Company leases furniture, fixtures and equipment under capital and
operating leases with terms in excess of one year. Additionally, the Company
leases its office space under operating leases. Total rent expense on operating
leases was $4.7 million, $1.8 million and $0.9 million for the years ended
December 31, 1996, 1995, and 1994, respectively.
Future minimum lease payments required under capital and noncancelable
operating leases with terms of one year or more, at December 31, 1996 were:
<TABLE>
<CAPTION>
CAPITAL OPERATING
(Dollars in thousands) LEASES LEASES
--------- -----------
<S> <C> <C>
YEAR ENDING
1997............................................................ $ 3,168 $ 6,337
1998............................................................ 2,924 6,405
1999............................................................ 1,371 5,874
2000............................................................ 1,089 4,559
2001............................................................ 697 3,240
2002 and thereafter............................................. 44 2,574
--------- -----------
Total......................................................... 9,293 $ 28,989
-----------
-----------
Less amounts representing interest................................ (1,564)
---------
Present value of net minimum lease payments....................... $ 7,729
---------
---------
</TABLE>
Under the terms of sales of automobile loans completed through
securitization transactions, the Company may be obligated to repurchase certain
automobile loans due to failure of the assets to meet specifically defined
criteria. The Company may substitute other assets for those repurchased because
of failure to meet the specifically defined criteria. The Company's potential
obligation for defaulted automobile loans, if realized, is expected to be
satisfied through the use of cash collateral accounts included in the
securitization transactions. The Company may not substitute other assets for
defaulted automobile loans.
Proceeds of transfers of automobile loans with limited recourse, accounted
for as sales, during the years ended December 31, 1996, 1995 and 1994 were $2.8
billion, $1.9 billion and $712.2 million, respectively. The outstanding balance
of automobile loans transferred and serviced for others in connection with
securitization transactions since the Company's inception was $3.8 billion at
December 31, 1996.
51
<PAGE>
OLYMPIC FINANCIAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. SHAREHOLDERS' EQUITY
On May 18, 1995, the shareholders approved an amendment to the Company's
Articles of Incorporation which increased its authorized capital stock from
35,714,286 to 100,000,000 shares. The Company had reserved shares of authorized
but unissued Common Stock at December 31, 1996, as follows:
<TABLE>
<S> <C>
Warrants......................................... 1,756,273
Restricted stock election plans.................. 592,348
Employee stock purchase plan..................... 276,891
Stock options.................................... 2,854,585
---------
5,480,097
---------
---------
</TABLE>
COMMON STOCK
In April 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.
In April 1995, the Company completed a secondary public offering of
9,849,900 shares of its Common Stock at $10.00 per share including an
over-allotment option of 1,284,900 shares and 65,000 shares pursuant to the
exercise of warrants. Additionally, pursuant to demand registration rights of
certain warrants issued by the Company between 1992 and 1994 in connection with
its issuance of 11.75% Senior Secured and 9.875% Senior Subordinated Notes, the
Company filed separate registration statements during April and October 1995,
covering 213,000 and 3,871,364 shares of Common Stock, respectively, issuable
upon exercise of the warrants for secondary sale at market should the holders
decide to do so. During 1995 and 1996, 1,650,569 and 754,520 shares of Common
Stock had been issued in connection with the exercise of warrants for aggregate
proceeds of $6.9 million and $3.1 million, respectively. As of December 31,
1996, the Company had remaining warrants outstanding for the purchase of
1,756,273 shares of Common Stock at exercise prices ranging from $4.13 to $4.75
per share. Additionally, in December 1995, the Company's Board of Directors
authorized the issuance of 10 shares of Common Stock to each employee as a
reward for current year results. An aggregate 6,180 shares were issued.
8% CUMULATIVE CONVERTIBLE EXCHANGEABLE PREFERRED STOCK
In December 1993, the Company sold 1,150,000 shares of its 8% Cumulative
Convertible Exchangeable Preferred Stock (the "Preferred Stock") at $25 per
share (listed on the Nasdaq National Market under the trading symbol "OLYMP").
In October 1996, the Company called for redemption on December 2, 1996, all of
its outstanding Preferred Stock. The total redemption price (including accrued
and unpaid dividends) was $27.12 per share. As an alternative to having their
preferred stock redeemed for cash, all but 200 shares of preferred stock
converted into common stock at a rate of 4.662 shares of common stock for each
share of preferred prior to the redemption date.
SHAREHOLDER RIGHTS PLAN
In October 1996, the Board of Directors adopted a Shareholder Rights Plan in
which Preferred Stock Purchase Rights were distributed as a dividend at the rate
of one Right for each share of the Company's Common Stock held on November 22,
1996. The Rights expire on October 28, 2006. Each Right generally will entitle
shareholders, in certain circumstances, to buy one-thousandth of a newly issued
share of Class A Preferred Stock of the Company at an exercise price of $90.00
per share. The Rights generally will be exerciseable and transferable apart from
Common Stock only if a person or group would beneficially own 15% or more of the
Common Stock. If any person becomes the beneficial owner of 15% or more of
52
<PAGE>
OLYMPIC FINANCIAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. SHAREHOLDERS' EQUITY (CONTINUED)
the Company's Common Stock, then each Right not owned by a 15% or more
shareholder or certain related parties will generally entitle its holders to
purchase, at the Right's then-current exercise price, shares of Common Stock
(or, in certain circumstances as determined by the Board, cash, other property
or other securities) having a value of twice the Right's exercise price. In
addition, if, after any person has become a 15% or more shareholder, the Company
is involved in a merger or other business combination transaction with another
person in which its Common Stock is changed or converted, or sells 50% or more
of its assets or earning power to another person, each Right will entitle its
holder to purchase, at the Right's then-current exercise price, shares of Common
Stock of such other person having a value twice the Right's exercise price.
The Company will generally be entitled to redeem the Rights at $.01 per
Right at any time until the tenth day following public disclosure that a person
or group has become the beneficial owner of 15% or more of the Company's Common
Stock.
COMMON STOCK DIVIDENDS
Under the Company's debt agreements, the Company may not pay any dividend or
make any other distribution on its Common Stock, nor may the Company redeem or
repurchase any of its Common Stock. Consequently, no cash dividends are expected
to be paid on the Common Stock in the foreseeable future.
11. EMPLOYEE BENEFITS AND STOCK INCENTIVE PLANS
RESTRICTED STOCK ELECTION PLANS
In July of 1994, the Board of Directors of the Company adopted a Restricted
Stock Election Plan (the "1994 Stock Election Plan"). The purpose of the 1994
Stock Election Plan is to reward management performance and to build each
participant's equity interest in the stock of the Company by providing long-term
incentives and rewards to officers and other key management employees of the
Company and its subsidiaries. The 1994 Stock Election Plan allows certain
employees of the Company to elect to receive all or a portion of certain bonuses
they are entitled to receive from the Company in 1994 through 1997 in the form
of shares of the Company's Common Stock. The 1994 Stock Election Plan authorizes
the granting of awards in the form of restricted shares of the Company's Common
Stock, subject to certain risks of forfeiture which may be eliminated over time
based upon achievement of certain performance criteria by the eligible employee
and/or the Company. A total of 800,000 shares of Common Stock are set aside for
awards under the 1994 Stock Election Plan. As of December 31, 1996 there have
been 523,466 shares granted under the plan with 316,519 shares remaining subject
to restriction.
In December 1995, the Board of Directors of the Company adopted a second
Restricted Stock Election Plan (the "1998 Stock Election Plan"). The purpose of
this Plan is the same as that of the 1994 Stock Election Plan except that it is
applicable to bonuses which may be earned by certain key employees of the
Company in the years 1998 through 2000. As with the 1994 Stock Election Plan,
the 1998 Stock Election Plan authorizes the granting of awards in the form of
restricted shares of the Company's Common Stock, subject to certain risks of
forfeiture which may be eliminated over time based upon achievement of certain
performance criteria by the eligible employee and/or the Company. A total of
600,000 shares of the Common Stock have been set aside for awards under the 1998
Stock Election Plan. As of December 31, 1996 there have been 284,186 shares
granted under the 1998 Stock Election Plan, all of which remain subject to
restriction.
In accordance with APB Opinion No. 25, "Accounting for Stock Issued to
Employees", the Company recorded deferred compensation as a reduction to
shareholders' equity for the portion of the restricted
53
<PAGE>
OLYMPIC FINANCIAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. EMPLOYEE BENEFITS AND STOCK INCENTIVE PLANS (CONTINUED)
stock award not yet earned. 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. In connection with the 1994 Stock Election Plan, the Company recognized
$1.0 million, $0.8 million and $0.3 million of compensation expense for the
years ended December 31, 1996, 1995 and 1994, respectively.
EMPLOYEE STOCK PURCHASE PLAN
In July 1993, the Company adopted an Employee Stock Purchase Plan (the
"Plan"). This Plan is available to all employees, including officers, who are
employed for at least 20 hours per week and more than five months in a calendar
year. All employees are eligible except those (i) who own and/or hold
outstanding options to purchase stock possessing 5% or more of the total
combined voting power of the capital stock of the Company, or (ii) who, for each
calendar year, are entitled to purchase more than $25,000 of fair market value
of such stock under all employee stock purchase plans. The participants purchase
stock on each exercise date (June 30 and December 31), and the shares are issued
within thirty days thereafter.
The exercise price is determined to be 85% of the lower of the mean of the
bid and ask prices of the Company's Common Stock on January 1, at the date the
participant becomes eligible, or on each exercise date. A total of 500,000
shares of Common Stock has been reserved for issuance under the Plan. As of
December 31, 1996, 223,109 shares of Common Stock have been issued to the
Company's employees under the Plan. The Plan is noncompensatory and results in
no expense to the Company.
DIRECTOR OPTION PLAN
The 1992 Director Stock Option Plan (the "DSOP") was approved by the
shareholders at the 1992 Annual Meeting. The DSOP provides for the automatic
grant of options to purchase the Company's Common Stock to outside directors
according to fixed terms. The DSOP provides that a new outside director
automatically receives options to purchase 15,000 shares upon first becoming an
outside director and an additional 15,000 shares on each anniversary date of the
original grant, up to a maximum of 120,000 shares. The maximum aggregate number
of shares of the Company's Common Stock which may be issued pursuant to the DSOP
is 840,000. As of December 31, 1996, 200,000 options to outside directors have
been issued and remain outstanding at exercise prices ranging from $3.00 to
$23.88. At December 31, 1996, 1995 and 1994 there were 175,000 options, 285,000
options and 195,000 options, respectively, exercisable under the DSOP.
STOCK OPTION PLAN
The Company has a Stock Option Plan (the "1990 Plan") which provides for the
granting of incentive and nonqualified options to designated employees and
non-employees, including consultants of the Company, to purchase up to a maximum
of 2,000,000 shares of the Company's Common Stock. The 1990 Plan is administered
by the Compensation Committee of the Board of Directors and has the authority
and discretion to determine the employees, officers, directors and others who
are to receive options, the type of option to be granted, the number of shares
subject to each option and the exercise price of each option (not to be less
than fair market value for incentive options). Options may not be granted under
the 1990 Plan after January 17, 2001. The term of each option, which is fixed by
the Compensation Committee, generally may not exceed ten years from the date the
option is granted. The 1990 Plan is noncompensatory and results in no expense to
the Company. At December 31, 1996, 1995 and 1994, there were 702,450 options,
548,165 options and 495,809 options, respectively, exercisable under the 1990
Plan.
54
<PAGE>
OLYMPIC FINANCIAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. EMPLOYEE BENEFITS AND STOCK INCENTIVE PLANS (CONTINUED)
A summary of stock option activity under the 1990 Plan is as follows:
<TABLE>
<CAPTION>
OUTSTANDING OPTIONS
--------------------------------------------
RESERVED SHARES NUMBER PRICE PER SHARE
--------------- ---------- ---------------
<S> <C> <C> <C>
BALANCE, DECEMBER 31, 1993......................................... 1,000,000 530,566 $ 0.48-$6.00
Granted.......................................................... -- 371,571 4.63-5.38
Exercised........................................................ -- -- -- --
Canceled......................................................... -- (7,000) 4.63-5.88
--------------- ---------- ---------------
BALANCE, DECEMBER 31, 1994......................................... 1,000,000 895,137 0.48-6.00
Granted.......................................................... 1,000,000 515,000 6.00-16.19
Exercised........................................................ -- (71,166) 3.00-6.00
Canceled......................................................... -- (48,000) 4.63-5.88
--------------- ---------- ---------------
BALANCE, DECEMBER 31, 1995......................................... 2,000,000 1,290,971 0.48-16.19
Granted.......................................................... -- 520,000 14.06-20.75
Exercised........................................................ -- (116,749) 0.48-7.63
Canceled......................................................... -- -- -- --
--------------- ---------- ---------------
BALANCE, DECEMBER 31, 1996......................................... 2,000,000 1,694,222 $ 0.48-$20.75
--------------- ---------- ---------------
--------------- ---------- ---------------
</TABLE>
In 1996, 1995 and 1994, the Company granted to a director options to
purchase a total of 325,000, 40,000 and 100,000 shares, respectively, of the
Company's Common Stock under Non-statutory Stock Option Agreements. These
options were granted in connection with such director's appointment as Chairman
of the Executive Committee of the Board of Directors and in consideration for
certain consulting arrangements entered into between the Company and the
director and have exercise prices ranging from $5.13 to $17.38. At December 31,
1996 and 1995, there were 240,000 and 100,000 options, respectively,
exerciseable under the Non-statutory Stock Option Agreements.
Effective January 1, 1996 the Company adopted Statement of Financial
Accounting Standards No. 123, Accounting for Stock-Based Compensation ("SFAS
123"). SFAS 123 provides for companies to recognize compensation expense
associated with stock based compensation plans over the anticipated service
period based on the fair value of the award on the date of grant. However, SFAS
123 allows companies to continue to measure compensation costs prescribed by APB
Opinion No. 25 "Accounting for Stock Issued to Employees" ("APB 25"). Companies
electing to continue accounting for stock based compensation plans under APB 25
must make pro forma disclosures of net income and earnings per share, as if SFAS
123 had been adopted. The company has continued to account for stock-based
compensation plans under APB 25. The pro forma disclosure of the effect of SFAS
123 on net income and earnings per share for the years ended December 31, is
presented below. The fair value of the options was estimated at date of grant
using a Black-Scholes option pricing model with the weighted-average risk-free
interest rate assumptions for 1995 and 1996 at 6.7%, volatility factor of the
expected market price of the Company's Common Stock of .68 and an option life of
five or ten years. Fair value calculations assume no dividends will be paid on
the Company's Common Stock.
<TABLE>
<CAPTION>
1995 1996
--------- ---------
<S> <C> <C>
Pro forma net income $ 24,697 $ 57,935
Pro forma earning per share:
Primary............................................................... $ 1.12 $ 1.72
Fully diluted......................................................... $ 0.93 $ 1.59
</TABLE>
55
<PAGE>
OLYMPIC FINANCIAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. EMPLOYEE BENEFITS AND STOCK INCENTIVE PLANS (CONTINUED)
The weighted average fair value of options granted during 1996 was $13.53.
Subsequent to December 31, 1996, the Company granted the option to purchase
1,200,000 shares of the Company's Common Stock under terms of an employment
agreement with its newly elected Chief Executive Officer. The options are
exercisable at $14.87 per share, ratably over a three year period beginning in
1998 and had a fair value, as computed under the provisions of SFAS 123, of
$11.87 at the date of grant.
CASH SURRENDER VALUE OF LIFE INSURANCE
In October 1995, the Company entered into split-dollar insurance agreements
with certain employees of the Company. Under the terms of the agreements, the
Company pays the premium due on life insurance policies owned by the employee
that build cash surrender value while also providing life insurance benefits for
the employee. The Company is entitled to a refund of all previously paid
premiums or the cash surrender value of the policy, whichever is lower, if the
agreement or the policy is terminated. In the event of death of the insured, the
Company will be entitled to a refund of all previously paid premiums. At
December 31, 1996, these policies had cash surrender value of $958,000. There
was no cash surrender value at December 31, 1995.
12. INCOME TAXES
The components of income tax expense for the three years ended December 31,
1996 consist of the following:
<TABLE>
<CAPTION>
(Dollars in thousands) 1994 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
Provision for deferred taxes:
Federal..................................................... $ 1,614 $ 17,078 $ 32,641
State....................................................... 231 2,440 3,047
--------- --------- ---------
Provision for income taxes................................ 1,845 19,518 35,688
Tax effect of extraordinary items........................... -- (2,571) --
--------- --------- ---------
Applicable income taxes, after extraordinary items........ $ 1,845 $ 16,947 $ 35,688
--------- --------- ---------
--------- --------- ---------
</TABLE>
The reconciliation between income tax expense and the amount computed by
applying the statutory federal income tax rate of 35% for the three years ended
December 31, 1996 is as follows:
<TABLE>
<CAPTION>
(Dollars in thousands) 1994 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
Federal tax at statutory rate................................. $ 2,054 $ 17,078 $ 33,601
State income tax, net of federal benefit...................... 253 2,440 3,715
Effect of reversal of valuation allowance..................... (688) -- --
Other......................................................... 226 -- (1,628)
--------- --------- ---------
Provision for income taxes.................................. 1,845 19,518 35,688
Tax effect of extraordinary items............................. -- (2,571) --
--------- --------- ---------
Applicable income taxes, after extraordinary items.......... $ 1,845 $ 16,947 $ 35,688
--------- --------- ---------
--------- --------- ---------
Effective income tax rate................................... 40.0% 40.0% 37.2%
</TABLE>
56
<PAGE>
OLYMPIC FINANCIAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
12. INCOME TAXES (CONTINUED)
Deferred income taxes are provided for temporary differences between pretax
income for financial reporting purposes and taxable income. The tax-effected
temporary differences and carryforwards which comprise the significant
components of the Company's deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
(Dollars in thousands) 1995 1996
---------- ----------
<S> <C> <C>
Deferred Tax Assets:
Securitization expenses....................................... $ 4,245 $ 5,089
Other......................................................... -- 1,364
---------- ----------
Gross deferred tax assets..................................... 4,245 6,453
Deferred Tax Liabilities:
Gain on securitizations....................................... (41,025) (84,595)
Other......................................................... (411) (3,796)
---------- ----------
Gross deferred tax liabilities................................ (41,436) (88,391)
---------- ----------
Net temporary differences....................................... (37,191) (81,938)
Net operating loss carryforwards (expiring 2006-2011)........... 18,491 27,551
---------- ----------
Net deferred tax liability.................................... $ (18,700) $ (54,387)
---------- ----------
---------- ----------
</TABLE>
At December 31, 1996, the Company has net operating loss carryforwards for
federal income tax purposes of approximately $74.1 million which are available
to offset future federal taxable income and expire no earlier than 2006. No
valuation allowance was required as of December 31, 1996 or 1995 because it is
more likely than not that the deferred tax asset will be realized against future
taxable income. The timing of the realization of the benefits related to a
portion of the income tax net operating loss carryforwards is limited on an
annual basis under Section 382 of the Internal Revenue Code.
13. DERIVATIVE ACTIVITIES AND OFF-BALANCE SHEET RISK
During the three years ended December 31, 1996, the Company entered into
several hedging transactions to manage its gross interest rate spread on loans
held for sale. The Company agreed to sell forward US Treasuries that most
closely parallel the average life of its portfolio of loans held for sale.
Hedging gains and losses are recognized as a component of the gain on sale of
loans on the date such loans are sold. As of December 31, 1996 and 1995, the
Company had entered into the following agreements to sell forward Two Year
Treasuries:
<TABLE>
<CAPTION>
(Dollars in thousands) 1995 1996
------------ ------------
<S> <C> <C>
Notional amount outstanding..................................... $ 450,000 $ 700,000
Unrealized gains (losses) on outstanding hedging transactions... $ (574) $ 484
</TABLE>
The hedging transactions outstanding at December 31, 1996 are expected to
close in March 1997.
Hedging realized gains (losses) during the three year period ended December
31 1996 were:
<TABLE>
<CAPTION>
(Dollars in thousands) 1994 1995 1996
---------- ---------- ----------
<S> <C> <C> <C>
Realized gains (losses).......................................... $ 821 $ (11,719) $ (349)
</TABLE>
57
<PAGE>
OLYMPIC FINANCIAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. DERIVATIVE ACTIVITIES AND OFF-BALANCE SHEET RISK (CONTINUED)
The Company generally maintains a margin cash account of approximately 0.5%
of the amount hedged with its counterparty in hedging transactions. See
discussion of the Company's hedging policy in "Management's Discussion and
Analysis of Financial Condition and Results of Operation--Capital
Resources--Hedging and Pre-funding Strategy."
14. SUBSEQUENT EVENT
In January 1997, the Company offered to purchase all of its 13% Senior Term
Notes, due 2000, at a price of $1,117.50 for each $1,000 principal amount
thereof, together with accrued and unpaid interest up to the date of purchase.
In connection with the offer to purchase, the Company is soliciting consent from
the holders of the 13% Senior Term Notes to remove substantially all financial
covenants applicable to such notes and is paying each holder of 13% Senior Term
Notes $20.00 in cash for each $1,000 of principal amount thereof if the required
consents are received. The Company will not be obligated to purchase any 13%
Senior Term Notes unless (1) a majority of the 13% Senior Notes not owned by the
Company or any of its affiliates are properly tendered, (2) consents sufficient
to approve the amendments are obtained and (3) the Company has deposited funds
with the depository sufficient to purchase all Senior Term Notes tendered,
whether from proceeds of a proposed public offering of senior notes aggregating
not less than $170 million or from other new financing sources acceptable to the
Company. In connection therewith, the Company proposes to make a public offering
of up to $300 million principal amount of senior notes. Proceeds from this
transaction will be used to repurchase up to $145 million principal amount of
the Company's outstanding 13% Senior Term Notes pursuant to the tender offer, as
well as for general corporate purposes. The public offering, which is expected
to commence during the week of February 3, 1997, will be made by means of a
prospectus under the Company's shelf registration statement under the Securities
Act of 1933, as amended. The Company's offer to purchase the 13% Senior Term
Notes expires at 5:00 p.m. Eastern Standard Time, on February 20, 1997 unless
extended.
15. UNAUDITED SELECTED QUARTERLY DATA
FOURTH QUARTER RESULTS OF OPERATIONS
The Company purchased $740.9 million of automobile loans in the fourth
quarter of 1996 compared to $588.7 million for the same period in 1995, and
securitized $720.2 million in 1996 compared to $574.5 million in 1995. Net
income in the fourth quarter of 1996 was $17.4 million compared to $10.2 million
in 1995. Increased average loans held for sale and a widening in the Company's
net interest rate spread in the fourth quarter of 1996, resulted in an increase
in net interest margin to $17.5 million from $9.4 million in the same period a
year ago. Non-interest revenue increased to $1.9 million in the fourth quarter
of 1996 compared to $0.6 million for same period in 1995 primarily due to late
fees and insufficient fund charges. Operating expenses increased to $29.0
million in the fourth quarter of 1996 from $13.4 million in the same period of
1995 primarily due to increased salaries and benefits reflecting a twofold
increase in associates as well as increased servicing and collection costs
associated with an increased servicing portfolio and rise in volume of Classic
loans.
58
<PAGE>
OLYMPIC FINANCIAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
15. UNAUDITED SELECTED QUARTERLY DATA (CONTINUED)
<TABLE>
<CAPTION>
QUARTER ENDED
---------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31,
(Dollars in thousands) 1995 1995 1995 1995 1996
------------- ----------- --------------- --------------- -------------
<S> <C> <C> <C> <C> <C>
REVENUES:
Net interest margin.............................. $ 4,538 $ 7,630 $ 9,601 $ 9,423 $ 12,300
Gain on sale of auto loans....................... 9,057 14,303 17,587 21,235 25,229
Service fee income............................... 2,300 3,003 3,872 4,812 5,743
Other non-interest income........................ 159 238 405 569 724
------------- ----------- --------------- --------------- -------------
Total revenues................................. 16,054 25,174 31,465 36,039 43,996
EXPENSES:
Salaries and benefits............................ 3,945 4,627 5,146 6,361 9,097
General and administrative and other operating
expenses....................................... 4,495 4,973 6,097 7,083 10,919
Long-term debt and other interest expense........ 1,845 4,574 5,205 5,546 5,516
------------- ----------- --------------- --------------- -------------
Total expenses................................. 10,285 14,174 16,448 18,990 25,532
------------- ----------- --------------- --------------- -------------
Operating income before income tax and
extraordinary items............................ 5,769 11,000 15,017 17,049 18,464
Provision for income taxes....................... 2,307 4,384 6,007 6,820 7,386
------------- ----------- --------------- --------------- -------------
Income before extraordinary items................ 3,462 6,616 9,010 10,229 11,078
Extraordinary items.............................. (3,344) (512) -- -- --
------------- ----------- --------------- --------------- -------------
Net income....................................... $ 118 $ 6,104 $ 9,010 $ 10,229 $ 11,078
------------- ----------- --------------- --------------- -------------
------------- ----------- --------------- --------------- -------------
PRIMARY EARNINGS PER SHARE:
Net income per common share before extraordinary
items.......................................... $ 0.23 $ 0.29 $ 0.34 $ 0.39 $ 0.41
Extraordinary items per common share............. (0.27) (0.02) -- -- --
------------- ----------- --------------- --------------- -------------
Net income (loss) per common share............. $ (0.04) $ 0.27 $ 0.34 $ 0.39 $ 0.41
------------- ----------- --------------- --------------- -------------
------------- ----------- --------------- --------------- -------------
FULLY DILUTED EARNINGS PER SHARE:
Net income per share before extraordinary
items.......................................... $ 0.19 $ 0.25 $ 0.30 $ 0.34 $ 0.37
Extraordinary items per share.................... (0.18) (0.02) -- -- --
------------- ----------- --------------- --------------- -------------
Net income per share........................... $ 0.01 $ 0.23 $ 0.30 $ 0.34 $ 0.37
------------- ----------- --------------- --------------- -------------
------------- ----------- --------------- --------------- -------------
Weighted average common and common equivalent
shares outstanding:
Primary........................................ 12,505,372 20,656,566 24,528,119 24,547,195 25,741,672
Fully diluted.................................. 18,185,965 26,661,621 30,406,065 30,368,723 30,218,329
<CAPTION>
JUNE 30, SEPTEMBER 30, DECEMBER 31,
(Dollars in thousands) 1996 1996 1996
----------- --------------- ---------------
<S> <C> <C> <C>
REVENUES:
Net interest margin.............................. $ 15,085 $ 18,079 $ 17,499
Gain on sale of auto loans....................... 25,452 30,113 34,979
Service fee income............................... 6,557 7,474 8,510
Other non-interest income........................ 2,449 1,406 1,896
----------- --------------- ---------------
Total revenues................................. 49,543 57,072 62,884
EXPENSES:
Salaries and benefits............................ 8,813 10,286 12,555
General and administrative and other operating
expenses....................................... 11,124 13,107 16,397
Long-term debt and other interest expense........ 6,433 6,660 6,584
----------- --------------- ---------------
Total expenses................................. 26,370 30,053 35,536
----------- --------------- ---------------
Operating income before income tax and
extraordinary items............................ 23,173 27,019 27,348
Provision for income taxes....................... 8,458 9,862 9,982
----------- --------------- ---------------
Income before extraordinary items................ 14,715 17,157 17,366
Extraordinary items.............................. -- -- --
----------- --------------- ---------------
Net income....................................... $ 14,715 $ 17,157 $ 17,366
----------- --------------- ---------------
----------- --------------- ---------------
PRIMARY EARNINGS PER SHARE:
Net income per common share before extraordinary
items.......................................... $ 0.43 $ 0.47 $ 0.46
Extraordinary items per common share............. -- -- --
----------- --------------- ---------------
Net income (loss) per common share............. $ 0.43 $ 0.47 $ 0.46
----------- --------------- ---------------
----------- --------------- ---------------
FULLY DILUTED EARNINGS PER SHARE:
Net income per share before extraordinary
items.......................................... $ 0.40 $ 0.44 $ 0.45
Extraordinary items per share.................... -- -- --
----------- --------------- ---------------
Net income per share........................... $ 0.40 $ 0.44 $ 0.45
----------- --------------- ---------------
----------- --------------- ---------------
Weighted average common and common equivalent
shares outstanding:
Primary........................................ 33,508,215 35,896,149 37,873,845
Fully diluted.................................. 37,205,287 39,423,446 38,935,961
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31,
(Dollars in thousands) 1995 1995 1995 1995 1996
------------- ----------- --------------- --------------- -------------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents........................ $ 5,654 $ 14,839 $ 9,169 $ 1,340 $ 22,552
Due from securitization trust.................... 135,013 75,018 50,398 -- 115,000
Auto loans held for sale......................... 500 61,801 108,808 118,556 82,857
Finance income receivable........................ 86,848 118,113 150,538 186,001 232,007
Restricted cash in spread accounts............... 28,326 36,292 48,160 63,580 79,779
Other assets..................................... 12,647 16,971 23,663 28,317 33,542
------------- ----------- --------------- --------------- -------------
Total assets................................... $ 268,988 $ 323,034 $ 390,736 $ 397,794 $ 565,737
------------- ----------- --------------- --------------- -------------
------------- ----------- --------------- --------------- -------------
LIABILITIES & EQUITY
Amounts due under warehouse facilities........... $ 130,816 $ 226 $ 41,281 $ 26,530 $ 127,224
Senior notes..................................... 50,000 145,000 145,000 145,000 145,000
Subordinated notes............................... 17,321 4,706 9,191 13,005 46,595
Capital lease obligations........................ 1,737 1,898 2,822 3,924 6,635
Deferred income taxes............................ 1,924 5,966 11,880 18,700 26,085
Accounts payable and accrued liabilities......... 6,430 9,358 15,982 9,822 21,633
Shareholders' equity............................. 60,760 155,880 164,580 180,813 192,565
------------- ----------- --------------- --------------- -------------
Total liabilities and equity................... $ 268,988 $ 323,034 $ 390,736 $ 397,794 $ 565,737
------------- ----------- --------------- --------------- -------------
------------- ----------- --------------- --------------- -------------
<CAPTION>
JUNE 30, SEPTEMBER 30, DECEMBER 31,
(Dollars in thousands) 1996 1996 1996
----------- --------------- ---------------
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents........................ $ 22,575 $ 3,593 $ 16,057
Due from securitization trust.................... 151,635 188,373 177,076
Auto loans held for sale......................... 52,300 18,925 36,285
Finance income receivable........................ 264,466 307,953 362,916
Restricted cash in spread accounts............... 101,948 122,071 142,977
Other assets..................................... 37,735 42,910 42,919
----------- --------------- ---------------
Total assets................................... $ 630,659 $ 683,825 $ 778,230
----------- --------------- ---------------
----------- --------------- ---------------
LIABILITIES & EQUITY
Amounts due under warehouse facilities........... $ 17,837 $ 38,486 $ 111,140
Senior notes..................................... 145,000 145,000 145,000
Subordinated notes............................... 52,288 53,563 53,689
Capital lease obligations........................ 7,446 8,049 7,729
Deferred income taxes............................ 34,543 44,405 54,387
Accounts payable and accrued liabilities......... 16,748 20,059 13,192
Shareholders' equity............................. 356,797 374,263 393,093
----------- --------------- ---------------
Total liabilities and equity................... $ 630,659 $ 683,825 $ 778,230
----------- --------------- ---------------
----------- --------------- ---------------
</TABLE>
59
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information regarding the directors of the Company is incorporated herein by
reference to the descriptions set forth under the caption "Election of
Directors" in the Proxy Statement for the Annual Meeting of Shareholders to be
held April 28, 1997 (the "1997 Proxy Statement"). Information regarding
executive officers of the Company is incorporated herein by reference to Item 1
of this Form 10-K under the caption "Executive Officers" on page 16.
ITEM 11. EXECUTIVE COMPENSATION
Information regarding executive compensation is incorporated herein by
reference to the descriptions set forth under the caption "Executive
Compensation" in the 1997 Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information regarding security ownership of certain beneficial owners and
management of the Company is incorporated herein by reference to the information
set forth under the caption "Security Ownership of Certain Beneficial Owners and
Management" in the 1997 Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information regarding certain relationships and related transactions with
the Company is incorporated herein by reference to the information set forth
under the caption "Certain Transactions" in the 1997 Proxy Statement.
PART IV.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Documents filed as a part of this report.
(1) Financial Statements of Olympic Financial Ltd.:
Report of Independent Auditors
Consolidated Balance Sheets As of December 31, 1996 and 1995
Consolidated Statements of Income for the years ended December 31, 1996,
1995 and 1994
Consolidated Statements of Changes in Shareholders' Equity for the years
ended December 31, 1996, 1995 and 1994
Consolidated Statements of Cash Flows for the years ended December 31,
1996, 1995 and 1994
Notes to Consolidated Financial Statements
(2) Financial Statement Schedules
Financial statement schedules have been omitted because they are not
applicable or because the required information is contained in the
financial statements or notes thereto.
60
<PAGE>
(3) Exhibits
<TABLE>
<C> <S>
3.1 Restated Articles of Incorporation of the Registrant, as amended
(incorporated by reference to Exhibit No. 4.1 to Registrant's Registration
Statement on Form S-2, File No. 33-90108).
3.2 Restated Bylaws of the Registrant, as amended (filed herewith).
4.1 Rights Agreement dated as of November 1, 1996, between the Registrant and
Norwest Bank Minnesota, National Association, as Rights Agent
(incorporated by reference to Exhibit 1 to the Registrant's Registration
Statement on Form 8-A filed November 7, 1996).
4.2 First Amendment and Restatement, dated as of April 28, 1995, of Indenture,
dated July 1, 1994, between the Registrant and Norwest Bank Minnesota,
National Association, as Trustee, relating to the Registrant's unsecured
Extendible Notes and Fixed-Term Notes, including forms of Notes
(incorporated by reference to Exhibit No. 4.8.1 to Post-Effective
Amendment No. 2 on Form S-3 to Registrant's Registration Statement on Form
S-1, File No. 33-81512).
4.3 Indenture, dated as of April 28, 1995, between the Registrant and Norwest
Bank Minnesota, National Association, as Trustee, relating to the
Registrant's 13% Senior Notes due 2000 (incorporated by reference to
Exhibit 4.5 to the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1995).
4.4 First Supplemental Indenture, dated as of August 11, 1995, to Indenture,
dated as of April 28, 1995, between the Registrant and Norwest Bank
Minnesota, National Association, as Trustee, relating to the Registrant's
13% Senior Notes due 2000 (incorporated by reference to Exhibit 4.6 to the
Registrant's Annual Report on Form 10-K for the year ended December 31,
1995).
4.5 Indenture dated as of March 15, 1996, between the Registrant and Norwest
Bank Minnesota, National Association, as Trustee, relating to the
Registrant's Subordinated Notes, Series 1996-A due 2001 (filed herewith).
4.6 First Supplemental Indenture, dated as of March 15, 1996, to Indenture,
dated as of March 15, 1996, between the Registrant and Norwest Bank
Minnesota, National Association, as Trustee, relating to the Registrant's
Subordinated Notes, Series 1996-A due 2001 (filed herewith).
10.1 Securities Purchase Agreement, dated May 29, 1992, between the Registrant
and the Investors named therein, as amended by the First Amendment thereto
dated August 11, 1992, the Second Amendment thereto dated October 19,
1992, the Third Amendment thereto dated September 14, 1993, the Fourth
Amendment thereto dated November 22, 1993, the Fifth Amendment thereto
dated August 29, 1992, the Sixth Amendment thereto dated September 8,
1994, the Seventh Amendment thereto dated December 28, 1994, and Eighth
Amendment thereto, dated March 6, 1995 (incorporated by reference to
Exhibit 10.3 to Registrant's Registration Statement on Form S-2, File No.
33-90108).
10.2 Ninth Amendment to the Securities Purchase Agreement, dated as of March 31,
1996, by and among the Registrant and each of the investors named on the
Investor Schedule attached thereto (filed herewith).
10.3 Credit Agreement dated as of July 11, 1996 among the Registrant, various
financial institutions (the "Lenders"), Bank of America National Trust and
Savings Association, as Agent for the Lenders and First Bank National
Association, as Co-Manager (filed herewith).
</TABLE>
61
<PAGE>
<TABLE>
<C> <S>
10.4 First Amendment and Waiver to Credit Agreement dated as of September 18,
1996 among the Registrant, the Lenders and Bank of America National Trust
and Savings Association, as Agent for the Lenders (filed herewith).
10.5 Trust Agreement dated as of December 28, 1995 between Olympic Receivables
Finance Corp. II ("ORFC II") and Wilmington Trust Company, as owner
trustee (the "Owner Trustee") (filed herewith).
10.6 Amendment dated as of June 12, 1996 to Trust Agreement dated as of December
28, 1995 between ORFC II and the Owner Trustee (filed herewith).
10.7 Indenture dated as of December 28, 1995 between Olympic Automobile
Receivables Warehouse Trust (the "Warehouse Trust") and Norwest Bank
Minnesota, National Association, as indenture trustee (in such capacity,
the "Indenture Trustee") (filed herewith).
10.8 Supplemental Indenture dated as of June 12, 1996 to Indenture dated as of
December 28, 1995 between the Warehouse Trust, the Indenture Trustee and
Morgan Guaranty Trust Company of New York, as successor to J.P. Morgan
Delaware, as administrative agent (in such capacity, the "Administrative
Agent") for Delaware Funding Corporation ("DFC") (filed herewith).
10.9 Receivables Purchase Agreement and Assignment dated as of December 28, 1995
between ORFC II, as Purchaser, and the Registrant, as Seller (filed
herewith).
10.10 Amendment dated as of June 12, 1996 to Receivables Purchase Agreement and
Assignment dated as of December 28, 1995 between ORFC II and the
Registration (filed herewith).
10.11 Amendment No. 2 dated as of September 30, 1996 to Receivables Purchase
Agreement and Assignment dated as of December 28, 1995 between ORFC II and
the Registrant (filed herewith).
10.12 Amendment No. 3 dated as of January 17, 1997 to Receivables Purchase
Agreement and Assignment dated as of December 28, 1995 between ORFC II and
the Registrant (filed herewith).
10.13 Sale and Servicing Agreement dated as of December 28, 1995 among the
Warehouse Trust, ORFC II, the Registrant, in its individual capacity and
as Servicer, the Norwest Bank Minnesota, National Association, as Backup
Servicer (in such capacity, the "Backup Servicer") (filed herewith).
10.14 Amendment dated as of June 12, 1996 to Sale and Servicing Agreement dated as
of December 28, 1995 among the Warehouse Trust, ORFC II, the Registrant
and the Backup Servicer (filed herewith).
10.15 Amendment No. 2 dated as of September 30, 1996 to Sale and Servicing
Agreement dated as of December 28, 1995 among the Warehouse Trust, ORFC
II, the Registrant and the Backup Servicer (filed herewith).
10.16 Amendment No. 3 dated as of January 17, 1997 to Sale and Servicing Agreement
dated as of December 28, 1995 among the Warehouse Trust, ORFC II, the
Registrant and the Backup Servicer (filed herewith).
10.17 Note Purchase Agreement dated as of December 28, 1995 among the Warehouse
Trust, the Registrant, as Servicer and in its individual capacity, DFC and
the Administrative Agent (incorporated by reference to Exhibit 10.11 to
the Registrant's Annual Report on Form 10-K for the year ended December
31, 1995).
</TABLE>
62
<PAGE>
<TABLE>
<C> <S>
10.18 Agreement to Increase Purchase Commitment and Consent dated as of June 12,
1996 relating to Note Purchase Agreement among the Warehouse Trust, the
Registrant, as Servicer and in its individual capacity, DFC and the
Administrative Agent (filed herewith).
10.19 Agreement to Extend Purchase Commitment Expiration Date dated as of December
20, 1996 relating to Note Purchase Agreement among the Warehouse Trust,
the Registrant, as Servicer and in its individual capacity, DFC and the
Administrative Agent (filed herewith).
10.20 First Amendment and Consent dated as of January 17, 1997 relating to Note
Purchase Agreement among the Warehouse Trust, the Registrant, as Servicer
and in its individual capacity, DFC and the Administrative Agent (filed
herewith).
10.21 Certificate Purchase Agreement dated as of December 28, 1995 among the
Warehouse Trust, the Registrant, as Servicer and in its individual
capacity, the Note Purchasers party thereto (the "Note Purchasers") and
Morgan Guaranty Trust Company of New York as successor to J.P. Morgan
Delaware, as Agent for the Note Purchasers (in such capacity, the
"Purchasers' Agent") (incorporated by reference to Exhibit 10.12 to the
Registrant's Annual Report on Form 10-K for the year ended December 31,
1995).
10.22 Agreement to Increase Aggregate Purchase Commitment and Consent relating to
Certificate Purchase Agreement among the Warehouse Trust, the Registrant,
as Servicer and in its individual capacity, the Note Purchasers and the
Purchasers' Agent (filed herewith).
10.23 First Amendment and Consent dated as of December 20, 1996 relating to
Certificate Purchase Agreement among the Warehouse Trust, the Registrant,
as Servicer and in its individual capacity, the Note Purchasers and the
Purchasers' Agent (filed herewith).
10.24 Second Amendment and Consent dated as of January 17, 1997 relating to
Certificate Purchase Agreement among the Warehouse Trust, the Registrant,
as Servicer and in its individual capacity, the Note Purchasers and the
Purchasers' Agent (filed herewith).
10.25 Asset Purchase Agreement dated as of December 28, 1995 among the
Administrative Agent and each of the "APA Purchasers" party thereto (filed
herewith).
10.26 First Amendment to Asset Purchase Agreement dated as of June 12, 1996 among
the Administrative Agent and the APA Purchasers (filed herewith).
10.27 Second Amendment and Consent to Asset Purchase Agreement dated as of
December 20, 1996 among the Administrative Agent and the APA Purchasers
(filed herewith).
10.28 Third Amendment and Consent relating to Asset Purchase Agreement dated as of
January 17, 1997 among the Administrative Agent and the Asset Purchasers
(filed herewith).
10.29 Receivables Purchase Agreement and Assignment between Olympic Receivables
Finance Corp. ("ORFC") and the Registrant (filed herewith).
10.30 Repurchase Agreement dated as of December 3, 1996 among Arcadia Receivables
Conduit Corp. ("ARCC") and ORFC (filed herewith).
</TABLE>
63
<PAGE>
<TABLE>
<C> <S>
10.31 Servicing Agreement dated as of December 3, 1996 among ARCC, ORFC, the
Registrant, in its individual capacity and as Servicer, Bank of America
National Trust and Savings Association, as agent, and Norwest Bank
Minnesota, National Association, as backup servicer, collateral agent and
indenture trustee (filed herewith).
10.32 Third Amended and Restated Stock Pledge Agreement dated as of December 3,
1996 among the Registrant and Norwest Bank Minnesota, National
Association, as collateral agent (filed herewith).
10.33 Security Agreement dated as of December 3, 1996 among the Registrant, ORFC,
ARCC, Financial Security Assurance Inc. ("FSA"), Bank of America National
Trust and Savings Association and Norwest Bank Minnesota, National
Association, as indenture trustee and collateral agent (filed herewith).
10.34 Indenture dated as of December 3, 1996 between ARCC and Norwest Bank
Minnesota, National Association, as trustee and collateral agent (filed
herewith).
10.35 Insurance and Indemnity Agreement dated as of December 3, 1996 among FSA,
the Registrant, ORFC and ARCC (filed herewith).
10.36 US $300,000,000 Floating Rate FSA Insured Automobile Receivables-backed Note
Purchase Agreement dated as of December 3, 1996 among ARCC, Receivables
Capital Corporation, and Bank of America National Trust and Savings
Association, as administrator of Receivables Capital Corporation and as
agent for the liquidity providers (filed herewith).
10.37 Spread Account Agreement dated as of March 25, 1993, as amended and restated
as of December 3, 1996, among the Registrant, ORFC, FSA and Norwest Bank
Minnesota, National Association, as trustee and collateral agent (the
"Spread Account Agreement") (filed herewith).
10.38 Warehousing Series Supplement dated as of December 3, 1996 to Spread Account
Agreement dated as of March 25, 1993, as amended and restated as of
December 3, 1996, among the Registrant, ORFC, FSA and Norwest Bank
Minnesota, National Association, as trustee and collateral agent (filed
herewith).
10.39 Series 1996-C Supplement, dated as of September 12, 1996, to the Spread
Account Agreement (incorporated by reference to Exhibit 10.1 to the
Registrant's Quarterly Report on Form 10-Q for the quarter ended September
30, 1996).
10.40 Amendment, dated as of September 12, 1996, among the Registrant, ORFC, FSA
and Norwest Bank Minnesota, National Association, to the Series 1996-B
Supplement, Series 1996-A Supplement, Series 1995-E Supplement, Series
1995-D Supplement, Series 1995-C Supplement, Series 1995-B Supplement,
Series 1995-A Supplement, Series 1994-B Supplement, Series 1994-A
Supplement, Series 1993-C Supplement, and Series 1993-B Supplement to the
Spread Account Agreement (incorporated by reference to Exhibit 10.3 to the
Registrant's Quarterly Report on Form 10-Q for the quarter ended September
30, 1996).
10.41 Series 1996-D Supplement, dated as of December 12, 1996, to Spread Account
Agreement (filed herewith).
10.42 Amendment, dated as of January 14, 1997, among the Registrant, ORFC, FSA and
Norwest Bank Minnesota, Natioanl Association, to the Series 1994-B
Supplement, the Series 1994-A Supplement, the Series 1993-D Supplement,
the Series 1993-C Supplement and the Series 1993-B Supplement (filed
herewith).
</TABLE>
64
<PAGE>
<TABLE>
<C> <S>
10.43 Insurance and Indemnity Agreement, dated as of March 25, 1993, among FSA,
ORFC and the Registrant (the "Series 1993-A Insurance and Indemnity
Agreement") (incorporated by reference to Exhibit 10.21 to Registrant's
Registration Statement on Form S-2, File No. 33-90108).
10.44 Insurance and Indemnity Agreement, dated as of June 11, 1993, among FSA,
ORFC and the Registrant (the "Series 1993-B Insurance and Indemnity
Agreement") (incorporated by reference to Exhibit 10.22 to Registrant's
Registration Statement on Form S-2, File No. 33-90108).
10.45 Insurance and Indemnity Agreement, dated as of August 17, 1993, among FSA,
Olympic Automobile Receivables Trust, 1993-C, Olympic First GP Inc.,
Olympic Second GP Inc., ORFC and the Registrant (the "Series 1993-C
Insurance and Indemnity Agreement") (incorporated by reference to Exhibit
10.23 to Registrant's Registration Statement on Form S-2, File No.
33-90108).
10.46 Insurance and Indemnity Agreement, dated as of December 2, 1993, among FSA,
Olympic Automobile Receivables Trust, 1993-D, Olympic First GP Inc.,
Olympic Second GP Inc., ORFC and the Registrant (the "Series 1993-D
Insurance and Indemnity Agreement") (incorporated by reference to Exhibit
10.24 to Registrant's Registration Statement on Form S-2, File No.
33-90108).
10.47 Insurance and Indemnity Agreement, dated as of April 5, 1994, among FSA,
Olympic Automobile Receivables Trust, 1994-A, Olympic First GP Inc.,
Olympic Second GP Inc., ORFC and the Registrant (the "Series 1994-A
Insurance and Indemnity Agreement") (incorporated by reference to Exhibit
10.25 to Registrant's Registration Statement on Form S-2, File No.
33-90108).
10.48 Insurance and Indemnity Agreement, dated as of September 23, 1994, among
FSA, Olympic Automobile Receivables Trust, 1994-B, Olympic First GP Inc.,
Olympic Second GP Inc., ORFC and the Registrant (the "Series 1994-B
Insurance and Indemnity Agreement") (incorporated by reference to Exhibit
10.26 to Registrant's Registration Statement on Form S-2, File No.
33-90108).
10.49 Insurance and Indemnity Agreement, dated as of February 9, 1995, among FSA,
ORFC and the Registrant (the "Series 1995-A Insurance and Indemnity
Agreement") (incorporated by reference to Exhibit 10.27 to Registrant's
Registration Statement on Form S-2, File No. 33-90108).
10.50 Insurance and Indemnity Agreement, dated as of March 15, 1995, among FSA,
Olympic Automobile Receivables Trust, 1995-B, Olympic First GP Inc.,
Olympic Second GP Inc., ORFC and the Registrant (the "Series 1995-B
Insurance and Indemnity Agreement") (incorporated by reference to Exhibit
10.24 to the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1995).
10.51 Insurance and Indemnity Agreement, dated as of June 15, 1995, among FSA,
Olympic Automobile Receivables Trust, 1995-C, Olympic First GP Inc.,
Olympic Second GP Inc., ORFC and the Registrant (the "Series 1995-C
Insurance and Indemnity Agreement") (incorporated by reference to Exhibit
10.25 to the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1995).
10.52 Insurance and Indemnity Agreement, dated as of September 21, 1995, among
FSA, Olympic Automobile Receivables Trust, 1995-D, Olympic First GP Inc.,
Olympic Second GP Inc., ORFC and the Registrant (the "Series 1995-D
Insurance and Indemnity Agreement") (incorporated by reference to Exhibit
10.27 to the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1995).
</TABLE>
65
<PAGE>
<TABLE>
<C> <S>
10.53 Insurance and Indemnity Agreement, dated as of December 6, 1995, among FSA,
Olympic Automobile Receivables Trust, 1995-E, Olympic First GP Inc.,
Olympic Second GP Inc., ORFC and the Registrant (the "Series 1995-E
Insurance and Indemnity Agreement") (incorporated by reference to Exhibit
10.28 to the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1995).
10.54 Insurance and Indemnity Agreement, dated as of March 14, 1996, among FSA,
Olympic Automobile Receivables Trust, 1996-A, Olympic First GP Inc.,
Olympic Second GP Inc., ORFC and the Registrant (the "Series 1996-A
Insurance and Indemnity Agreement") (incorporated by reference to Exhibit
10.2 to the Registrant's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1996).
10.55 Insurance and Indemnity Agreement, dated as of June 14, 1996, among FSA,
Olympic Automobile Receivables Trust, 1996-B, Olympic First GP Inc.,
Olympic Second GP Inc., ORFC and the Registrant (the "Series 1996-B
Insurance and Indemnity Agreement") (incorporated by reference to Exhibit
10.2 to the Registrant's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1996).
10.56 Insurance and Indemnity Agreement, dated as of September 12, 1996, among
FSA, Olympic Automobile Receivables Trust, 1996-C, Olympic First GP Inc.,
Olympic Second GP Inc., ORFC and the Registrant (the "Series 1996-C
Insurance and Indemnity Agreement") (incorporated by reference to Exhibit
10.2 to the Registrant's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1996).
10.57 Amendment, dated as of September 12, 1996, to the Series 1996-B Insurance
and Indemnity Agreement, the Series 1996-A Insurance and Indemnity
Agreement, the Series 1995-E Insurance and Indemnity Agreement, the Series
1995-D Insurance and Indemnity Agreement, the Series 1995-C Insurance and
Indemnity Agreement, the Series 1995-B Insurance and Indemnity Agreement,
the Series 1995-A Insurance and Indemnity Agreement, the Series 1994-B
Insurance and Indemnity Agreement, the Series 1994-A Insurance and
Indemnity Agreement, the Series 1993-D Insurance and Indemnity Agreement,
the Series 1993-C Insurance and Indemnity Agreement, the Series 1993-B
Insurance and Indemnity Agreement and the Series 1993-A Insurance and
Indemnity Agreement (filed herewith).
10.58 Insurance and Indemnity Agreement, dated as of December 12, 1996, among FSA,
Olympic Automobile Receivables Trust, 1996-D, Olympic First GP Inc.,
Olympic Second GP Inc., ORFC and the Registrant (the "Series 1996-D
Insurance and Indemnity Agreement") (filed herewith).
10.59 Employment Agreement, dated as of January 6, 1997, between the Registrant
and Richard A. Greenawalt (filed herewith).
10.60 Employment Agreement, dated August 1, 1991, between the Registrant and
Jeffrey C. Mack (incorporated by reference to Exhibit No. 10.27 to
Registrant's Registration Statement on Form S-18, File No. 33-43270C).
10.61 Extension and Amendment of Employment Agreement, dated July 1, 1993, between
the Registrant and Jeffrey C. Mack (incorporated by reference to Exhibit
10.106 to Registrant's Annual Report on Form 10-K for the year ended June
30, 1994).
10.62 Extension and Amendment of Employment Agreement, dated July 1, 1994, by and
between the Registrant and Jeffrey C. Mack (incorporated by reference to
Exhibit No. 10.34 to Registrant's Registration Statement on Form S-4, File
No. 33-81588).
</TABLE>
66
<PAGE>
<TABLE>
<C> <S>
10.63 Extension and Amendment of Employment Agreement, dated as of July 31, 1995,
by and between the Registrant and Jeffrey C. Mack (incorporated by
reference to Exhibit 10.33 to the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1995).
10.64 Amendment of Employment Agreement, dated as of December 20, 1995, by and
between the Registrant and Jeffrey C. Mack (filed herewith).
10.65 Jeffrey C. Mack Severance Package, dated August 26, 1996 (filed herewith).
10.66 Addendum, dated November 11, 1996, to Agreement between the Registrant and
Jeffrey C. Mack (filed herewith).
10.67 Employment Agreement, dated April 1, 1991, between the Registrant and Scott
H. Anderson and Amendment, dated September 3, 1991 (incorporated by
reference to Exhibit No. 10.29 to Registrant's Registration Statement on
Form S-18, File No. 33-43270C).
10.68 Extension and Amendment of Employment Agreement, dated July 1, 1993, between
the Registrant and Scott H. Anderson (incorporated by reference to Exhibit
No. 10.107 to Registrant's Annual Report on Form 10-K for the year ended
June 30, 1992).
10.69 Extension and Amendment of Employment Agreement, dated July 1, 1994, by and
between Scott H. Anderson and the Registrant (incorporated by reference to
Exhibit No. 10.36 to Registrant's Registration Statement on Form S-4, File
No. 33-81588).
10.70 Extension and Amendment of Employment Agreement, dated as of July 31, 1995,
between the Registrant and Scott H. Anderson (incorporated by reference to
Exhibit 10.37 to the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1995).
10.71 Amendment of Employment Agreement, dated as of December 20, 1995, by and
between the Registrant and Scott H. Anderson (filed herewith).
10.72 Employment Retention Agreement, dated as of November 7, 1996, between the
Registrant and Scott H. Anderson (filed herewith).
10.73 Employment Agreement, dated February 1, 1994, between the Registrant and
John A. Witham (incorporated by reference to Exhibit No. 10.111 to the
Registrant's Registration Statement on Form S-1, File No. 33-81512).
10.74 Extension and Amendment of Employment Agreement, dated as of December 20,
1995, by and between the Registrant and John A. Witham (incorporated by
reference to Exhibit 10.39 to the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1995).
10.75 Employment Retention Agreement, dated as of November 7, 1996, between the
Registrant and John A. Witham (filed herewith).
10.76 Employment Agreement, dated December 5, 1994, between the Registrant and A.
Mark Berlin, Jr. (incorporated by reference to Exhibit 10.35 to
Registrant's Registration Statement on Form S-2, File No. 33-90108).
10.77 Extension and Amendment of Employment Agreement, dated as of December 20,
1995, by and between the Registrant and A. Mark Berlin, Jr. (incorporated
by reference to Exhibit 10.41 to the Registrant's Annual Report on Form
10-K for the year ended December 31, 1995).
10.78 Employment Retention Agreement, dated as of November 7, 1996, between the
Registrant and A. Mark Berlin, Jr. (filed herewith).
</TABLE>
67
<PAGE>
<TABLE>
<C> <S>
10.79 Employment and Non-Compete Agreement, dated August 29, 1994, by and between
the Registrant and James D. Atkinson (incorporated by reference to Exhibit
10.43 to the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1995).
10.80 Extension and Amendment of Employment Agreement, dated as of July 31, 1995,
by and between the Registrant and James D. Atkinson III (incorporated by
reference to Exhibit 10.44 to the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1995).
10.81 Amendment of Employment Agreement, dated as of December 20, 1995, by and
between the Registrant and James D. Atkinson III (filed herewith).
10.82 Employment Retention Agreement, dated as of November 7, 1996, between the
Registrant and James D. Atkinson III (filed herewith).
10.83 Amendment of Employment Retention Agreement, dated as of December 31, 1996,
by and between the Registrant and James D. Atkinson III (filed herewith).
10.84 Employment and Non-Compete Agreement, dated September 21, 1994, by and
between the Registrant and Robert A. Barbee (incorporated by reference to
Exhibit 10.49 to the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1995).
10.85 Extension and Amendment of Employment Agreement, dated as of November 1,
1995, by and between the Registrant and Robert A. Barbee (incorporated by
reference to Exhibit 10.50 to the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1995).
10.86 Amendment of Employment Agreement, dated as of December 20, 1995, by and
between the Registrant and Robert A. Barbee (filed herewith).
10.87 Employment Retention Agreement, dated as of November 7, 1996, between the
Registrant and Robert A. Barbee (filed herewith).
10.88 Consulting Agreement, dated December 19, 1994, between the Registrant and
Warren Kantor (incorporated by reference to Exhibit 10.36 to Registrant's
Registration Statement on Form S-2, File No. 33-90108).
10.89 Consulting Agreement, dated as of January 1, 1996 between the Registrant and
Warren Kantor (filed herewith).
10.90 Letter Agreement, dated August 26, 1996, between the Registrant and Warren
Kantor (filed herewith).
10.91 Letter Agreement, dated December 18, 1996, between the Registrant and Warren
Kantor (filed herewith).
10.92 Consulting Agreement, dated as of January 1, 1997, by and between the
Registrant and Warren Kantor (filed herewith).
10.93 Non-Statutory Stock Option Agreement, dated December 19, 1994, between the
Registrant and Warren Kantor (incorporated by reference to Exhibit 10.37
to Registrant's Registration Statement on Form S-2, File No. 33-90108).
10.94 Non-Statutory Stock Option Agreement, dated January 1, 1996, by and between
the Registrant and Warren Kantor (incorporated by reference to Exhibit
10.60 to the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1995).
10.95 Non-Statutory Stock Option Agreement, dated August 26, 1996, between the
Registrant and Warren Kantor (filed herewith).
</TABLE>
68
<PAGE>
<TABLE>
<C> <S>
10.96 Non-Statutory Stock Option Agreement, dated December 18, 1996, between the
Registrant and Warren Kantor (filed herewith).
10.97 Non-Statutory Stock Option Agreement, dated January 1, 1997, between the
Registrant and Warren Kantor (filed herewith).
10.98 Olympic Financial Ltd. 1990 Stock Option Plan, as amended to date (filed
herewith).
10.99 1992 Director Option Plan, as amended to date (filed herewith).
10.100 Olympic Financial Ltd. Stock Purchase Plan (incorporated by reference to
Exhibit No. 10.90 to Registrant's Annual Report on Form 10-K for the year
ended June 30, 1992).
10.101 1994-1997 Restricted Stock Election Plan (incorporated by reference to
Exhibit 10.41 to Registrant's Registration Statement on Form S-2, File No.
33-90108).
10.102 1998-2000 Restricted Stock Election Plan, as amended to date (filed
herewith).
10.103 Warrant to Purchase Common Stock, dated August 11, 1992, between the
Registrant and Lincoln National Life Insurance Company (incorporated by
reference to Exhibit No. 10.85 to Registrant's Annual Report on Form 10-K
for the year ended June 30, 1992).
10.104 Warrant to Purchase Common Stock, dated August 11, 1992, between the
Registrant and Security Connecticut Life Insurance Company (incorporated
by reference to Exhibit No. 10.86 to Registrant's Annual Report on Form
10-K for the year ended June 30, 1992).
10.105 Warrant to Purchase Common Stock, dated June 24, 1992, between the
Registrant and NAP & Company (incorporated by reference to Exhibit No.
10.87 to Registrant's Annual Report on Form 10-K for the year ended June
30, 1992).
10.106 Warrant to Purchase Common Stock, dated June 24, 1992, between the
Registrant and Fuelship & Company (incorporated by reference to Exhibit
No. 10.88 to Registrant's Annual Report on Form 10-K for the year ended
June 30, 1992).
10.107 Warrant to Purchase Common Stock, dated June 24, 1992, between the
Registrant and BCI Growth L.P. (incorporated by reference to Exhibit No.
10.89 to Registrant's Annual Report on Form 10-K for the year ended June
30, 1992).
10.108 Warrant to Purchase Common Stock, dated December 17, 1993, between the
Registrant and John G. Kinnard and Company, Incorporated (incorporated by
reference to Exhibit 10.47 to Registrant's Registration Statement on Form
S-2, File No. 33-90108).
10.109 Warrant to Purchase Common Stock, dated September 1, 1994, between the
Registrant and Cede & Co. (incorporated by reference to Exhibit 10.48 to
Registrant's Registration Statement on Form S-2, File No. 33-90108).
10.110 Warrant to Purchase Common Stock, dated September 1, 1994, between the
Registrant and Booth & Co. (incorporated by reference to Exhibit 10.49 to
Registrant's Registration Statement on Form S-2, File No. 33-90108).
10.111 Warrant to Purchase Common Stock, dated September 1, 1994, between the
Registrant and Sun Life Insurance Company of America (incorporated by
reference to Exhibit 10.50 to Registrant's Registration Statement on Form
S-2, File No. 33-90108).
11.1 Computation of Earnings Per Share (filed herewith).
12.1 Computation of Ratio of Earnings to Fixed Charges (filed herewith).
12.2 Computation of Ratio of Earnings to Fixed Charges and Preferred Stock
Dividends (filed herewith).
</TABLE>
69
<PAGE>
<TABLE>
<C> <S>
21.1 Subsidiaries of the Registrant (filed herewith).
23.1 Consent of Ernst & Young LLP (filed herewith).
27.1 Financial Data Schedule (filed herewith).
99.1 Cautionary Statement (filed herewith).
</TABLE>
- ------------------------
(b) On October 7, 1996, the Company filed a current report on Form 8-K, dated
September 30, 1996, announcing that the Company was amending and restating
Section 4.1 of its by-laws defining the officers of the corporation.
On October 17, 1996, the Company filed a current report on Form 8-K, dated
October 16, 1996, announcing that the party which indicated interest to buy
the Company as announced on August 26, 1996 and certain other interested
parties have elected not to make a definitive offer.
On October 10, 1996, the Company filed two current reports on Form 8-K, both
dated August 5, 1996, reporting certain information with regard to the
Company's performance as servicer of Olympic Automobile Receivables Trust,
1996-B and Olympic Automobiles Receivables Trust, 1996-A, respectively.
On October 23, 1996, the Company filed a current report on Form 8-K, dated
October 11, 1996, announcing that Richard A. Zona had resigned as a member
of the Company's Board of Directors.
On November 1, 1996, the Company filed a current report on Form 8-K, dated
October 31, 1996, announcing that the Company had called for redemption on
December 2, 1996 of all of its outstanding 8% Cumulative Convertible
Exchangeable Preferred Stock, subject to the right of the holders of shares
of preferred stock to convert such shares into shares of Common Stock prior
to the close of business on December 2, 1996.
On November 7, 1996, the Company filed a current report on Form 8-K, dated
November 1, 1996, announcing that the Company had adopted a Shareholder
Rights Plan.
70
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Form 10-K to be signed
on its behalf by the undersigned, thereunto duly authorized.
OLYMPIC FINANCIAL LTD.
Date: February 7, 1997 By: /s/ WARREN KANTOR
------------------------------------------
Warren Kantor
CHAIRMAN OF THE BOARD AND DIRECTOR
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Richard A. Greenawalt and John A. Witham, or
either of them (with full power to act alone), as his true and lawful
attorneys-in-fact and agents, with full powers of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments to this Annual Report on Form 10-K,
and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission granting unto
said attorneys-in-fact and agents, full power and authority to do and perform
each and every act and thing requisite or necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or their substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Annual Report on Form 10-K has been signed below by the following persons on
behalf of the Registrant, and in the capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURES
- ----------------------------------------------
<C> <S> <C>
/s/ RICHARD A. GREENAWALT President, Chief Executive Officer
----------------------------------- and Director (Principal Executive February 7, 1997
Richard A. Greenawalt Officer)
/s/ JOHN A. WITHAM Executive Vice President and Chief
----------------------------------- Financial Officer (Principal February 7, 1997
John A. Witham Financial Officer)
/s/ BRIAN S. ANDERSON Senior Vice President, Corporate
----------------------------------- Controller and Assistant Secretary February 7, 1997
Brian S. Anderson (Principal Accounting Officer)
/s/ WARREN KANTOR
----------------------------------- Chairman of the Board and Director February 7, 1997
Warren Kantor
/s/ SCOTT H. ANDERSON
----------------------------------- Director February 7, 1997
Scott H. Anderson
/s/ A. MARK BERLIN
----------------------------------- Director February 7, 1997
A. Mark Berlin, Jr.
----------------------------------- Director February , 1997
Lawrence H. Bistodeau
/s/ ROBERT J. CRESCI
----------------------------------- Director February 7, 1997
Robert J. Cresci
/s/ JAMES L. DAVIS
----------------------------------- Director February 7, 1997
James L. Davis
/s/ FREDERICK W. ZUCKERMAN
----------------------------------- Director February 7, 1997
Frederick W. Zuckerman
</TABLE>
71
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBITS DESCRIPTION PAGE
- ----------- ------------------------------------------------------------------------------------------------- -----
<C> <S> <C>
3.1 Restated Articles of Incorporation of the Registrant, as amended (incorporated by reference to
Exhibit No. 4.1 to Registrant's Registration Statement on Form S-2, File No. 33-90108).
3.2 Restated Bylaws of the Registrant, as amended (filed herewith)...................................
4.1 Rights Agreement dated as of November 1, 1996, between the Registrant and Norwest Bank Minnesota,
National Association, as Rights Agent (incorporated by reference to Exhibit 1 to the
Registrant's Registration Statement on Form 8-A filed November 7, 1996).
4.2 First Amendment and Restatement, dated as of April 28, 1995, of Indenture, dated July 1, 1994,
between the Registrant and Norwest Bank Minnesota, National Association, as Trustee, relating
to the Registrant's unsecured Extendible Notes and Fixed-Term Notes, including forms of Notes
(incorporated by reference to Exhibit No. 4.8.1 to Post-Effective Amendment No. 2 on Form S-3
to Registrant's Registration Statement on Form S-1, File No. 33-81512).
4.3 Indenture, dated as of April 28, 1995, between the Registrant and Norwest Bank Minnesota,
National Association, as Trustee, relating to the Registrant's 13% Senior Notes due 2000
(incorporated by reference to Exhibit 4.5 to the Registrant's Annual Report on Form 10-K for
the year ended December 31, 1995).
4.4 First Supplemental Indenture, dated as of August 11, 1995, to Indenture, dated as of April 28,
1995, between the Registrant and Norwest Bank Minnesota, National Association, as Trustee,
relating to the Registrant's 13% Senior Notes due 2000 (incorporated by reference to Exhibit
4.6 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1995).
4.5 Indenture dated as of March 15, 1996, between the Registrant and Norwest Bank Minnesota, National
Association, as Trustee, relating to the Registrant's Subordinated Notes, Series 1996-A due
2001 (filed herewith)..........................................................................
4.6 First Supplemental Indenture, dated as of March 15, 1996, to Indenture, dated as of March 15,
1996, between the Registrant and Norwest Bank Minnesota, National Association, as Trustee,
relating to the Registrant's Subordinated Notes, Series 1996-A due 2001 (filed herewith).......
10.1 Securities Purchase Agreement, dated May 29, 1992, between the Registrant and the Investors named
therein, as amended by the First Amendment thereto dated August 11, 1992, the Second Amendment
thereto dated October 19, 1992, the Third Amendment thereto dated September 14, 1993, the
Fourth Amendment thereto dated November 22, 1993, the Fifth Amendment thereto dated August 29,
1992, the Sixth Amendment thereto dated September 8, 1994, the Seventh Amendment thereto dated
December 28, 1994, and Eighth Amendment thereto, dated March 6, 1995 (incorporated by reference
to Exhibit 10.3 to Registrant's Registration Statement on Form S-2, File No. 33-90108).
10.2 Ninth Amendment to the Securities Purchase Agreement, dated as of March 31, 1996, by and among
the Registrant and each of the investors named on the Investor Schedule attached thereto (filed
herewith)......................................................................................
10.3 Credit Agreement dated as of July 11, 1996 among the Registrant, various financial institutions
(the "Lenders"), Bank of America National Trust and Savings Association, as Agent for the
Lenders and First Bank National Association, as Co-Manager (filed herewith)....................
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBITS DESCRIPTION PAGE
- ----------- ------------------------------------------------------------------------------------------------- -----
<C> <S> <C>
10.4 First Amendment and Waiver to Credit Agreement dated as of September 18, 1996 among the
Registrant, the Lenders and Bank of America National Trust and Savings Association, as Agent
for the Lenders (filed herewith)...............................................................
10.5 Trust Agreement dated as of December 28, 1995 between Olympic Receivables Finance Corp. II ("ORFC
II") and Wilmington Trust Company, as owner trustee (the "Owner Trustee") (filed herewith).....
10.6 Amendment dated as of June 12, 1996 to Trust Agreement dated as of December 28, 1995 between ORFC
II and the Owner Trustee (filed herewith)......................................................
10.7 Indenture dated as of December 28, 1995 between Olympic Automobile Receivables Warehouse Trust
(the "Warehouse Trust") and Norwest Bank Minnesota, National Association, as indenture trustee
(in such capacity, the "Indenture Trustee") (filed herewith)...................................
10.8 Supplemental Indenture dated as of June 12, 1996 to Indenture dated as of December 28, 1995
between the Warehouse Trust, the Indenture Trustee and Morgan Guaranty Trust Company of New
York, as successor to J.P. Morgan Delaware, as administrative agent (in such capacity, the
"Administrative Agent") for Delaware Funding Corporation ("DFC") (filed herewith)..............
10.9 Receivables Purchase Agreement and Assignment dated as of December 28, 1995 between ORFC II, as
Purchaser, and the Registrant, as Seller (filed herewith)......................................
10.10 Amendment dated as of June 12, 1996 to Receivables Purchase Agreement and Assignment dated as of
December 28, 1995 between ORFC II and the Registration (filed herewith)........................
10.11 Amendment No. 2 dated as of September 30, 1996 to Receivables Purchase Agreement and Assignment
dated as of December 28, 1995 between ORFC II and the Registrant (filed herewith)..............
10.12 Amendment No. 3 dated as of January 17, 1997 to Receivables Purchase Agreement and Assignment
dated as of December 28, 1995 between ORFC II and the Registrant (filed herewith)..............
10.13 Sale and Servicing Agreement dated as of December 28, 1995 among the Warehouse Trust, ORFC II,
the Registrant, in its individual capacity and as Servicer, the Norwest Bank Minnesota,
National Association, as Backup Servicer (in such capacity, the "Backup Servicer") (filed
herewith)......................................................................................
10.14 Amendment dated as of June 12, 1996 to Sale and Servicing Agreement dated as of December 28, 1995
among the Warehouse Trust, ORFC II, the Registrant and the Backup Servicer (filed herewith)....
10.15 Amendment No. 2 dated as of September 30, 1996 to Sale and Servicing Agreement dated as of
December 28, 1995 among the Warehouse Trust, ORFC II, the Registrant and the Backup Servicer
(filed herewith)...............................................................................
10.16 Amendment No. 3 dated as of January 17, 1997 to Sale and Servicing Agreement dated as of December
28, 1995 among the Warehouse Trust, ORFC II, the Registrant and the Backup Servicer (filed
herewith)......................................................................................
10.17 Note Purchase Agreement dated as of December 28, 1995 among the Warehouse Trust, the Registrant,
as Servicer and in its individual capacity, DFC and the Administrative Agent (incorporated by
reference to Exhibit 10.11 to the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1995).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBITS DESCRIPTION PAGE
- ----------- ------------------------------------------------------------------------------------------------- -----
<C> <S> <C>
10.18 Agreement to Increase Purchase Commitment and Consent dated as of June 12, 1996 relating to Note
Purchase Agreement among the Warehouse Trust, the Registrant, as Servicer and in its individual
capacity, DFC and the Administrative Agent (filed herewith)....................................
10.19 Agreement to Extend Purchase Commitment Expiration Date dated as of December 20, 1996 relating to
Note Purchase Agreement among the Warehouse Trust, the Registrant, as Servicer and in its
individual capacity, DFC and the Administrative Agent (filed herewith).........................
10.20 First Amendment and Consent dated as of January 17, 1997 relating to Note Purchase Agreement
among the Warehouse Trust, the Registrant, as Servicer and in its individual capacity, DFC and
the Administrative Agent (filed herewith)......................................................
10.21 Certificate Purchase Agreement dated as of December 28, 1995 among the Warehouse Trust, the
Registrant, as Servicer and in its individual capacity, the Note Purchasers party thereto (the
"Note Purchasers") and Morgan Guaranty Trust Company of New York as successor to J.P. Morgan
Delaware, as Agent for the Note Purchasers (in such capacity, the "Purchasers' Agent")
(incorporated by reference to Exhibit 10.12 to the Registrant's Annual Report on Form 10-K for
the year ended December 31, 1995).
10.22 Agreement to Increase Aggregate Purchase Commitment and Consent relating to Certificate Purchase
Agreement among the Warehouse Trust, the Registrant, as Servicer and in its individual
capacity, the Note Purchasers and the Purchasers' Agent (filed herewith).......................
10.23 First Amendment and Consent dated as of December 20, 1996 relating to Certificate Purchase
Agreement among the Warehouse Trust, the Registrant, as Servicer and in its individual
capacity, the Note Purchasers and the Purchasers' Agent (filed herewith).......................
10.24 Second Amendment and Consent dated as of January 17, 1997 relating to Certificate Purchase
Agreement among the Warehouse Trust, the Registrant, as Servicer and in its individual
capacity, the Note Purchasers and the Purchasers' Agent (filed herewith).......................
10.25 Asset Purchase Agreement dated as of December 28, 1995 among the Administrative Agent and each of
the "APA Purchasers" party thereto (filed herewith)............................................
10.26 First Amendment to Asset Purchase Agreement dated as of June 12, 1996 among the Administrative
Agent and the APA Purchasers (filed herewith)..................................................
10.27 Second Amendment and Consent to Asset Purchase Agreement dated as of December 20, 1996 among the
Administrative Agent and the APA Purchasers (filed herewith)...................................
10.28 Third Amendment and Consent relating to Asset Purchase Agreement dated as of January 17, 1997
among the Administrative Agent and the Asset Purchasers (filed herewith).......................
10.29 Receivables Purchase Agreement and Assignment between Olympic Receivables Finance Corp. ("ORFC")
and the Registrant (filed herewith)............................................................
10.30 Repurchase Agreement dated as of December 3, 1996 among Arcadia Receivables Conduit Corp.
("ARCC") and ORFC (filed herewith).............................................................
10.31 Servicing Agreement dated as of December 3, 1996 among ARCC, ORFC, the Registrant, in its
individual capacity and as Servicer, Bank of America National Trust and Savings Association, as
agent, and Norwest Bank Minnesota, National Association, as backup servicer, collateral agent
and indenture trustee (filed herewith).........................................................
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBITS DESCRIPTION PAGE
- ----------- ------------------------------------------------------------------------------------------------- -----
<C> <S> <C>
10.32 Third Amended and Restated Stock Pledge Agreement dated as of December 3, 1996 among the
Registrant and Norwest Bank Minnesota, National Association, as collateral agent (filed
herewith)......................................................................................
10.33 Security Agreement dated as of December 3, 1996 among the Registrant, ORFC, ARCC, Financial
Security Assurance Inc. ("FSA"), Bank of America National Trust and Savings Association and
Norwest Bank Minnesota, National Association, as indenture trustee and collateral agent (filed
herewith)......................................................................................
10.34 Indenture dated as of December 3, 1996 between ARCC and Norwest Bank Minnesota, National
Association, as trustee and collateral agent (filed herewith)..................................
10.35 Insurance and Indemnity Agreement dated as of December 3, 1996 among FSA, the Registrant, ORFC
and ARCC (filed herewith)......................................................................
10.36 US $300,000,000 Floating Rate FSA Insured Automobile Receivables-backed Note Purchase Agreement
dated as of December 3, 1996 among ARCC, Receivables Capital Corporation, and Bank of America
National Trust and Savings Association, as administrator of Receivables Capital Corporation and
as agent for the liquidity providers (filed herewith)..........................................
10.37 Spread Account Agreement dated as of March 25, 1993, as amended and restated as of December 3,
1996, among the Registrant, ORFC, FSA and Norwest Bank Minnesota, National Association, as
trustee and collateral agent (the "Spread Account Agreement") (filed herewith).................
10.38 Warehousing Series Supplement dated as of December 3, 1996 to Spread Account Agreement dated as
of March 25, 1993, as amended and restated as of December 3, 1996, among the Registrant, ORFC,
FSA and Norwest Bank Minnesota, National Association, as trustee and collateral agent (filed
herewith)......................................................................................
10.39 Series 1996-C Supplement, dated as of September 12, 1996, to the Spread Account Agreement
(incorporated by reference to Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1996).
10.40 Amendment, dated as of September 12, 1996, among the Registrant, ORFC, FSA and Norwest Bank
Minnesota, National Association, to the Series 1996-B Supplement, Series 1996-A Supplement,
Series 1995-E Supplement, Series 1995-D Supplement, Series 1995-C Supplement, Series 1995-B
Supplement, Series 1995-A Supplement, Series 1994-B Supplement, Series 1994-A Supplement,
Series 1993-C Supplement, and Series 1993-B Supplement to the Spread Account Agreement
(incorporated by reference to Exhibit 10.3 to the Registrant's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1996).
10.41 Series 1996-D Supplement, dated as of December 12, 1996, to Spread Account Agreement (filed
herewith)......................................................................................
10.42 Amendment, dated as of January 14, 1997, among the Registrant, ORFC, FSA and Norwest Bank
Minnesota, Natioanl Association, to the Series 1994-B Supplement, the Series 1994-A Supplement,
the Series 1993-D Supplement, the Series 1993-C Supplement and the Series 1993-B Supplement
(filed herewith)...............................................................................
10.43 Insurance and Indemnity Agreement, dated as of March 25, 1993, among FSA, ORFC and the Registrant
(the "Series 1993-A Insurance and Indemnity Agreement") (incorporated by reference to Exhibit
10.21 to Registrant's Registration Statement on Form S-2, File No. 33-90108).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBITS DESCRIPTION PAGE
- ----------- ------------------------------------------------------------------------------------------------- -----
<C> <S> <C>
10.44 Insurance and Indemnity Agreement, dated as of June 11, 1993, among FSA, ORFC and the Registrant
(the "Series 1993-B Insurance and Indemnity Agreement") (incorporated by reference to Exhibit
10.22 to Registrant's Registration Statement on Form S-2, File No. 33-90108).
10.45 Insurance and Indemnity Agreement, dated as of August 17, 1993, among FSA, Olympic Automobile
Receivables Trust, 1993-C, Olympic First GP Inc., Olympic Second GP Inc., ORFC and the
Registrant (the "Series 1993-C Insurance and Indemnity Agreement") (incorporated by reference
to Exhibit 10.23 to Registrant's Registration Statement on Form S-2, File No. 33-90108).
10.46 Insurance and Indemnity Agreement, dated as of December 2, 1993, among FSA, Olympic Automobile
Receivables Trust, 1993-D, Olympic First GP Inc., Olympic Second GP Inc., ORFC and the
Registrant (the "Series 1993-D Insurance and Indemnity Agreement") (incorporated by reference
to Exhibit 10.24 to Registrant's Registration Statement on Form S-2, File No. 33-90108).
10.47 Insurance and Indemnity Agreement, dated as of April 5, 1994, among FSA, Olympic Automobile
Receivables Trust, 1994-A, Olympic First GP Inc., Olympic Second GP Inc., ORFC and the
Registrant (the "Series 1994-A Insurance and Indemnity Agreement") (incorporated by reference
to Exhibit 10.25 to Registrant's Registration Statement on Form S-2, File No. 33-90108).
10.48 Insurance and Indemnity Agreement, dated as of September 23, 1994, among FSA, Olympic Automobile
Receivables Trust, 1994-B, Olympic First GP Inc., Olympic Second GP Inc., ORFC and the
Registrant (the "Series 1994-B Insurance and Indemnity Agreement") (incorporated by reference
to Exhibit 10.26 to Registrant's Registration Statement on Form S-2, File No. 33-90108).
10.49 Insurance and Indemnity Agreement, dated as of February 9, 1995, among FSA, ORFC and the
Registrant (the "Series 1995-A Insurance and Indemnity Agreement") (incorporated by reference
to Exhibit 10.27 to Registrant's Registration Statement on Form S-2, File No. 33-90108).
10.50 Insurance and Indemnity Agreement, dated as of March 15, 1995, among FSA, Olympic Automobile
Receivables Trust, 1995-B, Olympic First GP Inc., Olympic Second GP Inc., ORFC and the
Registrant (the "Series 1995-B Insurance and Indemnity Agreement") (incorporated by reference
to Exhibit 10.24 to the Registrant's Annual Report on Form 10-K for the year ended December 31,
1995).
10.51 Insurance and Indemnity Agreement, dated as of June 15, 1995, among FSA, Olympic Automobile
Receivables Trust, 1995-C, Olympic First GP Inc., Olympic Second GP Inc., ORFC and the
Registrant (the "Series 1995-C Insurance and Indemnity Agreement") (incorporated by reference
to Exhibit 10.25 to the Registrant's Annual Report on Form 10-K for the year ended December 31,
1995).
10.52 Insurance and Indemnity Agreement, dated as of September 21, 1995, among FSA, Olympic Automobile
Receivables Trust, 1995-D, Olympic First GP Inc., Olympic Second GP Inc., ORFC and the
Registrant (the "Series 1995-D Insurance and Indemnity Agreement") (incorporated by reference
to Exhibit 10.27 to the Registrant's Annual Report on Form 10-K for the year ended December 31,
1995).
10.53 Insurance and Indemnity Agreement, dated as of December 6, 1995, among FSA, Olympic Automobile
Receivables Trust, 1995-E, Olympic First GP Inc., Olympic Second GP Inc., ORFC and the
Registrant (the "Series 1995-E Insurance and Indemnity Agreement") (incorporated by reference
to Exhibit 10.28 to the Registrant's Annual Report on Form 10-K for the year ended December 31,
1995).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBITS DESCRIPTION PAGE
- ----------- ------------------------------------------------------------------------------------------------- -----
<C> <S> <C>
10.54 Insurance and Indemnity Agreement, dated as of March 14, 1996, among FSA, Olympic Automobile
Receivables Trust, 1996-A, Olympic First GP Inc., Olympic Second GP Inc., ORFC and the
Registrant (the "Series 1996-A Insurance and Indemnity Agreement") (incorporated by reference
to Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended March
31, 1996).
10.55 Insurance and Indemnity Agreement, dated as of June 14, 1996, among FSA, Olympic Automobile
Receivables Trust, 1996-B, Olympic First GP Inc., Olympic Second GP Inc., ORFC and the
Registrant (the "Series 1996-B Insurance and Indemnity Agreement") (incorporated by reference
to Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended June
30, 1996).
10.56 Insurance and Indemnity Agreement, dated as of September 12, 1996, among FSA, Olympic Automobile
Receivables Trust, 1996-C, Olympic First GP Inc., Olympic Second GP Inc., ORFC and the
Registrant (the "Series 1996-C Insurance and Indemnity Agreement") (incorporated by reference
to Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1996).
10.57 Amendment, dated as of September 12, 1996, to the Series 1996-B Insurance and Indemnity
Agreement, the Series 1996-A Insurance and Indemnity Agreement, the Series 1995-E Insurance and
Indemnity Agreement, the Series 1995-D Insurance and Indemnity Agreement, the Series 1995-C
Insurance and Indemnity Agreement, the Series 1995-B Insurance and Indemnity Agreement, the
Series 1995-A Insurance and Indemnity Agreement, the Series 1994-B Insurance and Indemnity
Agreement, the Series 1994-A Insurance and Indemnity Agreement, the Series 1993-D Insurance and
Indemnity Agreement, the Series 1993-C Insurance and Indemnity Agreement, the Series 1993-B
Insurance and Indemnity Agreement and the Series 1993-A Insurance and Indemnity Agreement
(filed herewith)...............................................................................
10.58 Insurance and Indemnity Agreement, dated as of December 12, 1996, among FSA, Olympic Automobile
Receivables Trust, 1996-D, Olympic First GP Inc., Olympic Second GP Inc., ORFC and the
Registrant (the "Series 1996-D Insurance and Indemnity Agreement") (filed herewith)............
10.59 Employment Agreement, dated as of January 6, 1997, between the Registrant and Richard A.
Greenawalt (filed herewith)....................................................................
10.60 Employment Agreement, dated August 1, 1991, between the Registrant and Jeffrey C. Mack
(incorporated by reference to Exhibit No. 10.27 to Registrant's Registration Statement on Form
S-18, File No. 33-43270C).
10.61 Extension and Amendment of Employment Agreement, dated July 1, 1993, between the Registrant and
Jeffrey C. Mack (incorporated by reference to Exhibit 10.106 to Registrant's Annual Report on
Form 10-K for the year ended June 30, 1994).
10.62 Extension and Amendment of Employment Agreement, dated July 1, 1994, by and between the
Registrant and Jeffrey C. Mack (incorporated by reference to Exhibit No. 10.34 to Registrant's
Registration Statement on Form S-4, File No. 33-81588).
10.63 Extension and Amendment of Employment Agreement, dated as of July 31, 1995, by and between the
Registrant and Jeffrey C. Mack (incorporated by reference to Exhibit 10.33 to the Registrant's
Annual Report on Form 10-K for the year ended December 31, 1995).
10.64 Amendment of Employment Agreement, dated as of December 20, 1995, by and between the Registrant
and Jeffrey C. Mack (filed herewith)...........................................................
10.65 Jeffrey C. Mack Severance Package, dated August 26, 1996 (filed herewith)........................
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBITS DESCRIPTION PAGE
- ----------- ------------------------------------------------------------------------------------------------- -----
<C> <S> <C>
10.66 Addendum, dated November 11, 1996, to Agreement between the Registrant and Jeffrey C. Mack (filed
herewith)......................................................................................
10.67 Employment Agreement, dated April 1, 1991, between the Registrant and Scott H. Anderson and
Amendment, dated September 3, 1991 (incorporated by reference to Exhibit No. 10.29 to
Registrant's Registration Statement on Form S-18, File No. 33-43270C).
10.68 Extension and Amendment of Employment Agreement, dated July 1, 1993, between the Registrant and
Scott H. Anderson (incorporated by reference to Exhibit No. 10.107 to Registrant's Annual
Report on Form 10-K for the year ended June 30, 1992).
10.69 Extension and Amendment of Employment Agreement, dated July 1, 1994, by and between Scott H.
Anderson and the Registrant (incorporated by reference to Exhibit No. 10.36 to Registrant's
Registration Statement on Form S-4, File No. 33-81588).
10.70 Extension and Amendment of Employment Agreement, dated as of July 31, 1995, between the
Registrant and Scott H. Anderson (incorporated by reference to Exhibit 10.37 to the
Registrant's Annual Report on Form 10-K for the year ended December 31, 1995).
10.71 Amendment of Employment Agreement, dated as of December 20, 1995, by and between the Registrant
and Scott H. Anderson (filed herewith).........................................................
10.72 Employment Retention Agreement, dated as of November 7, 1996, between the Registrant and Scott H.
Anderson (filed herewith)......................................................................
10.73 Employment Agreement, dated February 1, 1994, between the Registrant and John A. Witham
(incorporated by reference to Exhibit No. 10.111 to the Registrant's Registration Statement on
Form S-1, File No. 33-81512).
10.74 Extension and Amendment of Employment Agreement, dated as of December 20, 1995, by and between
the Registrant and John A. Witham (incorporated by reference to Exhibit 10.39 to the
Registrant's Annual Report on Form 10-K for the year ended December 31, 1995).
10.75 Employment Retention Agreement, dated as of November 7, 1996, between the Registrant and John A.
Witham (filed herewith)........................................................................
10.76 Employment Agreement, dated December 5, 1994, between the Registrant and A. Mark Berlin, Jr.
(incorporated by reference to Exhibit 10.35 to Registrant's Registration Statement on Form S-2,
File No. 33-90108).
10.77 Extension and Amendment of Employment Agreement, dated as of December 20, 1995, by and between
the Registrant and A. Mark Berlin, Jr. (incorporated by reference to Exhibit 10.41 to the
Registrant's Annual Report on Form 10-K for the year ended December 31, 1995).
10.78 Employment Retention Agreement, dated as of November 7, 1996, between the Registrant and A. Mark
Berlin, Jr. (filed herewith)...................................................................
10.79 Employment and Non-Compete Agreement, dated August 29, 1994, by and between the Registrant and
James D. Atkinson (incorporated by reference to Exhibit 10.43 to the Registrant's Annual Report
on Form 10-K for the year ended December 31, 1995).
10.80 Extension and Amendment of Employment Agreement, dated as of July 31, 1995, by and between the
Registrant and James D. Atkinson III (incorporated by reference to Exhibit 10.44 to the
Registrant's Annual Report on Form 10-K for the year ended December 31, 1995).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBITS DESCRIPTION PAGE
- ----------- ------------------------------------------------------------------------------------------------- -----
<C> <S> <C>
10.81 Amendment of Employment Agreement, dated as of December 20, 1995, by and between the Registrant
and James D. Atkinson III (filed herewith).....................................................
10.82 Employment Retention Agreement, dated as of November 7, 1996, between the Registrant and James D.
Atkinson III (filed herewith)..................................................................
10.83 Amendment of Employment Retention Agreement, dated as of December 31, 1996, by and between the
Registrant and James D. Atkinson III (filed herewith)..........................................
10.84 Employment and Non-Compete Agreement, dated September 21, 1994, by and between the Registrant and
Robert A. Barbee (incorporated by reference to Exhibit 10.49 to the Registrant's Annual Report
on Form 10-K for the year ended December 31, 1995).
10.85 Extension and Amendment of Employment Agreement, dated as of November 1, 1995, by and between the
Registrant and Robert A. Barbee (incorporated by reference to Exhibit 10.50 to the Registrant's
Annual Report on Form 10-K for the year ended December 31, 1995).
10.86 Amendment of Employment Agreement, dated as of December 20, 1995, by and between the Registrant
and Robert A. Barbee (filed herewith)..........................................................
10.87 Employment Retention Agreement, dated as of November 7, 1996, between the Registrant and Robert
A. Barbee (filed herewith).....................................................................
10.88 Consulting Agreement, dated December 19, 1994, between the Registrant and Warren Kantor
(incorporated by reference to Exhibit 10.36 to Registrant's Registration Statement on Form S-2,
File No. 33-90108).
10.89 Consulting Agreement, dated as of January 1, 1996 between the Registrant and Warren Kantor (filed
herewith)......................................................................................
10.90 Letter Agreement, dated August 26, 1996, between the Registrant and Warren Kantor (filed
herewith)......................................................................................
10.91 Letter Agreement, dated December 18, 1996, between the Registrant and Warren Kantor (filed
herewith)......................................................................................
10.92 Consulting Agreement, dated as of January 1, 1997, by and between the Registrant and Warren
Kantor (filed herewith)........................................................................
10.93 Non-Statutory Stock Option Agreement, dated December 19, 1994, between the Registrant and Warren
Kantor (incorporated by reference to Exhibit 10.37 to Registrant's Registration Statement on
Form S-2, File No. 33-90108).
10.94 Non-Statutory Stock Option Agreement, dated January 1, 1996, by and between the Registrant and
Warren Kantor (incorporated by reference to Exhibit 10.60 to the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1995).
10.95 Non-Statutory Stock Option Agreement, dated August 26, 1996, between the Registrant and Warren
Kantor (filed herewith)........................................................................
10.96 Non-Statutory Stock Option Agreement, dated December 18, 1996, between the Registrant and Warren
Kantor (filed herewith)........................................................................
10.97 Non-Statutory Stock Option Agreement, dated January 1, 1997, between the Registrant and Warren
Kantor (filed herewith)........................................................................
10.98 Olympic Financial Ltd. 1990 Stock Option Plan, as amended to date (filed herewith)...............
10.99 1992 Director Option Plan, as amended to date (filed herewith)...................................
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBITS DESCRIPTION PAGE
- ----------- ------------------------------------------------------------------------------------------------- -----
<C> <S> <C>
10.100 Olympic Financial Ltd. Stock Purchase Plan (incorporated by reference to Exhibit No. 10.90 to
Registrant's Annual Report on Form 10-K for the year ended June 30, 1992).
10.101 1994-1997 Restricted Stock Election Plan (incorporated by reference to Exhibit 10.41 to
Registrant's Registration Statement on Form S-2, File No. 33-90108).
10.102 1998-2000 Restricted Stock Election Plan, as amended to date (filed herewith)....................
10.103 Warrant to Purchase Common Stock, dated August 11, 1992, between the Registrant and Lincoln
National Life Insurance Company (incorporated by reference to Exhibit No. 10.85 to Registrant's
Annual Report on Form 10-K for the year ended June 30, 1992).
10.104 Warrant to Purchase Common Stock, dated August 11, 1992, between the Registrant and Security
Connecticut Life Insurance Company (incorporated by reference to Exhibit No. 10.86 to
Registrant's Annual Report on Form 10-K for the year ended June 30, 1992).
10.105 Warrant to Purchase Common Stock, dated June 24, 1992, between the Registrant and NAP & Company
(incorporated by reference to Exhibit No. 10.87 to Registrant's Annual Report on Form 10-K for
the year ended June 30, 1992).
10.106 Warrant to Purchase Common Stock, dated June 24, 1992, between the Registrant and Fuelship &
Company (incorporated by reference to Exhibit No. 10.88 to Registrant's Annual Report on Form
10-K for the year ended June 30, 1992).
10.107 Warrant to Purchase Common Stock, dated June 24, 1992, between the Registrant and BCI Growth L.P.
(incorporated by reference to Exhibit No. 10.89 to Registrant's Annual Report on Form 10-K for
the year ended June 30, 1992).
10.108 Warrant to Purchase Common Stock, dated December 17, 1993, between the Registrant and John G.
Kinnard and Company, Incorporated (incorporated by reference to Exhibit 10.47 to Registrant's
Registration Statement on Form S-2, File No. 33-90108).
10.109 Warrant to Purchase Common Stock, dated September 1, 1994, between the Registrant and Cede & Co.
(incorporated by reference to Exhibit 10.48 to Registrant's Registration Statement on Form S-2,
File No. 33-90108).
10.110 Warrant to Purchase Common Stock, dated September 1, 1994, between the Registrant and Booth & Co.
(incorporated by reference to Exhibit 10.49 to Registrant's Registration Statement on Form S-2,
File No. 33-90108).
10.111 Warrant to Purchase Common Stock, dated September 1, 1994, between the Registrant and Sun Life
Insurance Company of America (incorporated by reference to Exhibit 10.50 to Registrant's
Registration Statement on Form S-2, File No. 33-90108).
11.1 Computation of Earnings Per Share (filed herewith)...............................................
12.1 Computation of Ratio of Earnings to Fixed Charges (filed herewith)...............................
12.2 Computation of Ratio of Earnings to Fixed Charges and Preferred Stock Dividends (filed
herewith)......................................................................................
21.1 Subsidiaries of the Registrant (filed herewith)..................................................
23.1 Consent of Ernst & Young LLP (filed herewith)....................................................
27.1 Financial Data Schedule (filed herewith).........................................................
99.1 Cautionary Statement (filed herewith)............................................................
</TABLE>
<PAGE>
BYLAWS
OF
OLYMPIC FINANCIAL LTD.
ARTICLE 1
OFFICES, CORPORATE SEAL
Section 1.1 REGISTERED AND OTHER OFFICES. The registered office of the
Corporation in Minnesota shall be that set forth in the Articles of
Incorporation or in the most recent amendment of the Articles of Incorporation
or statement of the Board of Directors filed with the Secretary of State of
Minnesota changing the registered office in the manner prescribed by law. The
Corporation may have such other offices, within or without the State of
Minnesota, as the Board of Directors shall, from time to time, determine.
Section 1.2 CORPORATE SEAL. If so directed by the Board of Directors by
resolution, the Corporation may use a corporate seal. The failure to use such
seal, however, shall not affect the validity of any documents executed on behalf
of the Corporation. The seal need only include the word "seal", but it may also
include, at the discretion of the Board, such additional wording as is permitted
by law.
Section 1.3 ARTICLES OF INCORPORATION. In the event of any conflict or
inconsistency between these Bylaws, or any amendment thereto, and the Articles
of Incorporation or any amendment thereto, whenever adopted, the Articles of
Incorporation shall govern.
ARTICLE 2
MEETINGS OF SHAREHOLDERS
Section 2.1 TIME AND PLACE OF MEETINGS. Regular or special meetings of
the shareholders, if any, shall be held on the date and at the time and place
fixed by the Chief Executive Officer, the Chairman of the Board, or the Board,
except that a regular or special meeting called by, or at the demand of a
shareholder or shareholders, pursuant to Minnesota Statutes, Section 302A.431,
Subd. 2, shall be held in the county where the principal executive office is
located.
Section 2.2 REGULAR MEETINGS. At any regular meeting of the
shareholders, there shall be an election of qualified successors for directors
who serve for an indefinite term or whose terms have expired or are due to
expire within six months after the date of the meeting. Any business
appropriate for action by the shareholders may be transacted at a regular
meeting. No meeting shall be considered a regular meeting unless specifically
designated as such in the notice of meeting or unless all the shareholders are
present in person or by proxy and none of them objects to such designation.
Regular meetings may be held no more frequently than once per year.
1
<PAGE>
Section 2.3 DEMAND BY SHAREHOLDERS. Regular or special meetings may be
demanded by a shareholder or shareholders, pursuant to the provisions of
Minnesota Statutes, Sections 302A.431, Subd. 2, and 302A.433, Subd. 2,
respectively. If a regular meeting of shareholders has not been held during the
immediately preceding fifteen (15) months, a shareholder or shareholders holding
three (3) percent or more of the voting power of all shares entitled to vote may
demand a regular meeting of shareholders by written notice of demand given to
the Chief Executive Officer or the Chief Financial Officer of the Corporation.
A shareholder or shareholders holding ten (10) percent or more of the voting
power of all shares entitled to vote may demand a special meeting of
shareholders by written notice of demand given to the Chief Executive Officer or
Chief Financial Officer of the Corporation and containing the purposes of the
meeting. Within thirty (30) days after receipt of the demand by one of those
officers, the Board shall cause a special meeting of shareholders to be called
and held on notice no later than ninety (90) days after receipt of the demand,
all at the expense of the Corporation. If the Board fails to cause a special
meeting to be called and held as required by this subdivision, the shareholder
or shareholders making the demand may call the meeting by giving notice as
required by Minnesota Statutes, Section 302A.435, all at the expense of the
Corporation. The business transacted at a special meeting is limited to the
purposes stated in the notice of the meeting. Any business transacted at a
special meeting that is not included in those stated purposes is voidable by or
on behalf of the Corporation, unless all of the shareholders have waived notice
of the meeting in accordance with Minnesota Statutes, Section 302A.435.
Section 2.4 QUORUM; ADJOURNED MEETINGS. The holders of a majority of
the voting power of the shares entitled to vote at a meeting constitute a quorum
for the transaction of business; said holders may be present at the meeting
either in person or by proxy. If a quorum is present when a duly called or held
meeting is convened, the shareholders present may continue to transact business
until adjournment, even though withdrawal of shareholders originally present
leaves less than the proportion or number otherwise required for a quorum. In
case a quorum shall not be present in person or by proxy at a meeting, those
present in person or by proxy may adjourn to such day as they shall, by majority
vote, agree upon, and a notice of such adjournment shall be mailed to each
shareholder entitled to vote at least five (5) days before such adjourned
meeting. If a quorum is present in person or by proxy, a meeting may be
adjourned from time to time without notice, other than announcement at the
meeting. At adjourned meetings at which a quorum is present in person or by
proxy, any business may be transacted at the meeting as originally noticed.
Section 2.5 VOTING. At each meeting of the shareholders, every
shareholder having the right to vote shall be entitled to vote either in person
or by proxy. Unless otherwise provided by the Articles of Incorporation or a
resolution of the Board of Directors filed with the Secretary of State, each
shareholder shall have one vote for each share held. Upon demand of any
shareholder, the vote upon any question before the meeting shall be by ballot.
Section 2.6 NOTICE OF MEETINGS. Notice of all meetings of shareholders
shall be given to every holder of voting shares, except where the meeting is an
adjourned meeting and the date, time and place of the meeting were announced at
the time of adjournment. Notice of regular
2
<PAGE>
meetings of shareholders shall be given at least fourteen (14), but not more
than sixty (60) days before the date of the meeting. Notice of special
meetings of shareholders may be given upon not less than ten (10) nor more
than sixty (60) days, except that written notice of meeting at which an
agreement of merger or exchange is to be considered shall be given to all
shareholders, whether entitled to vote or not, at least fourteen (14) days
prior thereto. Every notice of any special meeting shall state the purpose
or purposes for which the meeting has been called, and the business
transacted at all special meetings shall be confined to the purpose stated in
the call, unless all of the shareholders are present in person or by proxy
and none of them objects to consideration of a particular item of business.
Section 2.7 WAIVER OF NOTICE. A shareholder may waive notice of any
meeting of shareholders. A waiver of notice by a shareholder entitled to notice
is effective whether given before, at or after the meeting and whether given in
writing, orally or by attendance.
Section 2.8 NOTICE OF SHAREHOLDER BUSINESS
(A) REGULAR MEETINGS OF SHAREHOLDERS.
(1) The proposal of business, except nominations of persons for
election to the Board of Directors of the Corporation, to be considered by
the shareholders at a regular meeting of shareholders may be made by any
shareholder of the Corporation who is entitled to vote at the meeting and
who complies with the notice procedures set forth in clause (2) of this
paragraph (A) of this Bylaw and who was a shareholder of record at the time
such notice is delivered to the Secretary of the Corporation.
(2) For business, except nominations of persons for election to the
Board of Directors of the Corporation, to be properly brought before a
regular meeting by shareholder pursuant to Paragraph (A) (1) of this Bylaw
the shareholder must have given timely notice thereof in writing to the
Secretary of the Corporation. To be timely, a shareholder's notice shall be
delivered to the Secretary at the principal executive office of the
Corporation not less than sixty (60) days nor more than ninety (90) days
prior to the first anniversary of the preceding year's annual meeting;
provided, however, that in the event that the date of the annual meeting
is advanced by more than thirty (30) days or delayed by more than
sixty (60) days from such anniversary date, notice by the shareholder to be
timely must be so delivered not earlier than the ninetieth (90th) day prior
to such annual meeting and not later than the close of business on the later
of the sixtieth (60th) day prior to such annual meeting or the tenth (10th)
day following the day on which public announcement of the date of such
meeting is first made. Such shareholder's notice shall set forth (a) as to
any business, except for nominations of persons for election to the Board of
Directors of the Corporation, that the stockholder proposes to bring before
the meeting, a brief description of the business desired to be brought
before the meeting, the reasons for conducting such business at the meeting
and any material interest in such business of such shareholder and the
beneficial owner, if any, on whose behalf the proposal is made and (b) as to
the shareholder giving the notice and the beneficial owner, if any, on whose
behalf the nomination or proposal is made (i)
3
<PAGE>
the name and address of such shareholder, as they appear on the
Corporation's books, and of such beneficial owner and (ii) the class and
number of shares of the Corporation which are owned beneficially and of
record by such shareholder and such beneficial owner.
(B) SPECIAL MEETINGS OF SHAREHOLDERS. Only such business shall be
conducted at a special meeting of shareholders as shall have been brought before
the meeting pursuant to the Corporation's notice of meeting pursuant to Section
2.6 of these Bylaws.
(C) GENERAL.
(1) Only such business shall be conducted at a meeting of shareholders
as shall have been brought before the meeting in accordance with the
procedures set forth in this Bylaw. Except as otherwise provided by law,
the Articles of Incorporation or these Bylaws, the chairman of the meeting
shall have the power and duty to determine whether any business proposed to
be brought before the meeting was made in accordance with the procedures set
forth in this Bylaw, and, if any proposed business is not in compliance with
this Bylaw, to declare that such defective proposal shall be disregarded.
(2) For purposes of this Bylaw, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service,
Associated Press or comparable national news service or in a document
publicly filed by the Corporation with the Securities and Exchange
Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act.
(3) Notwithstanding the foregoing provisions of this Bylaw, a
shareholder shall also comply with all applicable requirements of the
Exchange Act and the rules and regulations thereunder with respect to
the matters set forth in this Bylaw. Nothing in this Bylaw shall be
deemed to affect any rights of shareholders to request inclusion of
proposals in the Corporation's proxy statement pursuant to Rule 14a-5
under the Exchange Act.
Section 2.9 AUTHORIZATION WITHOUT A MEETING. Any action required or
permitted to be taken at a meeting of the shareholders may be taken without a
meeting as authorized by law.
Section 2.10 RECORD DATE. The Board of Directors may fix a time, not
exceeding sixty (60) days preceding the date of any meeting of shareholders, as
a record date for the determination of the shareholders entitled to notice of
and to vote at such meeting, notwithstanding any transfer of shares on the books
of the Corporation after any record date so fixed. The Board of Directors may
close the books of the Corporation against the transfer of shares during the
whole or any part of such period. If the Board of Directors fails to fix a
record date for the determination of the shareholders entitled to notice of and
to vote at any meeting of the shareholders, the record date shall be the
twentieth (20th) day preceding the date of such meeting.
4
<PAGE>
ARTICLE 3
DIRECTORS
Section 3.1 GENERAL. The business and affairs of the Corporation shall
be managed by or shall be under the direction of the Board of Directors.
Section 3.2 NUMBER, QUALIFICATIONS AND TERM OF OFFICE. The Board of
Directors shall consist of four (4) persons. The Board of Directors may,
however, increase the number of directors and fill the vacancy or vacancies
created thereby. If the number of directors has been increased by the Board of
Directors as provided herein, then at the next succeeding meeting of
shareholders at which directors are elected, the number of directors to be
elected shall be such increased number. Directors need not be shareholders.
Each of the directors shall hold office until the regular meeting of the
shareholders next held after his election, until his successor shall have been
elected and shall qualify, or until he shall resign or shall have been removed
as hereinafter provided. No person (other than a person nominated by or on
behalf of the Board) shall be eligible for election as a director at any annual
or special meeting of shareholders unless a written request that his or her name
be placed in nomination is received from a shareholder of record by the
Secretary of the Corporation not less than sixty (60) days prior to the date
fixed for the meeting, together with the written consent of such person to serve
as a director.
Section 3.3 BOARD MEETINGS; PLACE AND NOTICE. Meetings of the Board of
Directors may be held from time to time at any place within or without the State
of Minnesota that the Board of Directors may designate. In the absence of
designation by the Board of Directors, Board meetings shall be held at the
principal executive office of the Corporation, except as may be otherwise
unanimously agreed orally or in writing or by attendance, Special or regular
meetings of the Board of Directors may be called by the Chairman of the Board,
the Chief Executive Officer, or the Chief Financial Officer, upon not less than
twenty-four (24) hours notice. Any director may call a Board meeting by giving
not less than five (5) business days notice to all directors of the date and
time of the meeting. The notice need not state the purpose of the meeting.
Notice may be given by mail, telephone, telegram, telecopy or by personal
service. If the meeting schedule is adopted by the Board, or if the date and
time of a Board meeting has been announced at a previous meeting, no notice is
required.
Section 3.4 WAIVER OF NOTICE. A director may waive notice of a meeting
of the Board. A waiver of notice by a director is effective, whether given
before, at or after the meeting and whether given in writing, orally or by
attendance.
Section 3.5 QUORUM. A majority of the directors currently holding
office is a quorum for the transaction of business.
Section 3.6 VACANCIES. Vacancies on the Board resulting from the death,
resignation or removal of a director, or by an increase in the number of
directors, may be filled by the affirmative vote of a majority of the remaining
directors, even though less than a quorum. Each director elected under this
Section to fill a vacancy holds office until a qualified successor is elected by
the shareholders at the next regular or special meeting of the shareholders.
5
<PAGE>
Section 3.7 COMMITTEES. The Board may by resolution establish
committees in the manner provided by law. Committee members need not be
directors. The following committees, if established by the Board, shall have
the responsibilities set forth respectively, subject to enlargement or
restriction of such responsibilities, as the Board, by resolutions, shall
determine:
a. AUDIT COMMITTEE
*Recommending the appointment of independent auditors.
*Consulting with the independent auditors on the plan of the auditors.
*Reviewing, in consultation with the independent auditors, their report
of audit or proposed report of audit and the accompanying management
letter.
*Consulting with the independent auditors on the adequacy of internal
controls.
b. COMPENSATION COMMITTEE
*Strategically, considers how the achievement of the overall goals and
objectives of the Corporation can be aided through adoption of an
appropriate compensation philosophy and effective compensation program
elements.
*Administratively, reviews salary progression, bonus allocations, stock
awards and the awards of supplemental benefits and perquisites for key
executives against the compensation objectives of the Corporation and
its overall performance.
*Approves the compensation arrangements for the Corporation's senior
management; also reviews and approves the adoption of any compensation
plans in which officers and directors are eligible to participate.
c. NOMINATING COMMITTEE
*Searches for and screens candidates for Board vacancies. The
Committee considers broader issues of composition and organization
of the Board, including committee assignments and individual Board
membership.
*Evaluates the Board itself and its members and reviews the
Corporation's management succession planning.
d. EXECUTIVE COMMITTEE
*Serves as a key link between the full Board and management.
*Is usually granted broad powers to assure that important matters which
arise between Board meetings, and cannot wait for the next scheduled
meeting, receive timely attention.
*Serves as a sounding board for general management problems on matters
that affect the Corporation as a whole.
6
<PAGE>
e. FINANCE COMMITTEE
*Stays informed on a timely basis about the Corporation's financial
status.
*Evaluates the financial information it receives and develops
conclusions as to any plan of action needed.
*Advises corporate management and the full Board in financial matters.
In some cases, the Finance Committee has the authority to act for the
full Board between meetings, but generally it is not empowered to act
on its own.
f. PENSION REVIEW COMMITTEE
*Reviews and approves corporate pension policy, formal pension plans
and amendments.
*Reviews actuarial recommendations and makes recommendations regarding
the Corporation's contribution to the pension plans.
*Selects asset managers and provides guidance on the specific
investment philosophy to be applied to the ongoing management of the
funds.
*Monitors the performance of the corporate pension funds.
*Monitors government actions with respect to pension governance and
reporting requirements.
g. STRATEGIC PLANNING (CORPORATE OBJECTIVES)
*Ensures the proper future direction of the Corporation by defining the
basic corporate and business unit long-term strategic goals vital to
the mission of creating shareholder value for the Corporation.
*Develops strategic plans as to how the Corporation will achieve these
objectives.
*Monitors the progress of the Corporation in achieving its long-term
strategic goals.
h. STOCK OPTION
*Assures that the levels and forms of the executive long-term incentive
compensation programs are adequate to motivate key management to
achieve the corporate long-term strategic goals.
*Involved in the design and approval of the executive long-term
incentive compensation programs.
*Administers the timing and determination of the size of grants; also
interprets plan provisions with regard to setting performance goals
and executing plan award agreements with individuals.
i. INVESTMENTS
*Reviews and approves all major allocations of corporate resources.
7
<PAGE>
*Evaluates the financial implications of all merger, acquisition and
divestiture activities.
Section 3.8 ABSENT DIRECTORS. A director may give advance written
consent or opposition to a proposal to be acted on at a Board meeting. If the
director is not present at the meeting, consent or opposition to a proposal does
not constitute presence for purposes of determining the existence of a quorum,
but consent or opposition shall be counted as a vote in favor of, or against,
the proposal and shall be entered in the minutes or other record of action of
the meeting if the proposal acted on at the meeting is substantially the same or
has substantially the same effect as the proposal to which the director has
consented or objected.
ARTICLE 4
OFFICERS
Section 4.1 NUMBER. The officers of the Corporation shall consist of a
Chief Executive Officer and a Chief Financial Officer. The term "Chief
Executive Officer," as such term is used herein, shall include an individual who
has all the authority, rights and powers as would ordinarily reside in a Chief
Executive Officer of the Company (an "Acting Chief Executive Officer"). The
Chief Executive Officer shall preside at all meetings of the shareholders and
directors and shall have such other duties as may be prescribed from time to
time by the Board of Directors. The Chief Executive Officer shall also see that
all orders and resolutions of the Board are carried into effect. The Chief
Executive Officer and Chief Financial Officer shall have such other duties as
are prescribed by statute. The Board may elect or appoint any other officers it
deems necessary for the operation and management of the Corporation, each of who
shall have the powers, rights, duties, responsibilities and terms of office
determined by the Board from time to time. Any number of offices or functions
of those offices may be held or exercised by the same person. If specific
persons have not been elected as President or Secretary, the Chief Executive
Officer may execute instruments or documents in those capacities. If a specific
person has not been elected to office of Treasurer, the Chief Financial Officer
of the Corporation may sign instruments or documents in that capacity.
Section 4.2 VICE PRESIDENT. Each Vice President, if one or more are
elected, shall have such powers and shall perform such duties as may be
specified in the Bylaws or prescribed by the Board of Directors or by the
Chairman of the Board or by the Chief Executive Officer. In the event of the
absence or disability of the Chief Executive Officer, Vice Presidents shall
succeed to his power and duties in the order designated by the Board of
Directors.
Section 4.3 SECRETARY. The Secretary, if one is elected, shall be
secretary of and shall attend all meetings of the shareholders and Board of
Directors and shall record all proceedings of such meetings in the minute book
of the Corporation. He shall give proper notice of meetings of shareholders and
directors. He shall perform such other duties as may, from time to time, be
prescribed by the Board of Directors, by the Chairman of the Board, or by the
Chief Executive Officer.
8
<PAGE>
Section 4.4 ELECTION AND TERM OF OFFICE. The Board of Directors shall
from time to time elect a Chairman of the Board of Directors, Chief Executive
Officer and Chief Financial Officer and any other officers or agents the Board
deems necessary. Such officers shall hold office until they are removed or
their successors are elected and qualified.
Section 4.5 DELEGATION OF AUTHORITY. An officer elected or appointed by
the Board may delegate some or all of the duties or powers of his office to
other persons, provided that such delegation is in writing.
Section 4.6 COMPENSATION OF OFFICERS. An officer shall be entitled only
to such compensation as shall be established by written contract or agreement
duly approved by or on behalf of the Corporation, or established or approved by
resolution of the Board of Directors. Absent such written contract, agreement
or resolution of the Board of Directors, no officer shall have a cause of action
against the Corporation to recover any amount due or alleged to be due as
compensation for services in his or her capacity as an officer of the
Corporation.
ARTICLE 5
SHARES AND THEIR TRANSFER
Section 5.1 CERTIFICATE OF SHARES. Every shareholder of this
Corporation shall be entitled to a certificate, to be in such form as prescribed
by law and adopted by the Board of Directors, certifying the number of shares of
the Corporation owned by him. The certificates shall be numbered in the order
in which they are issued and shall be signed by the Chief Executive Officer and
Secretary of the Corporation; provided, however, that when the certificate is
signed by a transfer agent or registrar, the signatures of any of such officers
upon the certificate may be facsimiles, engraved or printed thereon, if
authorized by the Board of Directors. Such certificate shall also have typed or
printed thereon such legend as may be required by any shareholder control
agreement. Every certificate surrendered to the Corporation for exchange or
transfer shall be canceled, and no new certificate or certificates shall be
issued in exchange for any existing certificate until such existing certificate
shall have been so canceled.
Section 5.2 TRANSFER OF SHARES. Transfer of shares on the books of the
Corporation may be authorized only by the shareholder named in the certificate,
or the shareholder's legal representative, or the shareholder's duly authorized
attorney in fact, and upon surrender of the certificate or the certificates for
such shares. The Corporation may treat, as the absolute owner of shares of the
Corporation, the person or persons in whose name or names the shares are
registered on the books of the Corporation.
Section 5.3 LOST CERTIFICATES. Any shareholder claiming that a
certificate for shares has been lost, destroyed or stolen shall make an
affidavit of that fact in such form as the Board of Directors shall require and
shall, if the Board of Directors so requires, give the Corporation a sufficient
indemnity bond, in form, in an amount, and with one or more sureties
satisfactory to the Board of Directors, to indemnify the Corporation against any
claims which may be made against it on account of the reissue of such
certificate. A new certificate shall then be issued to
9
<PAGE>
said shareholder for the same number of shares as the one alleged to have
been destroyed, lost or stolen.
ARTICLE 6
INDEMNIFICATION
Section 6.1 INDEMNIFICATION. The Corporation shall indemnify, in
accordance with the terms and conditions of Minnesota Statutes, Section
302A.521, the following persons: (a) officers and former officers; (b)
directors and former directors; (c) members and former members of committees
appointed or designated by the Board of Directors; and (d) employees and former
employees of the Corporation. The Corporation shall not be obligated to
indemnify any other person or entity, except to the extent such obligation shall
be specifically approved by resolution of the Board of Directors. This Section
6.1 is for the sole and exclusive benefit of the persons designated herein and
no person, firm or entity shall have any rights under this Section by way of
assignment, subrogation or otherwise and whether voluntarily, involuntarily or
by operation of law.
ARTICLE 7
MISCELLANEOUS
Section 7.1 GENDER REFERENCES. All referenced in these Bylaws to a
party in the masculine shall include the feminine and neuter.
Section 7.2 PLURALS. All references in the plural shall, where
appropriate, include the singular and all references in the singular shall,
where appropriate, be deemed to include the plural.
CERTIFICATION
I, James D. Atkinson III, do hereby certify that I am the duly elected,
qualified or acting Secretary of Olympic Financial Ltd., a corporation
organized under the laws of the State of Minnesota, and that the foregoing
is a true and correct copy of the Bylaws as of January 29, 1997.
/s/ James D. Atkinson III
-----------------------------
James D. Atkinson III
Secretary
10
<PAGE>
- --------------------------------------------------------------------------------
OLYMPIC FINANCIAL LTD.
to
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
as Trustee
_______________
SUBORDINATED NOTES
______________
INDENTURE
Dated as of March 15, 1996
- --------------------------------------------------------------------------------
<PAGE>
OLYMPIC FINANCIAL LTD.
Reconciliation and tie between Trust Indenture Act of 1939 and
Indenture, dated as of March 15, 1996
Trust Indenture
Act Section Indenture Section
- ----------- -----------------
Section 310(a)(1) . . . . . . . . . . . . . . . . . . . . 609
(a)(2) . . . . . . . . . . . . . . . . . . . . 609
(a) (3). . . . . . . . . . . . . . . . . . . . Not Applicable
(a) (4). . . . . . . . . . . . . . . . . . . . Not Applicable
(a)(5) . . . . . . . . . . . . . . . . . . . . 609
(b) . . . . . . . . . . . . . . . . . . . . 608, 610
Section 311 . . . . . . . . . . . . . . . . . . . . . 613
Section 312(a) . . . . . . . . . . . . . . . . . . . . . 701, 701(a)
(b) . . . . . . . . . . . . . . . . . . . . . . 701(b)
(c) . . . . . . . . . . . . . . . . . . . . . . 701(c)
Section 313 . . . . . . . . . . . . . . . . . . . . . . 702
Section 314(a) . . . . . . . . . . . . . . . . . . . . . . 703
(b) . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(c)(1) . . . . . . . . . . . . . . . . . . . . . . 102
(c)(2) . . . . . . . . . . . . . . . . . . . . . . 102
(c)(3) . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(d) . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(e) . . . . . . . . . . . . . . . . . . . . . . 102
Section 315(a) . . . . . . . . . . . . . . . . . . . . . . 601
(b) . . . . . . . . . . . . . . . . . . . . . . 602
(c) . . . . . . . . . . . . . . . . . . . . . . 601
(d) . . . . . . . . . . . . . . . . . . . . . . 601
(e) . . . . . . . . . . . . . . . . . . . . . . 514
Section 316(a) . . . . . . . . . . . . . . . . . . . . . . 101
(a)(1)(A) . . . . . . . . . . . . . . . . . . . . . . 502, 512
(a)(1)(B) . . . . . . . . . . . . . . . . . . . . . . 513
(a)(2) . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(b) . . . . . . . . . . . . . . . . . . . . . . 508
Section 317(a)(1) . . . . . . . . . . . . . . . . . . . . . 503
(a)(2) . . . . . . . . . . . . . . . . . . . . . 504
(b) . . . . . . . . . . . . . . . . . . . . . .1003
Section 318(a) . . . . . . . . . . . . . . . . . . . . . . 107
Note: This reconciliation and tie shall not, for any purpose,
be deemed to be part of the Indenture.
-i-
<PAGE>
TABLE OF CONTENTS
Page
RECITALS OF THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION . . . . . . . . . 1
SECTION 101. Definitions . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 102. Compliance Certificates and Opinions. . . . . . . . . . . . 11
SECTION 103. Form of Documents Delivered to Trustee. . . . . . . . . . . 12
SECTION 104. Acts of Holders . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 105. Notices, Etc., to Trustee and Company . . . . . . . . . . . 15
SECTION 106. Notice to Holders; Waiver . . . . . . . . . . . . . . . . . 15
SECTION 107. Compliance with Trust Indenture Act . . . . . . . . . . . . 16
SECTION 108. Effect of Headings and Table of Contents. . . . . . . . . . 16
SECTION 109. Successors and Assigns. . . . . . . . . . . . . . . . . . . 16
SECTION 110. Separability Clause . . . . . . . . . . . . . . . . . . . . 17
SECTION 111. Benefits of Indenture . . . . . . . . . . . . . . . . . . . 17
SECTION 112. Governing Law . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 113. Legal Holidays. . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE TWO
SECURITY FORMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 201. Forms Generally . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 202. Form of Trustee's Certificate of Authentication . . . . . . 18
SECTION 203. Form of Legend for Global Securities. . . . . . . . . . . . 18
ARTICLE THREE
THE SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 301. Amount Unlimited; Issuable in Series. . . . . . . . . . . . 19
SECTION 302. Denominations . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 303. Execution, Authentication, Delivery and Dating. . . . . . . 22
SECTION 304. Temporary Securities. . . . . . . . . . . . . . . . . . . . 25
SECTION 305. Registration, Registration of Transfer and Exchange . . . . 26
SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities. . . . . . 27
SECTION 307. Payment of Interest; Interest Rights Preserved. . . . . . . 28
SECTION 308. Persons Deemed Owners . . . . . . . . . . . . . . . . . . . 30
SECTION 309. Cancellation. . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 310. Computation of Interest . . . . . . . . . . . . . . . . . . 31
ARTICLE FOUR
SATISFACTION AND DISCHARGE . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 401. Satisfaction and Discharge of Indenture . . . . . . . . . . 31
-ii-
<PAGE>
SECTION 402. Application of Trust Money. . . . . . . . . . . . . . . . . 32
SECTION 403. Defeasance and Discharge of Indenture . . . . . . . . . . . 33
ARTICLE FIVE
REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 501. Events of Default . . . . . . . . . . . . . . . . . . . . . 34
SECTION 502. Acceleration of Maturity; Rescission and Annulment. . . . . 36
SECTION 503. Collection of Indebtedness and Suits for Enforcement by
Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 504. Trustee May File Proofs of Claim. . . . . . . . . . . . . . 38
SECTION 505. Trustee May Enforce Claims Without Possession of Securities 39
SECTION 506. Application of Money Collected. . . . . . . . . . . . . . . 40
SECTION 507. Limitation on Suits . . . . . . . . . . . . . . . . . . . . 40
SECTION 508. Unconditional Right of Holders to Receive Principal,
Premium and Interest. . . . . . . . . . . . . . . . . . . . 41
SECTION 509. Restoration of Rights and Remedies. . . . . . . . . . . . . 41
SECTION 510. Rights and Remedies Cumulative. . . . . . . . . . . . . . . 41
SECTION 511. Delay or Omission Not Waiver. . . . . . . . . . . . . . . . 42
SECTION 512. Control by Holders. . . . . . . . . . . . . . . . . . . . . 42
SECTION 513. Waiver of Past Defaults . . . . . . . . . . . . . . . . . . 42
SECTION 514. Undertaking for Costs . . . . . . . . . . . . . . . . . . . 43
SECTION 515. Waiver of Stay or Extension Laws. . . . . . . . . . . . . . 43
ARTICLE SIX
THE TRUSTEE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 601. Certain Duties and Responsibilities . . . . . . . . . . . . 44
SECTION 602. Notice of Defaults. . . . . . . . . . . . . . . . . . . . . 45
SECTION 603. Certain Rights of Trustee . . . . . . . . . . . . . . . . . 45
SECTION 604. Not Responsible for Recitals or Issuance of Securities. . . 47
SECTION 605. May Hold Securities . . . . . . . . . . . . . . . . . . . . 47
SECTION 606. Money Held in Trust . . . . . . . . . . . . . . . . . . . . 47
SECTION 607. Compensation and Reimbursement. . . . . . . . . . . . . . . 47
SECTION 608. Disqualification; Conflicting Interests . . . . . . . . . . 48
SECTION 609. Corporate Trustee Required; Eligibility . . . . . . . . . . 48
SECTION 610. Resignation and Removal; Appointment of Successor . . . . . 49
SECTION 611. Acceptance of Appointment by Successor. . . . . . . . . . . 50
SECTION 612. Merger, Conversion, Consolidation or Succession to Business 52
SECTION 613. Preferential Collection of Claims Against Company . . . . . 52
SECTION 614. Appointment of Authenticating Agent . . . . . . . . . . . . 52
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY. . . . . . . . . . . . . 54
-iii-
<PAGE>
SECTION 701. Preservation of Information; Communications to Holders. . . 54
SECTION 702. Reports by Trustee. . . . . . . . . . . . . . . . . . . . . 55
SECTION 703. Reports by Company. . . . . . . . . . . . . . . . . . . . . 55
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE . . . . . . . . . . . 56
SECTION 801. Company May Consolidate, Etc. Only on Certain Terms . . . . 56
SECTION 802. Successor Substituted . . . . . . . . . . . . . . . . . . . 57
ARTICLE NINE
SUPPLEMENTAL INDENTURES. . . . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 901. Supplemental Indentures Without Consent of Holders. . . . 57
SECTION 902. Supplemental Indentures With Consent of Holders . . . . . . 58
SECTION 903. Execution of Supplemental Indentures. . . . . . . . . . . . 60
SECTION 904. Effect of Supplemental Indentures . . . . . . . . . . . . . 60
SECTION 905. Conformity with Trust Indenture Act . . . . . . . . . . . . 60
SECTION 906. Reference in Securities to Supplemental Indentures. . . . . 60
SECTION 907. Notice of Supplemental Indentures . . . . . . . . . . . . . 60
SECTION 908. Supplemental Indentures With Consent of Holders of
Senior Debt . . . . . . . . . . . . . . . . . . . . . . . . 61
ARTICLE TEN
COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 1001. Payment of Principal, Premium and Interest. . . . . . . . . 61
SECTION 1002. Maintenance of Office or Agency . . . . . . . . . . . . . . 61
SECTION 1003. Money for Securities Payments to Be Held in Trust . . . . . 62
SECTION 1004. Existence . . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 1005. Defeasance of Certain Obligations . . . . . . . . . . . . . 63
SECTION 1006. Waiver of Certain Covenants . . . . . . . . . . . . . . . . 65
ARTICLE ELEVEN
REDEMPTION OF SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 1101. Applicability of Article. . . . . . . . . . . . . . . . . . 65
SECTION 1102. Election to Redeem; Notice to Trustee . . . . . . . . . . . 65
SECTION 1103. Selection by Trustee of Securities to Be Redeemed . . . . . 66
SECTION 1104. Notice of Redemption. . . . . . . . . . . . . . . . . . . . 67
SECTION 1105. Deposit of Redemption Price . . . . . . . . . . . . . . . . 67
SECTION 1106. Securities Payable on Redemption Date . . . . . . . . . . . 68
SECTION 1107. Securities Redeemed in Part . . . . . . . . . . . . . . . . 68
-iv-
<PAGE>
ARTICLE TWELVE
SINKING FUNDS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 1201. Applicability of Article. . . . . . . . . . . . . . . . . . 68
SECTION 1202. Satisfaction of Sinking Fund Payments with
Securities . . . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 1203. Redemption of Securities for Sinking Fund . . . . . . . . . 69
ARTICLE THIRTEEN
SUBORDINATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
SECTION 1301. Agreement to Subordinate. . . . . . . . . . . . . . . . . . 70
SECTION 1302. Distribution on Dissolution, Liquidation and
Reorganization. . . . . . . . . . . . . . . . . . . . . . . 70
SECTION 1303. No Payment When Senior Debt in Default. . . . . . . . . . . 71
SECTION 1304. Payment to Holders of Senior Debt . . . . . . . . . . . . . 72
SECTION 1305. Subrogation . . . . . . . . . . . . . . . . . . . . . . . . 72
SECTION 1306. Payment on Securities Permitted . . . . . . . . . . . . . . 73
SECTION 1307. Authorization of Holders to Trustee to Effect
Subordination . . . . . . . . . . . . . . . . . . . . . . . 73
SECTION 1308. No Waiver of Subordination Provisions . . . . . . . . . . . 74
SECTION 1309. Trustee as Holder of Senior Debt. . . . . . . . . . . . . . 74
SECTION 1310. Notices to Trustee. . . . . . . . . . . . . . . . . . . . . 74
SECTION 1311. No Fiduciary Duty by Trustee to Holders of Senior Debt. . . 75
SECTION 1312. Paying Agent Treated as Trustee . . . . . . . . . . . . . . 75
ARTICLE FOURTEEN
REPURCHASE OF SECURITIES AT OPTION OF HOLDERS. . . . . . . . . . . . . . . 76
SECTION 1401. Applicability of Article. . . . . . . . . . . . . . . . . . 76
SECTION 1402. Notice of Repurchase Date . . . . . . . . . . . . . . . . . 76
SECTION 1403. Deposit of Repurchase Price . . . . . . . . . . . . . . . . 76
SECTION 1404. Securities Payable on Repurchase Date . . . . . . . . . . . 77
SECTION 1405. Securities Repurchased in Part. . . . . . . . . . . . . . . 77
ARTICLE FIFTEEN
CORPORATE OBLIGATION ONLY. . . . . . . . . . . . . . . . . . . . . . . . . 78
SECTION 1501. Indenture and Securities Solely Corporate Obligations . . . 78
-v-
<PAGE>
INDENTURE, dated as of March 15, 1996 between OLYMPIC FINANCIAL LTD., a
corporation duly organized and existing under the laws of the State of Minnesota
(herein called the "Company"), having its principal office at 7825 Washington
Avenue South, Minneapolis, Minnesota 55439, and NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Trustee (herein called the "Trustee"), having its principal
office at Sixth Street and Marquette Avenue, Minneapolis, Minnesota 55479.
RECITALS OF THE COMPANY
The Company has duly authorized the execution and delivery of this
Indenture to provide for the issuance from time to time of its unsecured
debentures, notes or other evidences of indebtedness (herein called the
"Securities"), to be issued in one or more series as in this Indenture provided.
All things necessary to make this Indenture a valid agreement of the
Company, in accordance with its terms, have been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the Securities
by the Holders thereof, it is mutually covenanted and agreed, for the equal and
proportionate benefit of all Holders of the Securities or of series thereof
(including holders from time to time of the Securities of any series held
through a Holder which is a Depositary (as defined herein)), as follows:
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 101. Definitions.
For all purposes of this Indenture, except as otherwise expressly provided
or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings assigned to
them in this Article and include the plural as well as the singular;
(2) all other terms used herein which are defined in the Trust
Indenture Act or by Commission rule or regulation under the Trust Indenture
Act, either directly or by reference therein, have the meanings assigned to
them therein;
(3) any gender used in this Indenture shall be deemed and construed
to include correlative words of the masculine, feminine or neuter gender;
<PAGE>
(4) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with GAAP and, except as otherwise
herein expressly provided, GAAP with respect to any computation required or
permitted hereunder shall mean GAAP at the date of such computation; and
(5) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision.
Certain terms, used principally in Article Six, are defined in that
Article.
"Act", when used with respect to any Holder, has the meaning specified in
Section 104.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control", when used with respect to any specified Person, means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Authenticating Agent" means any Person authorized by the Trustee pursuant
to Section 614 to act on behalf of the Trustee to authenticate Securities of one
or more series.
"Board of Directors" means either the board of directors of the Company or
any duly authorized (generally or in any particular respect) committee appointed
by that board.
"Board Resolution" means a copy of a resolution certified by the Secretary
or an Assistant Secretary of the Company to have been duly adopted by the Board
of Directors and to be in full force and effect on the date of such
certification. Where any provision of this Indenture refers to action to be
taken pursuant to a Board Resolution (including establishment of any series of
the Securities and the forms and terms thereof), such action may be taken by any
committee, officer or employee of the Company authorized to take such action
(generally or in any particular respect) by a Board Resolution.
"Business Day", when used with respect to any Place of Payment or other
location, means each Monday, Tuesday, Wednesday, Thursday and Friday which is
not a day on which banking institutions generally in that Place of Payment or
other
-2-
<PAGE>
location are authorized or obligated by law or executive order to close,
unless otherwise specified in a form of Security.
"Capital Lease Obligation" means, as to any Person, the obligations of such
Person to pay rent or other amounts under a lease of (or other agreement
conveying the right to use) real or personal property, which obligations are
required to be classified and accounted for as capital lease obligations on the
balance sheet of such Person under GAAP, and the amount of such obligations at
the time any determination thereof is to be made for purposes of this Indenture
shall be the amount of the liability in respect of a capital lease that would at
such time be required to be capitalized on a balance sheet in accordance with
GAAP.
"Commission" means the Securities and Exchange Commission, as from time to
time constituted, created under the Securities Exchange Act of 1934, as amended,
or, if at any time after the execution of this instrument such Commission is not
existing and performing the duties now assigned to it under the Trust Indenture
Act, then the body performing such duties at such time.
"Company" means the Person named as the "Company" in the first paragraph of
this instrument until a successor corporation shall have become such pursuant to
the applicable provisions of this Indenture, and thereafter "Company" shall mean
such successor corporation, and any other obligor upon the Securities.
"Company Request" or "Company Order" means a written request or order
signed in the name of the Company by its Chairman of the Board, its President,
its Chief Executive Officer, its Chief Operating Officer, its Chief Financial
Officer, a Vice President, its Treasurer, an Assistant Treasurer, its Secretary
or an Assistant Secretary, or by any other officer of the Company authorized to
sign by Board Resolution, and delivered to the Trustee.
"Corporate Trust Office" means the office of the Trustee at which at any
particular time its corporate trust business shall be principally administered,
which at the date of original execution of the Indenture is Minneapolis,
Minnesota.
"Corporation" includes corporations, associations, companies, joint stock
companies and business trusts.
"Credit Enhancement Facility" means any document, instrument or agreement
entered into by any Person for the purpose of providing credit support for
Securitization Transactions and Warehouse Facilities.
"Defaulted Interest" has the meaning specified in Section 307.
-3-
<PAGE>
"Depositary" means, with respect to the Securities of any series issuable
or issued in whole or in part in the form of one or more Global Securities, the
clearing agency registered under the Exchange Act, specified for that purpose as
contemplated by Section 301 or any successor clearing agency registered under
the Exchange Act as contemplated by Section 305, and if at any time there is
more than one such Person, "Depositary" as used with respect to the Securities
of any series shall mean the Depositary with respect to the Securities of such
series.
"Event of Default" has the meaning specified in Section 501.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"GAAP" means generally accepted accounting principles in the United States
of America set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board or in
such other statements by such other entity as have been approved by a
significant segment of the accounting profession, which are in effect from time
to time.
"Global Security" means a Security bearing the legend specified in Section
202 evidencing all or part of a series of Securities, issued to the Depositary
for such series or its nominee, and registered in the name of such Depositary or
nominee.
"Holder" means a Person in whose name a Security is registered in the
Security Register.
"Indebtedness" means, as to any Person, any of the following obligations,
contingent or otherwise, whether outstanding on the date of this Indenture or
thereafter created, incurred, assumed or guaranteed by such Person:
(a) all obligations for borrowed money or for the deferred purchase
price of property or services (including, without limitation, any interest
accruing subsequent to an event of default), except any such obligation
that constitutes a trade payable or an accrued liability arising in the
ordinary course of business, if and to the extent the foregoing
Indebtedness would appear as a liability on a balance sheet of such Person
prepared in accordance with GAAP;
(b) all obligations evidenced by bonds, notes, debentures or other
similar instruments issued by such Person;
(c) all Indebtedness created or arising under any conditional sale or
other title retention agreement with respect to property acquired (even
though the rights and remedies of the seller or lender under such agreement
-4-
<PAGE>
in the event of default are limited to repossession or sale of such
property), except any such obligation that constitutes a trade payable or
an accrued liability arising in the ordinary course of business, if and to
the extent the foregoing Indebtedness would appear as a liability on a
balance sheet of such Person prepared in accordance with GAAP;
(d) all Capital Lease Obligations;
(e) all obligations for the payment of principal or interest, all
commitment fees and all reimbursement obligations incurred, created or
arising in connection with Securitization Transactions, Warehouse
Facilities or Credit Enhancement Facilities;
(f) all Indebtedness of the types referred to in the foregoing
clauses (a) through (e) above secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured
by) any lien upon or security interest in property of such Person
(including, without limitation, accounts and contract rights), even though
such Person has not assumed or become liable for the payment of such
Indebtedness;
(g) any guarantee of any Indebtedness of the types referred to in the
foregoing clauses (a) through (f), regardless of whether such obligation
would appear on a balance sheet of such Person prepared in accordance with
GAAP; and
(h) all renewals, extensions and refundings of any Indebtedness of
the types referred to in any of the foregoing clauses (a) through (g).
"Indenture" means this instrument as originally executed or as it may from
time to time be supplemented or amended by one or more indentures supplemental
hereto entered into pursuant to the applicable provisions hereof and shall
include the terms of particular series of Securities established as contemplated
by Section 301; provided, however, that, if at any time more than one Person is
acting as Trustee under this instrument due to the appointment of one or more
separate Trustees for any one or more separate series of Securities pursuant to
Section 610(e), "Indenture" shall mean, with respect to such series of
Securities for which any such Person is Trustee, this instrument as originally
executed or as it may from time to time be supplemented or amended by one or
more indentures supplemental hereto entered into pursuant to the applicable
provisions hereof and shall include the terms of particular series of Securities
for which such Person is Trustee established as contemplated by Section 301,
exclusive, however, of any provisions or terms which relate solely to other
series of Securities for which such Person is not Trustee, regardless of when
such terms or provisions were adopted, and exclusive of any provisions or terms
adopted by means of one or more indentures supplemental
-5-
<PAGE>
hereto executed and delivered after such Person had become such Trustee but
to which such Person, as such Trustee, was not a party.
"Interest", when used with respect to an Original Issue Discount Security
which by its terms bears interest only after Maturity, means interest payable
after Maturity.
"Interest Payment Date", when used with respect to any Security, means the
Stated Maturity of an installment of interest on such Security.
"Junior Subordinated Debt" means the Indebtedness of the Company under its
Subordinated Extendible Notes and Subordinated Fixed-Term Notes issued pursuant
to the indenture dated as of July 1, 1994, by and between the Company and
Norwest Bank Minnesota, National Association, as Trustee, as the same was
amended and restated as of April 28, 1995.
"Maturity", when used with respect to any Security, means the date on which
the principal of such Security or an installment of principal becomes due and
payable as therein or herein provided, whether at the Stated Maturity or by
declaration of acceleration, call for redemption or otherwise.
"Obligations" has the meaning specified in Section 1302.
"Officers' Certificate" means a certificate signed by the Chairman of the
Board, the President, the Chief Executive Officer, the Chief Operating Officer,
the Chief Financial Officer, a Vice President or an Assistant Vice President of
the Company, and by the Treasurer, an Assistant Treasurer, the Secretary or an
Assistant Secretary of the Company, and delivered to the Trustee.
"Opinion of Counsel" means a written opinion of counsel, who may be an
employee of or counsel for the Company.
"Original Issue Discount Security" means any Security which provides for an
amount less than the principal amount thereof to be due and payable upon a
declaration of acceleration of the Maturity thereof pursuant to Section 502.
"Outstanding", when used with respect to Securities, means, as of the date
of determination, all Securities theretofore authenticated and delivered under
this Indenture, except:
(i) Securities theretofore canceled by the Trustee or delivered to
the Trustee for cancellation;
-6-
<PAGE>
(ii) Securities for whose payment or redemption money in the necessary
amount has been theretofore deposited with the Trustee or any Paying Agent
(other than the Company) in trust or set aside and segregated in trust by
the Company (if the Company shall act as its own Paying Agent) for the
Holders of such Securities; provided that, if such Securities are to be
redeemed, notice of such redemption has been duly given pursuant to this
Indenture or provision therefor satisfactory to the Trustee has been made;
and
(iii) Securities which have been paid pursuant to Section 306 or
in exchange for or in lieu of which other Securities have been
authenticated and delivered pursuant to this Indenture, other than any such
Securities in respect of which there shall have been presented to the
Trustee proof satisfactory to it that such Securities are held by a bona
fide purchaser in whose hands such Securities are valid obligations of the
Company;
provided, however, that in determining whether the Holders of the requisite
principal amount of the Outstanding Securities have given any request, demand,
authorization, direction, notice, consent or waiver hereunder or whether a
quorum is present at a meeting of Holders of Securities, (i) the principal
amount of an Original Issue Discount Security that shall be deemed to be
Outstanding shall be the amount of the principal thereof that would be due and
payable as of the date of such determination upon acceleration of the Maturity
thereof pursuant to Section 502, (ii) the principal amount of a Security
denominated in one or more foreign currencies or currency units that shall be
deemed to be Outstanding shall be the U.S. dollar equivalent, determined in the
manner provided as contemplated by Section 301 as of the date of original
issuance of such Security, of the principal amount (or, in the case of an
Original Issue Discount Security, the U.S. dollar equivalent, determined as of
the date of original issuance of such Security, of the amount determined as
provided in (i) above) of such Security as determined by the Company pursuant to
Section 301, and (iii) Securities owned by the Company or any other obligor upon
the Securities or any Affiliate of the Company or of such other obligor shall be
disregarded and deemed not to be Outstanding, except that, in determining
whether the Trustee shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Securities which the
Trustee knows to be so owned shall be so disregarded. Securities so owned which
have been pledged in good faith may be regarded as Outstanding if the pledgee
establishes to the satisfaction of the Trustee the pledgee's right so to act
with respect to such Securities and that the pledges is not the Company or any
other obligor upon the Securities or any Affiliate of the Company or of such
other obligor.
"Paying Agent" means any Person authorized by the Company to pay the
principal of (and premium, if any) and/or interest on any Securities on behalf
of the Company.
-7-
<PAGE>
"Periodic Offering" means an offering of Securities of a series from time
to time the specific terms of which Securities, including without limitation the
rate or rates of interest (or formula for determining the rate or rates of
interest), if any, thereon, the Stated Maturity or Maturities thereof and the
redemption provisions, if any, with respect thereto, are to be determined by the
Company or its agents upon the issuance of such Securities.
"Person" means any individual, Corporation, partnership, joint venture,
association, joint stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Place of Payment", when used with respect to the Securities of any series,
means the place or places where the principal of (and premium, if any) and/or
interest on the Securities of that series are payable.
"Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same debt as that evidenced by such
particular Security, and, for the purposes of this definition, any Security
authenticated and delivered under Section 306 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Security shall be deemed to evidence the
same debt as the mutilated, destroyed, lost or stolen Security.
"Proceeding" has the meaning specified in Section 1302.
"Redemption Date", when used with respect to any Security or portion
thereof to be redeemed, means the date fixed for such redemption pursuant to
this Indenture.
"Redemption Price", when used with respect to any Security or portion
thereof to be redeemed, means the price at which it is to be redeemed pursuant
to this Indenture.
"Regular Record Date" for the interest payable on any Interest Payment Date
on the Securities of any series means the date specified for that purpose as
contemplated by Section 301.
"Responsible Officer", when used with respect to the Trustee, means any
officer of the Trustee assigned by it to administer its corporate trust matters.
"Repurchase Date", when used with respect to any Security or portion
thereof to be repurchased, means the date fixed for such repurchase pursuant to
this Indenture.
-8-
<PAGE>
"Repurchase Price", when used with respect to any Security or portion
thereof to be repurchased, means the price at which it is to be repurchased
pursuant to this Indenture.
"Securities" has the meaning stated in the first recital of this Indenture
and more particularly means any Securities authenticated and delivered under
this Indenture; provided, however, that if at any time there is more than one
Person acting as Trustee under this Indenture, "Securities" with respect to the
Indenture as to which such Person is Trustee shall have the meaning stated in
the first recital of this Indenture and shall more particularly mean Securities
authenticated and delivered under this Indenture, exclusive, however, of
Securities of any series as to which such Person is not Trustee.
"Securities Payment" has the meaning specified in Section 1302.
"Securitization Transaction" means a public or private transfer of
installment sales contracts, loans, leases or other receivables by which the
Company directly or indirectly securitizes a pool of specified installment sales
contracts, loans, leases or other receivables.
"Security Register" and "Security Registrar" have the respective meanings
specified in Section 305.
"Senior Debt" means all Indebtedness of the Company, except Indebtedness
created or evidenced by an instrument which expressly provides that such
Indebtedness is subordinated in right of payment to any other Indebtedness of
the Company. Without limiting the generality of the foregoing, Senior Debt
shall include: (i) the guarantee by the Company of any Indebtedness of any other
Person (including, without limitation, subordinated Indebtedness of another
Person), unless such guarantee is expressly subordinated to any other
Indebtedness of the Company; (ii) Indebtedness of the Company under its 13%
Senior Notes due 2000 issued pursuant to the indenture dated as of April 28,
1995, by and between the Company and Norwest Bank Minnesota, National
Association, as Trustee; and (iii) Indebtedness of the Company under that
certain Amended and Restated Credit Agreement dated as of August 4, 1995, by and
among the Company, First Bank National Association, as Administrative Bank, and
certain other banks party thereto. Without limiting the generality of the
foregoing, Senior Debt shall not include Indebtedness of the Company under the
Securities or the Junior Subordinated Debt. Notwithstanding anything to the
contrary in the foregoing, Senior Debt shall not include (x) any Indebtedness of
the Company to any of its Subsidiaries or other Affiliates and (y) any
Indebtedness incurred for the purchase of goods or materials or for services
obtained in the ordinary course of business (other than with the proceeds of
revolving credit borrowings permitted hereby).
-9-
<PAGE>
"Senior Payment Default" means any default in the payment of any Obligation
on any Senior Debt when due, whether at the stated maturity of any such payment
or by declaration of acceleration, call for redemption, mandatory repurchase,
payment or prepayment or otherwise.
"Special Record Date" for the payment of any Defaulted Interest means a
date fixed by the Trustee pursuant to Section 307.
"Stated Maturity", when used with respect to any Security or any
installment of principal thereof or interest thereon, means the date specified
in such Security as the fixed date on which the principal of such Security or
such installment of principal or interest is due and payable.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof and (ii) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are such Person or one or more Subsidiaries
of such Person (or any combination thereof).
"Trust Indenture Act" or "TIA" means the Trust Indenture Act of 1939 as in
force at the date as of which this instrument was executed, except as provided
in Section 905.
"Trustee" means the Person named as the "Trustee" in the first paragraph of
this instrument until a successor Trustee shall have become such pursuant to the
applicable provisions of this Indenture, and thereafter "Trustee" shall mean or
include each Person who is then a Trustee hereunder, and if at any time there is
more than one such Person, "Trustee" as used with respect to the Securities of
any series shall mean the Trustee with respect to Securities of that series.
"U.S. Government Obligations" means direct obligations of the United States
of America, or any Person controlled or supervised by and acting as an agency or
instrumentality of such government, in each case where the payment or payments
thereunder are unconditionally guaranteed as a full faith and credit obligation
by such government and which are not callable or redeemable at the option of the
issuer or issuers thereof, and shall also include a depository receipt issued by
a bank or trust company as custodian with respect to any such U.S. Government
Obligation or a specific payment of interest on or principal of or other amount
with respect to any such U.S. Government Obligation held by such custodian for
the account of the
-10-
<PAGE>
holder of a depository receipt, provided that (except as required by law)
such custodian is not authorized to make any deduction from the amount
payable to the holder of such depository receipt from any amount received by
the custodian in respect of the U.S. Government Obligation or the specific
payment of interest on or principal of or other amount with respect to the
U.S. Government Obligation evidenced by such depository receipt.
"Vice President", when used with respect to the Company, means any vice
president, whether or not designated by a number or a word or words added before
or after the title "vice president".
"Voting Stock", when used with respect to a Corporation, means stock of the
class or classes having general voting power under ordinary circumstances to
elect at least a majority of the board of directors, managers or trustees of
such Corporation (irrespective of whether at the time stock or securities of any
other class or classes shall have or might have voting power by reason of the
happening of any contingency).
"Warehouse Facility" means a funding arrangement with one or more financial
institutions or other lenders or purchasers, either directly or through a
special purpose vehicle, exclusively to finance for a period not to exceed six
months the purchase of consumer installment sales contracts, loans, leases or
other receivables pending Securitization Transactions, including, without
limitation, so-called "pool bank" arrangements and repurchase agreements.
SECTION 102. Compliance Certificates and Opinions.
Upon any application or request by the Company to the Trustee to take any
action under any provision of this Indenture, the Company shall furnish to the
Trustee, if so requested by the Trustee, an Officers' Certificate stating that
all conditions precedent, if any, provided for in this Indenture relating to the
proposed action have been complied with and an Opinion of Counsel stating that
in the opinion of such counsel all such conditions precedent, if any, have been
complied with, except that in the case of any such application or request as to
which the furnishing of such documents is specifically required by any provision
of this Indenture relating to such particular application or request, no
additional certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture shall include:
(1) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
-11-
<PAGE>
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of each such individual, he has
made such examination or investigation as is necessary to enable him to
express an informed opinion whether such covenant or condition has been
complied with; and
(4) a statement whether, in the opinion of each such individual, such
condition or covenant has been complied with.
Every such certificate provided under this Indenture shall be without
personal recourse to the individual executing the same and may include an
express statement to such effect.
SECTION 103. Form of Documents Delivered to Trustee.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of any officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate, opinion or representations
with respect to the matters upon which such officer's certificate or opinion is
based are erroneous. Any such certificate or Opinion of Counsel may be based,
insofar as it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company. Any certificate or opinion of counsel may be stated to be based on the
certificates or opinions of other counsel, in which event it shall be
accompanied by a copy of such other certificates or opinions.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument. All applications, requests, certificates, statements or
other
-12-
<PAGE>
instruments given under this Indenture shall be without personal recourse
to any individual giving the same and may include an express statement to such
effect.
SECTION 104. Acts of Holders.
(a) Any request, demand, authorization, direction, notice, consent, waiver
or other action provided by this Indenture to be given or taken by Holders may
be embodied in and evidenced by one or more instruments of substantially similar
tenor signed by such Holders (including Persons who hold their Securities
through a Holder which is a Depositary) in person or by an agent duly appointed
in writing, and, except as herein otherwise expressly provided, such action
shall become effective when such instrument or instruments are delivered to the
Trustee and, where it is hereby expressly required, to the Company. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Holders signing
such instrument or instruments. Proof of execution of any such instrument or of
a writing appointing any such agent shall be sufficient for any purpose of this
Indenture and (subject to Section 601) conclusive in favor of the Trustee and
the Company, if made in the manner provided in this Section.
Without limiting the generality of the foregoing, a Holder, including a
Depositary that is a Holder of a Global Security, may make, give or take, by a
proxy or proxies duly appointed in writing, any request, demand, authorization,
direction, notice, consent, waiver or other action provided or permitted by this
Indenture to be made, given or taken by the Holders, and a Depositary that is a
Holder of a Global Security may provide its proxy or proxies to the beneficial
owners of interest in any such Global Security.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved in any reasonable manner which the Trustee
deems sufficient and in accordance with such reasonable rules as the Trustee may
determine, provided that, in any instance, the Trustee may require further proof
with respect to any matter referred to in this Section.
(c) The ownership of Securities shall be proved by the Security Register.
(d) The Company may fix any day as the record date for the purpose of
determining the Holders (including Persons who hold Securities through a Holder
which is a Depositary) of Securities of any series entitled to give or take any
request, demand, authorization, direction, notice, consent, waiver or other
action, or to vote on any action, authorized or permitted to be given or taken
by Holders of Securities of such series. If not set by the Company prior to the
first solicitation of a Holder of Securities of such series made by any Person
in respect of any such action, or, in the case of any such vote, prior to such
vote, the record date for any such action or vote
-13-
<PAGE>
shall be the 30th day (or, if later, the date of the most recent list of
Holders required to be provided pursuant to Section 701) prior to such first
solicitation or vote, as the case may be. With regard to any record date for
action to be taken by the Holders (including Persons who hold Securities
through a Holder which is a Depositary) of one or more series of Securities,
only the Holders of Securities of such series on such date (or their duly
designated proxies) shall be entitled to give or take, or vote on, the
relevant action.
With regard to any action that may be given or taken hereunder only by
Holders (including Persons who hold their Securities through a Holder which is a
Depositary) of a requisite principal amount of Outstanding Securities of any
series (or their duly appointed agents) and for which a record date is set
pursuant to this subsection (d), the Company may, at its option, set an
expiration date after which no such action purported to be given or taken by any
Holder shall be effective hereunder unless given or taken on or prior to such
expiration date by Holders (including Persons who hold Securities through a
Holder which is a Depositary) of the requisite principal amount of Outstanding
Securities of such series on such record date (or their duly appointed agents).
On or prior to any expiration date set pursuant to this Subsection (d), the
Company may, on one or more occasions at its option, extend such date to any
later date. Nothing in this subsection (d) shall prevent any Holder (or any
duly appointed agent thereof) from giving or taking, after any expiration date,
any action identical to, or, at any time, contrary to or different from any
action given or taken, or purported to have been given and taken, hereunder by a
Holder on or prior to such date, in which event the Company may set a record
date in respect hereof pursuant to this subsection (d).
Notwithstanding the foregoing, upon receipt by the Trustee, with respect to
Securities of any series, of (i) any Notice of Default pursuant to Section 501,
(ii) any declaration or acceleration, or any rescission and annulment of any
such declaration, pursuant to Section 502, or (iii) any direction given pursuant
to Section 512 (any such notice, declaration, rescission and annulment, or
direction being referred to herein as a "Direction"), a record date shall
automatically and without any other action by any Person be set for the purpose
of determining the Holders (including Persons who hold Securities through a
Holder which is a Depositary) of Outstanding Securities of such series entitled
to join in such Direction, which record date shall be the close of business on
the day the Trustee receives such Direction. The Holders (including Persons who
hold Securities through a Holder which is a Depositary) of Outstanding
Securities of such series on such record date (or their duly appointed agents),
and only such Persons, shall be entitled to join in such Direction, whether or
not such Holders remain Holders after record date; provided that, unless such
Direction shall have become effective by virtue of Holders (including Persons
who hold Securities through a Holder which is a Depositary) of the requisite
principal amount of Outstanding Securities of such series on such record date
(or their duly appointed agents) having joined therein on or prior to the
-14-
<PAGE>
90th day after such record date, such Direction shall automatically and
without any action by any Person be canceled and be of no further effect.
Nothing in this paragraph shall prevent a Holder (or duly appointed agent
thereof) from giving, before or after the expiration of such 90-day period, a
Direction contrary to or different from, or, after the expiration of such
period, identical to, a Direction that has been canceled pursuant to the
proviso to the preceding sentence, in which event a new record date in
respect thereof shall be set pursuant to this subsection (d).
(e) Any request, demand, authorization, direction, notice, consent, waiver
or other Act of the Holder of any Security shall bind every future Holder of the
same Security and the Holder of every Security issued upon the registration of
transfer thereof or in exchange therefor or in lieu thereof in respect of
anything done, omitted or suffered to be done by the Trustee or the Company in
reliance thereon, whether or not notation of such action is made upon such
Security.
SECTION 105. Notices, Etc., to Trustee and Company.
Any request, demand, authorization, direction, notice, consent, waiver or
Act of Holders or other document provided or permitted by this Indenture to be
made upon, given or furnished to, or filed with,
(1) the Trustee by any Holder or by the Company shall be sufficient
for every purpose hereunder (unless otherwise herein expressly provided) if
made, given, furnished or filed in writing to or with a Responsible Officer
of the Trustee at its Corporate Trust Office, Attention: Corporate Trust
Department, or
(2) the Company by the Trustee or by any Holder shall be sufficient
for every purpose hereunder (unless otherwise herein expressly provided) if
in writing and mailed, first-class postage prepaid, to the Company
addressed to it at the address of its principal office specified in the
first paragraph of this instrument (Attention: Treasurer) or at any other
address previously furnished in writing to the Trustee by the Company.
SECTION 106. Notice to Holders; Waiver.
Where this Indenture provides for notice to Holders of any event, such
notice shall be sufficiently given (unless otherwise herein expressly provided)
if in writing and mailed, first-class postage prepaid, to each Holder (including
Persons who hold Securities through a Holder which is a Depositary if the name
and address of such beneficial holder has been provided in writing to the Person
required to give such notice prior to the date such notice is given) affected by
such event, at such Holder's address as it appears in the Security Register or
as provided in writing by the Depositary, not later than the latest date, and
not earlier than the earliest date,
-15-
<PAGE>
prescribed for the giving of such notice. In any case where notice to Holders
is given by mail, neither the failure to mail such notice, nor any defect in
any notice so mailed, to any particular Holder shall affect the sufficiency
of such notice with respect to other Holders. Any notice mailed to the
Holder in the manner herein prescribed shall be conclusively deemed to have
been received by such Holder, whether or not such Holder actually receives
such notice. Where this Indenture provides for notice in any manner, such
notice may be waived in writing by the Person entitled to receive such
notice, either before or after the event, and such waiver shall be the
equivalent of such notice. Waivers of notice by Holders shall be filed with
the Trustee, but such filing shall not be a condition precedent to the
validity of any action taken in reliance upon such waiver.
In case by reason of the suspension of regular mail service or by reason of
any other cause it shall be impracticable to give such notice by mail, then such
notification as shall be made by or with the approval of the Trustee shall
constitute a sufficient notification for every purpose hereunder.
SECTION 107. Compliance with Trust Indenture Act.
This Indenture is subject to, and shall be governed by, the provisions of
the Trust Indenture Act that are required to be part of this Indenture. If any
provision hereof limits, qualifies or conflicts with a provision of the Trust
Indenture Act that is required under such Act to be a part of and govern this
Indenture, the provision of the Trust Indenture Act shall control. If any
provision of this Indenture modifies or excludes any provision of the Trust
Indenture Act that may be so modified or excluded, the latter provision shall be
deemed to apply to this Indenture as so modified or to be excluded, as the case
may be.
SECTION 108. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents are for
convenience only and shall not affect the construction hereof.
SECTION 109. Successors and Assigns.
All covenants and agreements in this Indenture by the Company or the
Trustee shall bind its successors and assigns, whether so expressed or not.
SECTION 110. Separability Clause.
In case any provision in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
-16-
<PAGE>
SECTION 111. Benefits of Indenture.
Nothing in this Indenture or in the Securities, express or implied, shall
give to any Person, other than the parties hereto, any Authenticating Agent, any
Paying Agent, any Securities Registrar, and their successors hereunder and the
Holders (including Persons who hold Securities through a Holder which is a
Depositary), any benefit or any legal or equitable right, remedy or claim under
this Indenture.
SECTION 112. Governing Law.
This Indenture and the Securities shall be governed by and construed in
accordance with the laws of the State of Minnesota.
SECTION 113. Legal Holidays.
Except as may be otherwise specified with respect to any particular
Securities, in any case where any Interest Payment Date, Redemption Date or
Stated Maturity of any Security shall not be a Business Day at any Place of
Payment, then (notwithstanding any other provision of this Indenture or of the
Securities) payment of interest or principal (and premium, if any) need not be
made at such Place of Payment on such date, but may be made on the next
succeeding Business Day at such Place of Payment with the same force and effect
as if made on the Interest Payment Date or Redemption Date, or at the Stated
Maturity, provided that no interest shall accrue for the period from and after
such Interest Payment Date, Redemption Date or Stated Maturity, as the case may
be.
ARTICLE TWO
SECURITY FORMS
SECTION 201. Forms Generally.
The Securities of each series, including Global Securities representing
Securities of such series, shall be in the form established, without the
approval of any Holders or the Trustee, by or pursuant to a Board Resolution in
accordance with Section 301 or by one or more indentures supplemental hereto, in
each case with such appropriate insertions, omissions, substitutions and other
variations as are required or permitted by this Indenture, and may have such
letters, numbers or other marks of identification and such legends or
endorsements placed thereon as may be required to comply with the rules of any
securities exchange or as may, consistently herewith, be determined by the
officers executing such Securities, as evidenced by their execution of the
Securities.
-17-
<PAGE>
The definitive Securities may be printed, lithographed or engraved on steel
engraved borders or may be produced in any other manner, all as determined by
the officers executing such Securities, as evidenced by their execution of such
Securities.
SECTION 202. Form of Trustee's Certificate of Authentication.
The Trustee's certificate of authentication shall be in substantially the
following form:
This is one of the Securities of the series designated therein and issued
pursuant to the within-mentioned Indenture.
_______________________, as
Trustee
By________________________
Authorized Signature
SECTION 203. Form of Legend for Global Securities.
Any Global Security authenticated and delivered hereunder shall, in
addition to the provisions established by or pursuant to a Board Resolution or
in one or more indentures supplemental hereto in accordance with Section 201,
bear a legend in substantially the following form or such similar form as may be
required by the Depositary:
"Unless this certificate is presented by an authorized
representative of The Depository Trust Company (55 Water Street, New
York, New York) to the issuer or to its agent for registration of
transfer, exchange or payment, and any certificate issued is
registered in the name of Cede & Co. or such other name as requested
by an authorized representative of The Depository Trust Company and
any payment is made to Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL since
the registered owner hereof, Cede & Co., has an interest herein."
ARTICLE THREE
THE SECURITIES
SECTION 301. Amount Unlimited; Issuable in Series.
The aggregate principal amount of Securities which may be authenticated and
delivered under this Indenture is unlimited.
-18-
<PAGE>
The Securities may be issued in one or more series. There shall be
established, without the approval of any Holders or the Trustee, by or pursuant
to authority granted by one or more Board Resolutions, and, subject to Section
303, there shall be set forth in an Officers' Certificate, or established in one
or more indentures supplemental hereto, prior to the initial issuance of
Securities of any series, all or any of the following, as applicable:
(1) the title of the Securities of the series (which shall
distinguish the Securities of the series from Securities of any other
series);
(2) any limit upon the aggregate principal amount of the Securities
of the series which may be authenticated and delivered under this Indenture
(except for Securities authenticated and delivered upon registration of
transfer of, or in lieu of, other Securities of the series pursuant to
Section 304, 305, 306, 906, 1107 and except for any Securities which,
pursuant to Section 303, are deemed never to have been authenticated and
delivered hereunder) and the absence of such limitation shall mean that the
Company may issue from time to time additional securities of such series
without limitation as to aggregate principal amount;
(3) the Person to whom any interest on a Security of the series shall
be payable, if other than the Person in whose name that Security (or one or
more Predecessor Securities) is registered at the close of business on the
Regular Record Date for such interest;
(4) the date or dates, or the method by which such date or dates are
determined or extended, on which the principal or installments of principal
and premium, if any, of the Securities of the series is or are payable;
(5) the rate or rates (which may be fixed or variable) at which the
Securities of the series shall bear interest, if any, or the method by
which such rate or rates shall be determined, the date or dates from which
such interest shall accrue, the Interest Payment Dates on which such
interest shall be payable, the Regular Record Date for the interest payable
on any Interest Payment Date and the circumstances, if any in which the
Company may defer interest payments and the basis upon which interest shall
be calculated if other than that of a 360-day year of twelve 30-day months;
(6) the place or places, if any, where the principal of (and premium,
if any) and interest on Securities of the series shall be payable, any
Securities of the series may be surrendered for registration of transfer or
exchange and notices and demands to or upon the Company with respect to the
Securities
-19-
<PAGE>
of the series and this Indenture may be served, other than or in
addition to the Corporate Trust Office of the Trustee;
(7) if applicable, the period or periods within which, the price or
prices at which and the terms and conditions upon which Securities of the
series may be redeemed, in whole or in part, at the option of the Company;
(8) the obligation, if any, of the Company to redeem or purchase
Securities of the series pursuant to any sinking fund or analogous
provisions or at the option of a Holder thereof and the period or periods
within which, the price or prices at which and the terms and conditions
upon which Securities of the series shall be redeemed or purchased, in
whole or in part, pursuant to such obligation;
(9) whether the Securities of the series will be convertible into
shares of Common Stock and/or exchangeable for other securities, and if so,
the terms and conditions upon which such Securities will be so convertible
or exchangeable, and any deletions from or modifications or additions to
this Indenture to permit or to facilitate the issuance of such convertible
or exchangeable Securities or the administration thereof;
(10) the identity of each Security Registrar and Paying Agent, if
other than or in addition to the Trustee;
(11) if the amount of principal of, or any premium or interest on, any
Securities of the series may be determined by reference to an index or
pursuant to a formula, the manner in which such amounts shall be
determined;
(12) the applicability of, and any addition to or change in, the
covenants and definitions currently set forth in this Indenture;
(13) if other than denominations of $1,000 or any amount in excess
thereof which is an integral multiple of $1,000, the denominations in which
Securities of the series shall be issuable;
(14) if other than the currency of the United States of America, the
currency, currencies, currency units or composite currencies in which
payment of the principal of and any premium and interest on any Securities
of the series shall be payable and the manner of determining the U.S.
dollar equivalent of the principal amount thereof for purposes of the
definition of "Outstanding" in Section 101, and, if the principal of or any
premium or interest on any Securities of the series is to be payable, at
the election of the Company or a Holder thereof, in one or more currencies
or currency units
-20-
<PAGE>
other than that or those in which the Securities are stated to be payable,
the currency, currencies or currency units in which payment of the
principal of and any premium and interest on Securities of such series as
to which such election is made shall be payable, and the periods within
which and the terms and conditions upon which such election is to be made;
(15) any other event or events of default applicable with respect to
Securities of the series in addition to or in lieu of those provided in
Section 501 and any change in the right of the Trustee or the Holders to
declare the principal of or any premium or interest on such Securities due
and payable;
(16) if less than the principal amount thereof, the portion of the
principal amount of Securities of the series which shall be payable upon
declaration of acceleration of the Maturity thereof pursuant to Section
502;
(17) whether the Securities of the series shall be issued in whole or
in part in the form of one or more Global Securities and, if so, (a) the
Depositary with respect to such Global Security or Securities and (b) the
circumstances under which any such Global Security may be exchanged for
Securities registered in the name of, and any transfer of such Global
Security may be registered to, a Person other than such Depositary or its
nominee, if other than as set forth in Section 305;
(18) if applicable, that the Securities of the series, in whole or any
specified part, shall not be defeasible pursuant to Section 403 or Section
1005 or both such Sections and, if other than by a Company Order, the
manner in which any election by the Company to defend such Securities shall
be evidenced; and
(19) any other terms of the series (which terms shall not be
inconsistent with the provisions of this Indenture, except as permitted by
Section 901(5)).
All Securities of any one series (other than Securities offered in a
Periodic Offering) shall be substantially identical except as to denomination
and except as may otherwise be provided by or pursuant to the Board Resolution
referred to above and, subject to Section 303, set forth, or determined in the
manner provided, in the Officers' Certificate referred to above or in any such
indenture supplemental hereto. All Securities of any one series need not be
issued at the same time. Unless otherwise provided, Securities of a single
series may have different terms, and a series may be reopened, without the
consent of the Holders of Securities of such series, for issuance of additional
Securities of such series.
-21-
<PAGE>
If any of the terms of the series are established by action taken pursuant
to a Board Resolution, a copy of an appropriate record of such action shall be
certified by the Secretary or an Assistant Secretary of the Company and
delivered to the Trustee at or prior to the delivery of the Officers'
Certificate setting forth the terms of the series.
With respect to Securities of a series offered in a Periodic Offering, such
Board Resolution and Officers' Certificate or supplemental indenture may provide
general terms or parameters for Securities of such series and provide either
that the specific terms of particular Securities of such series shall be
specified in a Company Order or that such terms shall be determined by the
Company or its agents in accordance with other procedures specified in a Company
Order as contemplated by the third paragraph of Section 303.
SECTION 302. Denominations.
Unless otherwise provided in the applicable Officers' Certificate or
supplemental indenture, the Securities of each series shall be issued in
registered form without coupons in such denominations as shall be specified as
contemplated by Section 301. In the absence of any such provisions with respect
to the Securities of any series, the Securities of such series shall be issuable
in denominations of $1,000 or any amount in excess thereof which is an integral
multiple of $1,000.
SECTION 303. Execution, Authentication, Delivery and Dating.
The Securities shall be executed on behalf of the Company by its Chairman
of the Board, its President, its Chief Executive Officer, its Chief Operating
Officer, its Chief Financial Officer or one of its Vice Presidents, under its
corporate seal affixed thereto or reproduced thereon attested by its Secretary
or one of its Assistant Secretaries. The signature of any of these officers on
the Securities may be manual or facsimile.
Securities bearing the manual or facsimile signatures of individuals who
were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Securities or did not
hold such offices at the date of such Securities.
At any time and from time to time after the execution and delivery of this
Indenture, the Company may deliver Securities of any series executed by the
Company to the Trustee for authentication, together with a Company Order for the
authentication and delivery of such Securities, or, in the case of Securities
offered in a Periodic Offering, from time to time in accordance with such other
procedures (including, without limitation, the receipt by the Trustee of
electronic instructions
-22-
<PAGE>
from the Company or its duly authorized agents, promptly confirmed in writing
by the Company) acceptable to the Trustee as may be specified from time to
time by a Company Order for establishing the specific terms of particular
Securities being so offered, and the Trustee in accordance with the Company
Order shall authenticate and deliver such Securities. If the form or forms
or terms of the Securities of the series have been established by or pursuant
to one or more Board Resolutions as permitted by Sections 201 and 301, in
authenticating such Securities and accepting the additional responsibilities
under this Indenture in relation to such Securities, the Trustee shall be
entitled to receive, and (subject to Section 601) shall be fully protected in
relying upon
(a) an Opinion of Counsel stating:
(1) that the form or forms of such Securities have been established
in conformity with the provisions of this Indenture;
(2) that the terms of such Securities have been established in
conformity with the provisions of this Indenture;
(3) that authentication and delivery of such Securities and the
execution and delivery of the supplemental indenture, if any, by the
Trustee will not violate the terms of the Indenture;
(4) that the Company has the corporate power to issue, and has duly
authorized, such Securities;
(5) that such Securities, when authenticated and delivered by the
Trustee and issued by the Company in the manner and subject to any
conditions specified in such Opinion of Counsel, will constitute valid and
legally binding obligations of the Company, enforceable against the Company
in accordance with their terms, subject to bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or transfer and other
laws of general applicability relating to or affecting the enforcement of
creditors' rights and to general equity principles, provided that such
Opinion of Counsel need express an opinion as to whether a court in the
United States would render a money judgment in a currency other than that
of the United States; and
(6) that the issuance of such Securities will not contravene the
certificate of incorporation or bylaws of the Company or result in any
violation of any of the terms or provisions of any law or regulation or of
any indenture, mortgage or other agreement known to such Counsel by which
the Company is bound;
-23-
<PAGE>
(b) an executed supplemental indenture, if any;
(c) a copy of a Board Resolution; and
(d) an Officers' Certificate;
provided, however, that, with respect to Securities of a series offered in a
Periodic Offering, the Trustee shall be entitled to receive such Opinion of
Counsel in connection only with the first authentication of each form of
Securities of such series and that the opinions described in clauses (a)(2) and
(a)(5) above may state, respectively, that
(2) if the terms of such Securities are to be established pursuant to
a Company Order or pursuant to such procedures as may be specified from
time to time by a Company Order, all as contemplated by a Board Resolution
or action taken pursuant thereto, such terms will have been duly authorized
by the Company and established in conformity with the provisions of this
Indenture; and
(5) that such Securities, when executed by the Company, completed,
authenticated and delivered by the Trustee in accordance with this
Indenture, and issued and delivered by the Company and paid for, all in
accordance with any agreement of the Company relating to the offering,
issuance and sale of such Securities, will be duly issued under this
Indenture and will constitute valid and legally binding obligations of the
Company, enforceable in accordance with their terms, subject to bankruptcy,
insolvency, reorganization, moratorium and other laws relating to or
affecting generally the enforcement of creditors' rights and to general
principles of equity.
With respect to Securities of a series offered in a Periodic Offering, the
Trustee may rely, as to the authorization by the Company of any of such
Securities, the form or forms and terms thereof and the legality, validity,
binding effect and enforceability thereof, upon the Opinion of Counsel, Company
Order and other documents delivered pursuant to Sections 201 and 301 and this
Section, as applicable, in connection with the first authentication of a form of
Securities of such series and it shall not be necessary for the Company to
deliver such Opinion of Counsel and other documents (except as may be required
by the specified other procedures, if any, referred to above) at or prior to the
time of authentication of each Security of such series unless and until the
Trustee receives notice that such Opinion of Counsel or other documents have
been superseded or revoked, and may assume compliance with any conditions
specified in such Opinion of Counsel (other than any conditions to be performed
by the Trustee). If such form or forms or terms have been so established, the
Trustee shall not be required to authenticate such Securities if the issue of
such Securities pursuant to this Indenture will affect the
-24-
<PAGE>
Trustee's own rights, duties or immunities under the Securities and this
Indenture or otherwise in a manner which is not reasonably acceptable to the
Trustee.
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose unless there appears on such Security a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by manual signature, and such certificate upon any
Security shall be conclusive evidence, and the only evidence, that such Security
has been duly authenticated and delivered hereunder and is entitled to the
benefits of this Indenture. Notwithstanding the foregoing, if any Security shall
have been authenticated and delivered hereunder but never issued and sold by the
Company, and the Company shall deliver such Security to the Trustee for
cancellation as provided in Section 309, for all purposes of this Indenture such
Security shall be deemed never to have been authenticated and delivered
hereunder and shall never be entitled to the benefits of this Indenture.
SECTION 304. Temporary Securities.
Pending the preparation of definitive Securities of any Series, the Company
may execute, and upon Company Order the Trustee shall authenticate and deliver,
temporary Securities which are printed, lithographed, typewritten or otherwise
produced, in any authorized denomination, substantially of the tenor of the
definitive Securities in lieu of which they are issued and with such appropriate
insertions, omissions, substitutions and other variations as the officers
executing such Securities may determine, as evidenced by their execution of such
Securities. In the case of Securities of any series, such temporary Securities
may be in the form of Global Securities.
If temporary Securities of any series are issued, the Company will cause
definitive Securities of that series to be prepared without unreasonable delay.
After the preparation of definitive Securities of such series, the temporary
Securities of such series shall be exchangeable, subject to Section 305, for
definitive Securities of like tenor of such series upon surrender of the
temporary Securities of such series at the office or agency of the Company in a
Place of Payment for that series, without charge to the Holder. Upon surrender
for cancellation of any one or more temporary Securities of any series the
Company shall execute and the Trustee shall authenticate and deliver in exchange
therefor a like principal amount of definitive Securities of the same series and
of like tenor and of any authorized denominations. Until so exchanged the
temporary Securities of any series shall in all respects be entitled to the same
benefits under this Indenture as definitive Securities of such series and tenor.
-25-
<PAGE>
SECTION 305. Registration, Registration of Transfer and Exchange.
The Company shall cause to be kept at the Corporate Trust Office of the
Trustee a register (the "Security Register") in which, subject to such
reasonable regulations as it may prescribe, the Company shall provide for the
registration of Securities and of transfers of Securities. The Trustee is
hereby appointed "Security Registrar" of each series of Securities for the
purpose of registering Securities and transfers of Securities as herein provided
at the Corporate Trust Office.
Upon surrender for registration of transfer of any Security of any series
at the office or agency of the Company in any Place of Payment for such series,
the Company shall execute and the Trustee shall authenticate and deliver (in the
name of the designated transferee or transferees) one or more new Securities of
the same series, of any authorized denominations and of a like aggregate
principal amount and tenor and bearing a number not contemporaneously
outstanding.
At the option of the Holder, Securities of any series may be exchanged for
other Securities of the same series, of any authorized denominations and of a
like aggregate principal amount and tenor, upon surrender of the Securities to
be exchanged at the office or agency of the Company in any Place of Payment for
such series. Whenever any Securities are so surrendered for exchange, the
Company shall execute, and the Trustee shall authenticate and deliver, the
Securities which the Holder making the exchange is entitled to receive.
All Securities issued upon any registration of transfer or exchange of
Securities shall be the valid obligations of the Company, evidencing the same
debt and entitled to the same benefits under this Indenture as the Securities
surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of transfer or for
exchange shall (if so required by the Company or the Trustee) be duly endorsed,
or be accompanied by a written instrument of transfer in form satisfactory to
the Company and the Security Registrar duly executed, by the Holder thereof or
such Holder's attorney duly authorized in writing.
No service charge shall be made for any registration of transfer or
exchange of Securities, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
with any registration of transfer or exchange of Securities, other than
exchanges pursuant to Section 304, 906 or 1107 not involving any transfer.
The Company may but shall not be required (i) to issue, register the
transfer of or exchange Securities of any series during a period beginning at
the opening of business 15 days before the day of the mailing of a notice of
redemption of Securities
-26-
<PAGE>
of that series selected for redemption under Section 1103 and ending at the
close of business on the day of such mailing, (ii) to register the transfer
of or exchange any Security so selected for redemption in whole or in part,
except the unredeemed portion of any Security being redeemed in part or (iii)
to register the transfer of or exchange any certificated Securities during a
period beginning five days before the date of Maturity with respect to such
Security and ending on such date of Maturity.
Notwithstanding the foregoing, except as otherwise specified as
contemplated by Section 301, no Global Security shall be exchangeable pursuant
to this Section 305 for Securities registered in the name of, and no transfer of
a Global Security of any series may be registered to, any Person other than the
Depositary for such Security or its nominee, unless (i) such Depositary notifies
the Company that it is unwilling or unable to continue as Depositary for such
Global Security or the Company determines that the Depositary is unable to
continue as Depositary and the Company thereafter fails to appoint a successor
Depositary, (ii) the Company provides for such exchange or registration of
transfer pursuant to Section 301 of this Indenture, (iii) the Company executes
and delivers to the Trustee a Company Order that such Global Security shall be
so exchangeable and the transfer thereof so registrable, or (iv) there shall
have occurred and be continuing an Event of Default with respect to the
Securities of such series which entitles the Holders of such Securities to
accelerate the maturity thereof Upon the occurrence in respect of any Global
Security of any series of any one or more of the conditions specified in clauses
(i), (ii), (iii) or (iv) of the preceding sentence or such other conditions as
may be specified as contemplated by Section 301 for such series, such Global
Security may be exchanged for Securities not bearing the legend specified in
Section 205 and registered in the names of such Persons as may be specified by
the Depositary (including Persons other than the Depositary or its nominees).
Notwithstanding any other provision of this Indenture, a Global Security
may not be transferred except as a whole by the Depositary for such Global
Security to a nominee of the Depositary or by a nominee of the Depositary to the
Depositary or another nominee of the Depositary.
SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities.
If any mutilated Security, including a Global Security, is surrendered to
the Trustee or the Company, together with such security, bond or indemnity as
may be required by the Trustee or the Company to save each of them and any agent
of either of them harmless, the Company shall execute and the Trustee shall
authenticate and deliver in exchange therefor a new Security, including a new
Global Security if the mutilated Security was a Global Security, of the same
series and of like tenor and principal amount and bearing a number not
contemporaneously outstanding.
-27-
<PAGE>
If there shall be delivered to the Company and the Trustee (i) evidence to
their satisfaction of the destruction, loss or theft of any Security, including
a Global Security if the destroyed, lost or stolen Security was a Global
Security, and (ii) such security or indemnity as may be required by them to save
each of them and any agent of either of them harmless, then, in the absence of
notice to the Company or the Trustee that such Security has been acquired by a
bona fide purchaser, the Company shall execute and upon its written request the
Trustee shall authenticate and deliver, in lieu of any such destroyed, lost or
stolen Security, a new Security, including a Global Security if the destroyed,
lost or stolen Security was a Global Security, of the same series and of like
tenor and principal amount and bearing a number not contemporaneously
outstanding.
In case any such mutilated, destroyed, lost or stolen Security has become
or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section, the Company may
require the payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto and any other expenses (including
the fees and expenses of the Trustee), if any, connected therewith.
Every new Security of any series issued pursuant to this Section in lieu of
any destroyed, lost or stolen Security shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all the benefits of this Indenture equally and proportionately with
any and all other Securities of that series duly issued hereunder. A new
Security shall have such legends as appeared on the old Security unless the
Company determines otherwise.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities.
SECTION 307. Payment of Interest; Interest Rights Preserved.
Unless otherwise provided as contemplated by Section 301 with respect to
any series of Securities, interest on any Security which is payable, and is
punctually paid or duly provided for, on any Interest Payment Date shall be paid
to the Person in whose name that Security (or one or more Predecessor
Securities) is registered in the Security Register at the close of business on
the Regular Record Date for such Interest Payment Date.
Any interest on any Security of any series which is payable but is not
punctually paid or duly provided for on any Interest Payment Date (herein called
-28-
<PAGE>
"Defaulted Interest") shall forthwith cease to be payable to the Holder on the
relevant Regular Record Date by virtue of having been such Holder, and such
Defaulted Interest may be paid by the Company, at its election in each case, as
provided in clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted Interest
to the Persons in whose names the Securities of such series (or their
respective Predecessor Securities) are registered at the close of business
on a Special Record Date for the payment of such Defaulted Interest, which
shall be fixed in the following manner. The Company shall notify the
Trustee in writing of the amount of Defaulted Interest proposed to be paid
on each Security of such series and the date of the proposed payment, and
at the same time the Company shall deposit with the Trustee an amount of
money equal to the aggregate amount proposed to be paid in respect of such
Defaulted Interest or shall make arrangements satisfactory to the Trustee
for such deposit prior to the date of the proposed payment, such money when
deposited to be held in trust for the benefit of the Persons entitled to
such Defaulted Interest as in this clause provided. Thereupon the Trustee
shall fix a Special Record Date for the payment of such Defaulted Interest
which shall be not more than 15 days and not less than 10 days prior to the
date of the proposed payment and not less than 10 days after the receipt by
the Trustee of the notice of the proposed payment. The Trustee shall
promptly notify the Company of such Special Record Date and, in the name
and at the expense of the Company, shall cause notice of the proposed
payment of such Defaulted Interest and the Special Record Date therefor to
be mailed, first-class postage prepaid, to each Holder of Securities of
such series at such Holder's address as it appears in the Security
Register, not less than 10 days prior to such Special Record Date. Notice
of the proposed payment of such Defaulted Interest and the Special Record
Date therefor having been so mailed, such Defaulted Interest shall be paid
to the Persons in whose names the Securities of such series (or their
respective Predecessor Securities) are registered at the close of business
on such Special Record Date and shall no longer be payable pursuant to the
following clause (2).
(2) The Company may make payment of any Defaulted Interest on the
Securities of any series in any other lawful manner not inconsistent with
the requirements of any securities exchange on which such Securities may be
listed, and upon such notice as may be required by such exchange, if, after
notice given by the Company to the Trustee of the proposed payment pursuant
to this clause, such manner of payment shall be deemed practicable by the
Trustee.
Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon registration of transfer of, or in exchange
for, or in lieu
-29-
<PAGE>
of, any other Security shall carry the rights to interest accrued and unpaid,
and to accrue, which were carried by such other Security.
SECTION 308. Persons Deemed Owners.
Prior to due presentment of a Security for registration of transfer, the
Company, the Trustee and any agent of the Company or the Trustee may treat the
Person in whose name such Security is registered in the Security Register as the
owner of such Security for the purpose of receiving payment of principal of (and
premium, if any) and (subject to Sections 305 and 307) interest on such Security
and for all other purposes whatsoever, whether or not such Security be overdue,
and neither the Company, the Trustee nor any agent of the Company or the Trustee
shall be affected by notice to the contrary.
No holder of any beneficial interest in any Global Security held on its
behalf by a Depositary (or its nominees) shall have any rights under this
Indenture with respect to such Global security or any Security represented
thereby, and such Depositary may be treated by the Company, the Trustee, and any
agent of the Company or the Trustee as the owner of such Global Security or any
Security represented thereby for all purposes whatsoever. Notwithstanding the
foregoing, with respect to any Global Security, nothing herein shall prevent the
Company, the Trustee, or any agent of the Company or the Trustee, from giving
effect to any written certification, proxy or other authorization furnished by a
Depositary as Holder of such Global Security, or impair, as between a Depositary
and the owners of beneficial interests in such Global Security, the operation of
customary practices governing the exercise of the rights of the Depositary (or
its nominees) as Holder of such Global Security.
SECTION 309. Cancellation.
All Securities surrendered for payment, redemption, registration of
transfer or exchange or for credit against any sinking fund payment shall, if
surrendered to any Person other than the Trustee, be delivered to the Trustee
and shall be promptly canceled by it. The Company may at any time deliver to
the Trustee for cancellation any Securities previously authenticated and
delivered hereunder which the Company may have acquired in any manner
whatsoever, and may deliver to the Trustee (or to any other Person for delivery
to the Trustee) for cancellation any Securities previously authenticated
hereunder which the Company has not issued and sold, and all Securities so
delivered shall be promptly canceled by the Trustee. No Securities shall be
authenticated in lieu of or in exchange for any Securities canceled as provided
in this Section, except as expressly permitted by this Indenture. The Trustee is
hereby directed by the Company to destroy the canceled Securities held by the
Trustee, and the Trustee shall provide the Company with a certificate of a
Responsible Officer certifying as to the destruction of such Securities.
-30-
<PAGE>
SECTION 310. Computation of Interest.
Except as otherwise specified pursuant to Section 301 for Securities of any
series, interest on the Securities of each series shall be computed on the basis
of a 360-day year of twelve 30-day months and no interest will accrue with
respect to the 31st day of any month.
ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 401. Satisfaction and Discharge of Indenture.
This Indenture shall upon Company Request cease to be of further effect
with respect to any series of Securities specified in a Company Request (except
as to any surviving rights of registration of transfer or exchange of Securities
herein expressly provided for), and the Trustee, at the expense of the Company,
shall execute proper instruments acknowledging satisfaction and discharge of
this Indenture, when
(1) either
(A) all Securities of such series therefore authenticated and
delivered (other than (i) Securities which have been destroyed, lost
or stolen and which have been replaced or paid as provided in Section
306 and (ii) Securities for whose payment money has therefore been
deposited in trust or segregated and held in trust by the Company and
thereafter repaid to the Company or discharged from such trust, as
provided in Section 1003) have been delivered to the Trustee for
cancellation; or
(B) all Securities of such series not therefore delivered to the
Trustee for cancellation
(i) have become due and payable, or
(ii) will become due and payable at their Stated Maturity
within one year, or
(iii) are to be called for redemption within one year
under arrangements satisfactory to the Trustee for the giving of
notice of redemption by the Trustee in the name, and at the
expense, of the Company,
-31-
<PAGE>
and the Company, in the case of (i), (ii) or (iii) above, has
deposited or caused to be deposited with the Trustee as trust funds in
trust for the purpose an amount, in the currency in which such
Securities are payable, sufficient to pay and discharge the entire
indebtedness on such Securities not theretofore delivered to the
Trustee for cancellation, for principal (and premium, if any) and
interest to the date of such deposit (in the case of Securities which
have become due and payable) or to the respective Stated Maturity or
Redemption Date, as the case may be;
(2) the Company has paid or caused to be paid all other sums payable
hereunder by the Company, and
(3) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent
herein provided for relating to the satisfaction and discharge of this
Indenture with respect to the Securities of such series have been complied
with.
Notwithstanding the satisfaction and discharge of this Indenture with
respect to a series of Securities, the obligations of the Company and the
Trustee to the Holders of Securities of other series not so satisfied and
discharged, the obligations of the Company to the Trustee under Section 607, the
obligations of the Trustee to any Authenticating Agent under Section 614, and,
if money shall have been deposited with the Trustee pursuant to Subclause (B) of
clause (1) of this Section, the obligations of the Trustee under Section 402 and
the last paragraph of Section 1003, shall survive.
SECTION 402. Application of Trust Money.
Subject to provisions of the last paragraph of Section 1003, all money
deposited with the Trustee pursuant to Section 401 shall be held in trust and
applied by it, in accordance with the provisions of the Securities of each
series and this Indenture, to the payment, either directly or through any Paying
Agent (including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal (and premium, if
any) and interest for whose payment such money has been deposited with the
Trustee but such money need not be segregated from other funds except to the
extent required by law.
SECTION 403. Defeasance and Discharge of Indenture.
If principal of and any premium and interest on Securities of any series
are denominated and payable in U.S. Dollars, the Company shall be deemed to have
paid and discharged the entire Indebtedness on all the Outstanding Securities of
such series on the 91st day after the date of the deposit referred to in
subparagraph (d) hereof, and the provisions of this Indenture, as it relates to
such Outstanding
-32-
<PAGE>
Securities, shall no longer be in effect (and the Trustee, at the request and
expense of the Company, shall execute proper instruments acknowledging the
same), except as to:
(a) the rights of Holders of Securities of such series to receive,
from the trust funds described in subparagraph (d) hereof, (i) payment of
the principal of (and premium, if any) or interest on the Outstanding
Securities of such series on the Stated Maturity of such principal or
installment of principal or interest and (ii) the benefit of any mandatory
sinking fund payments applicable to the Securities of such series on the
day on which such payments are due and payable in accordance with the terms
of this Indenture and such Securities;
(b) the Company's obligations with respect to such Securities under
Sections 305, 306, 1002 and 1003; and
(c) the rights, powers, trusts, duties and immunities of the Trustee
hereunder;
provided that, the following conditions shall have been satisfied:
(d) The Company has deposited or caused to be irrevocably deposited
with the Trustee (or another trustee satisfying the requirements of Section
609) as trust funds in the trust, specifically pledged as security for, and
dedicated solely to, the benefit of the Holders of the Securities of such
series, (i) U.S. Dollars in an amount, or (ii) U.S. Government Obligations
which through the payment of interest and principal in respect thereof in
accordance with their terms will provide not later than one day before the
due date of any payment referred to in clause (A) or (B) of this
subparagraph (d) U.S. Dollars in an amount or (iii) a combination thereof,
sufficient, in the opinion of a nationally-recognized firm of independent
certified public accountants expressed in a written certification thereof
delivered to the Trustee, to pay and discharge (A) the principal of (and
premium, if any) and each installment of principal of (and premium, if any)
and interest on the Outstanding Securities of such series on the Stated
Maturity of such principal or installment of principal and interest and (B)
any mandatory sinking fund or analogous payments applicable to the
Securities of such series on the day on which such payments are due and
payable in accordance with the terms of this Indenture and of such
Securities;
(e) such deposit shall not cause the Trustee with respect to the
Securities of such series to have a conflicting interest as defined in
Section 608 and for purposes of the Trust Indenture Act with respect to
such Securities;
-33-
<PAGE>
(f) such deposit will not result in a breach or violation of, or
constitute a default under, this Indenture or any other agreement or
instrument to which the Company is a party or by which it is bound;
(g) such provision would not cause any Outstanding Securities of such
series then listed on the New York Stock Exchange or other securities
exchange to be delisted as a result thereof;
(h) no Event of Default or event which with notice or lapse of time
would become an Event of Default with respect to the Securities of such
series shall have occurred and be continuing on the date of such deposit or
during the period ending on the 91st day after such date;
(i) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel to the effect that there has been a change in
applicable federal law such that, or the Company has received from, or
there has been published by, the Internal Revenue Service a ruling to the
effect that, Holders of the Securities of such series will not recognize
income, gain or loss for federal income tax purposes as a result of such
deposits, defeasance and discharge and will be subject to federal income
tax on the same amount and in the same manner and at the same times, as
would have been the case if such deposit, defeasance and discharge had not
occurred; and
(j) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent
relating to the defeasance contemplated by this Section have been complied
with.
ARTICLE FIVE
REMEDIES
SECTION 501. Events of Default.
"Event of Default", wherever used herein with respect to Securities of any
series, and unless otherwise provided with respect to Securities of any series
pursuant to Section 301, means any one of the following events (whatever the
reason for such Event of Default and whether it shall be voluntary or
involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(1) default in the payment of any interest upon any Security of such
series when it becomes due and payable, and continuance of such default for
a period of 30 days; or
-34-
<PAGE>
(2) default in the payment of the principal of (or premium, if any,
on) any Security of such series when due and payable; or
(3) default in the deposit of any sinking fund payment in respect of
any Security of such series, when and as due by the terms of a Security of
such series; or
(4) default in the performance, or breach, of any covenant or
warranty of the Company in this Indenture or the Securities of such series
(other than a covenant or warranty a default in the performance or breach
of which is elsewhere in this Section specifically dealt with or which has
expressly been included in this Indenture solely for the benefit of a
series of one or more Securities other than such series), and continuance
of such default or breach for a period of 60 days after written notice
thereof has been received by the Company from the Trustee or by the Company
and the Trustee from the Holders of at least 25% in aggregate principal
amount of the Outstanding Securities of such series, specifying such
default or breach and requiring it to be remedied and stating that such
notice is a "Notice of Default" hereunder; or
(5) an event of default, as defined in any indenture or instrument
under which the Company or any Subsidiary shall have outstanding at least
$5,000,000 aggregate principal amount of Indebtedness (other than as part
of a Securitization Transaction), shall happen and be continuing and such
Indebtedness shall, as a result thereof, have been accelerated (or
comparable event shall have occurred) so that the same shall have become
due and payable prior to the date on which the same would otherwise have
become due and payable and such acceleration has been in effect without
rescission or annulment for a period of 60 days; provided, however, that if
such event of default under such indenture or instrument shall be remedied
or cured by the Company or waived by the holders of such Indebtedness, or
if such acceleration under such indenture or instrument shall have been
rescinded or annulled by the holders of such Indebtedness, then, unless the
Securities of such series shall have been accelerated as provided in this
Indenture, the Event of Default hereunder by reason thereof shall be deemed
likewise to have been thereupon remedied, cured or waived without further
action upon the part of either the Trustee or any Holders of the Securities
of any series; or
(6) the entry by a court having jurisdiction in the premises of (A) a
decree or order for relief in respect of the Company in an involuntary case
or proceeding under any applicable Federal or State bankruptcy, insolvency,
reorganization or other similar law or (B) a decree or order adjudging the
Company a bankrupt or insolvent, or approving as properly filed a petition
seeking reorganization, arrangement, adjustment or composition of or in
-35-
<PAGE>
respect of the Company under any applicable Federal or State law, or
appointing a custodian, receiver, liquidator, assignee, trustee,
sequestrator or other similar official of the Company or of any substantial
part of its property, or ordering the winding up or liquidation of its
affairs, and the continuance of any such decree or order for relief or any
such other decree or order unstayed and in effect for a period of 60
consecutive days; or
(7) the commencement by the Company of a voluntary case or proceeding
under any applicable Federal or State bankruptcy, insolvency,
reorganization or other similar law or of any other case or proceeding to
be adjudicated a bankrupt or insolvent, or the consent by it to the entry
of a decree or order for relief in respect of the Company in an involuntary
case or proceeding under any applicable Federal or State bankruptcy,
insolvency, reorganization or other similar law or to the commencement of
any bankruptcy or insolvency case or proceeding against it, or the filing
by it of a petition or answer or consent seeking reorganization or relief
under any applicable Federal or State law, or the consent by it to the
filing of such petition or to the appointment of or taking possession by a
custodian, receiver, liquidator, assignee, trustee, sequestrator or other
similar official of the Company or of any substantial part of its property,
or the making by it of an assignment for the benefit of creditors, or the
admission by it in writing of its inability to pay its debts generally as
they become due, or the taking of corporate action by the Company in
furtherance of any such action; or
(8) a final judgment, judicial decree or order for the payment of
money in excess of $5,000,000 shall be rendered against the Company or any
Subsidiary, and such judgment, decree or order shall have remained unpaid,
unvacated, unbonded or unstayed for a period of 60 days; or
(9) any other Event of Default provided with respect to Securities of
such series pursuant to Section 301.
SECTION 502. Acceleration of Maturity; Rescission and Annulment.
If an Event of Default with respect to Outstanding Securities of any series
occurs and is continuing, then and in every such case the Trustee or the Holders
of not less than 25% in aggregate principal amount of the Outstanding Securities
of such series may declare the principal amount (or, if any of the Securities of
such series are Original Issue Discount Securities, such lesser portion of the
principal amount of such Securities as may be specified in the terms thereof) of
all of the Securities of that series to be due and payable immediately, by a
notice in writing to the Company (and to the Trustee if given by Holders), and
upon any such declaration such principal amount (or specified portion thereof)
shall become immediately due and payable; provided that in the case of an Event
of Default
-36-
<PAGE>
described in Section 501(6) or (7) hereof, the principal amount of all
Securities (or specified portion thereof) shall become due and payable
immediately, without any notice to the Company or the Trustee.
Upon payment of such principal amount (and premium, if any), such interest
and interest on overdue principal and overdue interest to the extent prescribed
therefor in the Securities of such series (to the extent payment of such
interest is legally enforceable), all of the Company's obligations in respect of
the payment of principal and interest on the Securities of such series shall
terminate.
At any time after such a declaration of acceleration with respect to
Outstanding Securities of any series has been made and before a judgment or
decree for payment of the money due has been obtained by the Trustee as
hereinafter in this Article provided, the Holders of a majority in aggregate
principal amount of the Outstanding Securities of such series, by written notice
to the Company and the Trustee, may rescind and annul such declaration and its
consequences if
(1) the Company has paid or deposited with the Trustee a sum
sufficient to pay
(A) all overdue interest on all Securities of such series,
(B) the principal of (and premium, if any, on) any Securities of
such series which have become due otherwise than by such declaration
of acceleration and interest thereon at the rate or rates prescribed
therefor in such Securities,
(C) to the extent that payment of such interest is lawful,
interest upon overdue interest at the rate or rates prescribed
therefor in such Securities, and
(D) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee
under Section 607; and
(2) all Events of Default with respect to Securities of such series,
other than the non-payment of the principal of Securities of such series
which have become due solely by such declaration of acceleration, have been
cured or waived as provided in Section 513.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
-37-
<PAGE>
SECTION 503. Collection of Indebtedness and Suits for Enforcement by Trustee.
The Company covenants that if
(1) default is made in the payment of any interest on any Security of
any series when such interest becomes due and payable and such default
continues for a period of 30 days, or
(2) default is made in the payment of the principal of (or premium,
if any, on) any Security of any series at the Maturity thereof,
the Company will, upon demand of the Trustee, pay to it, for the benefit of the
Holders of such Security, the whole amount then due and payable on such Security
for principal (and premium, if any) and interest and, to the extent that payment
of such interest shall be legally enforceable, interest on any overdue principal
(and premium, if any) and on any overdue interest at the rate or rates
prescribed therefor in such Security, and, in addition thereto such further
amount as shall be sufficient to cover the costs and expenses of collection,
including the reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel.
If an Event of Default with respect to Securities of any series occurs and
is continuing, the Trustee may in its discretion proceed to protect and enforce
its rights and the rights of the Holders of Securities of such series by such
appropriate judicial proceedings as the Trustee shall deem most effectual to
protect and enforce any such rights, whether for the specific enforcement of any
covenant or agreement in this Indenture or in aid of the exercise of any power
granted herein, or to enforce any other proper remedy.
SECTION 504. Trustee May File Proofs of Claim.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to the Company or any other obligor upon the
Securities of any series or the property of the Company or of such other obligor
or their creditors, the Trustee (irrespective of whether the principal of the
Securities of any series shall then be due and payable as therein expressed or
by declaration or otherwise and irrespective of whether the Trustee shall have
made any demand on the Company for the payment of overdue principal or interest)
shall be entitled and empowered, by intervention in such proceeding or
otherwise,
(i) to file and prove a claim for the whole amount of principal (and
premium, if any) or such portion of the principal amount of any series of
Original Issue Discount Securities as may be specified in the terms of such
-38-
<PAGE>
series and interest owing and unpaid in respect of the Securities of such
series and to file such other papers or documents as may be necessary or
advisable in order to have the claims of the Trustee (including any claim
for the reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel, and any other amounts due the Trustee
under Section 607) and of the Holders allowed in such judicial proceeding,
and
(ii) to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceeding is hereby authorized by
each Holder of Securities of such series to make such payments to the Trustee
and, in the event that the Trustee shall consent to the making of such payments
directly to the Holders, to pay to the Trustee any amount due it for the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel, and any other amounts due the Trustee under Section 607.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
of any series or the rights of any Holder thereof or to authorize the Trustee to
vote in respect of the claim of any Holder in any such proceeding.
SECTION 505. Trustee May Enforce Claims Without Possession of Securities.
All rights of action and claims under this Indenture or the Securities may
be prosecuted and enforced by the Trustee without the possession of any of the
Securities or the production thereof in any proceeding relating thereto, and any
such proceeding instituted by the Trustee shall be brought in its own name as
trustee of an express trust, and any recovery of judgment shall, after provision
for the payment of the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, and for any other amounts due
the Trustee under Section 607, be for the ratable benefit of the Holders of the
Securities in respect of which such judgment has been recovered.
SECTION 506. Application of Money Collected.
Any money collected by the Trustee with respect to any series of Securities
pursuant to this Article shall be applied in the following order, at the date or
dates fixed by the Trustee and, in case of the distribution of such money on
account of principal (or premium, if any) or interest, upon presentation of the
Securities of such series and the notation thereon of the payment if only
partially paid and upon surrender thereof if fully paid:
-39-
<PAGE>
FIRST: To the payment of all amounts due the Trustee under Section
607; and
SECOND: To the payment of the amounts then due and unpaid for
principal of (and premium, if any) and interest on the Securities of such
series in respect of which or for the benefit of which such money has been
collected, ratably, without preference or priority of any kind, according
to the amounts due and payable on such Securities for principal (and
premium, if any) and interest, respectively; and
THIRD: The balance, if any, to the Person or Persons entitled
thereto.
SECTION 507. Limitation on Suits.
No Holder of any Security of any series shall have any right to institute
any proceeding, judicial or otherwise, with respect to this Indenture, or for
the appointment of a receiver or trustee, or for any other remedy hereunder,
unless
(1) such Holder has previously given written notice to the Trustee of
a continuing Event of Default with respect to the Securities of such
series;
(2) the Holders of not less than 25% in principal amount of the
Outstanding Securities of such series shall have made written request to
the Trustee to institute proceedings in respect of such Event of Default in
its own name as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities to be incurred in
compliance with such request;
(4) the Trustee, for 60 days after its receipt of such notice,
request and offer of indemnity, has failed to institute any such
proceeding; and
(5) no direction inconsistent with such written request has been
given to the Trustee during such 60-day period by the Holders of a majority
in principal amount of the Outstanding Securities of such series;
it being understood and intended that no one or more of such Holders shall have
any right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture to affect, disturb or prejudice the rights of any other of
such Holders, or to obtain or to seek to obtain priority or preference over any
other of such Holders
-40-
<PAGE>
or to enforce any right under this Indenture, except in the manner herein
provided and for the equal and ratable benefit of all of such Holders.
SECTION 508. Unconditional Right of Holders to Receive Principal, Premium and
Interest.
Notwithstanding any other provision in this Indenture, the Holder of any
Security shall have the right, which is absolute and unconditional, to receive
payment of the principal of (and premium, if any) and (subject to Section 307)
interest on such Security on the Stated Maturity or Maturities expressed in such
Security (or, in the case of redemption, on the Redemption Date, or, in the case
of a repurchase right at the option of the Holder, if any, on the repurchase
date specified pursuant to Section 301) and to institute suit for the
enforcement of any such payment, and such rights shall not be impaired without
the consent of such Holder.
SECTION 509. Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to enforce any
right or remedy under this Indenture and such proceeding has been discontinued
or abandoned for any reason, or has been determined adversely to the Trustee or
to such Holder, then and in every such case, subject to any determination in
such proceeding, the Company, the Trustee and the Holders shall be restored
severally and respectively to their former positions hereunder and thereafter
all rights and remedies of the Trustee and the Holders shall continue as though
no such proceeding had been instituted.
SECTION 510. Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement or payment of
mutilated, destroyed, lost or stolen Securities in the last paragraph of Section
306, no right or remedy herein conferred upon or reserved to the Trustee or to
the Holders is intended to be exclusive of any other right or remedy, and every
right and remedy shall, to the extent permitted by law, be cumulative and in
addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
SECTION 511. Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of Securities of any
series to exercise any right or remedy accruing upon any Event of Default with
respect to such series shall impair any such right or remedy or constitute a
waiver of any such Event of Default or an acquiescence therein. Every right and
remedy given
-41-
<PAGE>
by this Article or by law to the Trustee or to the Holders may be exercised
from time to time, and as often as may be deemed expedient, by the Trustee or
by the Holders, as the case may be.
SECTION 512. Control by Holders.
The Holders of a majority in aggregate principal amount of the Outstanding
Securities of any series shall have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred on the Trustee, with respect to the
Securities of such series, provided that
(1) such direction shall not be in conflict with any rule of law or
with this Indenture, and
(2) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction.
SECTION 513. Waiver of Past Defaults.
The Holders of not less than a majority in aggregate principal amount of
the Outstanding Securities of any series may, on behalf of the Holders of all
the Securities of such series, waive any past default hereunder with respect to
such series and its consequences, except a default
(1) in the payment of the principal of (or premium, if any) or
interest on any Security of such series when due (other than amounts due
and payable solely upon acceleration pursuant to Section 502), unless
theretofore paid in full and cured in accordance with the terms of this
Indenture, or
(2) in respect of a covenant or provision hereof which under Section
902 cannot be modified or amended without the consent of the Holder of each
Outstanding Security of such series affected.
Upon any such waiver, such default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured, for every purpose
of this Indenture; but no such waiver shall extend to any subsequent or other
default or impair any right consequent thereon.
SECTION 514. Undertaking for Costs.
All parties to this Indenture agree, and each Holder of any Security by
such Holder's acceptance thereof shall be deemed to have agreed, that any court
may in
-42-
<PAGE>
its discretion require, in any suit for the enforcement of any right or
remedy under this Indenture, or in any suit against the Trustee for any action
taken, suffered or omitted by it as Trustee, the filing by any party litigant in
such suit of an undertaking to pay the costs of such suit, and that such court
may in its discretion assess reasonable costs, including reasonable attorneys'
fees, against any party litigant in such suit, having due regard to the merits
and good faith of the claims or defenses made by such party litigant; provided,
however, that the provisions of this Section shall not apply to any suit
instituted by the Company, to any suit instituted by the Trustee, to any suit
instituted by any Holder, or group of Holders, holding in the aggregate more
than 10% in principal amount of the Outstanding Securities of the affected
series, or to any suit instituted by any Holder for the enforcement of the
payment of the principal of (or premium, if any) or interest on any Security on
or after the Stated Maturity or Maturities expressed in such Security (or, in
the case of redemption, on or after the Redemption Date or, in the case of a
repurchase right at the option of the Holder, if any, on the repurchase date
specified pursuant to Section 301).
SECTION 515. Waiver of Stay or Extension Laws.
The Company covenants (to the extent that it may lawfully do so) that it
will not at any time insist upon, or plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay or extension law wherever enacted,
now or at any time hereafter in force, which may affect the covenants or the
performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such law
and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.
ARTICLE SIX
THE TRUSTEE
SECTION 601. Certain Duties and Responsibilities.
(a) With respect to Securities of any series, except during the
continuance of an Event of Default,
(1) the Trustee undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture, and no implied
covenants or obligations shall be read into this Indenture against the
Trustee; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the
-43-
<PAGE>
Trustee and conforming to the requirements of this Indenture; but in
the case of any such certificates or opinions which by any provision hereof
are specifically required to be furnished to the Trustee, the Trustee shall
be under a duty to examine the same to determine whether or not they
conform to the requirements of this Indenture.
(b) With respect to Securities of any series, in case an Event of Default
has occurred and is continuing, the Trustee shall exercise such of the rights
and powers vested in it by this Indenture, and use the same degree of care and
skill in their exercise, as a prudent man would exercise or use under the
circumstances in the conduct of his own affairs.
(c) No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act, or its own willful misconduct, except that:
(1) this Subsection shall not be construed to limit the effect of
Subsection (a) of this Section;
(2) the Trustee shall not be liable for any error of judgment made in
good faith by a Responsible Officer, unless it shall be proved that the
Trustee was negligent in ascertaining the pertinent facts;
(3) the Trustee shall not be liable with respect to any action taken
or omitted to be taken by it in good faith with respect to any series of
Securities in accordance with the direction of the Holders of a majority in
principal amount of the Outstanding Securities of such series, relating to
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 this Indenture with respect to the Notes, provided such
direction shall not be in conflict with any rule of law or with this
Indenture; and
(4) no provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder, or in the exercise of any
of its rights or powers, if it shall have reasonable grounds for believing
that repayment of such funds or adequate indemnity against such risk or
liability is not reasonably assured to it.
(d) Whether or not therein expressly so provided, every provision of this
Indenture relating to the conduct or affecting the liability of or affording
protection to the Trustee shall be subject to the provisions of this Section.
SECTION 602. Notice of Defaults.
-44-
<PAGE>
Within 90 days after the occurrence of any default hereunder with respect
to the Securities of any series, the Trustee shall transmit by mail to all
Holders of Securities of such series, as their names and addresses appear in the
Security Register, notice of such default hereunder known to the Trustee, unless
such default shall have been cured or waived; provided however, that, except in
the case of a default in the payment of the principal of (or premium, if any) or
interest on any Security of such series or in the payment of any sinking fund
installment with respect to Securities of such series, the Trustee shall be
protected in withholding such notice if and so long as the board of directors,
the executive committee or a trust committee of directors and/or Responsible
Officers of the Trustee in good faith determine that the withholding of such
notice is in the interest of the Holders of Securities of such series; and
provided, further, that in the case of any default of the character specified in
Section 501(4) with respect to Securities of such series, no such notice to
Holders shall be given until at least 60 days after the occurrence thereof. For
the purpose of this Section, therein "default" means any event which is, or
after notice or lapse of time or both would become, an Event of Default with
respect to Securities of such series.
SECTION 603. Certain Rights of Trustee.
Subject to the provisions of Section 601:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of Indebtedness or other paper or
document believed by it to be genuine and to have been signed or presented
by the proper party or parties;
(b) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order or as
otherwise expressly provided herein and any resolution of the Board of
Directors may be sufficiently evidenced by a Board Resolution;
(c) whenever in the administration of this Indenture the Trustee
shall deem it desirable that a maker be proved or established prior to
taking, suffering or omitting any action hereunder, the Trustee (unless
other evidence be herein specifically prescribed) may, in the absence of
bad faith on its part, rely upon an Officers' Certificate;
(d) the Trustee may consult with counsel and the written advice of
such counsel or any Opinion of Counsel shall be full and complete
-45-
<PAGE>
authorization and protection in respect of any action taken, suffered or
omitted by it hereunder in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction
of any of the Holders of Securities of any series pursuant to this
Indenture, unless such Holders shall have offered to the Trustee reasonable
security or indemnity against the costs, expenses and liabilities which
might be incurred by it in compliance with such request or direction;
(f) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of Indebtedness or other paper or
document, but the Trustee, in its discretion, may make such furler inquiry
or investigation into such fact or matters as it may see fit, and, if the
Trustee shall determine to make such further inquiry or investigation, it
shall be entitled to examine the books, records and premises of the Company
pertaining to the Securities, personally or by agent or attorney;
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by
it hereunder; and
(h) the Trustee shall not be liable for any action taken, suffered or
omitted by it in good faith and believed by it to be authorized or within
the discretion, rights or powers conferred upon it by this Indenture.
SECTION 604. Not Responsible for Recitals or Issuance of Securities.
The recitals contained herein and in the Securities of each series, except
the Trustee's certificates of authentication, shall be taken as the statements
of the Company, and neither the Trustee nor any Authenticating Agent assumes any
responsibility for their correctness. The Trustee makes no representations as
to the validity or sufficiency of this Indenture or of the Securities of any
series, except that the Trustee represents that it is duly authorized to execute
and deliver this Indenture and any supplemental indenture, to authenticate such
Securities and to perform its obligations under this Indenture and such
Securities. The Trustee or any Authenticating Agent shall not be accountable
for the use or application by the Company of Securities of any series or the
proceeds thereof.
SECTION 605. May Hold Securities.
-46-
<PAGE>
The Trustee, any Authenticating Agent, any Paying Agent, any Security
Registrar or any other agent of the Company, in its individual or any other
capacity, may become the owner or pledgee of Securities and, subject to TIA
Sections 310(b) and 311, may otherwise deal with the Company with the same
rights it would have if it were not Trustee, Authenticating Agent, Paying Agent,
Security Registrar or such other agent.
SECTION 606. Money Held in Trust.
Money held by the Trustee in trust hereunder need not be segregated from
other funds except to the extent required by law. The Trustee shall be under no
liability for interest on any money received by it hereunder except as otherwise
agreed with the Company.
SECTION 607. Compensation and Reimbursement.
The Company agrees
(1) to pay to the Trustee 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 trustee
of an express trust);
(2) except as otherwise expressly provided herein, to reimburse the
Trustee upon its request for all reasonable expenses, disbursements and
advances incurred or made by the Trustee in accordance with any provision
of this Indenture (including the reasonable compensation and the expenses
and disbursements of its agents and counsel), except any such expense,
disbursement or advance as may be attributable to its negligence or bad
faith; and
(3) to indemnify the Trustee and its agents for, and to hold it
harmless against, any loss, liability or expense incurred without
negligence or bad faith on its part, arising out of or in connection with
the acceptance or administration of the trust or trusts hereunder,
including the costs and expenses of defending itself against any claim or
liability in connection with the exercise or performance of any of its
powers or duties hereunder.
(b) As security for the performance of the obligations of the Company
under this Section, the Trustee shall have a lien prior to the Securities upon
all property and funds held or collected by the Trustee as such, except funds
held in trust for the payment of principal of and interest on the Securities of
any series.
-47-
<PAGE>
"Trustee" for the purposes of this Section includes any predecessor
Trustee, but negligence or bad faith of any Trustee shall not be attributable to
any other Trustee.
(c) When the Trustee incurs expenses or renders services in connection
with an Event of Default specified in Section 501(6) or (7), the expenses and
the compensation for such services are intended to constitute expenses of
administration under any bankruptcy law.
SECTION 608. Disqualification; Conflicting Interests.
The provisions of TIA Section 310(b) shall apply to the Trustee.
SECTION 609. Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder which shall be eligible to
act under TIA Section 310(a)(1) and whose parent shall have a combined capital
and surplus of at least $50,000,000 and subject to supervision or examination by
Federal, State or District of Columbia authority. If such Corporation publishes
reports of condition at least annually, pursuant to law or to the requirements
of said supervising or examining authority, then for the purposes of this
Section, the combined capital and surplus of such Corporation shall be deemed to
be its combined capital and surplus as set forth in its most recent report of
condition so published. If at any time the Trustee shall cease to be eligible
in accordance with the provisions of this Section, it shall resign immediately
in the manner and with the effect hereinafter specified in this Article.
Neither the Company, nor any Person directly or indirectly controlling,
controlled by or under common control with the Company, shall act as Trustee
hereunder.
SECTION 610. Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee in accordance with the
applicable requirements of Section 611.
(b) The Trustee may resign at any time with respect to the Securities of
one or more series by giving written notice thereof to the Company specifying
its intention to resign, the applicable series affected by such resignation, the
reason therefor and the date upon which such resignation shall become effective.
Notwithstanding the foregoing, unless the reason for such resignations is a
conflict pursuant to Section 608, the Trustee must resign with respect to all
Securities if the Trustee resigns with respect to any series of Securities. If
the instrument of acceptance by a successor Trustee required by Section 611
shall not have been delivered to the Trustee within 60 days after the giving of
such notice of resignation,
-48-
<PAGE>
the resigning Trustee may petition any court of competent jurisdiction for
the appointment of a successor Trustee with respect to the Securities of such
series.
(c) The Trustee may be removed at any time with respect to the Securities
of any series by Act of the Holders of a majority in principal amount of the
Outstanding Securities of such series, delivered to the Trustee and to the
Company.
(d) The Trustee may be removed with respect to any or all series of
Securities at any time upon 30 days notice by filing with it an instrument in
writing signed on behalf of the Company by a duly authorized officer of the
Company specifying such removal and the date on which it is to become effective.
(e) If at any time:
(1) the Trustee shall fail to comply with TIA Section 310(b) after
written request therefor by the Company or by any Holder who has been a
bona fide Holder of a Security for at least six months, or
(2) the Trustee shall cease to be eligible under Section 609 and
shall fail to resign after written request therefor by the Company or by
any such Holder, or
(3) the Trustee shall become incapable of acting or shall be adjudged
a bankrupt or insolvent or a receiver of the Trustee or of its property
shall be appointed or any public officer shall take charge or control of
the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
then, in any such case, (i) the Company by a Board Resolution may remove the
Trustee with respect to any one or more series of Securities or all Securities,
or (ii) subject to Section 514, any Holder who has been a bona fide Holder of a
Security for at least six months may, on behalf of himself and all others
similarly situated, petition any court of competent jurisdiction for the removal
of the Trustee with respect to such series of Securities and the appointment of
a successor Trustee or Trustees.
(f) If the Trustee shall resign, be removed or become incapable of acting,
or if a vacancy shall occur in the office of Trustee for any cause, with respect
to the Securities of one or more series, the Company, by a Board Resolution,
shall promptly appoint a successor Trustee or Trustees with respect to the
Securities of that or those series (it being understood that any such successor
Trustee may be appointed with respect to the Securities of one or more or all of
such series and that at any time there shall be only one Trustee with respect to
the Securities of any particular series) and shall comply with the applicable
requirements of Section 611.
-49-
<PAGE>
If, within one year after such resignation, removal or incapability, or the
occurrence of such vacancy, a successor Trustee with respect to the
Securities of any series shall be appointed by Act of the Holders of a
majority in principal amount of the Outstanding Securities of such series
delivered to the Company and the retiring Trustee, the successor Trustee so
appointed shall, forthwith upon its acceptance of such appointment in
accordance with the applicable requirements of Section 611, become the
successor Trustee with respect to the Securities of such series and to that
extent supersede the successor Trustee appointed by the Company. If no
successor Trustee with respect to the Securities of any series shall have
been so appointed by the Company or the Holders and accepted appointment in
the manner required by Section 611, any Holder who has been a bona fide
Holder of a Security of such series for at least six months may, on behalf of
himself and all others similarly situated, petition any court of competent
jurisdiction for the appointment of a successor Trustee with respect to the
Securities of such series.
(g) The Company shall give notice of each resignation and each removal of
the Trustee with respect to the Securities of any series and each appointment of
a successor Trustee with respect to the Securities of any series by mailing
written notice of such event by first-class mail, postage prepaid, to all
Holders of Securities of such series as their names and addresses appear in the
Security Register. Each notice shall include the name of the successor Trustee
with respect to the Securities of such series and the address of its Corporate
Trust Office.
SECTION 611. Acceptance of Appointment by Successor.
(a) In case of the appointment hereunder of a successor Trustee with
respect to all Securities, every such successor Trustee so appointed shall
execute, acknowledge and deliver to the Company and to the retiring Trustee an
instrument accepting such appointment, and thereupon the resignation or removal
of the retiring Trustee shall become effective and such successor Trustee,
without any further act, deed or conveyance, shall become vested with all the
rights, powers, trusts and duties of the retiring Trustee; but, on the request
of the Company or the successor Trustee, such retiring Trustee shall, upon
payment of its charges, execute and deliver an instrument transferring to such
successor Trustee all the rights, powers and trusts of the retiring Trustee and
shall duly assign, transfer and deliver to such successor Trustee all property
and money held by such retiring Trustee hereunder.
(b) In case of the appointment hereunder of a successor Trustee with
respect to the Securities of one or more (but not all) series, the Company, the
retiring Trustee and each successor Trustee with respect to the Securities of
one or more series shall execute and deliver an indenture supplemental hereto
wherein each successor Trustee shall accept such appointment and which (1) shall
contain such provisions as shall be necessary or desirable to transfer and
confirm to, and to vest
-50-
<PAGE>
in, each successor Trustee all the rights, powers, trusts and duties of the
retiring Trustee with respect to the Securities of that or those series to
which the appointment of such successor Trustee relates, (2) if the retiring
Trustee is not retiring with respect to all Securities, shall contain such
provisions as shall be deemed necessary or desirable to confirm that all the
rights, powers, trusts and duties of the retiring Trustee with respect to the
Securities of that or those series as to which the retiring Trustee is not
retiring shall continue to be vested in the retiring Trustee, and (3) shall
add to or change any of the provisions of this Indenture as shall be
necessary to provide for or facilitate the administration of the trusts
hereunder by more than one Trustee, it being understood that nothing herein
or in such supplemental indenture shall constitute such Trustees co-trustees
of the same trust and that each such Trustee shall be trustee of a trust or
trusts hereunder separate and apart from any trust or trusts hereunder
administered by any other such Trustee; and upon the execution and delivery
of such supplemental indenture the resignation or removal of the retiring
Trustee shall become effective to the extent provided therein and each such
successor Trustee, without any further act, deed or conveyance, shall become
vested with all the rights, powers, trusts and duties of the retiring Trustee
with respect to the Securities of that or those series to which the
appointment of such successor Trustee relates; but, on request of the Company
or any successor Trustee, such retiring Trustee shall duly assign, transfer
and deliver to such successor Trustee all property and money held by such
retiring Trustee hereunder with respect to the Securities of that or those
series to which the appointment of such successor Trustee relates. Whenever
there is a successor Trustee with respect to one or more (but less than all)
series of securities issued pursuant to this Indenture, the terms "Indenture"
and "Securities" shall have the meanings specified in the provisos to the
respective definitions of those terms in Section 101 which contemplate such
situation.
(c) Upon request of any such successor Trustee, the Company shall execute
any and all instruments for more fully and certainly vesting in and confirming
to such successor Trustee all such rights, powers and trusts referred to in
paragraph (a) and (b) of this Section, as the case may be.
(d) No successor Trustee shall accept its appointment unless at the time
of such acceptance such successor Trustee shall be qualified and eligible under
this Article.
SECTION 612. Merger, Conversion, Consolidation or Succession to Business.
Any Corporation into which the Trustee may be merged or converted or with
which it may be consolidated, or any Corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
Corporation succeeding to all or substantially all the corporate trust business
of the Trustee, shall be the successor of the Trustee hereunder, provided such
Corporation
-51-
<PAGE>
shall be otherwise qualified and eligible under this Article, without the
execution or filing of any paper or any further act on the part of any of the
parties hereto. In case any Securities shall have been authenticated, but
not delivered, by the Trustee then in office, any successor by merger,
conversion or consolidation to such authenticating Trustee may adopt such
authentication and deliver the Securities so authenticated with the same
effect as if such successor Trustee had itself authenticated such Securities;
in case any of the Securities shall not have been authenticated by the
Trustee then in office, any successor by merger, conversion or consolidation
to such Trustee may authenticate such Securities either in the name of such
predecessor hereunder or in the name of the successor Trustee; and in all
such cases such certificates shall have the full force which it is anywhere
in the Securities or in this Indenture provided that the certificate of the
Trustee shall have; provided, however, that the right to adopt the
certificate of authentication of any predecessor Trustee or to authenticate
Securities in the name of any predecessor Trustee shall apply only to its
successor or successors by merger, conversion or consolidation.
SECTION 613. Preferential Collection of Claims Against Company.
The Trustee shall comply with TIA Section 311(a). A Trustee which has
resigned or been removed is subject to TIA Section 311(a) to the extent
indicated therein.
SECTION 614. Appointment of Authenticating Agent.
At any time when any of the Securities remain Outstanding the Trustee, with
the concurrence of the Company, may appoint an Authenticating Agent or Agents
with respect to one or more series of Securities which shall be authorized to
act on behalf of the Trustee to authenticate Securities of such series, and
Securities so authenticated shall be entitled to the benefits of this Indenture
and shall be valid and obligatory for all purposes as if authenticated by the
Trustee hereunder. Wherever reference is made in this Indenture to the
authentication and delivery of Securities by the Trustee or the Trustee's
certificate of authentication, such reference shall be deemed to include
authentication and delivery on behalf of the Trustee by an Authenticating Agent
and a certificate of authentication executed on behalf of the Trustee by an
Authenticating Agent. Each Authenticating Agent shall be acceptable to the
Company and shall at all times be a Corporation organized and doing business
under the laws of the United States of America, any State thereof or the
District of Columbia authorized under such laws to act as Authenticating Agent,
having a combined capital and surplus of not less than $50,000,000 and subject
to supervision or examination by Federal, State or District of Columbia
authority. If such Authenticating Agent publishes reports of condition at least
annually, pursuant to law or to the requirements of said supervising or
examining authority, then for the purposes of this Section, the combined capital
and surplus of such
-52-
<PAGE>
Authenticating Agent shall be deemed to be its combined capital and surplus
as set forth in its most recent report of condition so published. If at any
time an Authenticating Agent shall cease to be eligible in accordance with
the provisions of this Section, such Authenticating Agent shall resign
immediately in the manner and with the effect specified in this Section.
Any Corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any Corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any Corporation succeeding to the corporate agency or
corporate trust business of an Authenticating Agent, shall continue to be an
Authenticating Agent, provided such Corporation shall be otherwise eligible
under this Section, without the execution or filing of any paper or any further
act on the part of the Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving written notice
thereof to the Trustee and to the Company. The Trustee may at anytime terminate
the agency of an Authenticating Agent by giving written notice thereof to such
Authenticating Agent and to the Company. Upon receiving such a notice of
resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, the Trustee may appoint a successor Authenticating
Agent which shall be acceptable to the Company and shall mail written notice of
such appointment by first class mail, postage prepaid, to all Holders of
Securities of the series with respect to which such Authenticating Agent will
serve, as their names and addresses appear in the Security Register. Any
successor Authenticating Agent upon acceptance of its appointment hereunder
shall become vested with all the rights, powers and duties of its predecessor
hereunder, with like effect as if originally named as an Authenticating Agent.
No successor Authenticating Agent shall be appointed unless eligible under the
provisions of this Section.
The Trustee agrees to pay to each Authenticating Agent from time to time
reasonable compensation for its services under this Section, and the Trustee
shall be entitled to reimbursement for such payments subject to Section 607.
If an appointment with respect to one or more series is made pursuant to
this Section, the Securities of such series may have endorsed thereon, in
addition to the Trustee's certificate of authentication an alternate certificate
of authentication in the following form:
-53-
<PAGE>
This is one of the Securities of the series designated herein and issued
pursuant to the within-mentioned Indenture.
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, as
Trustee
By __________________________
Authorized Signature
____________________________,
as Authenticating Agent
By __________________________
Authorized Signature
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 701. Preservation of Information; Communications to Holders.
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders of such series of Securities
received by the Trustee in its capacity as Security Registrar.
(b) The rights of Holders of any series of Securities to communicate with
other Holders of such series with respect to their rights under this Indenture
or under such Securities, and the corresponding rights and privileges of the
Trustee, shall be as provided by TIA Section 312(b).
(c) Every Holder of Securities, by receiving and holding the same, agrees
with the Company and the Trustee that neither the Company nor the Trustee nor
any agent of either of them shall be held accountable by reason of the
disclosure of any such information as to the names and addresses of the Holders
in accordance with Section 702(b), regardless of the source from which such
information was derived, and that the Trustee shall not be held accountable by
reason of mailing any material pursuant to a request made under Section 702(b).
-54-
<PAGE>
SECTION 702. Reports by Trustee.
Within 60 days after May 15 of each year commencing with the later of May
15, 1996 or the first May 15 after the first issuance of Securities pursuant to
this Indenture, the Trustee shall transmit by mail to all Holders of Securities
of all series as provided in TIA Section 313(c) a brief report dated as of such
May 15 if required by TIA Section 313(a). A copy of each such report shall, at
the time of such transmission to Holders, be filed by the Trustee with each
stock exchange upon which any Securities are listed, with the Commission and
with the Company. The Company will notify the Trustee when any series of
Securities is listed on any stock exchange.
SECTION 703. Reports by Company.
The Company shall:
(1) file with the Trustee, within 15 days after the Company is
required to file the same with the Commission, copies of the annual reports
and of the information, documents and other reports (or copies of such
portions of any of the foregoing as the Commission may from time to time by
rules and regulations prescribe) which the Company may be required to file
with the Commission pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934; or, if the Company is not required to file
information, documents or reports pursuant to either of said Sections, then
it shall file with the Trustee and the Commission, in accordance with rules
and regulations prescribed from time to time by the Commission, such of the
supplementary and periodic information, documents and reports which may be
required pursuant to Section 13 of the Securities Exchange Act of 1934 in
respect of a security listed and registered on a national securities
exchange as may be prescribed from time to time in such rules and
regulations;
(2) file with the Trustee and the Commission, in accordance with
rules and regulations prescribed from time to time by the Commission, such
additional information, documents and reports with respect to compliance by
the Company with the conditions and covenants of this Indenture as may be
required from time to time by such rules and regulations;
(3) transmit by mail to all Holders of all series of Securities, as
their names and addresses appear in the Security Register, reports as may
be required by rules and regulations prescribed from time to time by the
Commission; and
(4) furnish to the Trustee, within 120 days after the end of each
fiscal year of the Company ending after the date hereof, a brief
certificate of the
-55-
<PAGE>
Company's principal executive officer, principal financial officer
or principal accounting officer as to his or her knowledge of the
Company's compliance with all conditions and covenants under this
Indenture. For purposes of this paragraph, such compliance
shall be determined without regard to any period of grace or
requirement of notice provided under this Indenture.
The Trustee has no duty to review the financial or other reports described
in paragraphs (1) and (2) of this Section for purposes of determining compliance
with this or any other provision of this Indenture.
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 801. Company May Consolidate, Etc. Only on Certain Terms.
The Company shall not consolidate with or merge into any other Person or
convey, transfer or lease its properties and assets substantially as an entirety
to any Person unless:
(1) the Person formed by such consolidation or into which the Company
is merged or the Person which acquires by conveyance or transfer, or which
leases, the properties and assets of the Company substantially as an
entirety shall be a Corporation, partnership or trust, shall be organized
and validly existing under the laws of the United States of America, any
State thereof or the District of Columbia and shall expressly assume, by an
indenture supplemental hereto, executed and delivered to the Trustee, in
form satisfactory to the Trustee, the due and punctual payment of the
principal of (and premium, if any) and interest on all the Securities and
the performance or observance of every covenant of this Indenture on the
part of the Company to be performed or observed;
(2) immediately after giving effect to such transaction, no Event of
Default, and no event which, after notice or lapse of time or both, would
become an Event of Default, shall have happened and be continuing; and
(3) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that such consolidation, merger,
conveyance, transfer or lease and, if a supplemental indenture is required
in connection with such transaction, such supplemental indenture, comply
with this Article and that all conditions precedent herein provided for
relating to such transaction have been complied with.
-56-
<PAGE>
SECTION 802. Successor Substituted.
Upon any consolidation of the Company with, or merger by the Company into,
any other Person or any conveyance, transfer or lease of the properties and
assets of the Company substantially as an entirety in accordance with Section
801, the successor Person formed by such consolidation or into which the Company
is merged or to which such conveyance, transfer or lease is made shall succeed
to, and be substituted for, and may exercise every right and power of, the
Company under this Indenture with the same effect as if such successor Person
had been named as the Company herein, and thereafter, except in the case of a
lease, the predecessor Person shall be relieved of all obligations and covenants
under this Indenture and the Securities.
ARTICLE NINE
SUPPLEMENTAL INDENTURES
SECTION 901. Supplemental Indentures Without Consent of Holders.
Without the consent of any Holders, the Company, when authorized by or
pursuant to a Board Resolution, and the Trustee, at any time and from time to
time, may enter into one or more indentures supplemental hereto, in form
satisfactory to the Trustee, for any of the following purposes:
(1) to evidence the succession of another Person to the Company and
the assumption by any such successor of the covenants of the Company herein
and in the Securities; or
(2) to add to the covenants of the Company for the benefit of the
Holders of all or any series of Securities (and if such covenants are to be
for the benefit of less than all series of Securities, stating that such
covenants are expressly being included solely for the benefit of one or
more specified series) or to surrender any right or power herein conferred
upon the Company; or
(3) to add any additional Events of Default (and if such Events of
Default are to be for the benefit of less than all series of Securities,
stating that such Events of Default are being included solely for the
benefit of such series); or
(4) to add to or change any of the provisions of this Indenture to
such extent as shall be necessary to permit or facilitate the issuance of
Securities in bearer form, registrable or not registrable as to principal,
and with or without interest coupons, or to permit or facilitate the
issuance of Securities of any series in certificated or uncertificated
form; or
-57-
<PAGE>
(5) to add to, change or eliminate any of the provisions of this
Indenture in respect of one or more series of Securities, provided that any
such addition, change or elimination (i) shall neither (A) apply to any
Security of any series created prior to the execution of such supplemental
indenture and entitled to the benefit of such provision nor (B) modify the
rights of the Holder of any such Security with respect to such provision or
(ii) shall become effective only when there is no such Security
Outstanding; or
(6) to secure the Securities of any series; or
(7) to establish the form or terms of Securities of any series as
permitted by Sections 201 and 301; or
(8) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Securities of one or
more series and to add to or change any of the provisions of this Indenture
as shall be necessary to provide for or facilitate the administration of
the trusts hereunder by more than one Trustee, pursuant to the requirements
of Section 61 l(b); or
(9) to cure any ambiguity or defect in or to correct or supplement
any provision herein which may be inconsistent with any other provision in
this Indenture or any Security of any series, or to make any other
provisions with respect to matters or questions arising under this
Indenture, provided such action shall not adversely affect the interests of
the Holders of Securities of any series in any material respect.
SECTION 902. Supplemental Indentures With Consent of Holders.
With the consent of the Holders of not less than a majority in aggregate
principal amount of the Securities of all series at the time Outstanding
affected by such supplemental indenture (voting as one class), by Act of said
Holders delivered to the Company and the Trustee, the Company, when authorized
by a Board Resolution, and the Trustee may enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Indenture or of
modifying in any manner the rights of the Holders of Securities of such series
under this Indenture; provided, however, that no such supplemental indenture
shall, without the consent of the Holder of each Outstanding Security affected
thereby,
(1) change the Stated Maturity of the principal of, or any
installment of principal of or interest on, any such affected Security, or
reduce the principal amount thereof or the rate of interest thereon or any
premium payable upon the redemption thereof, or reduce the amount of the
principal
-58-
<PAGE>
of an Original Issue Discount Security that would be due and
payable upon a declaration of acceleration of the Maturity thereof pursuant
to Section 502, or change any Place of Payment where, or the coin or
currency in which, any such Security or any premium or the interest thereon
is payable, or impair the right to institute suit for the enforcement of
any such payment on or after the Stated Maturity thereof (or, in the case
of redemption or repayment, on or after the Redemption Date or any
repayment date), or
(2) reduce the percentage in principal amount of the Outstanding
Securities of any series, the consent of whose Holders is required for any
modifications or amendments to the Indenture with respect to such series or
to the terms and conditions of such series or to approve a supplemental
indenture with respect to such series, or the consent of whose Holders is
required for any waiver with respect to such series of compliance with
certain provisions of this Indenture or certain defaults hereunder and
their consequences provided for in this Indenture, or
(3) modify any of the provisions of this Section 902, Section 513 or
Section 1005, except to increase any such percentage or to provide that
certain other provisions of this Indenture cannot be modified or waived
without the consent of the Holder of each Outstanding Security affected
thereby; provided however, that this clause shall not be deemed to require
the consent of any Holder with respect to changes in the references to "the
Trustee" and concomitant changes in this Section 902 and Section 1005, or
the deletion of this proviso, in accordance with the requirements of
Sections 61l(b) and 901(8).
A supplemental indenture which changes or eliminates any covenant or other
provision of this Indenture which has expressly been included solely for the
benefit of one or more particular series of Securities, or which modifies the
rights of the Holders of Securities of such series with respect to such covenant
or other provision, shall be deemed not to affect the rights under this
Indenture of the Holders of Securities of any other series.
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such Act shall approve the substance thereof.
SECTION 903. Execution of Supplemental Indentures.
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby of
the trusts created by this Indenture, the Trustee shall be entitled to receive,
and (subject to Section 601) shall be fully protected in relying upon, an
Opinion of Counsel stating that the
-59-
<PAGE>
execution of such supplemental indenture is authorized or permitted by this
Indenture. The Trustee may, but shall not be obligated to, enter into any
such supplemental indenture which affects the Trustee's own rights, duties or
immunities under this Indenture or otherwise.
SECTION 904. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this Article, this
Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Securities of the series affected thereby theretofore or thereafter
authenticated and delivered hereunder shall be bound thereby to the extent
provided therein.
SECTION 905. Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the Trust Indenture Act as then in effect.
SECTION 906. Reference in Securities to Supplemental Indentures.
Securities authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Trustee, bear a notation in a form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so determine,
new Securities of any series so modified as to conform, in the opinion of the
Trustee and the Company, to any such supplemental indenture may be prepared and
executed by the Company and authenticated and delivered by the Trustee in
exchange for Outstanding Securities of such series.
SECTION 907. Notice of Supplemental Indentures.
Promptly after the execution by the Company and the Trustee of any
supplemental indenture pursuant to the provisions of Section 902, the Company
shall give notice thereof to the Holders of each Outstanding Security so
affected, pursuant to Section 106, setting forth in general terms the substance
of such supplemental indenture.
SECTION 908. Supplemental Indentures With Consent of Holders of Senior Debt.
Without the consent of the holders of all Senior Debt affected thereby, the
Company and the Trustee shall not have the power to enter into an indenture or
indentures supplemental hereto for the purpose of amending or modifying the
-60-
<PAGE>
definition of "Senior Debt" in this Indenture in a manner adverse to the holders
of such affected Senior Debt.
ARTICLE TEN
COVENANTS
SECTION 1001. Payment of Principal, Premium and Interest.
The Company covenants and agrees for the benefit of each series of
Securities that it will duly and punctually pay the principal of (and premium,
if any) and interest on the Securities of such series in accordance with the
terms of such Securities and this Indenture. In the absence of contrary
provisions with respect to the Securities of any series, interest on the
Securities of any series may, at the option of the Company, be paid by check
mailed to the address of the Person entitled thereto as it appears on the
Security Register.
SECTION 1002. Maintenance of Office or Agency.
The Company will maintain in each Place of Payment for any series of
Securities an office or agency where Securities of such series may be presented
or surrendered for payment, where Securities of such series may be surrendered
for registration of transfer or exchange and where notices and demands to or
upon the Company in respect of the Securities of such series and this Indenture
may be served. The Company will give prompt written notice to the Trustee of
the location and any change in the location of such office or agency. If at any
time the Company shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the Corporate Trust
Office of the Trustee, and the Company hereby appoints the Trustee as its agent
to receive all such presentations, surrenders, notices and demands.
The Company may also from time to time designate one or more other offices
or agencies where the Securities of one or more series may be presented or
surrendered for any or all such purposes and may from time to time rescind such
designations; provided, however, that no such designation or rescission shall in
any manner relieve the Company of its obligation to maintain an office or agency
in each Place of Payment for Securities of any series for such purposes. The
Company will give prompt written notice to the Trustee of any such designation
or rescission and of any change in the location of any such other office or
agency.
SECTION 1003. Money for Securities Payments to Be Held in Trust.
If the Company shall at any time act as its own Paying Agent with respect
to any series of Securities, it will, on or before each due date of the
principal of (and
-61-
<PAGE>
premium, if any) or interest on any of the Securities of such series,
segregate and hold in trust for the benefit of the Persons entitled thereto a
sum in the currency in which such series of Securities is payable sufficient
to pay the principal (and premium, if any) or interest so becoming due until
such sums shall be paid to such Persons or otherwise disposed of as herein
provided and will promptly notify the Trustee of its failure so to act.
Whenever the Company shall have one or more Paying Agents for any series of
Securities, it will, prior to each due date of the principal of (and premium, if
any) or interest on any Securities of such series, deposit with a Paying Agent a
sum sufficient to pay the principal (and premium, if any) or interest so
becoming due, such sum to be held in trust for the benefit of the Persons
entitled to such principal, premium or interest, and (unless such Paying Agent
is the Trustee) the Company will promptly notify the Trustee of its failure so
to act.
The Company will cause each Paying Agent for any series of Securities other
than the Trustee to execute and deliver to the Trustee an instrument in which
such Paying Agent shall agree with the Trustee, subject to the provisions of
this Section, that such Paying Agent will:
(1) hold all sums held by it for the payment of the principal of (and
premium, if any) or interest on Securities of such series in trust for the
benefit of the Holders of such Securities until such sums shall be paid to
such Holders or otherwise disposed of as herein provided;
(2) give the Trustee notice of any default by the Company (or any
other obligor upon the Securities of such series) in the making of any
payment of principal (and premium, if any) or interest on the Securities of
such series; and
(3) during the continuance of any such default by the Company (or any
other obligor upon the Securities of such series) in the making of any
payment of principal (and premium, if any) or interest on the Securities of
such series, upon the written request of the Trustee, forthwith pay to the
Trustee all sums so held in trust by such Paying Agent.
The Company may at any time, for the purpose of obtaining the satisfaction
and discharge of this Indenture or for any other purpose, pay, or by Company
Order direct any Paying Agent to pay, to the Trustee all sums held in trust by
the Company or such Paying Agent, such sums to be held by the Trustee upon the
same trusts as those upon which such sums were held by the Company or such
Paying Agent, and, upon such payment by any Paying Agent to the Trustee, such
Paying Agent shall be released from all further liability with respect to such
money.
-62-
<PAGE>
Any money deposited with the Trustee or any Paying Agent, or then held by
the Company, in trust for the payment of the principal of (and premium, if any)
or interest on any Security and remaining unclaimed for two years after such
principal (and premium, if any) or interest has become due and payable shall be
paid to the Company on Company Request, or (if then held by the Company) shall
be discharged from such trust; and the Holder of such Security shall thereafter,
as an unsecured general creditor, look only to the Company for payment thereof,
and all liability of the Trustee or such Paying Agent with respect to such trust
money, and all liability of the Company as trustee thereof, shall thereupon
cease; provided, however, that the Trustee or such Paying Agent, before being
required to make any such repayment, may at the expense of the Company cause to
be published once, in a newspaper published in the English language, customarily
published on each Business Day and of general circulation in the Borough of
Manhattan, The City of New York, notice that such money remains unclaimed and
that, after a date specified therein, which shall not be less than 30 days from
the date of such publication, any unclaimed balance of such money then remaining
will be repaid to the Company on Company Request.
SECTION 1004. Existence.
Subject to Article Eight, the Company will do or cause to be done all
things necessary to preserve and keep in full force and effect its existence,
rights (charter and statutory) and franchises; provided, however, that the
Company shall not be required to preserve any-such right or franchise if the
Board of Directors shall determine that the preservation thereof is no longer
desirable in the conduct of the business of the Company and that the loss
thereof is not disadvantageous in any material respect to the Holders.
SECTION 1005. Defeasance of Certain Obligations.
The following provisions shall apply to the Securities of each series
unless specifically otherwise provided in a Board Resolution, Officers'
Certificate or indenture supplemental hereto provided pursuant to Section 301.
The Company may omit to comply with any term, provision or condition set forth
in Article Ten and Section 301(12) and any such omission with respect Article
Ten and to Section 301(12) shall not be an Event of Default, in each case with
respect to the Securities of that series, provided that the following conditions
have been satisfied:
(1) with reference to this Section 1005, the Company has deposited or
caused to be irrevocably deposited with the Trustee (or another trustee
satisfying the requirements of Section 609) as trust funds in trust,
specifically pledged as security for, and dedicated solely to, the benefit
of the Holders of the Securities of that series, (i) money in an amount, or
(ii) U.S. Government Obligations which through the payment of interest and
principal in respect
-63-
<PAGE>
thereof in accordance with their terms will provide not later than
one day before the due date of any payment referred to in clause (A)
or (B) of this subparagraph (1) money in an amount, or (iii) a
combination thereof, sufficient, in the opinion of a nationally-recognized
firm of independent public accountants expressed in a written certification
thereof delivered to the Trustee, to pay and discharge (A) the principal of
(and premium, if any) and each installment of principal (and premium, if
any) and interest on the Outstanding Securities on the Stated Maturity of
such principal or installments of principal and interest and (B) any
mandatory sinking fund payments or analogous payments applicable to the
Securities of such series on the day on which such payments are due and
payable in accordance with the terms of this Indenture and of such
Securities;
(2) such deposit shall not cause the Trustee with respect to the
Securities of that series to have a conflicting interest as defined in
Section 608 and for purposes of the Trust Indenture Act with respect to the
Securities of any series;
(3) such deposit will not result in a breach or violation of, or
constitute a default under, this Indenture or any other agreement or
instrument to which the Company is a party or by which it is bound;
(4) no Event of Default or event which with notice or lapse of time
would become an Event of Default with respect to the Securities of that
series shall have occurred and be continuing on the date of such deposit;
(5) the Company has delivered to the Trustee an Opinion of Counsel to
the effect that Holders of the Securities of such series will not recognize
income, gain or loss for Federal income tax purposes as a result of such
deposit and defeasance of certain obligations and will be subject to
Federal income tax on the same amount and in the same manner and at the
same times as would have been the case if such deposit and defeasance had
not occurred; and
(6) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent
herein provided for relating to the defeasance contemplated in this Section
have been complied with.
SECTION 1006. Waiver of Certain Covenants.
The Company may omit in any particular instance to comply with any term,
provision or condition set forth in Article Ten and Section 301(12), inclusive,
with respect to the Securities of any series if before the time for such
compliance the
-64-
<PAGE>
Holders of not less than a majority in aggregate principal amount of the
Outstanding Securities of such series shall, by Act of such Holders, either
waive such compliance in such instance or generally waive compliance with
such term, provision or condition, but no such waiver shall extend to or
affect such term, provision or condition except to the extent so expressly
waived, and, until such waiver shall become effective, the obligations of the
Company and the duties of the Trustee in respect of any such term, provision
or condition shall remain in full force and effect.
The Company may, but shall not be obligated to, fix a record date for the
purpose of determining the Persons entitled to waive any such term, provision or
condition. If a record date is fixed for such purpose, the Holders on such
record date or their duly designated proxies, and only such Persons, shall be
entitled to waive any such term, provision or condition hereunder, whether or
not such Holders remain Holders after such record date; provided that unless the
Holders of not less than a majority in principal amount of the Outstanding
Securities of such series shall have waived such term, provision or condition
prior to the date which is 90 days after such record date, any such waiver
previously given shall automatically and without further action by any Holder be
canceled and of no further effect.
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
SECTION 1101. Applicability of Article.
Securities of any series which are redeemable before their Stated Maturity
shall be redeemable in accordance with their terms and (except as otherwise
specified as contemplated by Section 301 for Securities of any series) in
accordance with this Article.
SECTION 1102. Election to Redeem; Notice to Trustee.
The election of the Company to redeem Securities of any series shall be
evidenced by an Officers' Certificate. The Company shall, at least 45 days
prior to the Redemption Date fixed by the Company (unless a shorter notice shall
be satisfactory to the Trustee), notify the Trustee of
(1) such Redemption Date,
(2) the Redemption Price,
(3) if the Securities of such series have different terms and less
than all of the Securities of such series are to be redeemed, the terms of
the Securities to be redeemed,
-65-
<PAGE>
(4) whether the redemption is pursuant to a mandatory or optional
sinking fund, or both, if such is the case, and
(5) if less than all the Securities of such series with identical
terms are to be redeemed, the principal amount of such Securities to be
redeemed.
In the case of any redemption of Securities prior to the expiration of any
restriction on such redemption provided in the terms of such Securities or
elsewhere in this Indenture, the Company shall furnish the Trustee with an
Officers' Certificate evidencing compliance with such restriction.
SECTION 1103. Selection by Trustee of Securities to Be Redeemed.
If less than all the Securities of like tenor of any series are to be
redeemed, the particular Securities to be redeemed shall be selected not more
than 60 days prior to the Redemption Date by the Trustee, from the Outstanding
Securities of like tenor of such series not previously called for redemption, by
such method as the Trustee shall deem fair and appropriate and which may provide
for the selection for redemption of portions (equal to the minimum authorized
denomination for Securities of like tenor of that series or any integral
multiple thereof of the principal amount of Securities of such series of a
denomination larger than the minimum authorized denomination for Securities of
that series).
The Trustee shall promptly notify the Company in writing of the Securities
selected for redemption and, in the case of any Securities selected for partial
redemption, the principal amount thereof to be redeemed.
For all purposes of this Indenture, unless the context otherwise requires,
all provisions relating to the redemption of Securities shall relate, in the
case of any Securities redeemed or to be redeemed only in part, to the portion
of the principal amount of such Securities which has been or is to be redeemed.
SECTION 1104. Notice of Redemption.
Notice of redemption shall be given by first-class mail, postage prepaid,
mailed not less than 30 nor more than 60 days prior to the Redemption Date, to
each Holder of Securities to be redeemed, at each such Holder's address
appearing in the Security Register.
All notices of redemption shall state:
(1) the Redemption Date,
-66-
<PAGE>
(2) the Redemption Price,
(3) if less than all the Outstanding Securities of like tenor of any
series are to be redeemed, the identification (and, in the case of partial
redemption, the principal amounts) of the particular Securities to be
redeemed,
(4) that on the Redemption Date the Redemption Price will become due
and payable upon each such Security to be redeemed and, if applicable, that
interest thereon will cease to accrue on and after said date,
(5) the place or places where such Securities are to be surrendered
for payment of the Redemption Price, and
(6) that the redemption is for a sinking fund, if such is the case.
Notice of redemption of Securities to be redeemed at the election of the
Company shall be given by the Trustee in the name and at the expense of the
Company, unless the Company notifies the Trustee of its intention to give such
notice directly.
SECTION 1105. Deposit of Redemption Price.
On or prior to any Redemption Date, the Company shall deposit with the
Trustee or with a Paying Agent (or, if the Company is acting as its own Paying
Agent, segregate and hold in trust as provided in Section 1003) an amount of
money in immediately available funds sufficient to pay the Redemption Price of,
and (except if the Redemption Date shall be an Interest Payment Date) accrued
interest on, all the Securities which are to be redeemed on that date.
SECTION 1106. Securities Payable on Redemption Date.
Notice of redemption having been given as aforesaid, the Securities so to
be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified, and from and after such date (unless the
Company shall default in the payment of the Redemption Price and accrued
interest) such Securities shall cease to bear interest. Upon surrender of any
such Security for redemption in accordance with said notice, such Security shall
be paid by the Company at the Redemption Price, together with accrued interest
to the Redemption Date; provided, however, that, unless otherwise specified as
contemplated by Section 301, installments of interest whose Stated Maturity is
on or prior to the Redemption Date shall be payable to the Holders of such
Securities, or one or more Predecessor Securities, registered as such at the
close of business on the
-67-
<PAGE>
relevant Regular Record Dates according to their terms and the provisions of
Section 307.
If any Security called for redemption shall not be so paid upon surrender
thereof for redemption, the principal (and premium, if any) shall, until paid,
bear interest from the Redemption Date at the rate prescribed therefor in the
Security.
SECTION 1107. Securities Redeemed in Part.
Any Security which is to be redeemed in part shall be surrendered at a
Place of Payment for such series (with, if the Company or the Trustee so
requires, due endorsement by, or a written instrument of transfer in form
satisfactory to the Company and the Trustee duly executed by, the Holder thereof
or such Holder's attorney duly authorized in writing), and the Company shall
execute, and the Trustee shall authenticate and deliver to the Holder of such
Security without service charge, a new Security or Securities of the same series
and of like tenor, of any authorized denomination as requested by such Holder,
in aggregate principal amount equal to and in exchange for the unredeemed
portion of the principal of the Security so surrendered. To the extent a series
of Securities represented by a Global Security is to be redeemed only in part, a
notation of such redemption shall be made by the Trustee in the schedule of
exchanges on the Global Security.
ARTICLE TWELVE
SINKING FUNDS
SECTION 1201. Applicability of Article.
The provisions of this Article shall be applicable to any sinking fund for
the retirement of Securities of a series except as otherwise specified as
contemplated by Section 301 for Securities of such series.
The minimum amount of any sinking fund payment provided for by the terms of
Securities of any series is herein referred to as a "mandatory sinking fund
payment", and any payment in excess of such minimum amount provided for by the
terms of Securities of any series is herein referred to as an "optional sinking
fund payment". If provided for by the terms of Securities of any series, the
cash amount of any sinking fund payment may be subject to reduction as provided
in Section 1202. Each sinking fund payment shall be applied to the redemption
of Securities of any series as provided for by the terms of Securities of such
series.
SECTION 1202. Satisfaction of Sinking Fund Payments with Securities.
The Company (1) may deliver Outstanding Securities of like tenor of a
series (other than any previously called for redemption) and (2) may apply as a
credit
-68-
<PAGE>
Securities of like tenor of a series which have been redeemed either at
the election of the Company pursuant to the terms of such Securities or through
the application of permitted optional sinking fund payments pursuant to the
terms of such Securities, in each case in satisfaction of all or any part of any
sinking fund payment with respect to the Securities of like tenor of such series
required to be made pursuant to the terms of such Securities as provided for by
the terms of such series; provided that such Securities have not been previously
so credited. Such Securities shall be received and credited for such purpose by
the Trustee at the Redemption Price specified in such Securities for redemption
through operation of the sinking fund and the amount of such sinking fund
payment shall be reduced accordingly. Such Securities shall be first applied to
the sinking fund payment next due and any excess shall be applied to the
following sinking fund payments in the order they are due.
SECTION 1203. Redemption of Securities for Sinking Fund.
Not less than 60 days prior to each sinking fund payment date for
Securities of like tenor of a series, the Company will deliver to the Trustee an
Officers' Certificate specifying the amount of the next ensuing sinking fund
payment for such Securities pursuant to the terms of such Securities, the
portion thereof, if any, which is to be satisfied by payment of cash and the
portion thereof, if any, which is to be satisfied by delivering and crediting
Securities of like tenor of that series pursuant to Section 1202 and, at the
time of delivery of such Officers' Certificate, will also deliver to the Trustee
any Securities to be so delivered. Not less than 30 days before each such
sinking fund payment date the Trustee shall select the Securities to be redeemed
upon such sinking fund payment date in the manner specified in Section 1103 and
cause notice of the redemption thereof to be given in the name of and at the
expense of the Company in the manner provided in Section 1104. Such notice
having been duly given. the redemption of such Securities shall be made upon
the terms and in the manner stated in Sections 1106 and 1107.
ARTICLE THIRTEEN
SUBORDINATION
SECTION 1301. Agreement to Subordinate.
The Company covenants and agrees, and each Holder of Securities of each
series, by such Holder's acceptance thereof, likewise covenants and agrees, that
the indebtedness evidenced by the Securities of each series and the payment of
the principal thereof, premium, if any, sinking fund requirements therefor and
interest thereon shall be subordinate and subject in right of payment, to the
extent and in the manner hereinafter set forth, to the prior payment in full in
cash or cash equivalents of all Senior Debt.
-69-
<PAGE>
SECTION 1302. Distribution on Dissolution, Liquidation and Reorganization.
Upon any distribution to creditors of the Company in a liquidation,
dissolution or winding up of the Company, whether voluntary or involuntary, or
in a bankruptcy, reorganization, insolvency, receivership or similar proceeding
relating to the Company or its properties, or upon an assignment for the benefit
of creditors or any other marshaling of the assets and liabilities of the
Company (each such event, if any, herein sometimes referred to as a
"Proceeding"):
(a) all principal of, premium, if any, interest (including interest
after the commencement of any such Proceeding at the rate specified in the
applicable Senior Debt) and commitment fees (the "Obligations") due on, or
to become due on or in respect of, all Senior Debt shall first be paid in
full in cash or cash equivalents before any payment or distribution of any
kind or character, whether in cash, property or securities, by set off or
otherwise (including any payment or distribution which may be payable or
deliverable by reason of the payment of any Junior Subordinated Debt), on
account of the principal of (and premium, if any) or interest on any
Securities or on account of any purchase, redemption, retirement or other
acquisition of Securities by the Company, any Subsidiary of the Company,
the Trustee or any Paying Agent or on account of any other obligation of
the Company in respect of any Securities (all such payments, distributions,
purchases, redemptions, retirements and acquisitions, whether or not in
connection with a Proceeding, herein referred to, individually and
collectively, as a "Securities Payment"), or before the Holders of the
Securities shall be entitled to retain any assets so paid or distributed in
respect thereof; and
(b) until the Senior Debt is paid in full in cash or cash equivalents
(as provided in subsection (a) above), any Securities Payment to which the
Holders of the Securities or the Trustee for their benefit would be
entitled except for the provisions of this Section 1302, shall be paid or
delivered by the Company or any receiver, trustee in bankruptcy,
liquidating trustee, agent or other person making such payment or
distribution directly to the holders of Senior Debt or their representative
or representatives or the trustee or trustees under any indenture pursuant
to which any instruments evidencing any Senior Debt may have been issued,
as their respective interests may appear.
For purposes of this Article Thirteen only, the words "any payment or
distribution of any kind or character, whether in cash, property or securities"
shall not be deemed to include (i) a payment or distribution of stock or
securities of the Company provided for by a plan of reorganization or
readjustment authorized by an order or decree of a court of competent
jurisdiction in a reorganization proceeding under any applicable bankruptcy law
or of any other corporation provided for by
-70-
<PAGE>
such plan of reorganization or readjustment which stock or securities are
subordinated in right of payment to all then outstanding Senior Debt to the
same extent as, or to a greater extent than, the Securities are so
subordinated as provided in this Article; or (ii) any deposit, or payment
made therefrom, pursuant to Article Four or Section 1005, with respect to any
series of Securities; provided that, in the case of any such payment from a
defeasance trust, the assets deposited in trust to fund such payment have
been so deposited for any period of at least 90 consecutive days without the
occurrence of a blockage of payment on such series of Securities pursuant to
this Section 1302 or Section 1303 hereof. The consolidation of the Company
with, or the merger of the Company into, another Person or the liquidation or
dissolution of the Company following the conveyance or transfer of all or
substantially all of its properties and assets as an entirety to another
Person upon the terms and conditions set forth in Article Eight shall not be
deemed a Proceeding for the purposes of this Section if the Person formed by
such consolidation or into which the Company is merged or the Person which
acquires by conveyance or transfer such properties and assets as an entirety,
as the case may be, shall, as a part of such consolidation, merger,
conveyance or transfer, comply with the conditions set forth in Article Eight.
SECTION 1303. No Payment When Senior Debt in Default.
In the event that any Senior Payment Default shall have occurred, then no
Securities Payment shall be made unless and until such Senior Payment Default
shall have been cured or waived in writing or shall have ceased to exist or all
Obligations in respect of such Senior Debt shall have been paid in full in cash
or cash equivalents.
The provisions of this Section shall not apply to any Securities Payment
with respect to which Section 1302 hereof would be applicable.
SECTION 1304. Payment to Holders of Senior Debt.
Subject to the provisions of Section 1306, in the event that,
notwithstanding the provisions of Section 1302 or Section 1303, any Securities
Payment shall be received by the Trustee on behalf of the Holders of the
Securities (i) from the Company in violation of such provisions, or (ii) from
any other Person under such circumstances that such payment would, if made
directly by the Company, be in violation of such provisions, such payment or
distribution shall be held by the Trustee in trust for the benefit of, and shall
immediately be paid over by the Trustee, upon written request by a Person
entitled to give notice on behalf of such Senior Debt as specified in Section
1310, to the holders of Senior Debt or their representative or representatives,
or to the trustee or trustees under any indenture under which any instrument
evidencing any of such Senior Debt may have been
-71-
<PAGE>
issued, as their respective interests may appear, for application to the
payment of Senior Debt.
Upon any payment or distribution of assets or securities of the Company
referred to in Sections 1302 and 1303, the Trustee and the Holders of the
Securities shall be entitled to rely upon any order or decree of a court of
competent jurisdiction, or upon any certificate of any liquidating trustee or
agent or other similar Person making any payment or distribution to the Trustee
or to the Holders of the Securities, for the purpose of ascertaining the persons
entitled to participate in such payment or distribution, the holders of the
Senior Debt, the amount thereof or payment thereon, the amount or amounts paid
or distributed thereon and all other facts pertinent thereto or to this Article
Thirteen. In the event that the Trustee determines, in good faith, that further
evidence is required with respect to the right of any Person as a holder of
Senior Debt to participate in any payment or distribution referred to in
Sections 1302 and 1303, the Trustee may request such Person to furnish evidence
to the reasonable satisfaction of the Trustee as to the amount of Senior Debt
held by such Person, as to the extent to which such Person is entitled to
participation in such payment or distribution, and as to other facts pertinent
to the rights of such Person under Sections 1302 and 1303, and if such evidence
is not furnished, the Trustee may defer any payment to such Person pending
judicial determination as to the right of such Person to receive such payment.
SECTION 1305. Subrogation.
Subject to the payment in full in cash or cash equivalents of all Senior
Debt at the time outstanding and, in the case of Warehouse Facilities, all
outstanding fees and expenses required to be paid by the Company pursuant to the
respective terms thereof, the Holders of the Securities shall be subrogated to
the rights of each holder of Senior Debt (to the extent of the payments or
distributions made to such holder pursuant to the provisions of Sections 1302,
1303 and 1304) to receive payments or distributions of cash, assets or
securities of the Company applicable to the Senior Debt until the Securities
shall be paid in full. No payments or distributions to holders of Senior Debt
of cash, assets or securities of the Company to which Holders of Securities
would be entitled except for the provisions of this Article Thirteen, and no
payment over pursuant to the provisions of this Article Thirteen to holders of
such Senior Debt by the Holders of Securities shall, as among the Company, its
creditors other than the holders of Senior Debt, and the Holders of the
Securities, be deemed to be a payment by the Company on account of the Senior
Debt, it being understood that the provisions of this Article Thirteen are
intended solely for the purpose of defining the relative rights of the Holders
of the Securities, on the one hand, and the holders of the Senior Debt, on the
other hand, and nothing contained in this Article Thirteen or elsewhere in this
Indenture, or in the Securities, is intended to or shall impair, as between the
Company, its creditors other than the
-72-
<PAGE>
holders of Senior Debt, and the Holders of the Securities, the obligation of
the Company, which is absolute and unconditional, to pay to the Holders of
the Securities the principal of, premium, if any, and interest on the
Securities, as and when the same shall become due and payable in accordance
with their terms, or is intended to or shall affect the relative rights of
the Holders of the Securities and creditors of the Company other than the
holders of Senior Debt, nor shall anything herein or therein prevent the
Trustee or the Holder of any Securities from exercising all remedies
otherwise permitted by applicable law upon default under this Indenture,
subject to the rights, if any, under this Article Thirteen of the holders of
Senior Debt in respect of cash, property or securities of the Company
received upon the exercise of any such remedy.
SECTION 1306. Payment on Securities Permitted.
Nothing contained in this Article Thirteen or elsewhere in this Indenture,
or in any of the Securities, shall prevent the Company from making payment of
the principal of, sinking fund, if any, premium, if any, or interest on the
Securities, at any time, except under the conditions described in Section 1303
and except during the pendency of any Proceeding within the meaning of Section
1302. Nothing contained in this Article Thirteen or elsewhere in this
Indenture, or in any of the Securities, shall prevent the application by the
Trustee of any moneys deposited with it hereunder for the purpose, to the
payment of or on account of the principal of, sinking fund, if any, or premium,
if any, or interest on the Securities, unless the Trustee shall have received
written notice, directed to it at its Corporate Trust Office as provided in
Section 1310.
SECTION 1307. Authorization of Holders to Trustee to Effect Subordination.
Each Holder of Securities, by such Holder's acceptance thereof, authorizes
and directs the Trustee in such Holder's behalf to take such action as may be
necessary or appropriate to effectuate, as between the Holders of the Securities
and the holders of Senior Debt, the subordination provided in this Article
Thirteen and appoints the Trustee his attorney-in-fact for any and all such
purposes.
SECTION 1308. No Waiver of Subordination Provisions.
No right of any present or future holder of any Senior Debt to enforce
subordination as herein provided shall at any time in any way be prejudiced or
impaired by any act or failure to act on the part of the Company or by any act
or failure to act by any such holder, or by any noncompliance by the Company
with terms, provisions and covenants of this Indenture, regardless of any
knowledge thereof any such holder may have or be otherwise charged with.
-73-
<PAGE>
Without in any way limiting the generality of the foregoing paragraph, the
holders of Senior Debt may, at any time and from time to time without the
consent of or notice to the Trustee or the Holders of the Securities, without
incurring responsibility to the Holders of the Securities and without impairing
or releasing the subordination provided in this Article or the obligations
hereunder of the Holders of the Securities to the holders of Senior Debt, do any
one or more of the following: (i) change the manner, place or terms of payment
or extend the time of payment of, or renew or alter, Senior Debt, or otherwise
amend or supplement in any manner Senior Debt or any instrument evidencing the
same or any agreement under which Senior Debt is outstanding; (ii) permit the
Company to borrow, repay and then reborrow any or all of the Senior Debt; (iii)
sell, exchange, release or otherwise deal with any property pledged, mortgaged
or otherwise securing Senior Debt; (iv) release any Person liable in any manner
for the collection of Senior Debt; (v) exercise or refrain from exercising any
rights against the Company and any other Person; and (vi) apply any sums
received by them to Senior Debt.
SECTION 1309. Trustee as Holder of Senior Debt.
The Trustee shall be entitled to all the rights set forth in this Article
Thirteen in respect of any Senior Debt at any time held by it, to the same
extent as any other holder of Senior Debt, and nothing in Section 613 or
elsewhere in this Indenture shall deprive or be construed to deprive the Trustee
of its rights as such holder.
Nothing in this Article Thirteen shall apply to claims of, or payments to,
the Trustee under or pursuant to Section 607 hereof.
SECTION 1310. Notices to Trustee.
The Company shall give prompt written notice to the Trustee of any fact
known to the Company which would prohibit the making of any payment to or by the
Trustee in respect of the Securities, but failure to give such notice shall not
affect the subordination of the Securities to the extent herein provided if
notice is otherwise given as hereinafter provided in this Section 1310.
Notwithstanding the provisions of this Article or any other provision of this
Indenture, the Trustee shall not be charged with knowledge of the existence of
any facts which would prohibit the making of any payment to or by the Trustee in
respect of the Securities, unless and until a Responsible Officer of the Trustee
shall have received written notice thereof from the Company, any holder of
Senior Debt or Qualified Senior Debt or any trustee, fiduciary or agent
therefor; and, prior to the receipt of any such written notice, the Trustee,
subject to the provisions of Section 601 hereof, shall be entitled in all
respects to assume that no such facts exist. Any notice required or permitted
to be given to the Trustee by a holder of Senior Debt or Qualified Senior Debt
or a trustee, fiduciary or transfer agent therefor shall be in writing and shall
be sufficient for every purpose hereunder in writing and either (i) sent via
facsimile to the
-74-
<PAGE>
Trustee, the receipt of which shall be confirmed via telephone, or (ii)
mailed, first class postage prepaid, or sent overnight carrier, to the
Trustee addressed to it at the address of its principal office specified in
the first paragraph of this instrument or at any other address furnished in
writing to such holder of the Senior Debt or Qualified Senior Debt by the
Trustee. Notwithstanding anything else contained herein, no notice, request
or other communication to or with the Trustee shall be deemed given unless
received by a Responsible Officer at the Trustee's principal corporate trust
office.
SECTION 1311. No Fiduciary Duty by Trustee to Holders of Senior Debt.
The Trustee shall not be deemed to owe any fiduciary duty to the holders of
Senior Debt and shall not be liable to any such holders if it shall in good
faith mistakenly pay over or distribute to Holders of Securities or the Company
or any other Person moneys or assets to which any holders of Senior Debt shall
be entitled by virtue of this Article Thirteen or otherwise.
SECTION 1312. Paying Agent Treated as Trustee.
In case at any time any Paying Agent other than the Trustee shall have been
appointed by the Company and be then acting hereunder, the term "Trustee" as
used in this Article Thirteen shall in such case (unless the context shall
otherwise require) be construed as extending to and including such Paying Agent
within its meaning as fully for all intents and purposes as if such Paying Agent
were named in this Article Thirteen in place of the Trustee.
ARTICLE FOURTEEN
REPURCHASE OF SECURITIES AT OPTION OF HOLDERS
SECTION 1401. Applicability of Article.
Securities of any series which are repurchasable before their Stated
Maturity at the option of the Holders shall be repurchasable in accordance with
their terms and (except as otherwise specified pursuant to Section 301 for
Securities of any series) in accordance with this Article.
SECTION 1402. Notice of Repurchase Date.
Notice of any Repurchase Date with respect to Securities of any series
shall, unless otherwise specified by the terms of such Securities, be given by
the Company not less than 45 nor more than 60 days prior to such Repurchase Date
to each Holder of Securities of such series subject to repurchase in accordance
with Section 105.
The notice as to Repurchase Date shall state:
-75-
<PAGE>
(1) the Repurchase Date;
(2) the Repurchase Price;
(3) the place or places where such Securities are to be surrendered
for payment of the Repurchase Price and the date by which such Securities
must be so surrendered in order to be repurchased;
(4) a description of the procedure which a Holder must follow to
exercise a repurchase right; and
(5) that exercise of the option to elect repurchase is irrevocable.
No failure of the Company to give the foregoing notice shall limit any Holder's
right to exercise a repurchase right.
SECTION 1403. Deposit of Repurchase Price.
On or prior to the Repurchase Date, the Company shall deposit with the
Trustee or with a Paying Agent (or, if the Company is acting as its own paying
Agent, segregate and hold in trust as provided in Section 1003) an amount of
money sufficient to pay the Repurchase Price of and (unless the Repurchase Date
shall be an Interest Payment Date) accrued interest, if any, on all of the
Securities of such series which are to be repurchased on that date.
SECTION 1404. Securities Payable on Repurchase Date.
The form of option to elect repurchase having been delivered as specified
in the form of Security for such series as provided in Article Two, the
Securities of such series so to be repurchased shall, on the Repurchase Date,
become due and payable at the Repurchase Price applicable thereto and from and
after such date (unless the Company shall default in the payment of the
Repurchase Price and accrued interest) such Securities shall cease to bear
interest. Upon surrender of any such Security for repurchase in accordance with
said notice, such Security shall be paid by the Company at the Repurchase Price
together with accrued interest to the Repurchase Date; provided, however, that
installments of interest whose Stated Maturity is on or prior to such Repurchase
Date shall be payable to the Holders of such Securities, or one or more
Predecessor Securities, registered as such at the close of business on the
relevant Regular and Special Record Dates according to their terms and the
provisions of Section 307.
-76-
<PAGE>
If any such Security shall not be paid upon surrender thereof for
repurchase, the principal (and premium, if any) shall, until paid, bear interest
from the Repurchase Date at the rate prescribed therefor in such Security.
SECTION 1405. Securities Repurchased in Part.
Any Security which by its terms may be repurchased in part at the option of
the Holder and which is to be repurchased only in part shall be surrendered at
any office or agency of the Company designated for that purpose pursuant to
Section 1002 (with, if the Company or the Trustee so requires, due endorsement
by, or a written instrument of transfer in form satisfactory to the Company and
the Trustee duly executed by, the Holder thereof or such Holder's attorney duly
authorized in writing), and the Company shall execute, and the Trustee shall
authenticate and deliver to the Holder of such Security without service charge,
a new Security or Securities of the same series and of like tenor of any
authorized denomination as requested by such Holder, in aggregate principal
amount equal to and in exchange for the unrepurchased portion of the principal
of the Security so surrendered. To the extent a series of Securities
represented by a Global Security is to be repurchased in part only, a notation
of such redemption shall be made by the Trustee in the schedule of exchanges on
the Global Security.
ARTICLE FIFTEEN
CORPORATE OBLIGATION ONLY
SECTION 1501. Indenture and Securities Solely Corporate Obligations.
No recourse under or upon any obligation, covenant or agreement contained
in this Indenture, any indenture supplement, or in any Security, because of any
Indebtedness evidenced thereby, shall be had against any incorporator, or
against any past, present or future stockholder, employee, officer or director,
as such, of the Company or of any successor corporation, either directly or
through the Company or any successor corporation, under any rule of law, statute
or constitutional provision or by the enforcement of any assessment or penalty
or by any legal or equitable proceeding or otherwise, all such liability,
whether at common law, in equity, by any constitution, statute or otherwise, of
incorporators, stockholders, employees, officers or directors being expressly
waived and released by the acceptance of the Securities by the Holders thereof
and as part of the consideration of the issuance of the Securities.
* * *
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
-77-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed all as of the day and year first above written.
OLYMPIC FINANCIAL LTD.
By /s/ B.S. Anderson
----------------------
Brian S. Anderson
Senior Vice President and Chief
Accounting Officer
Attest:
/s/ James Atkinson
- --------------------
James D. Atkinson III
Senior Vice President, Corporate
Counsel and Secretary
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION, as
Trustee
By /s/ Curtis D. Schwegman
-----------------------
Curtis D. Schwegman
Corporate Trust Officer
Attest:
/s/ Raymond S. Haverstock
- ---------------------------
Name: Raymond S. Haverstock
Title: Assistant Secretary
-78-
<PAGE>
STATE OF MINNESOTA )
) SS.
COUNTY OF HENNEPIN )
On the 27th day of March, 1996, before me personally came Brian S.
Anderson, to me known, who, being by me duly sworn, did depose and say that he
is Senior Vice President and Chief Accounting Officer of Olympic Financial Ltd.,
one of the corporations described in and which executed the foregoing
instrument; that he knows the seal of said corporation; that the seal affixed to
said instrument is such corporate seal; that it was so affixed by authority of
the Board of Directors of said corporation, and that he signed his name thereto
by like authority.
[SEAL] /s/ Maureen R. Sultan
----------------------
Notary Public
STATE OF MINNESOTA )
) SS.
COUNTY OF HENNEPIN )
On the 28th day of March, 1996, before me personally came Curtis D.
Schwegman, to me known, who, being by me duly sworn, did depose and say that he
is a Corporate Trust Officer of Norwest Bank Minnesota, National Association,
one of the corporations described in and which executed the foregoing
instrument; that he knows the seal of said corporation; that the seal affixed to
said instrument is such corporate seal; that it was so affixed by authority of
the Board of Directors of said corporation, and that he signed his name thereto
by like authority.
[SEAL] /s/ Jane Yun
-----------------
Notary Public
-79-
<PAGE>
_______________________________________________________________________________
OLYMPIC FINANCIAL LTD.
to
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
as Trustee
_______________
SUBORDINATED NOTES
______________
FIRST SUPPLEMENTAL INDENTURE
Dated as of March 15, 1996
TO
Indenture dated as of March 15, 1996
_______________________________________________________________________________
<PAGE>
FIRST SUPPLEMENTAL INDENTURE, dated as of March 15, 1996, between
OLYMPIC FINANCIAL LTD., a corporation duly organized and existing under the
laws of the State of Minnesota (herein called the "Company"), having its
principal office at 7825 Washington Avenue South, Minneapolis, Minnesota
55439, and NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, as Trustee (herein
called the "Trustee"), having its principal office at Sixth Street and
Marquette Avenue, Minneapolis, Minnesota 55479.
RECITALS OF THE COMPANY
The Company has heretofore executed and delivered to the Trustee an
Indenture, dated as of March 15, 1996 (the "Indenture") (all terms used in
this First Supplemental Indenture that are defined in the Indenture shall
have the meanings assigned to them in the Indenture), pursuant to which the
Company may from time to time issue one or more series of its unsecured
debentures, notes or other evidences of indebtedness.
The Company desires and has requested the Trustee to join with it in
the execution and delivery of this First Supplemental Indenture for the
purpose of amending certain of the provisions relating to subordination with
respect to series of Securities that may be issued by the Company pursuant to
this First Supplemental Indenture subsequent to the date hereof (the "First
Supplemental Indenture Securities").
Section 901(5)(ii) of the Indenture permits the Company, when
authorized by or pursuant to a Board Resolution, and the Trustee to enter
into one or more indentures supplemental to the Indenture without the consent
of any Holders for the purpose of adding to, changing or eliminating any of
the provisions of the Indenture in respect of one or more series of
Securities, provided that such addition, change or elimination shall become
effective only when there is no such Security Outstanding.
The Board of Directors of the Company, by Written Consent effective as
of October 2, 1995, authorized the Capital and Funding Committee of the Board
of Directors of the Company to negotiate, enter into, execute and deliver on
behalf of the Company one or more indentures relating to the Securities,
including any supplemental indentures.
The Capital and Funding Committee of the Board of Directors of the
Company, by Written Action effective as of March 15, 1996, authorized this
First Supplemental Indenture.
The Company has furnished the Trustee with copies of the Written
Consent of the Board of Directors and the Written Action of the Capital and
Funding Committee of the Board of Directors of the Company, certified by the
Secretary of the Company.
<PAGE>
All things necessary to make this First Supplemental Indenture a valid
agreement of the Company, in accordance with its terms, have been done.
NOW, THEREFORE, THIS FIRST SUPPLEMENTAL INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of First
Supplemental Indenture Securities by the Holders thereof, it is mutually
covenanted and agreed, for the equal and proportionate benefit of all Holders
of First Supplemental Indenture Securities or of any series thereof
(including holders from time to time of First Supplemental Indenture
Securities of any series held through a Holder which is a Depositary (as
defined in the Indenture)), as follows:
ARTICLE ONE
SECTION 101. In addition to the definitions contained in Section 101
of the Indenture, the following definitions shall apply to this First
Supplemental Indenture:
"Payment Blockage Period" means the period (i) commencing on such date
(the "Payment Blockage Commencement Date") as shall be specified in a written
notice received by the Company and the Trustee from the holders (or a
trustee, fiduciary or agent therefor) of Qualified Senior Debt, which notice
shall state that a Senior Nonmonetary Default has occurred and specify the
Payment Blockage Commencement Date, which date shall not be earlier than the
date on which such notice is received, and (ii) ending (subject to any
blockage of payments that may then or thereafter be in effect as the result
of any Senior Payment Default) on the earlier of (A) the date on which such
Senior Nonmonetary Default shall have been cured or waived in writing or
shall have ceased to exist and any acceleration of Qualified Senior Debt to
which such Senior Nonmonetary Default relates shall have been rescinded or
annulled or the Qualified Senior Debt to which such Senior Nonmonetary
Default relates shall have been discharged or (B) the 179th day after the
Payment Blockage Commencement Date.
"Qualified Senior Debt" means Senior Debt outstanding under either (i)
an indenture pursuant to which $100,000,000 principal amount of Senior Debt
is issued and outstanding or (b) a Warehouse Facility which by its terms
authorizes at least $100,000,000 of Senior Debt to be borrowed by the Company
from time to time.
"Senior Nonmonetary Default" means the occurrence or existence and
continuance of any event of default (including the lapse of any applicable
grace period and the delivery of any required notice) under the terms of any
instrument or agreement pursuant to which any Qualified Senior Debt is
outstanding,
-2-
<PAGE>
permitting one or more holders of such Qualified Senior Debt (or
a trustee or agent on behalf of the holders thereof) to declare such
Qualified Senior Debt due and payable prior to the date on which it would
otherwise become due and payable, other than a Senior Payment Default.
SECTION 102. In addition to the subordination provisions contained in
Section 1303 of the Indenture, the following subordination provisions shall
apply to First Supplemental Indenture Securities:
"In the event that any Senior Nonmonetary Default shall have occurred
and be continuing with respect to any Qualified Senior Debt, and the
Company and the Trustee have received written notice from the holders (or a
trustee, fiduciary or agent therefor) of such Qualified Senior Debt (in
accordance with the terms of the instruments governing such Qualified
Senior Debt) stating that a Senior Nonmonetary Default has occurred and
specifying a Payment Blockage Commencement Date, then, during the Payment
Blockage Period, no payment or distribution of any kind or character,
whether in cash, property or securities, by set off or otherwise (including
any payment or distribution which may be payable or deliverable by reason
of the payment of any Junior Subordinated Debt), shall be made on account
of the principal of any First Supplemental Indenture Securities or on
account of any purchase, redemption, retirement or other acquisition of
First Supplemental Indenture Securities by the Company. No more than one
Payment Blockage Period may be commenced with respect to the First
Supplemental Indenture Securities during any period of 360 consecutive
days, and there shall be a period of at least 181 consecutive days in each
period of 360 consecutive days when no Payment Blockage Period is in
effect. For all purposes of this paragraph, no Senior Nonmonetary Default
that existed or was continuing on any Payment Blockage Commencement Date
with respect to the Qualified Senior Debt initiating such Payment Blockage
Period shall be, or be made, the basis for the commencement of a subsequent
Payment Blockage Period by holders of Qualified Senior Debt or their
representatives unless such Senior Nonmonetary Default shall have been
cured for a period of not less than 90 consecutive days. From and after a
Payment Blockage Commencement Date or the occurrence of a Senior Payment
Default, neither the Trustee nor the Holders of not less than 25% in
aggregate principal amount of the Outstanding First Supplemental Indenture
Securities of any series may declare the principal amount (or, if any of
the First Supplemental Indenture Securities of such series are Original
Issue Discount Securities, such lesser portion of the principal amount of
such First Supplemental Indenture Securities as may be specified in the
terms thereof) of all of the First Supplemental Indenture Securities of
that series to be due and payable immediately, as provided in Section 502
of the Indenture, until the first to occur of the following:
-3-
<PAGE>
(1) the related Senior Nonmonetary Default or Senior Payment
Default is cured and, if such Qualified Senior Debt was previously
accelerated, such acceleration has been rescinded or annulled, or
(2) the related Senior Nonmonetary Default or Senior Payment
Default is waived by the holders of such Qualified Senior Debt and, if
such Qualified Senior Debt was previously accelerated, such
acceleration has been rescinded or annulled, or
(3) the expiration of 180 days after the Payment Blockage
Commencement Date or the occurence of the Senior Payment Default, if
the maturity of such Qualified Senior Debt has not been accelerated at
such time or the holder or holders of not less than 51% in principal
amount of the outstanding Qualified Senior Debt with respect to which
a Senior Nonmonetary Default or Senior Payment Default then exists, or
an agent, representative or trustee therefor, has not exercised any
judicial or non-judicial remedy with respect to any collateral
securing such Qualified Senior Debt at such time.
Notwithstanding anything to the contrary in this paragraph, upon payment in
full of the Qualified Senior Debt, payments and distributions may be made
on account of the principal of the First Supplemental Indenture Securities
or on account of any purchase, redemption, retirement or other acquisition
of First Supplemental Indenture Securities by the Company. Nothing in this
paragraph shall be deemed to prevent the automatic acceleration of the
principal amount of all First Supplemental Indenture Securities (or
specified portion thereof) immediately upon the occurrence of an Event of
Default under Sections 501(6) or (7) of the Indenture pursuant to the
proviso contained in the first paragraph of Section 502 of the Indenture.
The provisions of this Section 102 shall not apply to any payments or
distributions made on account of the principal of the First Supplemental
Indenture Securities or on account of any purchase, redemption, retirement
or other acquisition of First Supplemental Indenture Securities by the
Company with respect to which Section 1302 of the Indenture would be
applicable."
SECTION 103. Without the consent of the holders of all Qualified Senior
Debt affected thereby, the Company and the Trustee shall not have the power to
enter into an indenture or indentures supplemental hereto for the purpose of
amending or modifying the definition of "Qualified Senior Debt" in this First
-4-
<PAGE>
Supplemental Indenture in a manner adverse to the holders of such affected
Qualified Senior Debt.
SECTION 104. The Company hereby certifies that the amendments to the
Indenture set forth in this First Supplemental Indenture do not affect any
series of Securities currently Outstanding. The Company hereby covenants and
agrees that it shall comply with Section 1303 of the Indenture, as supplemented
by Section 102 of this First Supplemental Indenture, as it applies by its terms
to First Supplemental Indenture Securities of any series.
ARTICLE TWO
SECTION 201. For all purposes of this First Supplemental Indenture, except
as otherwise herein expressly provided or unless the context otherwise requires:
(a) the terms and expressions used herein shall have the same meanings as
corresponding terms and expressions used in the Indenture; and (b) the words
"herein," "hereof," "hereby" and other words of similar import used in this
First Supplemental Indenture refer to this First Supplemental Indenture and not
to any particular section hereof.
SECTION 202. Except as expressly amended hereby, the Indenture is in all
respects ratified and confirmed and all the terms, conditions and provisions
thereof shall remain in full force and effect.
SECTION 203. This First Supplemental Indenture may be executed in any
number of counterparts, each of which shall be deemed to be an original, but all
such counterparts shall together constitute but one and the same instrument.
SECTION 204. The Trustee makes no representation as to the validity or
sufficiency of this First Supplemental Indenture.
SECTION 205. The Recitals contained herein shall be taken as the
statements of the Company and the Trustee assumes no responsibility for their
correctness.
SECTION 206. This First Supplemental Indenture and the First Supplemental
Indenture Securities shall be governed by and construed in accordance with the
laws of the State of Minnesota.
-5-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this First Supplemental
Indenture to be duly executed all as of the day and year first above written.
OLYMPIC FINANCIAL LTD.
By /s/ Brian S. ANDERSON
---------------------------------
Brian S. Anderson
Senior Vice President and Chief
Accounting Officer
Attest:
/s/ JAMES D. ATKINSON III
- ---------------------------------
James D. Atkinson III
Senior Vice President, Corporate
Counsel and Secretary
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION, as
Trustee
By /s/ CURTIS D. SCHWEGMAN
---------------------------------
Curtis D. Schwegman
Corporate Trust Officer
Attest:
/s/ RAYMOND S. HAVERSTOCK
- ----------------------------------
Name: Raymond S. Haverstock
---------------------------
Title: Assistant Secretary
---------------------------
-6-
<PAGE>
STATE OF MINNESOTA )
) SS.
COUNTY OF HENNEPIN )
On the 27th day of March, 1996, before me personally came Brian S.
Anderson, to me known, who, being by me duly sworn, did depose and say that he
is Senior Vice President and Chief Accounting Officer of Olympic Financial Ltd.,
one of the corporations described in and which executed the foregoing
instrument; that he knows the seal of said corporation; that the seal affixed to
said instrument is such corporate seal; that it was so affixed by authority of
the Board of Directors of said corporation, and that he signed his name thereto
by like authority.
[SEAL] /s/ MAUREEN R. SULTAN
-------------------------------
Notary Public
STATE OF MINNESOTA )
) SS.
COUNTY OF HENNEPIN )
On the 28th day of March, 1996, before me personally came Curtis D.
Schwegman, to me known, who, being by me duly sworn, did depose and say that he
is a Corporate Trust Officer of Norwest Bank Minnesota, National Association,
one of the corporations described in and which executed the foregoing
instrument; that he knows the seal of said corporation; that the seal affixed to
said instrument is such corporate seal; that it was so affixed by authority of
the Board of Directors of said corporation, and that he signed his name thereto
by like authority.
[SEAL] /s/ JANE YUN
-------------------------------
Notary Public
-7-
<PAGE>
AMENDMENT
NINTH AMENDMENT TO THE SECURITIES PURCHASE AGREEMENT, dated as of
March 31, 1995, by and among Olympic Financial Ltd., a Minnesota corporation
(the "Company"), and each of the investors named on the Investor Schedule
attached hereto (the "Investors").
WITNESSETH:
WHEREAS, the Company and the Investors are party to that certain
Securities Purchase Agreement dated as of May 29, 1992, as amended by First
Amendment dated as of August 11, 1992, Second Amendment dated as of October 19,
1992, Third Amendment dated as of September 14, 1993, Fourth Amendment dated as
of November 22, 1993, Fifth Amendment dated as of August 29, 1994, Sixth
Amendment dated as of September 9, 1994, Amendment dated December 28, 1994 and
Eighth Amendment dated as of March 6, 1995 (as so amended, the "Securities
Purchase Agreement");
WHEREAS, the Company intends to adopt and amend certain stock option
plans at its annual meeting to be held in May 1995 and has requested that the
Investors agree to amend certain provisions of the Securities Purchase Agreement
that will be affected by the adoption or the amendment of such plans and the
issuance of shares of the Company's Common Stock pursuant to such plans; and
WHEREAS, the Investors are willing to agree to such requested
amendment on the terms set forth herein.
NOW THEREFORE, in consideration of the covenants and agreements made
herein, the parties hereto hereby agree to amend the Securities Purchase
Agreement as follows:
1. AMENDMENT TO SECTION 11G OF THE SECURITIES PURCHASE AGREEMENT.
SECTION 1.1. DELETION OF SECTION 11G. Section 11G of the
Securities Purchase Agreement is deleted in its entirety.
2. MISCELLANEOUS.
SECTION 2.1. SECURITIES PURCHASE AGREEMENT AMENDED. This
Amendment shall be deemed to be an amendment to the Securities Purchase
Agreement, and the Securities Purchase Agreement, as amended hereby, is
hereby ratified, approved and confirmed in all respects. This Agreement shall
be limited to the matters expressly set forth herein and shall not be deemed
to amend or modify
<PAGE>
any other term or condition of the Securities Purchase Agreement or any other
document incident thereto or to waive any right of any party thereunder. All
references to the Securities Purchase Agreement in any other document,
instrument, agreement or writing hereafter shall be deemed to refer to the
Securities Purchase Agreement as amended hereby.
SECTION 2.2. EFFECTIVENESS. This Amendment shall become effective
when it has been executed and delivered by the Company, the holders of all
outstanding Notes and the holders of all outstanding Warrants.
SECTION 2.3. SUCCESSORS AND ASSIGNS ON TRANSFERABILITY. This
Amendment shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns.
SECTION 2.4. GOVERNING LAW. This Amendment and the rights and
duties of the parties under this Amendment shall be governed by, and construed
and interpreted in accordance with, the law of the State of New York, without
regard to principles of conflicts of law.
SECTION 2.5. COUNTERPARTS. This Amendment may be executed in two
or more counterparts, each of which shall be deemed an original, and it shall
not be necessary in making proof of this Amendment to produce or account for
more than one such counterpart.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the date and year first above written.
OLYMPIC FINANCIAL LTD.
By /s/ Jeffrey C. Mack
---------------------------------
Jeffrey C. Mack
Chairman, Chief Executive Officer and
President
-2-
<PAGE>
DECLARATION OF TRUST FOR DEFINED
BENEFIT PLANS OF ICI AMERICAN
HOLDINGS INC.
By: Pecks Management Partners, Ltd.,
its Investment Advisor
By /s/ Robert J. Cresci
-----------------------------
Robert J. Cresci
Managing Director
DECLARATION OF TRUST FOR DEFINED
BENEFIT PLANS OF ZENECA HOLDINGS
INC.
By: Pecks Management Partners Ltd.,
its Investment Advisor
By /s/ Robert J. Cresci
-----------------------------
Robert J. Cresci
Managing Director
DELAWARE STATE EMPLOYEES'
RETIREMENT FUND
By: Pecks Management Partners Ltd.,
its Investment Advisor
By /s/ Robert J. Cresci
-----------------------------
Robert J. Cresci
Managing Director
-3-
<PAGE>
BCI GROWTH, L.P.
By: Teaneck Associates
its General Partner
By /s/ J. Barton Goodwin
-------------------------------
J. Barton Goodwin
General Partner
THE LINCOLN NATIONAL LIFE
INSURANCE COMPANY
By: Lincoln National Investment
Management Company, as its
attorney-in-fact
By /s/ Richard L. Corwin
-------------------------------
Richard L. Corwin
Second Vice President
SECURITY-CONNECTICUT LIFE
INSURANCE COMPANY
By: Lincoln National Investment
Management Company, as its
attorney-in-fact
By /s/ Richard L. Corwin
-------------------------------
Richard L. Corwin
Second Vice President
-4-
<PAGE>
INVESTOR SCHEDULE
1. Declaration of Trust for Defined Benefit Plans of ICI American
Holdings Inc.
2. Declaration of Trust for Defined Benefit Plans of ZENECA Holdings Inc.
3. Delaware State Employees' Retirement Fund
4. BCI Growth, L.P.
5. The Lincoln National Life Insurance Company
6. Security-Connecticut Life Insurance Company
-5-
<PAGE>
CONFORMED COPY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CREDIT AGREEMENT
DATED AS OF JULY 11, 1996
AMONG
OLYMPIC FINANCIAL LTD.,
VARIOUS FINANCIAL INSTITUTIONS,
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
AS AGENT,
AND
FIRST BANK NATIONAL ASSOCIATION,
AS CO-MANAGER,
ARRANGED BY BA SECURITIES, INC.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Section Page
ARTICLE I
DEFINITIONS
1.1 Certain Defined Terms. . . . . . . . . . . . . . . . . . . . 1
1.2 Other Interpretive Provisions. . . . . . . . . . . . . . . . 24
1.3 Accounting Principles. . . . . . . . . . . . . . . . . . . . 25
ARTICLE II
THE CREDITS
2.1 Amounts and Terms of Commitments . . . . . . . . . . . . . . 25
2.2 Loan Accounts . . . . . . . . . . . . . . . . . . . . . . . 26
2.3 Procedure for Borrowing. . . . . . . . . . . . . . . . . . . 26
2.4 Conversion and Continuation Elections for Borrowings . . . . 27
2.5 Voluntary Termination or Reduction of Commitments. . . . . . 29
2.6 Prepayments. . . . . . . . . . . . . . . . . . . . . . . . . 29
2.7 Repayment. . . . . . . . . . . . . . . . . . . . . . . . . . 30
2.8 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . 30
2.9 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(a) Agent's and Arranger's Fees. . . . . . . . . . . . . . 31
(b) Commitment Fees. . . . . . . . . . . . . . . . . . . . 31
2.10 Computation of Fees and Interest . . . . . . . . . . . . . . 31
2.11 Payments by the Company. . . . . . . . . . . . . . . . . . . 31
2.12 Payments by the Lenders to the Agent . . . . . . . . . . . . 32
2.13 Sharing of Payments, etc . . . . . . . . . . . . . . . . . . 33
2.14 Additional Lenders; Increased Commitments. . . . . . . . . . 33
ARTICLE III
TAXES, YIELD PROTECTION AND ILLEGALITY
3.1 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
3.2 Illegality . . . . . . . . . . . . . . . . . . . . . . . . . 35
3.3 Increased Costs and Reduction of Return. . . . . . . . . . . 36
3.4 Funding Losses . . . . . . . . . . . . . . . . . . . . . . . 37
3.5 Inability to Determine Rates . . . . . . . . . . . . . . . . 38
3.6 Certificates of Lenders. . . . . . . . . . . . . . . . . . . 38
3.7 Substitution of Lenders. . . . . . . . . . . . . . . . . . . 38
3.8 Limitation on Recovery . . . . . . . . . . . . . . . . . . . 39
3.9 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . 39
ARTICLE IV
CONDITIONS PRECEDENT
4.1 Conditions of Initial Loans. . . . . . . . . . . . . . . . . 39
(a) Credit Agreement and Notes . . . . . . . . . . . . . . . 40
(b) Pledge and Security Agreement. . . . . . . . . . . . . . 40
-i-
<PAGE>
Section Page
(c) Collateral Monitoring Agreement . . . . . . . . . . . . . . 40
(d) Counterpart to Agency Agreement and Retail Lockbox
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 40
(e) Resolutions; Incumbency; Articles; Bylaws; Other
Documents . . . . . . . . . . . . . . . . . . . . . . . . . 40
(f) Good Standing. . . . . . . . . . . . . . . . . . . . . . . . 41
(g) Legal Opinions . . . . . . . . . . . . . . . . . . . . . . . 41
(h) Payment of Fees. . . . . . . . . . . . . . . . . . . . . . . 41
(i) No Material Adverse Change . . . . . . . . . . . . . . . . . 41
(j) Certificate. . . . . . . . . . . . . . . . . . . . . . . . . 41
(k) Financing Statements . . . . . . . . . . . . . . . . . . . . 41
(l) Other Documents. . . . . . . . . . . . . . . . . . . . . . . 42
4.2 Conditions to All Loans . . . . . . . . . . . . . . . . . . . . . . 42
(a) Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
(b) Continuation of Representations and Warranties . . . . . . . 42
(c) No Existing Default. . . . . . . . . . . . . . . . . . . . . 43
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.1 Organization, Standing, Etc. . . . . . . . . . . . . . . . . 43
5.2 Authorization and Validity . . . . . . . . . . . . . . . . . 43
5.3 No Conflict, No Default. . . . . . . . . . . . . . . . . . . 43
5.4 Government Consent . . . . . . . . . . . . . . . . . . . . . 44
5.5 Financial Statements and Condition . . . . . . . . . . . . . 44
5.6 Litigation and Contingent Liabilities. . . . . . . . . . . . 44
5.7 Compliance . . . . . . . . . . . . . . . . . . . . . . . . . 44
5.8 Environmental, Health and Safety Laws. . . . . . . . . . . . 45
5.9 ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
5.10 Ownership of Property; Liens . . . . . . . . . . . . . . . . 45
5.11 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
5.12 Trademarks, Patents, Etc . . . . . . . . . . . . . . . . . . 46
5.13 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . 46
5.14 Partnerships and Joint Ventures. . . . . . . . . . . . . . . 46
5.15 Federal Reserve Regulations. . . . . . . . . . . . . . . . . 46
5.16 Regulated Entities . . . . . . . . . . . . . . . . . . . . . 46
5.17 Full Disclosure. . . . . . . . . . . . . . . . . . . . . . . 46
5.18 Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . 47
ARTICLE VI
AFFIRMATIVE COVENANTS
6.1 Financial Statements and Reports . . . . . . . . . . . . . . 47
6.2 Corporate Existence. . . . . . . . . . . . . . . . . . . . . 49
6.3 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . 50
6.4 Payment of Taxes and Claims. . . . . . . . . . . . . . . . . 50
6.5 Inspection . . . . . . . . . . . . . . . . . . . . . . . . . 50
-ii-
<PAGE>
Section Page
6.6 Maintenance of Properties. . . . . . . . . . . . . . . . . . 50
6.7 Books and Records. . . . . . . . . . . . . . . . . . . . . . 51
6.8 Compliance . . . . . . . . . . . . . . . . . . . . . . . . . 51
6.9 ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
6.10 Environmental Matters. . . . . . . . . . . . . . . . . . . . 51
6.11 Collateral Monitor . . . . . . . . . . . . . . . . . . . . . 51
ARTICLE VII
NEGATIVE COVENANTS
7.1 Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
7.2 Sale of Assets . . . . . . . . . . . . . . . . . . . . . . . 52
7.3 Purchase of Assets . . . . . . . . . . . . . . . . . . . . . 53
7.4 Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
7.5 Change in Nature of Business . . . . . . . . . . . . . . . . 53
7.6 Subsidiaries, Partnerships and Joint Ventures. . . . . . . . 53
7.7 Other Agreements . . . . . . . . . . . . . . . . . . . . . . 53
7.8 Restricted Payments. . . . . . . . . . . . . . . . . . . . . 54
7.9 Investments. . . . . . . . . . . . . . . . . . . . . . . . . 54
7.10 Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . 55
7.11 Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
7.12 Contingent Liabilities . . . . . . . . . . . . . . . . . . . 56
7.13 Unconditional Purchase Obligations . . . . . . . . . . . . . 56
7.14 Transactions with Related Parties. . . . . . . . . . . . . . 57
7.15 Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . 57
7.16 Selection Procedures . . . . . . . . . . . . . . . . . . . . 57
7.17 Capital Base . . . . . . . . . . . . . . . . . . . . . . . . 57
7.18 Leverage Ratio . . . . . . . . . . . . . . . . . . . . . . . 58
7.19 Portfolio Loss Ratio . . . . . . . . . . . . . . . . . . . . 58
7.20 Delinquency Ratio. . . . . . . . . . . . . . . . . . . . . . 58
ARTICLE VIII
EVENTS OF DEFAULT
8.1 Event of Default . . . . . . . . . . . . . . . . . . . . . . 58
(a) Non-Payment . . . . . . . . . . . . . . . . . . . . . . 58
(b) Representation or Warranty. . . . . . . . . . . . . . . 58
(c) Certain Covenants . . . . . . . . . . . . . . . . . . . 58
(d) Other Defaults. . . . . . . . . . . . . . . . . . . . . 59
(e) Insolvency; Voluntary Proceedings . . . . . . . . . . . 59
(f) Involuntary Proceedings . . . . . . . . . . . . . . . . 59
(g) Judgments . . . . . . . . . . . . . . . . . . . . . . . 59
(h) ERISA . . . . . . . . . . . . . . . . . . . . . . . . . 59
(i) Cross Default . . . . . . . . . . . . . . . . . . . . . 60
(j) Common Stock. . . . . . . . . . . . . . . . . . . . . . 60
(k) Finance Income Receivable . . . . . . . . . . . . . . . 60
(l) Change of Control . . . . . . . . . . . . . . . . . . . 60
-iii-
<PAGE>
Section Page
(m) Senior Note Offers. . . . . . . . . . . . . . . . . . . 60
(n) Subordinated Debt Offers. . . . . . . . . . . . . . . . 60
8.2 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . 61
8.3 Rights Not Exclusive . . . . . . . . . . . . . . . . . . . . 61
ARTICLE IX
THE AGENT
9.1 Appointment and Authorization; "Agent" . . . . . . . . . . . 61
9.2 Delegation of Duties . . . . . . . . . . . . . . . . . . . . 62
9.3 Liability of Agent . . . . . . . . . . . . . . . . . . . . . 62
9.4 Reliance by Agent. . . . . . . . . . . . . . . . . . . . . . 62
9.5 Notice of Default. . . . . . . . . . . . . . . . . . . . . . 63
9.6 Credit Decision. . . . . . . . . . . . . . . . . . . . . . . 63
9.7 Indemnification of Agent . . . . . . . . . . . . . . . . . . 64
9.8 Agent in Individual Capacity . . . . . . . . . . . . . . . . 64
9.9 Resignation; Removal; Successor Agent. . . . . . . . . . . . 65
9.10 Withholding Tax. . . . . . . . . . . . . . . . . . . . . . . 65
ARTICLE X
MISCELLANEOUS
10.1 Amendments and Waivers . . . . . . . . . . . . . . . . . . . 67
10.2 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . 68
10.3 No Waiver; Cumulative Remedies . . . . . . . . . . . . . . . 68
10.4 Costs and Expenses . . . . . . . . . . . . . . . . . . . . . 69
10.5 Company Indemnification. . . . . . . . . . . . . . . . . . . 69
10.6 Payments Set Aside . . . . . . . . . . . . . . . . . . . . . 70
10.7 Successors and Assigns . . . . . . . . . . . . . . . . . . . 70
10.8 Assignments, Participations, Etc . . . . . . . . . . . . . . 70
10.9 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . 72
10.10 Set-off. . . . . . . . . . . . . . . . . . . . . . . . . . . 73
10.11 Automatic Debits of Fees . . . . . . . . . . . . . . . . . . 73
10.12 Notification of Addresses, Lending Offices, Etc. . . . . . . 74
10.13 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . 74
10.14 Severability . . . . . . . . . . . . . . . . . . . . . . . . 74
10.15 No Third Parties Benefited . . . . . . . . . . . . . . . . . 74
10.16 Governing Law and Jurisdiction . . . . . . . . . . . . . . . 74
10.17 Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . 75
10.18 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . 75
10.19 Use of Name. . . . . . . . . . . . . . . . . . . . . . . . . 75
- iv-
<PAGE>
SCHEDULES
Schedule A List of States Where UCC Financing Statements
are Required for Customers.
Schedule 1.1 Pricing Schedule
Schedule 2.1 Commitments and Pro Rata Shares
Schedule 5.6 Litigation and Contingent Liabilities
Schedule 5.13 Subsidiaries
Schedule 5.14 Partnerships and Joint Ventures
Schedule 7.9 Investments
Schedule 7.10 Indebtedness
Schedule 7.11 Liens
Schedule 10.2 Offshore and Domestic Lending Offices;
Addresses for Notices
EXHIBITS
Exhibit A Form of Notice of Borrowing
Exhibit B Form of Notice of Conversion/Continuation
Exhibit C Form of Note
Exhibit D Form of Borrowing Base Certificate
Exhibit E Form of Agreed-upon Procedures Report
Exhibit F Form of Pledge and Security Agreement
Exhibit G-1 Form of Legal Opinion of Dorsey & Whitney LLP
Exhibit G-2 Form of Legal Opinion of James D. Atkinson III
Exhibit H Form of Assignment and Acceptance
Exhibit I Form of Compliance Certificate
-v-
<PAGE>
CREDIT AGREEMENT
This CREDIT AGREEMENT is entered into as of July 11, 1996, among OLYMPIC
FINANCIAL LTD., a Minnesota corporation (the "COMPANY"), the several financial
institutions from time to time party to this Agreement (collectively the
"LENDERS"; individually each a "LENDER"), BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Agent, and FIRST BANK NATIONAL ASSOCIATION, as
Co-Manager.
WHEREAS, the Lenders have agreed to make available to the Company a
revolving credit facility upon the terms and conditions set forth in this
Agreement;
NOW, THEREFORE, in consideration of the mutual agreements, provisions and
covenants contained herein, the parties agree as follows:
ARTICLE I
DEFINITIONS
1.1 CERTAIN DEFINED TERMS. The following terms have the following
meanings:
ACQUISITION means the purchase, in one transaction or a series of
related transactions, directly or indirectly (including by merger, tender
offer, exchange offer, consolidation or otherwise) by the Company and/or
any of its Subsidiaries of more than 50% of the assets or issued and
outstanding stock of another Person.
AFFECTED LENDER - see SECTION 3.7.
AFFILIATE means, as to any Person, any other Person which, directly
or indirectly, is in control of, or is controlled by, or is under common
control with, such Person. A Person shall be deemed to control another
Person if the controlling Person possesses, directly or indirectly, the
power to direct or cause the direction of the management and policies of
such other Person, whether through the ownership of voting securities or
membership interests, by contract or otherwise.
AGENCY AGREEMENT means the Agency Agreement, dated as of November 13,
1992, among the Company, Harris Trust and Savings Bank and the Program
Parties (as therein defined).
<PAGE>
AGENT means BofA in its capacity as Agent for the Lenders hereunder,
and any successor agent arising under SECTION 9.9.
AGENT-RELATED PERSONS means the Agent and any successor thereto in
such capacity hereunder, together with their respective Affiliates, and
the officers, directors, employees, agents and attorneys-in-fact of such
Persons and Affiliates acting for or on behalf of the Agent.
AGENT'S PAYMENT OFFICE means the address for payments set forth on
SCHEDULE 10.2 or such other address as the Agent may from time to time
specify.
AGREED-UPON PROCEDURES means the procedures described in the
Agreed-upon Procedures Report to be applied by the Collateral Monitor to
the Pledged Auto Receivables and related Contract Files covered by the
relevant Agreed-upon Procedures Report, as such procedures may be
amended, modified or supplemented from time to time with the written
consent of the Company, the Collateral Monitor and the Required Lenders.
AGREED-UPON PROCEDURES REPORT means a report substantially in the
form of EXHIBIT E attached hereto which is to be prepared by the
Collateral Monitor and delivered to the Agent in accordance with
SECTION 6.1(k).
AGREED-UPON PROCEDURES REPORTING PERIOD means, with respect to any
Agreed-upon Procedures Report, a period commencing on the last day
covered by the last Agreed-upon Procedures Report delivered to the Agent
(or, if no previous Agreed-upon Procedures Report has been delivered to
the Agent, the Effective Date) and ending on a date which is not greater
than 20 days prior to the delivery of such Agreed-upon Procedures Report.
AGREEMENT means this Credit Agreement.
APPLICABLE MARGIN means, (a) for any Base Rate Loan, zero, and (b)
for any Offshore Rate Loan or Resetting Rate Loan, the applicable
percentage set forth in SCHEDULE 1.1 beneath the then-current Level and
opposite the then-current Usage.
ARRANGER means BA Securities, Inc., a Delaware corporation.
ASSIGNEE - see SUBSECTION 10.8(a).
ASSIGNMENT AND ACCEPTANCE - see SUBSECTION 10.8(a).
-2-
<PAGE>
ATTORNEY COSTS means and includes all fees and disbursements of any
law firm or other external counsel, the allocated cost of internal legal
services and all disbursements of internal counsel.
AUTO LOAN SECURITIZATION means a public or private transfer of Auto
Receivables in the ordinary course of business and by which the Company
directly or indirectly securitizes a pool of specified Auto Receivables.
AUTO RECEIVABLE means installment sales contracts and promissory
notes purchased by the Company or a Subsidiary of the Company from motor
vehicle dealers and secured by new and used automobiles and light trucks.
AVERAGE SERVICING PORTFOLIO means, at any time, the quotient of (a)
the sum of the aggregate Servicing Portfolio as of the last day of each
of the Company's most recently completed seven fiscal months divided by
(b) 7.0.
BAI means Bank of America Illinois, an Illinois banking corporation.
BANKRUPTCY CODE means the Federal Bankruptcy Reform Act of 1978 (11
U.S.C. Section 101, ET SEQ.).
BASE RATE means, for any day, the higher of: (a) 0.50% per annum
above the latest Federal Funds Rate; and (b) the rate of interest in
effect for such day as publicly announced from time to time by BAI in
Chicago, Illinois, as its "reference rate." (The "reference rate" is a
rate set by BAI based upon various factors including BAI's costs and
desired return, general economic conditions and other factors, and is
used as a reference point for pricing some loans, which may be priced at,
above or below such announced rate.) Any change in the reference rate
announced by BAI shall take effect at the opening of business on the day
specified in the public announcement of such change.
BASE RATE LOAN means a Loan that bears interest based on the Base
Rate.
BofA means Bank of America National Trust and Savings Association, a
national banking association.
BORROWING means a borrowing hereunder made by the Lenders ratably
according to their respective Pro Rata Shares consisting of Loans of the
same Type made to the Company on the same day by the Lenders under
ARTICLE II and, in the case of Offshore Rate Loans, having the same
Interest Period.
-3-
<PAGE>
BORROWING BASE means, at any date, an amount equal to 95% of the
outstanding principal amount of all Eligible Auto Receivables.
BORROWING BASE CERTIFICATE see SECTION 6.1(d).
BORROWING DATE means any date on which a Borrowing occurs under SECTION
2.3.
BUSINESS DAY means any day other than a Saturday, Sunday or other day on
which commercial banks in New York City, Chicago or San Francisco are authorized
or required by law to close and, if the applicable Business Day relates to any
Offshore Rate Loan, means such a day on which dealings are carried on in the
applicable offshore dollar interbank market.
CAPITAL ADEQUACY REGULATION means any guideline, request or directive of
any central bank or other Governmental Authority, or any other law, rule or
regulation, whether or not having the force of law, in each case, regarding
capital adequacy of any bank or of any corporation controlling a bank.
CAPITAL BASE means, at any date, the Company's Tangible Net Worth at such
date.
CAPITAL BASE PROCEEDS, for any period, means the proceeds received by the
Company from any sale of equity securities during such period (net of direct,
out-of-pocket expenses incurred in connection with such sale).
CAPITALIZED LEASE means any lease which is or should be capitalized on the
books of the lessee in accordance with GAAP.
CASH EQUIVALENT means: (a) Dollars; (b) securities issued or directly and
fully guaranteed or insured by the United States government or any agency or
instrumentality thereof having maturities of not more than six months from the
date of acquisition; (c) certificates of deposit and eurodollar time deposits
with maturities of six months or less from the date of acquisition, bankers'
acceptances with maturities not exceeding six months and overnight bank
deposits, in each case with any domestic commercial bank having capital and
surplus in excess of $500 million and a Keefe Bank Watch Rating of "B" or
better; (d) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in CLAUSES (b) and (c) above
entered into with any financial institution meeting the qualifications specified
in CLAUSE (c) above or with any other Person with a short-term unsecured credit
rating of at least A-1 from S&P or P-1 from Moody's, which repurchase agreement
is secured by a fully
-4-
<PAGE>
perfected security interest in any obligation of the type described in
CLAUSES (b) and (c) having a market value of not less than 100% of the
repurchase obligation of the financial institution or other Person
thereunder; (e). commercial paper having a rating of A-1 or P-1 (or higher)
from Moody's or S&P, and in each case maturing within six months after the
date of acquisition; (f) the amount of any liabilities (as shown on the
Company's or any of its Subsidiary's most recent balance sheet or in the
notes thereto) of the Company or any Subsidiary that are assumed by the
transferee of Finance Income Receivable in any sale thereof permitted by
SECTION 7.2(b); and (g) any notes or other obligations received by the
Company or any such Subsidiary from such transferee that are immediately
converted by the Company or such Subsidiary into Cash Equivalents (to the
extent of the Cash Equivalents received).
CHANGE OF CONTROL means:
(a) the acquisition by any Person, or two or more Persons acting in
concert, of beneficial ownership (within the meaning of Rule 13d-3 of the SEC
under the Securities Exchange Act of 1934) of 20% or more of the outstanding
shares of voting stock of the Company; or
(b) the replacement of a majority of the Board of Directors of the
Company, over a one-year period, from the directors who constituted the Board
of Directors of the Company at the beginning of such period, which
replacement shall not have been approved by the Board of Directors of the
Company (or replacement directors approved by the Board of Directors of the
Company), as constituted at the beginning of such period.
CLOSING DATE means the date on which all conditions precedent set forth in
SECTION 4.1 are satisfied or waived by all Lenders (or, in the case of
SUBSECTION 4.1(h), waived by the Person entitled to receive the applicable
payment).
CODE means the Internal Revenue Code of 1986, and regulations promulgated
thereunder.
COLLATERAL has the meaning assigned thereto in the Pledge and Security
Agreement.
COLLATERAL MONITOR means Ernst & Young or other successor collateral
monitor selected in accordance with SECTION 6.11.
COLLATERAL MONITORING AGREEMENT - see SECTION 4.1(c).
-5-
<PAGE>
COLLATERAL PAYMENTS has the meaning assigned thereto in the Pledge and
Security Agreement.
COLLECTION ACCOUNT has the meaning assigned thereto in the Pledge and
Security Agreement.
CO-MANAGER means First Bank National Association, in its capacity as
Co-Manager for the Lenders.
COMMITMENT - see SECTION 2.1. As of the Effective Date, the initial amount
of the combined Commitments of all Lenders is $170,000,000.
COMMITMENT FEE RATE means the applicable rate set forth in SCHEDULE 1.1
beneath the then-current Level and opposite the then-current Usage.
COMPANY - see the PREAMBLE.
COMPLIANCE CERTIFICATE means a certificate substantially in the form of
EXHIBIT I.
CONTRACT FILE means, with respect to each Auto Receivable, the original of
such Auto Receivable and the following original documentation relating to such
Auto Receivable:
(a) a copy of the credit application of the Customer named in the Auto
Receivable to the Dealer named in the Auto Receivable;
(b) a copy of the certificate of title or the Dealer application for
Certificate of Title or a certificate of title application for correction of
title, in each case showing the Company as lien holder or a guaranty letter from
the Dealer agreeing to repurchase the Auto Receivable if the required
certificate of title is not received;
(c) a copy of the executed representation letter from the Customer named
in the Auto Receivable agreeing to provide physical damage insurance for the
related Vehicle;
(d) with respect to each Auto Receivable originated in any of the states
listed on SCHEDULE A hereto, as amended from time to time by the Agent on
behalf of the Lenders, an acknowledgment filed copy of UCC-1 Financing
Statements showing the Company as secured party and the Customer obligated on
such Auto Receivable as debtor, and an executed UCC-3 statement naming the
Company as assignor and the Agent as assignee;
-6-
<PAGE>
(e) a copy of a completed Credit Score Sheet showing Credit Score, DAS
Score, Debt/Income Ratio and Payment/Income Ratio for the Customer and
co-obligor (if any); and
(f) a copy of a completed Comment Sheet showing Loan to Value Ratio.
CONVERSION/CONTINUATION DATE means any date on which, under SECTION 2.4,
the Company (a) converts Loans of one Type to another Type or (b) continues as
Loans of the same Type, but with a new Interest Period, Loans having an Interest
Period expiring on such date.
CUSTOMER has the meaning assigned thereto in the Pledge and Security
Agreement.
DEALER has the meaning assigned thereto in the Pledge and Security
Agreement.
DEALER AGREEMENT has the meaning assigned thereto in the Pledge and
Security Agreement.
DEBENTURES means the Company's 8% Convertible Subordinated Debentures due
2008 into which the Preferred Stock may be exchanged in accordance with the
terms of the Preferred Stock.
DEFAULTED AUTO RECEIVABLE means any Auto Receivable with respect to which:
(a) all or any portion of a Scheduled Payment has become delinquent for a number
of days such that such Auto Receivable would be considered to be a defaulted
Auto Receivable under the terms of any Auto Loan Securitization; (b) the
automobile financed pursuant to such Auto Receivable has been repossessed (and
any applicable redemption period has expired); or (c) the Company has determined
in good faith that payments under such Auto Receivable are not likely to be
resumed.
DELINQUENCY RATIO means, at any time, the result (expressed as a
percentage) obtained by dividing (a) the then outstanding principal amount of
those Included Contracts which at such date have a Scheduled Payment which is
more than thirty days past due by (b) the then outstanding principal amount of
all Included Contracts.
DOLLARS, DOLLARS and $ each mean lawful money of the United States.
EFFECTIVE DATE means the date on which the Agent has received counterparts
of this Agreement executed by the parties hereto.
-7-
<PAGE>
ELIGIBLE AUTO RECEIVABLES means only such Auto Receivables of which the
Company is the holder, which were originated by the Company in the normal
course of business under one or more Dealer Agreements and which satisfy all
of the following criteria as determined by the Required Lenders in their
reasonable discretion:
(a) such Auto Receivable had an original principal balance, has a
remaining maturity, is fully amortizing with level payments, and has an
interest rate and other economic terms that are consistent with the economic
terms of the Company's most recent pool of Auto Receivables which the
Company securitized or sold so that such Auto Receivable could have been
included in such most recent securitization or sale;
(b) such Auto Receivable is a Pledged Auto Receivable and the Agent
for the benefit of the Lenders has a perfected, first priority security
interest in such Auto Receivable and the proceeds from any foreclosure of
the automobile financed pursuant to such Auto Receivable;
(c) the number of days since such Auto Receivable was originated is
not greater than 180 days;
(d) such Auto Receivable has not been amended or modified in any
manner which would prevent it from being included in a pool of Auto
Receivables to be securitized and sold and such Auto Receivable has not been
rejected for inclusion in any pool of Auto Receivables which have been or
are to be securitized and sold;
(e) no payment under such Auto Receivable is more than thirty days
past due in accordance with the stated terms of such Auto Receivable;
(f) such Auto Receivable is documented on the Company's standard
documentation which has been properly completed and executed;
(g) the Customer of such Auto Receivable is not the subject of any
current bankruptcy or similar insolvency proceeding;
(h) the Dealer has delivered a complete Contract File including the
original of such Auto Receivable to the Company and, except for those
periods when such original is being transmitted by one of the Company's
offices to its main office or is being microfiched or otherwise copied or
electronically imaged off of the
-8-
<PAGE>
Company's premises, such original is in the possession of the Company;
(i) if a Stage I Receivable, 10:00 a.m., Chicago time, on its Stage I
Payment Date has not yet occurred;
(j) the final payment under such Auto Receivable is not more than
72 months after the date such Auto Receivable was originated (PROVIDED, that
this CLAUSE (j) shall not exclude Auto Receivables from being Eligible Auto
Receivables so long as the Auto Receivables included by virtue of this
proviso do not exceed 10% of all Eligible Auto Receivables); and
(k) the Contract File for such Auto Receivable is not a Rejected
File or the Agent has not determined that such Auto Receivable fails to
satisfy the standards for eligibility set forth in this definition.
ELIGIBLE ASSIGNEE means any of (a) a commercial bank organized under the
laws of the United States, or any state thereof, and having a combined capital
and surplus of at least $500,000,000; (b) a commercial bank organized under the
laws of any other country which is a member of the Organization for Economic
Cooperation and Development (the "OECD"), or a political subdivision of any such
country, and having a combined capital and surplus of at least $500,000,000,
provided that such bank is acting through a branch or agency located in the
United States; and (c) a Person that is primarily engaged in the business of
commercial banking and that is (i) a Subsidiary of a Lender, (ii) a Subsidiary
of a Person of which a Lender is a Subsidiary or (iii) a Person of which a
Lender is a Subsidiary.
ENVIRONMENTAL LAWS means all federal, state or local laws, statutes, common
law duties, rules, regulations, ordinances and codes, together with all
administrative orders, directed duties, requests, licenses, authorizations and
permits of, and agreements with, any Governmental Authorities, in each case
relating to environmental, health, safety and land use matters.
ERISA means the Employee Retirement Income Security Act of 1974, and
regulations promulgated thereunder.
ERISA AFFILIATE means any trade or business (whether or not incorporated)
under common control with the Company within the meaning of Section 414(b) or
(c) of the Code (and Sections 414(m) and (o) of the Code for purposes of
provisions relating to Section 412 of the Code).
-9-
<PAGE>
EVENT OF DEFAULT -- see SECTION 8.1.
EXCEPTION means, with respect to any Contract File, each exception listed
in paragraph 6 or 7 of the Agreed-upon Procedures Report reviewing such
Contract File.
FEDERAL FUNDS RATE means, for any day, the rate set forth in the weekly
statistical release designated as H.15(519), or any successor publication,
published by the Federal Reserve Bank of New York (including any such
successor, "H.15(519)") on the preceding Business Day opposite the caption
"Federal Funds (Effective)"; or, if for any relevant day such rate is not so
published on any such preceding Business Day, the rate for such day will be the
arithmetic mean as determined by the Agent of the rates for the last
transaction in overnight Federal funds arranged prior to 9:00 a.m. (New York
City time) on that day by each of three leading brokers of Federal funds
transactions in New York City selected by the Agent.
FINANCE INCOME RECEIVABLE means the "Finance Income Receivable" appearing,
and as determined in accordance with GAAP, on the audited consolidated balance
sheet of the Company calculated in a manner consistent with the calculation of
"Finance Income Receivable" shown on the Company's audited balance sheet as at
December 31, 1995.
FRB means the Board of Governors of the Federal Reserve System, and any
Governmental Authority succeeding to any of its principal functions.
FURTHER TAXES means any and all present or future taxes, levies,
assessments, imposts, duties, deductions, fees, withholdings or similar charges
(including net income taxes and franchise taxes), and all liabilities with
respect thereto, imposed by any jurisdiction on account of amounts payable or
paid pursuant to SECTION 3.1.
GAAP means generally accepted accounting principles set forth from time to
time in the opinions and pronouncements of the Accounting Principles Board and
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board (or agencies with
similar functions of comparable stature and authority within the U.S.
accounting profession), which are applicable to the circumstances as of the
date of any determination.
GOVERNMENTAL AUTHORITY means any nation or government, any state or other
political subdivision thereof, any central bank (or similar monetary or
regulatory authority) thereof, any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to
-10-
<PAGE>
government, and any corporation or other entity owned or controlled, through
stock or capital ownership or otherwise, by any of the foregoing.
HEDGING OBLIGATIONS means, with respect to any Person, the obligations of
such Person under interest rate swap, cap or collar agreements or other
agreements or arrangements designed to protect such Person against fluctuations
in interest rates.
HOSTILE ACQUISITION means an Acquisition of a Person if such Person (or its
Board of Directors or equivalent governing body) has (i) announced that it will
oppose such Acquisition or (ii) commenced any litigation which alleges that
such Acquisition violates, or will violate, any Requirement of Law.
INCLUDED CONTRACTS means all Auto Receivables which are either owned by the
Company or a Subsidiary of the Company or have been securitized and sold by the
Company or a Subsidiary of the Company as part of a pool of Auto Receivables;
PROVIDED, HOWEVER, that Defaulted Auto Receivables shall not be Included
Contracts.
INDEBTEDNESS means, with respect to any Person, without duplication, all
obligations, contingent or otherwise, which in accordance with GAAP should be
classified upon such Person's balance sheet as liabilities, but in any event
including the following (whether or not they should be classified as
liabilities upon such balance sheet): (a) all indebtedness for borrowed money
of such Person and all obligations of such Person secured by any mortgage,
pledge, security interest, lien, charge or other encumbrance existing on
property owned or acquired subject thereto, whether or not the obligation
secured thereby shall have been assumed and whether or not the obligation
secured is the obligation of such Person or another party; (b) any obligation
of such Person on account of deposits or advances; (c) any obligation of such
Person for the deferred purchase price of any property or services, except
Trade Accounts Payable; (d) any obligation of such Person as lessee under any
Capitalized Lease; (e) all guaranties, endorsements and other contingent
obligations of such Person in respect to Indebtedness of others (other than
endorsements of instruments for collection in the ordinary course of such
Person's business); and (f) undertakings or agreements to reimburse or
indemnify issuers of letters of credit issued for the account of such Person.
For all purposes of this Agreement, the Indebtedness of any Person shall
include the Indebtedness of any partnership or joint venture in which such
Person is a general partner or a joint venturer.
-11-
<PAGE>
INDEMNIFIED LIABILITIES -- see SECTION 10.5.
INDEMNIFIED PERSON -- see SECTION 10.5.
INSOLVENCY PROCEEDING means, with respect to any Person, (a) any case,
action or proceeding with respect to such Person before any court or other
Governmental Authority relating to bankruptcy, reorganization, insolvency,
liquidation, receivership, dissolution, winding-up or relief of debtors, or (b)
any general assignment for the benefit of creditors, composition, marshalling
of assets for creditors, or other similar arrangement in respect of its
creditors generally or any substantial portion of its creditors; in each case
undertaken under any U.S. Federal, state or foreign law, including the
Bankruptcy Code.
INTEREST PAYMENT DATE means, as to any Offshore Rate Loan, the last day of
each Interest Period applicable to such Loan and, as to any Base Rate Loan or
Resetting Rate Loan, the first Business Day of each March, June, September and
December.
INTEREST PERIOD means, as to any Offshore Rate Loan, the period commencing
on the Borrowing Date of such Loan or on the Conversion/Continuation Date on
which such Loan is converted into or continued as an Offshore Rate Loan, and
ending on the date one, two or three months thereafter as selected by the
Company in its Notice of Borrowing or Notice of Conversion/Continuation, as the
case may be; PROVIDED that:
(i) if any Interest Period would otherwise end on a day that is not a
Business Day, such Interest Period shall be extended to the following
Business Day unless the result of such extension would be to carry such
Interest Period into another calendar month, in which event such Interest
Period shall end on the preceding Business Day;
(ii) any Interest Period that begins on the last Business Day of a
calendar month (or on a day for which there is no numerically corresponding
day in the calendar month at the end of such Interest Period) shall end on
the last Business Day of the calendar month at the end of such Interest
Period; and
(iii) no Interest Period for any Loan shall extend beyond the
Termination Date.
INVESTMENT means the acquisition, purchase, making or holding of any stock
or other security, any loan, advance, contribution to capital, extension of
credit (except for trade
-12-
<PAGE>
and customer accounts receivable for inventory sold or services rendered in the
ordinary course of business and payable in accordance with customary trade
terms), any acquisitions of real or personal property (other than real and
personal property acquired in the ordinary course of business) and any purchase
or commitment or option to purchase stock or other debt or equity securities
of, or any interest in, another Person or any integral part of any business or
the assets comprising such business or part thereof.
IRS means the Internal Revenue Service, and any Governmental Authority
succeeding to any of its principal functions under the Code.
LEVEL means either Level One or Level Two as set forth on SCHEDULE 1.1.
LENDER -- see the PREAMBLE.
LENDING OFFICE means, as to any Lender, the office or offices of such
Lender specified as its "Lending Office" or "Domestic Lending Office" or
"Offshore Lending Office", as the case may be, on SCHEDULE 10.2, or such other
office or offices as such Lender may from time to time notify the Company and
the Agent.
LEVERAGE RATIO -- see SECTION 7.18.
LIEN means any security interest, mortgage, deed of trust, pledge,
hypothecation, assignment, charge or deposit arrangement, encumbrance, lien
(statutory or other) or preferential arrangement of any kind or nature
whatsoever in respect of any property (including those created by, arising
under or evidenced by any conditional sale or other title retention agreement,
the interest of a lessor under a capital lease, or any financing lease having
substantially the same economic effect as any of the foregoing, but not
including the interest of a lessor under an operating lease).
LOAN means an extension of credit by a Lender to the Company under
SECTION 2.3. A Loan may be an Offshore Rate Loan, a Resetting Rate Loan or a
Base Rate Loan (each a "TYPE" of Loan).
LOAN DOCUMENTS means this Agreement, any Notes, the Pledge and Security
Agreement, the Collateral Monitoring Agreement, the Lock-Box Agreement, the
Agency Agreement and all other documents delivered to the Agent or any Lender
in connection herewith or therewith.
-13-
<PAGE>
LOCK-BOX AGREEMENT means the Retail Lockbox Agreement dated as of November
13, 1992, among the Company, Harris Trust and Savings Bank and the Program
Partners (as therein defined).
MASTER SUBORDINATED INDENTURE NOTES means notes issued pursuant to the
Master Subordinated Notes Indenture.
MASTER SUBORDINATED NOTES INDENTURE means the Indenture dated March 15,
1996 between the Company and Norwest Bank Minnesota, National Association, as
trustee, as the same may be amended, supplemented or restated from time to time.
MATERIAL ADVERSE EFFECT means a material adverse change in, or a material
adverse effect upon, the business, assets or condition, financial or otherwise,
of the Company or on the ability of the Company or any other party obligated
thereunder to perform its obligations under the Loan Documents.
MOODY'S means Moody's Investors Service, Inc. or any successor thereto.
MULTIEMPLOYER PLAN means a "multiemployer plan", within the meaning of
Section 4001(a)(3) of ERISA, with respect to which the Company or any ERISA
Affiliate may have any liability.
NET INCOME means, for any period, the Company's after-tax net income for
such period determined in accordance with GAAP but after deduction of dividend
payments on the Preferred Stock.
NET PORTFOLIO LOSSES means, for any period, the aggregate amount of gross
charge-offs of Auto Receivables serviced by the Company or any of its
Subsidiaries during such period, net of all recoveries with respect to any such
Auto Receivables (including post-disposition amounts received on previously
charged-off Auto Receivables), calculated in a manner consistent with the
calculation of net losses in the Company's Annual Report on Form 10-K for the
year ended December 31, 1994.
NET PROCEEDS means the aggregate Cash Equivalent proceeds received by the
Company or any of its Subsidiaries in respect of any sale of Finance Income
Receivable (including any Cash Equivalent received upon the sale or other
disposition of any non-cash consideration received in such sale), net of the
direct costs relating to such sale (including legal, accounting and investment
banking fees and sales commissions) and taxes paid or payable as a result
thereof (after taking into account any available tax credits or deductions and
any
-14-
<PAGE>
tax sharing arrangements) and any reserve for adjustment in respect of the
sale price of such asset established in accordance with GAAP.
NET WORTH means, as to any Person, the total of all assets appearing on a
balance sheet of such Person after deducting all proper reserves (including
reserves for depreciation, obsolescence and amortization) minus all liabilities
of such Person, in each case determined in accordance with GAAP.
NOTE means a promissory note executed by the Company in favor of a Lender
pursuant to SUBSECTION 2.2(b), in substantially the form of EXHIBIT C.
NOTICE OF BORROWING means a notice in substantially the form of EXHIBIT A.
NOTICE OF CONVERSION/CONTINUATION means a notice in substantially the form
of EXHIBIT B.
OBLIGATIONS means all advances, debts, liabilities, obligations, covenants
and duties arising under any Loan Document owing by the Company to any Lender,
the Agent or any Indemnified Person, whether direct or indirect (including those
acquired by assignment), absolute or contingent, due or to become due, or now
existing or hereafter arising.
OFFSHORE RATE means, for any Interest Period, with respect to Offshore Rate
Loans comprising part of the same Borrowing, the rate of interest per annum
(rounded upward, if necessary, to the next 1/16th of 1%) determined by the Agent
as follows:
Offshore Rate = IBOR
------------------------------------
1.00 - Eurodollar Reserve Percentage.
Where,
EURODOLLAR RESERVE PERCENTAGE means for any day for any Interest
Period the maximum reserve percentage (expressed as a decimal, rounded
upward, if necessary, to the next 1/100th of 1%) in effect on such day and
applicable to any Lender under regulations issued from time to time by the
FRB for determining the maximum reserve requirement (including any
emergency, supplemental or other marginal reserve requirement) with respect
to Eurocurrency funding (currently referred to as "Eurocurrency
liabilities"); and
-15-
<PAGE>
IBOR means the rate of interest per annum determined by the Agent as
the rate at which dollar deposits in the approximate amount of BAI's
Offshore Rate Loan are offered for such Interest Period based on information
presented on the Telerate Screen page 3750 at approximately 11:00 a.m.
(Chicago time) two Business Days prior to the commencement of such Interest
Period; PROVIDED, that if at least two such offered rates appear on the
Telerate Screen in respect of such Interest Period, the arithmetic mean of
all such rates (as determined by the Agent) will be the rate used; PROVIDED,
FURTHER, that if Telerate ceases to provide LIBOR quotations, such rate
shall be the rate of interest determined by the Agent at which dollar
deposits in the approximate amount of BAI's Offshore Rate Loan for such
Interest Period would be offered by BofA's Grand Cayman Branch, Grand
Cayman, B.W.I. (or such other office as may be designated for such purpose
by BofA), to major banks in the offshore dollar market at their request at
approximately 11:00 A.M. (New York City time) two Business Days prior to the
commencement of such Interest Period.
The Offshore Rate shall be adjusted automatically as to all Offshore
Rate Loans then outstanding as of the effective date of any change in the
Eurodollar Reserve Percentage.
OFFSHORE RATE LOAN means a Loan that bears interest based on the Offshore
Rate.
OTHER TAXES means any present or future stamp, court or documentary taxes
or any other charges or similar levies which arise from any payment made
hereunder or from the execution, delivery, performance, enforcement or
registration of, or otherwise with respect to, this Agreement or any other Loan
Document.
PARTICIPANT - see SUBSECTION 10.8(c).
PBGC means the Pension Benefit Guaranty Corporation, or any Governmental
Authority succeeding to any of its principal functions under ERISA.
PERMITTED ACQUISITION means an Acquisition by the Company or any Subsidiary
of any Person that is a going concern that satisfies the following conditions:
(a) no Event of Default or Unmatured Event of Default is in
existence at the time of such Acquisition or would result therefrom;
-16-
<PAGE>
(b) the Person acquired in such Acquisition is in the same or a similar
line of business as the Company is in on the Effective Date;
(c) the Agent shall have received from the Company, in form and
substance satisfactory to the Required Lenders, PRO FORMA calculations of the
covenants in SECTIONS 7.17, 7.18, 7.19 and 7.20 showing compliance with such
covenants as of the date of such Acquisition after giving effect thereto;
(d) the Acquisition is not a Hostile Acquisition; and
(e) the total consideration for all such Acquisitions (including cash
and noncash purchase price, liabilities assumed, deferred or financed
purchase price, purchase price characterized as consulting agreements,
noncompetition payments and the like) does not exceed $100,000,000 in the
aggregate.
PERMITTED LIENS means: (i) Liens on Auto Receivables in connection with
Auto Loan Securitizations or under Warehouse Facilities (PROVIDED that no
such Lien attaches to any Pledged Auto Receivables); (ii) Liens in favor of
the Agent for the benefit of the Lenders; (iii) Liens on property existing at
the time of acquisition thereof by the Company or any Subsidiary (PROVIDED
that such Liens were in existence prior to the contemplation of such
acquisition); (iv) Liens to secure the performance of statutory obligations,
surety or appeal bonds, performance bonds or other obligations of a like
nature incurred in the ordinary course of business; (v) Liens to secure
Indebtedness permitted under SECTION 7.10(h) covering only the assets
acquired with such Indebtedness (PROVIDED that the Indebtedness secured
thereby shall not exceed the lesser of the purchase price or the fair market
value of such property at the time of its lease); (vi) Liens existing on the
Effective Date and listed on SCHEDULE 7.11; (vii) Liens for taxes,
assessments or governmental charges or claims that are not yet delinquent or
that are being contested in good faith by appropriate proceedings promptly
instituted and diligently concluded, provided that any reserve or other
appropriate provision as shall be required in conformity with GAAP shall have
been made therefor; (viii) Liens in favor of a monoline insurance company or
other provider of credit enhancement in connection with any Auto Loan
Securitization or Warehouse Facility (PROVIDED that no such Lien attaches to
any Pledged Auto Receivables); (ix) Liens on Finance Income Receivable in
connection with the sale of the same; (x) Liens associated with Hedging
Obligations (provided that such Liens do not attach to any Pledged Auto
Receivables); (xi) a Lien on
-17-
<PAGE>
the "Reserve Fund" (under and as defined in the Senior Notes Indenture); and
(xii) Liens incurred in the ordinary course of business of the Company or any
Subsidiary of the Company, with respect to obligations that do not exceed
$1,000,000 at any one time outstanding and that (a) are not incurred in
connection with the borrowing of money or the obtaining of advances of credit
(other than trade credit in the ordinary course of business) and (b) do not
in the aggregate materially detract from the value of the property or
materially impair the use thereof in the operation of business by the Company
or such Subsidiary.
PERSON means an individual, partnership, corporation, limited liability
company, business trust, joint stock company, trust, unincorporated
association, joint venture or Governmental Authority.
PLAN means an employee benefit plan (as defined in Section 3(3) of
ERISA), other than a Multiemployer Plan, with respect to which the Company
may have any liability.
PLEDGE AND SECURITY AGREEMENT means the Pledge and Security Agreement
dated as of even date herewith between the Company and the Agent.
PLEDGED AUTO RECEIVABLES has the meaning assigned thereto in the Pledge
and Security Agreement.
PORTFOLIO LOSS RATIO, at any time, means the result (expressed as a
percentage) obtained by dividing (a) Net Portfolio Losses for the Company's
most recent six fiscal months multiplied by 2.0 by (b) the Average Servicing
Portfolio at such time.
PREFERRED STOCK means up to 1,150,000 shares of the Company's Cumulative
Convertible Exchangeable Preferred Stock as described in the Company's
Amendment No. 3 to Form S-1 Registration Statement dated November 22, 1993.
PRIOR CREDIT AGREEMENT - see SECTION 4.1.
PRO RATA SHARE means, as to any Lender at any time, the percentage
equivalent (expressed as a decimal, rounded to the ninth decimal place) at
such time of such Lender's Commitment divided by the combined Commitments of
all Lenders at such time.
RELATED PARTY means any Person (other than a Subsidiary) (a) which
directly or indirectly, through one or more intermediaries, controls, or is
controlled by, or is under common control with, the Company, (b) which
beneficially owns
-18-
<PAGE>
or holds 10% or more of the equity interest of the Company or (c) 10% or
more of the equity interest of which is beneficially owned or held by the
Company or a Subsidiary. The term "control" means the possession, directly
or indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through the ownership of voting
securities, by contract or otherwise.
REJECTED FILE means a Contract File which is identified in an Agreed-upon
Procedures Report as having an Exception.
REPLACEMENT LENDER - see SECTION 3.7.
REPORTABLE EVENT means a reportable event, as described in Section 4043
of ERISA and the regulations issued under such section, with respect to a
Plan, excluding, however, such events as to which the PBGC, by regulation,
has waived the requirement of Section 4043(a) of ERISA that it be notified
within 30 days of the occurrence of such event, provided, that a failure to
meet the minimum funding standard of Section 412 of the Code and Section 302
of ERISA shall be a reportable event regardless of the issuance of any such
waivers in accordance with Section 412(d) of the Code.
REQUIRED LENDERS means (a) prior to the Termination Date, Lenders holding
at least 66-2/3% of the Commitments, and (b) on and after the Termination
Date, Lenders holding at least 66-2/3% of the then aggregate unpaid principal
amount of the Loans.
REQUIREMENT OF LAW means, as to any Person, any law (statutory or
common), treaty, rule or regulation or determination of an arbitrator or of a
Governmental Authority, in each case applicable to or binding upon such
Person or any of its property or to which such Person or any of its property
is subject.
RESETTING RATE means, on any date and with respect to all Resetting Rate
Loans, the rate of interest, as determined by the Agent, equal to the
Offshore Rate which would be applicable to a notional Offshore Rate Loan in
the amount of BAI's Resetting Rate Loan having an Interest Period of one
month and an interest determination date of such date. The Resetting Rate
shall be adjusted automatically each day for any change in the applicable
Offshore Rate for such day.
RESETTING RATE LOAN means a Loan that bears interest based on the
Resetting Rate.
-19-
<PAGE>
RESPONSIBLE OFFICER means the Chairman, the President, any Vice
President, the Treasurer or any Assistant Treasurer of the Company.
S&P means Standard & Poor's, a division of The McGraw Hill Companies, Inc.
SCHEDULED PAYMENT means, with respect to any period for any Auto
Receivable, the amount set forth in such Auto Receivable as required to be
paid by the obligor in such period. If the obligor's payment obligation
under an Auto Receivable with respect to a period has been modified so as to
differ from the amount specified in such Auto Receivable (a) as a result of
the order of a court in an insolvency proceeding involving the obligor, (b)
pursuant to the Soldiers' and Sailors' Civil Relief Act of 1940 or (c) as a
result of modifications or extensions of the Auto Receivable permitted by the
agreement relating to the securitization of such Auto Receivable, the
Scheduled Payment with respect to such period shall refer to the obligor's
payment obligation with respect to such period as so modified.
SEC means the Securities and Exchange Commission, or any Governmental
Authority succeeding to any of its principal functions.
SENIOR NOTES means the $145,000,000 13% Senior Notes due 2000 issued by
the Company under the Senior Notes Indenture.
SENIOR NOTES INDENTURE means the Indenture dated as of April 28, 1995, by
and between the Company and Norwest Bank Minnesota, National Association, as
trustee, as supplemented by the First Supplemental Indenture thereto dated as
of August 11, 1995, and as the same may be further amended, supplemented or
restated from time to time with the prior written consent of the Required
Lenders, PROVIDED, HOWEVER, that:
(a) so long as none of the following actions adversely affects the
Lenders' rights under the Loan Documents, the Senior Notes Indenture may
be amended without the consent of any Lender to cure any ambiguity
contained therein, to correct or supplement any provisions in the Senior
Notes Indenture which may be inconsistent with any other provisions
therein or to add any other provisions with respect to matters or
questions arising under the Senior Notes Indenture which are not
inconsistent with the provisions therein;
(b) the Senior Notes Indenture may be amended, supplemented or
otherwise modified without the consent of
-20-
<PAGE>
any Lender so long as any such amendment, supplement or modification (1)
does not increase the rate of or change the time for payment of interest
payable with respect to the Senior Notes, (2) does not advance the
maturity of the Senior Notes, (3) does not impose any covenant, default
or repayment or redemption obligation on the Company less favorable to
the Company than those in effect on the date hereof under the Senior
Notes Indenture, (4) does not amend any Section of the Senior Notes
Indenture (or any definition used in any such Section) expressly
referred to herein in a manner less favorable to the Lenders than those
in effect on the date hereof, (5) does not impose a Lien on any assets
of the Company or any Subsidiary other than a Lien on the "Reserve Fund"
(as defined in the Senior Notes Indenture) and (6) is not otherwise
adverse to the Lenders; and
(c) each reference in this Agreement to any provision of the Senior
Notes Indenture shall be deemed to incorporate such provision (and all
related definitions set forth in the Senior Notes Indenture) by
reference and such incorporation by reference shall survive any
termination, discharge or defeasance of the Senior Notes Indenture.
SERVICING PORTFOLIO, at any time, means the aggregate principal balance
of all Auto Receivables which have been purchased or otherwise acquired by
the Company or any of its Subsidiaries (whether or not thereafter sold or
disposed of) which are serviced by the Company or any of its Subsidiaries at
such time, calculated in a manner consistent with the calculation of the
components of Average Servicing Portfolio in the Company's Annual Report on
Form 10-K for the year ended December 31, 1995.
STAGE I LOANS means, at any date, with respect to any Notice of
Borrowing, the portion of the Loans requested pursuant to such Notice of
Borrowing that is shown as being supported by Stage I Receivables comprising
part of the Borrowing Base as shown on such Borrowing Base Certificate.
STAGE I PAYMENT DATE - see SECTION 2.7.
STAGE I RECEIVABLE means, at any date, a Pledged Auto Receivable which is
not a Stage II Receivable.
STAGE II LOANS means, at any date with respect to any Notice of
Borrowing, the portion of the Loan being requested pursuant to such Notice of
Borrowing which is shown as being supported by Stage II Receivables
comprising part of the Borrowing Base as shown on such Notice of Borrowing.
-21-
<PAGE>
STAGE II RECEIVABLE means, at any date, a Pledged Auto Receivable which
has been completely processed by the Company at its Minneapolis, Minnesota
principal place of business; I.E., (a) the Company has recorded such Auto
Receivable and its related Contract File on microfiche or has otherwise
copied or electronically imaged the same, (b) the Company has placed the
legend on such Auto Receivable required by Section 3.16(b) of the Pledge and
Security Agreement and (c) the Company has deposited the original of such
Pledged Auto Receivable and its related Contract File in a segregated secure
file cabinet containing only Pledged Auto Receivables and conspicuously
identified as containing property subject to the Agent's security interest.
SUBORDINATED DEBT means Indebtedness of the Company which is not secured
by a Lien on the assets of the Company or any of its Subsidiaries and which
is subordinated in right of payment to the Obligations.
SUBSIDIARY of a Person means any corporation, association, partnership,
limited liability company, joint venture or other business entity of which
more than 50% of the voting stock, membership interests or other equity
interests (in the case of Persons other than corporations), is owned or
controlled directly or indirectly by such Person, or one or more of the
Subsidiaries of such Person, or a combination thereof. Without limiting the
generality of the foregoing, the term "Subsidiary" specifically includes any
special purpose vehicle or conduit formed by a Person that is otherwise
within the ambit of the immediately preceding sentence. Unless the context
otherwise clearly requires, references herein to a "Subsidiary" refer to a
Subsidiary of the Company.
TANGIBLE NET WORTH means, as to any Person at any time, such Person's Net
Worth at such time, excluding the value of goodwill (other than goodwill
arising from a Permitted Acquisition), trademarks, trade names, copyrights,
patents, licenses and similar intangibles but specifically including, in the
case of the Company, all Finance Income Receivable as at such time.
TAXES means any and all present or future taxes, levies, assessments,
imposts, duties, deductions, charges, fees, withholdings or similar charges,
and all liabilities with respect thereto, excluding, in the case of each
Lender and the Agent, such taxes (including income taxes or franchise taxes)
as are taxes imposed on or measured by each Lender's net income by the
jurisdiction (or any political subdivision thereof) under the laws of which
such Lender or the Agent, as the case may be, is organized or maintains a
lending office.
-22-
<PAGE>
TERMINATION DATE means the earlier to occur of:
(a) July 10, 1997; and
(b) the date on which the Commitments terminate in accordance
with the provisions of this Agreement.
TRADE ACCOUNTS PAYABLE means, as to any Person, the trade accounts
payable of such Person with a maturity of not greater than 90 days
incurred in the ordinary course of such Person's business.
TYPE has the meaning specified in the definition of "Loan."
UNITED STATES and U.S. each means the United States of America.
UNMATURED EVENT OF DEFAULT means any event or circumstance which,
with the giving of notice, the lapse of time, or both, would (if not
cured or otherwise remedied during such time) constitute an Event of
Default.
USAGE means, on any date, the ratio (expressed as a percentage) that
the aggregate outstanding principal amount of the Loans on such date
bears to the combined Commitments on such date.
VEHICLE has the meaning assigned thereto in the Pledge and Security
Agreement.
WAREHOUSE DEBT means Indebtedness of the Company and its
Subsidiaries outstanding under Warehouse Facilities including the
repurchase price of any Auto Receivables sold to any other Person
pursuant to the terms of any Warehouse Facility.
WAREHOUSE FACILITY means the funding arrangements with financial
institutions or other lenders or purchasers exclusively to finance the
purchase of Auto Receivables by the Company or a Subsidiary of the
Company for a period not to exceed six months in the ordinary course of
business, including so-called "pool bank" arrangements and repurchase
agreements for Auto Receivables.
WEIGHTED AVERAGE LIFE TO MATURITY means, when applied to any
Indebtedness at any time, the number of years obtained by dividing (i)
the sum of the products obtained by multiplying (a) the amount of each
then-remaining installment, sinking fund, serial maturity or other
required payments of principal, including payment at final maturity, in
respect thereof, by (b) the number of years (calculated to the nearest
one-
-23-
<PAGE>
twelfth) that will elapse between such time and the making of such
payment by (ii) the then-outstanding principal amount of such
Indebtedness.
WHOLLY-OWNED SUBSIDIARY means any corporation in which (other than
directors' qualifying shares required by law) 100% of the capital stock
of each class having ordinary voting power, and 100% of the capital
stock of every other class, in each case, at the time as of which any
determination is being made, is owned, beneficially and of record, by
the Company, or by one or more other Wholly-Owned Subsidiaries, or by a
combination thereof.
1.2 OTHER INTERPRETIVE PROVISIONS.
(a) The meanings of defined terms are equally applicable to the singular
and plural forms of the defined terms.
(b) The words "hereof", "herein", "hereunder" and similar words refer to
this Agreement as a whole and not to any particular provision of this Agreement;
and subsection, Section, Schedule and Exhibit references are to this Agreement
unless otherwise specified.
(c) (i) The term "documents" includes any and all instruments, documents,
agreements, certificates, indentures, notices and other writings, however
evidenced.
(ii) The term "including" is not limiting and means "including without
limitation."
(iii) In the computation of periods of time from a specified date
to a later specified date, the word "from" means "from and including"; the
words "to" and "until" each mean "to but excluding", and the word "through"
means "to and including."
(d) Unless otherwise expressly provided herein, (i) references to
agreements (including this Agreement) and other contractual instruments shall
be deemed to include all subsequent amendments and other modifications
thereto, but only to the extent such amendments and other modifications are
not prohibited by the terms of any Loan Document, and (ii) references to any
statute or regulation are to be construed as including all statutory and
regulatory provisions consolidating, amending, replacing, supplementing or
interpreting the statute or regulation.
(e) The captions and headings of this Agreement are for convenience of
reference only and shall not affect the interpretation of this Agreement.
-24-
<PAGE>
(f) This Agreement and the other Loan Documents may use several
different limitations, tests or measurements to regulate the same or similar
matters. All such limitations, tests and measurements are cumulative and
shall each be performed in accordance with their terms. Unless otherwise
expressly provided herein, any reference to any action of the Agent, the
Lenders or the Required Lenders by way of consent, approval or waiver shall
be deemed modified by the phrase "in its/their sole discretion."
(g) This Agreement and the other Loan Documents are the result of
negotiations among and have been reviewed by counsel to the Agent, the
Company and the other parties, and are the products of all parties.
Accordingly, they shall not be construed against the Lenders or the Agent
merely because of the Agent's or Lenders' involvement in their preparation.
1.3 ACCOUNTING PRINCIPLES.
(a) Unless the context otherwise clearly requires, all accounting terms
not expressly defined herein shall be construed, and all financial
computations required under this Agreement shall be made, in accordance with
GAAP, consistently applied.
(b) References herein to "fiscal year" and "fiscal quarter" refer to
such fiscal periods of the Company.
ARTICLE II
THE CREDITS
2.1 AMOUNTS AND TERMS OF COMMITMENTS. Each Lender severally agrees, on
the terms and conditions set forth herein, to make Loans to the Company from
time to time on any Business Day during the period from the Closing Date to
the Termination Date, in an aggregate amount not to exceed at any time
outstanding the amount set forth on SCHEDULE 2.1 with respect to such Lender
(such amount, as the same may be reduced under SECTION 2.5, increased under
SECTION 2.14 or changed as a result of one or more assignments under SECTION
10.8, such Lender's "COMMITMENT"); PROVIDED, HOWEVER, that the aggregate
principal amount of all outstanding Loans shall not at any time exceed the
lesser of (x) the combined Commitments at such time and (y) the Borrowing
Base at such time as determined from the most recent Borrowing Base
Certificate as modified by any Agreed-upon Procedures Report delivered to the
Lenders after the date of such Borrowing Base Certificate; and PROVIDED,
FURTHER, that the aggregate principal amount of the Loans of any Lender shall
not at any time exceed such Lender's Commitment; and PROVIDED, FURTHER, that
the aggregate outstanding principal amount of Stage I Loans at any time shall
not exceed 40% of the combined Commitments at such time. Within the limits
of each Lender's
-25-
<PAGE>
Commitment, and subject to the other terms and conditions hereof, the Company
may borrow under this SECTION 2.1, prepay under SECTION 2.6 and reborrow
under this SECTION 2.1.
2.2 LOAN ACCOUNTS. (a) The Loans made by each Lender shall be evidenced
by one or more accounts or records maintained by such Lender in the ordinary
course of business. The accounts or records maintained by the Agent and each
Lender shall be conclusive (absent manifest error) of the amount of the Loans
made by the Lenders to the Company, and the interest and payments thereon.
Any failure so to record or any error in doing so shall not, however, limit
or otherwise affect the obligation of the Company hereunder to pay any amount
owing with respect to the Loans.
(b) Upon the request of any Lender made through the Agent, the Loans
made by such Lender may be evidenced by one or more Notes, instead of or in
addition to loan accounts. Each such Lender shall endorse on the schedules
annexed to its Note(s) the date, amount and maturity of each Loan made by it
and the amount of each payment of principal made by the Company with respect
thereto. Each such Lender is irrevocably authorized by the Company to
endorse the schedule to its Note(s) and each Lender's record shall be
conclusive absent manifest error; PROVIDED, HOWEVER, that the failure of a
Lender to make, or an error in making, a notation thereon with respect to any
Loan shall not limit or otherwise affect the obligations of the Company
hereunder or under any such Note to such Lender.
2.3 PROCEDURE FOR BORROWING. (a) Each Borrowing shall be made upon the
Company's irrevocable written notice delivered to the Agent in the form of a
Notice of Borrowing, which notice must be received by the Agent prior to (i)
10:00 a.m. (Chicago time) two Business Days prior to the requested Borrowing
Date, in the case of Offshore Rate Loans, and (ii) 10:00 a.m. (Chicago time)
on the requested Borrowing Date, in the case of Base Rate Loans or Resetting
Rate Loans, specifying:
(A) the amount of the Borrowing, which, in the case of any
Borrowing consisting of Offshore Rate Loans or Resetting Rate Loans,
shall be in an aggregate amount of $5,000,000 or a higher integral
multiple of $1,000,000 or which, in the case of any Borrowing
consisting of Base Rate Loans, shall be in an aggregate amount of
$1,000,000 or a higher integral multiple of $1,000,000;
(B) the requested Borrowing Date, which shall be a Business Day;
(C) the Type of Loans comprising such Borrowing; and
-26-
<PAGE>
(D) in the case of Offshore Rate Loans, the duration of the
initial Interest Period therefor.
Any request for a Loan that is not based on Pledged Auto Receivables
described in a Notice of Borrowing shall be accompanied by a Borrowing Base
Certificate as of the immediately preceding Business Day.
(b) The Agent will promptly notify each Lender of its receipt of
any Notice of Borrowing and of the amount of such Lender's Pro Rata Share of
such Borrowing.
(c) Subject to the conditions precedent set forth herein, each
Lender will make the amount of its Pro Rata Share of each Borrowing available
to the Agent for the account of the Company at the Agent's Payment Office by
12:00 noon (Chicago time) on the Borrowing Date requested by the Company in
funds immediately available to the Agent. Such amounts will then be made
available promptly to the Company by the Agent, at such account and office as
the Company shall direct from time to time, in like funds as received by the
Agent.
(d) After giving effect to any Borrowing, unless the Agent
otherwise consents, there may not be more than five different Interest
Periods in effect for all Borrowings consisting of Offshore Rate Loans.
2.4 CONVERSION AND CONTINUATION ELECTIONS FOR BORROWINGS. (a) The Company
may, upon irrevocable written notice to the Agent in accordance with SUBSECTION
2.4(b):
(i) elect, as of any Business Day, in the case of Base Rate Loans or
Resetting Rate Loans, or as of the last day of the applicable Interest
Period, in the case of Offshore Rate Loans, to convert any such Loans (or
any part thereof in an aggregate amount of (x) in the case of Offshore Rate
Loans and Resetting Rate Loans, $5,000,000 or a higher integral multiple of
$1,000,000 or (y) in the case of Base Rate Loans, $1,000,000 or a higher
integral multiple of $1,000,000) into Loans of another Type; or
(ii) elect, as of the last day of the applicable Interest Period, to
continue any Loans having Interest Periods expiring on such day (or any
part thereof in an aggregate amount of $5,000,000 or a higher integral
multiple of $1,000,000);
PROVIDED that if at any time the aggregate amount of Offshore Rate Loans or
Resetting Rate Loans in respect of any Borrowing is reduced, by payment,
prepayment, or conversion of any part thereof,
-27-
<PAGE>
to be less than $5,000,000, such Offshore Rate Loans or Resetting Rate Loans
shall automatically convert into Base Rate Loans.
(b) The Company shall deliver a Notice of Conversion/Continuation
to be received by the Agent not later than (i) 10:00 a.m. (Chicago time) at
least two Business Days in advance of the Conversion/Continuation Date, if
the Loans are to be converted into or continued as Offshore Rate Loans; and
(ii) 10:00 a.m. (Chicago time) on the Conversion/Continuation Date, if the
Loans are to be converted into Base Rate Loans or Resetting Rate Loans,
specifying:
(A) the proposed Conversion/Continuation Date;
(B) the aggregate amount of Loans to be converted or continued;
(C) the Type of Loans resulting from the proposed conversion or
continuation; and
(D) in the case of conversions into Offshore Rate Loans, the
duration of the requested Interest Period.
(c) If upon the expiration of any Interest Period applicable to
Offshore Rate Loans, the Company has failed to select timely a new Interest
Period to be applicable to such Offshore Rate Loans, the Company shall be
deemed to have elected to convert such Offshore Rate Loans into Resetting
Rate Loans effective as of the expiration date of such Interest Period.
(d) The Agent will promptly notify each Lender of its receipt of a
Notice of Conversion/Continuation, or, if no timely notice is provided by the
Company, the Agent will promptly notify each Lender of the details of any
automatic conversion. All conversions and continuations shall be made
ratably according to the respective outstanding principal amounts of the
Loans held by each Lender with respect to which the notice was given.
(e) Unless the Required Lenders otherwise consent, (x) during the
existence of an Event of Default or Unmatured Event of Default, the Company
may not elect to have a Loan converted into or continued as an Offshore Rate
Loan and (Y) during the existence of an Event of Default, the Company may not
elect to have a Loan converted into or continued as a Resetting Rate Loan and
(z) all outstanding Resetting Rate Loans shall automatically convert to Base
Rate Loans upon the occurrence of any Event of Default.
(f) After giving effect to any conversion or continuation of Loans,
unless the Agent shall otherwise consent,
-28-
<PAGE>
there may not be more than five different Interest Periods in effect for
Offshore Rate Loans.
2.5 VOLUNTARY TERMINATION OR REDUCTION OF COMMITMENTS. The Company may,
upon not less than three Business Days' prior notice to the Agent, terminate
the Commitments, or permanently reduce the Commitments by an aggregate amount
of $5,000,000 or a higher integral multiple of $1,000,000; UNLESS, after
giving effect thereto and to any payments or prepayments of Loans made on the
effective date thereof, the aggregate principal amount of all Loans would
exceed the amount of the combined Commitments then in effect. Once reduced
in accordance with this Section, the Commitments may not be increased. Any
reduction of the Commitments shall be applied to each Lender according to its
Pro Rata Share. All accrued commitment fees to, but not including, the
effective date of any reduction or termination of Commitments shall be paid
on the effective date of such reduction or termination.
2.6 PREPAYMENTS. (a) OPTIONAL. In addition to prepayments made upon
dates described in CLAUSE (i) of the definition of "Sweep Date" in the Pledge
and Security Agreement, subject to SECTION 3.4, the Company may, from time to
time, upon irrevocable notice to the Agent not later than 10:30 a.m. (Chicago
time) on any Business Day, in the case of Base Rate Loans or Resetting Rate
Loans, and on the day which is two Business Days prior to the date of
prepayment, in the case of Offshore Rate Loans, ratably prepay Loans in whole
or in part, in an aggregate amount of $5,000,000 or a higher integral
multiple of $1,000,000. Such notice of prepayment shall specify the date and
amount of such prepayment and the Loans to be prepaid. The Agent will
promptly notify each Lender of its receipt of any such notice, and of such
Lender's Pro Rata Share of such prepayment. If such notice is given by the
Company, the Company shall make such prepayment and the payment amount
specified in such notice shall be due and payable on the date specified
therein, together with accrued interest to such date on the amount prepaid
and any amounts required pursuant to SECTION 3.4.
(b) MANDATORY.
(i) If at any time (A) the excess of (1) the outstanding
principal balance of the Loans OVER (2) the amount of Collateral Payments
deposited into the Collection Account exceeds (B) the lesser of (1) the
aggregate amount of the combined Commitments at such time or (2) the
Borrowing Base at such time as determined from the most recent Borrowing
Base Certificate as modified by any Agreed-upon Procedures Report delivered
to the Lenders after the date of such Borrowing Base Certificate, then the
Company shall immediately make a principal prepayment of the Loans in an
amount equal to such excess; and
-29-
<PAGE>
(ii) The Company shall make payments of the Loans as required
by the last sentence of SECTION 2.7 with respect to Stage I Loans, Article
IV of the Pledge and Security Agreement and Section 7.7 of the Pledge and
Security Agreement.
2.7 REPAYMENT. The Company shall repay all Loans on the Termination
Date. The Company shall repay each Stage I Loan by 10:00 a.m., Chicago time,
on the fourth Business Day (the "STAGE I PAYMENT DATE") after the date such
Stage I Loan is made by either (a) converting the Stage I Loan to a Stage II
Loan by delivering to the Agent a Notice of Borrowing requesting such
conversion or (b) repaying such Stage I Loan.
2.8 INTEREST. (a) Each Loan shall bear interest on the outstanding
principal amount thereof from the applicable Borrowing Date at a rate per
annum equal to the Offshore Rate, the Resetting Rate or the Base Rate, as the
case may be (and subject to the Company's right to convert to another Type of
Loan under SECTION 2.4), PLUS the Applicable Margin as in effect from time to
time. Notwithstanding anything to the contrary herein, no Stage I Loan shall
be an Offshore Rate Loan.
(b) Interest on each Loan shall be paid in arrears on each Interest
Payment Date. Interest also shall be paid on the date of any conversion of
Offshore Rate Loans under SECTION 2.4 and prepayment of Loans under SECTION
2.6, in each case for the portion of the Loans so converted or prepaid.
(c) Notwithstanding the foregoing provisions of this Section, after
the occurrence and during the continuance of an Event of Default or after
acceleration, THEN the Company shall pay interest (after as well as before
entry of judgment thereon to the extent permitted by law) on the principal
amount of all outstanding Loans and, to the extent permitted by applicable
law, on any other amount payable hereunder or under any other Loan Document,
at a rate per annum equal to the rate otherwise applicable thereto pursuant
to the terms hereof (or, after the end of the applicable Interest Period for
any Offshore Rate Loan, the Base Rate) plus 2%. All such interest shall be
payable on demand.
(d) Anything herein to the contrary notwithstanding, the
obligations of the Company to any Lender hereunder shall be subject to the
limitation that payments of interest shall not be required for any period for
which interest is computed hereunder, to the extent (but only to the extent)
that contracting for or receiving such payment by such Lender would he
contrary to the provisions of any law applicable to such Lender limiting the
highest rate of interest that may be lawfully contracted for, charged or
received by such Lender, and in such circumstances the Company shall pay
-30-
<PAGE>
such Lender interest at the highest rate permitted by applicable law.
2.9 FEES.
(a) AGENT'S AND ARRANGER'S FEES. The Company agrees to pay to the
Agent and the Arranger such fees at such times and in such amounts as are
mutually agreed to from time to time by the Company and the Agent or the
Arranger, as the case may be.
(b) COMMITMENT FEES. The Company shall pay to the Agent for the
account of each Lender a commitment fee computed at the Commitment Fee Rate
on the average daily unused amount of such Lender's Commitment. Such
commitment fee shall accrue from the Effective Date to the Termination Date
and shall be due and payable quarterly in arrears on the first Business Day
of each March, June, September and December, with the final payment to be
made on the Termination Date; PROVIDED that, in connection with any reduction
or termination of Commitments under SECTION 2.5, the accrued commitment fee
calculated for the period ending on the date of such reduction or termination
shall be paid on the date of such reduction or termination, with (in the case
of any reduction) the following quarterly payment being calculated on the
basis of the period from such reduction date to the quarterly payment date.
The commitment fees shall continue to accrue notwithstanding that one or more
conditions to borrowing in ARTICLE IV are not met.
2.10 COMPUTATION OF FEES AND INTEREST. (a) All computations of interest
for Base Rate Loans when the Base Rate is determined by BAI's "reference
rate" shall be made on the basis of a year of 365 or 366 days, as the case
may be, and actual days elapsed. All other computations of interest and fees
shall be made on the basis of a 360-day year and actual days elapsed.
Interest and fees shall accrue during each period during which such interest
or such fees are computed from the first day thereof to the last day thereof.
(b) Each determination of an interest rate by the Agent shall be
conclusive and binding on the Company and the Lenders in the absence of
manifest error. The Agent will, at the request of the Company or any Lender,
deliver to the Company or such Lender, as the case may be, a statement
showing the quotations used by the Agent in determining any interest rate and
the resulting interest rate.
2.11 PAYMENTS BY THE COMPANY. (a) All payments to be made by the Company
shall be made without set-off, recoupment or counterclaim. Except as
otherwise expressly provided herein, all payments by the Company shall be
made to the Agent for the account of the Lenders at the Agent's Payment
Office, and shall be made in Dollars and in immediately available funds, no
later than 12:00 noon (Chicago time) on the date specified herein. The Agent
will
-31-
<PAGE>
promptly distribute to each Lender its Pro Rata Share (or other applicable
share as expressly provided herein) of such payment in like funds as
received. Any payment received by the Agent later than 12:00 noon (Chicago
time) shall be deemed to have been received on the following Business Day
and any applicable interest or fee shall continue to accrue.
(b) Whenever any payment is due on a day other than a Business Day,
such payment shall be made on the following Business Day (unless, in the case
of an Offshore Rate Loan, the following Business Day is in another calendar
month, in which case such payment shall be made on the preceding Business
Day), and such extension of time shall in such case be included in the
computation of interest or fees, as the case may be.
(c) Unless the Agent receives notice from the Company prior to the
date on which any payment is due to the Lenders that the Company will not
make such payment in full as and when required, the Agent may assume that the
Company has made such payment in full to the Agent on such date in
immediately available funds and the Agent may (but shall not be so required),
in reliance upon such assumption, distribute to each Lender on such due date
an amount equal to the amount then due such Lender. If and to the extent the
Company has not made such payment in full to the Agent, each Lender shall
repay to the Agent on demand such amount distributed to such Lender, together
with interest thereon at the Federal Funds Rate for each day from the date
such amount is distributed to such Lender until the date repaid.
2.12 PAYMENTS BY THE LENDERS TO THE AGENT. (a) Unless the Agent receives
notice from a Lender at least one Business Day prior to the date of a
Borrowing that such Lender will not make available as and when required
hereunder to the Agent for the account of the Company the amount of such
Lender's Pro Rata Share of such Borrowing, the Agent may assume that such
Lender has made such amount available to the Agent in immediately available
funds on the Borrowing Date and the Agent may (but shall not be so required),
in reliance upon. such assumption, make available to the Company on such date
a corresponding amount. If and to the extent any Lender shall not have made
its full amount available to the Agent in immediately available funds and the
Agent in such circumstances has made available to the Company such amount,
such Lender shall on the Business Day following such Borrowing Date make such
amount available to the Agent, together with interest at the Federal Funds
Rate for each day during such period. A notice of the Agent submitted to any
Lender with respect to amounts owing under this SUBSECTION (a) shall be
conclusive, absent manifest error. If such amount is so made available, such
payment to the Agent shall constitute such Lender's Loan on the date of
Borrowing for all purposes of this Agreement. If such amount is not made
available to the Agent on the Business Day following the Borrowing Date, the
-32-
<PAGE>
Agent will notify the Company of such failure to fund and, upon demand by the
Agent, the Company shall pay such amount to the Agent for the Agent's
account, together with interest thereon for each day elapsed since the date
of such Borrowing, at a rate per annum equal to the interest rate applicable
at the time to the Loans comprising such Borrowing.
(b) The failure of any Lender to make any Loan on any Borrowing
Date shall not relieve any other Lender of any obligation hereunder to make a
Loan on such Borrowing Date, but no Lender shall be responsible for the
failure of any other Lender to make the Loan to be made by such other Lender
on any Borrowing Date.
2.13 SHARING OF PAYMENTS, ETC. If, other than as expressly provided
elsewhere herein, any Lender shall obtain on account of the Loans made by it
any payment or other recovery (whether voluntary, involuntary, through the
exercise of any right of set-off, or otherwise) on account of principal of or
interest on any Loan, or any other amount payable hereunder, in excess of its
Pro Rata Share, such Lender shall immediately (i) notify the Agent of such
fact and (ii) purchase from the other Lenders such participations in the
Loans made by them as shall be necessary to cause such purchasing Lender to
share the excess payment or other recovery pro rata with each of them;
PROVIDED that if all or any portion of such excess payment or other recovery
is thereafter recovered from the purchasing Lender, such purchase shall to
that extent be rescinded and each other Lender shall repay to the purchasing
Lender the purchase price paid therefor, together with an amount equal to
such paying Lender's ratable share (according to the proportion of (A) the
amount of such paying Lender's required repayment to (B) the total amount so
recovered from the purchasing Lender) of any interest or other amount paid or
payable by the purchasing Lender in respect of the total amount so recovered.
The Company agrees that any Lender so purchasing a participation from
another Lender may, to the fullest extent permitted by law, exercise all its
rights of payment (including the right of set-off, but subject to SECTION
10.10) with respect to such participation as fully as if such Lender were the
direct creditor of the Company in the amount of such participation. The
Agent will keep records (which shall be conclusive and binding in the absence
of manifest error) of participations purchased under this Section and will in
each case notify the Lenders following any such purchases or repayments.
2.14 ADDITIONAL LENDERS; INCREASED COMMITMENTS. The parties agree that
any Lender may, by written agreement with the Company (a copy of which shall
be delivered to the Agent), increase its Commitment and that additional
financial institutions who are acceptable to the Company and the Agent may
become Lenders party hereto and that, in each case, by virtue thereof,
subject to SECTION 2.5, the Commitments may be increased; PROVIDED, that
-33-
<PAGE>
(a) the Commitment of each such additional financial institution shall be not
less than $10,000,000 and the aggregate Commitments shall in no event exceed
$300,000,000 and (b) each such additional financial institution shall execute
and deliver to the Company and the Agent a counterpart of this Agreement.
Upon any Lender so agreeing to increase its Commitment or any additional
financial institution executing a counterpart hereof, each such additional
financial institution shall be a "Lender" for purposes hereof and the other
Loan Documents and the aggregate amount of the Commitments shall be increased
by an amount equal to the Commitment of the new Lender and/or by the
increased Commitment of the existing Lender and the Lenders shall effect such
purchases and sales among themselves as shall be necessary to result in each
Lender having its ratable share of each outstanding Borrowing and Type of
Loan as specified by the Agent (and SECTION 3.4 shall apply to losses and
expenses incurred by any Lender as a consequence of such purchases and
sales), and the Agent shall have received such other documents as it shall
have reasonably requested. Upon any increase in the Commitments contemplated
by CLAUSE (a) above, the Company and the Agent shall amend SCHEDULE 2.1 to
reflect the increase in the Commitments.
ARTICLE III
TAXES, YIELD PROTECTION AND ILLEGALITY
3.1 TAXES. (a) Any and all payments by the Company to each Lender and
the Agent under this Agreement and any other Loan Document shall be made free
and clear of, and without deduction or withholding for, any Taxes. In
addition, the Company shall pay all Other Taxes.
(b) If the Company shall be required by law to deduct or withhold
any Taxes, Other Taxes or Further Taxes from or in respect of any sum payable
hereunder to any Lender or the Agent, then:
(i) the sum payable shall be increased as necessary so that,
after making all required deductions and withholdings (including deductions
and withholdings applicable to additional sums payable under this Section),
such Lender or the Agent, as the case may be, receives and retains an amount
equal to the sum it would have received and retained had no such deductions
or withholdings been made;
(ii) the Company shall make such deductions and withholdings;
(iii) the Company shall pay the full amount deducted or withheld
to the relevant taxing authority or other authority in accordance with
applicable law; and
-34-
<PAGE>
(iv) the Company shall also pay to the Agent for the account of
the Agent or any applicable Lender, at the time interest is paid, all
additional amounts which such Lender or the Agent reasonably determines
as necessary to preserve the after-tax yield the Agent or such Lender would
have received if such Taxes, Other Taxes or Further Taxes had not been
imposed.
(c) The Company agrees to indemnify and hold harmless each Lender
and the Agent for the full amount of Taxes, Other Taxes and Further Taxes in
the amount that the Agent or such Lender reasonably determines as necessary
to preserve the after-tax yield such Lender would have received if such
Taxes, Other Taxes or Further Taxes had not been imposed, and any liability
(including penalties, interest, additions to tax and expenses) arising
therefrom or with respect thereto, whether or not such Taxes, Other Taxes or
Further Taxes were correctly or legally asserted. Payment under this
indemnification shall be made upon demand therefor by the Agent or such
Lender.
(d) Within 30 days after the date of any payment by the Company of
Taxes, Other Taxes or Further Taxes, the Company shall furnish to each Lender
and the Agent the original or a certified copy of a receipt evidencing
payment thereof, or other evidence of payment satisfactory to such Lender or
the Agent.
(e) If the Company is required to pay any amount to any Lender or
the Agent pursuant to SUBSECTION (b) or (c) of this Section, then such
Lender or such Agent shall use reasonable efforts (consistent with legal and
regulatory restrictions) to change the jurisdiction of its Lending Office or
other relevant office so as to eliminate any such additional payment by the
Company which may thereafter accrue, if such change in the sole judgment of
such Lender or the Agent is not otherwise disadvantageous to such Lender or
the Agent.
3.2 ILLEGALITY. (a) If any Lender determines that the introduction of
any Requirement of Law, or any change in any Requirement of Law, or in the
interpretation or administration of any Requirement of Law, has made it
unlawful, or that any central bank or other Governmental Authority has
asserted that it is unlawful, for any Lender or its applicable Lending Office
to make Offshore Rate Loans or Resetting Rate Loans, then, on notice thereof
by the Lender to the Company through the Agent, any obligation of such Lender
to make Offshore Rate Loans and Resetting Rate Loans shall be suspended until
the Lender notifies the Agent and the Company that the circumstances giving
rise to such determination no longer exist.
(b) If a Lender determines that the introduction of any Requirement
of Law, or any change in any Requirement of Law, or in
-35-
<PAGE>
the interpretation or administration of any Requirement of Law, has made it
unlawful, or that any central bank or other Governmental Authority has
asserted that it is unlawful, for any Lender or its applicable Lending Office
to maintain any Offshore Rate Loan or Resetting Rate Loan, the Company shall,
upon its receipt of notice of such fact and demand from such Lender (with a
copy to the Agent), prepay in full such Offshore Rate Loan or Resetting Rate
Loan of such Lender then outstanding, together with interest accrued thereon
and any amount required under SECTION 3.4, in the case of an Offshore Rate
Loan, either on the last day of the Interest Period thereof or, if earlier,
on the date on which such Lender may no longer lawfully continue to maintain
such Offshore Rate Loan or Resetting Rate Loan or, in the case of a Resetting
Rate Loan, immediately. If the Company is required to so prepay any Offshore
Rate Loan or Resetting Rate Loan, then concurrently with such prepayment,
the Company shall borrow from the affected Lender, in the amount of such
repayment, a Base Rate Loan.
(c) If the obligation of any Lender to make or maintain Offshore
Rate Loans or Resetting Rate Loans has been so terminated or suspended, all
Loans which would otherwise be made by such Lender as Offshore Rate Loans or
Resetting Rate Loans shall be instead Base Rate Loans.
(d) Before giving any notice to the Agent or demand upon the Company
under this Section, the affected Lender shall designate a different Lending
Office with respect to its Offshore Rate Loans or Resetting Rate Loans if
such designation will avoid the need for giving such notice or making such
demand and will not, in the judgment of the Lender, be illegal or otherwise
disadvantageous to the Lender.
3.3 INCREASED COSTS AND REDUCTION OF RETURN. (a) If after the date
hereof any Lender reasonably determines that, due to either (i) the
introduction of or any change (other than any change by way of imposition of
or increase in reserve requirements included in the calculation of the
Offshore Rate) in or in the interpretation of any law or regulation or (ii)
the compliance by that Lender with any guideline or request from any central
bank or other Governmental Authority (whether or not having the force of
law), there shall be any increase in the cost to such Lender of agreeing to
make or making, funding or maintaining any Offshore Rate Loan or Resetting
Rate Loan (other than reserves included in the determination of the Offshore
Rate), then the Company shall be liable for, and shall from time to time,
upon demand (with a copy of such demand to be sent to the Agent), pay to the
Agent for the account of such Lender, additional amounts as are sufficient to
compensate such Lender for such increased costs.
(b) If after the date hereof any Lender shall have reasonably determined
that (i) the introduction of any Capital
36
<PAGE>
Adequacy Regulation, (ii) any change in any Capital Adequacy Regulation,
(iii) any change in the interpretation or administration of any Capital
Adequacy Regulation by any central bank or other Governmental Authority
charged with the interpretation or administration thereof or (iv) compliance
by the Lender (or its Lending Office) or any corporation controlling the
Lender with any Capital Adequacy Regulation affects or would affect the
amount of capital required or expected to be maintained by the Lender or any
corporation controlling the Lender (taking into consideration such Lender's
or such corporation's policies with respect to capital adequacy) and such
Lender reasonably determines that the amount of such capital is required to
be increased as a consequence of its Commitment, Loans, credits or
obligations under this Agreement, then, upon demand of such Lender to the
Company through the Agent, the Company shall pay to the Lender, from time to
time as specified by the Lender, additional amounts sufficient to compensate
the Lender for such increase. The Lenders may use reasonable averaging and
attribution methods in determining compensation under this SECTION 3.3(b).
(c) Before giving any notice to the Agent under this Section, the
affected Lender shall use commercially reasonable efforts to designate a
different Lending Office with respect to its Offshore Rate Loans if such
designation will avoid the need for giving such notice or making such demand
and will not, in the judgment of the Lender, be illegal or otherwise
disadvantageous to the Lender.
3.4 FUNDING LOSSES. The Company shall reimburse each Lender and hold
each Lender harmless from any reasonable loss or expense which the Lender may
sustain or incur as a consequence of:
(a) the failure of the Company to make on a timely basis any payment of
principal of any Offshore Rate Loan;
(b) the failure of the Company to borrow, continue or convert a Loan
after the Company has given (or is deemed to have given) a Notice of
Borrowing or a Notice of Conversion/Continuation with respect to an Offshore
Rate Loan;
(c) the failure of the Company to make any prepayment of an Offshore
Rate Loan in accordance with any notice delivered under SECTION 2.6;
(d) the prepayment or other payment (including after acceleration
thereof) of an Offshore Rate Loan on a day that is not the last day of the
relevant Interest Period; or
(e) the automatic conversion under SECTION 3.2 of any Offshore Rate Loan
to a Base Rate Loan on a day that is not the last day of the relevant
Interest Period;
37
<PAGE>
including any such reasonable loss or expense arising from the liquidation or
reemployment of funds obtained by it to maintain its Offshore Rate Loans or
from fees payable to terminate the deposits from which such funds were
obtained. For purposes of calculating amounts payable by the Company to the
Lenders under this Section and under SUBSECTION 3.3(a), each Offshore Rate
Loan made by a Lender (and each related reserve, special deposit or similar
requirement) shall be conclusively deemed to have been funded at the IBOR
used in determining the Offshore Rate for such Offshore Rate Loan by a
matching deposit or other borrowing in the interbank eurodollar market for a
comparable amount and for a comparable period, whether or not such Offshore
Rate Loan is in fact so funded. The Lenders may use reasonable averaging and
attribution methods in determining losses and expenses under this SECTION 3.4.
3.5 INABILITY TO DETERMINE RATES. If (a) the Agent determines that for
any reason adequate and reasonable means do not exist for determining the
Offshore Rate for any requested Interest Period with respect to a proposed
Offshore Rate Loan or Resetting Rate Loan, or (b) the Required Lenders
determine that the Offshore Rate applicable pursuant to SUBSECTION 2.8(a) for
any requested Interest Period with respect to a proposed Offshore Rate Loan
or Resetting Rate Loan does not adequately and fairly reflect the cost to
such Lender of funding such Loan, the Agent will promptly so notify the
Company and each Lender. Thereafter, the obligation of the Lenders to make
or maintain Offshore Rate Loans and Resetting Rate Loans shall be suspended
until the Agent revokes such notice in writing. Upon receipt of such notice,
the Company may revoke any Notice of Borrowing or Notice of
Conversion/Continuation then submitted by it. If the Company does not revoke
such Notice, the Lenders shall make, convert or continue the Loans, as
proposed by the Company, in the amount specified in the applicable notice
submitted by the Company, but such Loans shall be made, converted or
continued as Base Rate Loans instead of Offshore Rate Loans or Resetting Rate
Loans.
3.6 CERTIFICATES OF LENDERS. Any Lender claiming reimbursement or
compensation under this ARTICLE III shall deliver to the Company (with a copy
to the Agent) a certificate setting forth in reasonable detail the amount
payable to the Lender hereunder and such certificate shall be conclusive and
binding on the Company in the absence of manifest error.
3.7 SUBSTITUTION OF LENDERS. Upon the receipt by the Company from any
Lender (an "AFFECTED LENDER") of a claim for reimbursement or compensation
under SECTION 3.1 or SECTION 3.3 or a notice described in SECTION 3.2, the
Company may: (i) request the Affected Lender to use its best efforts to obtain
a replacement bank or financial institution satisfactory to the Company to
acquire and assume all or a ratable part of all of such Affected Lender's
Loans and Commitment (a "REPLACEMENT LENDER"); (ii)
38
<PAGE>
request one more of the other Lenders to acquire and assume all or part of such
Affected Lender's Loans and Commitment; or (iii) designate a Replacement
Lender. Any such designation of a Replacement Lender under CLAUSE (i) or (iii)
shall be subject to the prior written consent of the Agent (which consent shall
not be unreasonably withheld). Upon notice from the Company, the Affected
Lender shall assign, pursuant to an Assignment and Acceptance, its Commitment,
Loans and its other rights and obligations hereunder or a ratable share thereof
to the Replacement Lender or Replacement Lenders designated by the Company for
a purchase price equal to the sum of the principal amount of the Loans so
assigned and all accrued and unpaid interest thereon. The Company shall, on
the effective date of such assignment, pay to the Affected Lender its ratable
share of all accrued and unpaid fees to which it is entitled. Any such
assignment shall be made in accordance with SECTIONS 10.8(a) and (b).
3.8 LIMITATION ON RECOVERY. Notwithstanding SECTIONS 3.1, 3.3(a) and (b),
if any Lender fails to notify the Company of any event which will entitle such
Lender to reimbursement or compensation pursuant to SECTIONS 3.1 and 3.3 within
90 days after such Lender obtains knowledge of such event, then such Lender
shall not be entitled to reimbursement of any Tax or any compensation from the
Company for any increased cost or reduction of return arising prior to the date
which is 90 days before the date on which such Lender notifies the Company of
such event.
3.9 SURVIVAL. The agreements and obligations of the Company in this
ARTICLE III shall survive the payment of all other Obligations.
ARTICLE IV
CONDITIONS PRECEDENT
4.1 CONDITIONS OF INITIAL LOANS. The obligation of each Lender to make
its initial Loan is, in addition to the conditions precedent set forth in
SECTION 4.2, subject to the conditions that (i) the Company shall have submitted
evidence reasonably satisfactory to the Agent and the Lenders that all existing
obligations of the Company under the Amended and Restated Credit Agreement dated
as of August 4, 1995 with various financial institutions and First Bank National
Association (the "PRIOR CREDIT AGREEMENT") have been (or concurrently with the
initial Borrowing will be) paid in full and that all "Commitments" under and as
defined in the Prior Credit Agreement have been terminated and (ii) the Agent
shall have received all of the following, in form and substance satisfactory to
the Agent and each Lender, and (except for the Notes) in sufficient copies for
each Lender:
-39-
<PAGE>
(a) CREDIT AGREEMENT AND NOTES. This Agreement executed by each party
hereto and the Notes executed by the Company.
(b) PLEDGE AND SECURITY AGREEMENT. The Pledge and Security Agreement
executed by the Company.
(c) COLLATERAL MONITORING AGREEMENT. An engagement letter between the
Agent and the Collateral Monitor executed by the parties thereto pursuant to
which the Agent engages the Collateral Monitor to perform the Agreed-upon
Procedures on behalf of the Lenders and to deliver the Agreed-upon Procedures
Reports in accordance with SECTION 6.1(k), which engagement letter shall be in
form and substance satisfactory to the Agent and the Required Lenders (such
engagement letter, as the same may be amended, supplemented or otherwise
modified from time to time, the "COLLATERAL MONITORING AGREEMENT").
(d) COUNTERPART TO AGENCY AGREEMENT AND RETAIL LOCKBOX AGREEMENT. A
Counterpart to Agency Agreement and Retail Lockbox Agreement executed by Harris
Trust and Savings Bank in form and substance satisfactory to the Required
Lenders and the Agent.
(e) RESOLUTIONS; INCUMBENCY; ARTICLES; BYLAWS; OTHER DOCUMENTS.
(i) Copies of the resolutions of the board of directors of the Company
authorizing the execution and delivery of this Agreement and the other Loan
Documents and the consummation of the transactions contemplated hereby,
certified as of the Closing Date by the Secretary or an Assistant Secretary
of the Company;
(ii) a certificate of the Secretary or Assistant Secretary of the
Company certifying the names and true signatures of the officers and
associates of the Company authorized to execute and deliver this Agreement,
all other Loan Documents to be delivered by the Company hereunder and all
Notices of Borrowing, Notices of Conversion/Continuation, Borrowing Base
Certificates and Compliance Certificates;
(iii) a copy of the articles of incorporation of the Company certified
by the Secretary of State of Minnesota as of a date not more than ten days
prior to the Effective Date;
(iv) a copy of the bylaws of the Company, certified by the Secretary
or an Assistant Secretary of the Company; and
(v) copies, certified by the Secretary or an Assistant Secretary of
the Company, of the Agency Agreement, the Lockbox Agreement and the Senior
Notes Indenture, in each
-40-
<PAGE>
case together with all amendments, supplements and other modifications
thereto.
(f) GOOD STANDING. A copy of a good standing certificate as of a recent
date for the Company from the Secretary of State of Minnesota.
(g) LEGAL OPINIONS. (i) An opinion of Dorsey & Whitney LLP, counsel to the
Company, substantially in the form of EXHIBIT G-1 and (ii) an opinion of James
D. Atkinson III, in-house corporate counsel to the Company, substantially in the
form of EXHIBIT G-2.
(h) PAYMENT OF FEES. Evidence of payment by the Company of all accrued
and unpaid fees, costs and expenses to the extent due and payable on the
Closing Date, together with Attorney Costs of the Agent to the extent invoiced
prior to or on the Closing Date, plus such additional amounts of Attorney Costs
as shall constitute the Agent's reasonable estimate of Attorney Costs incurred
or to be incurred by it through the closing proceedings (provided that such
estimate shall not thereafter preclude final settling of accounts between the
Company and the Agent), including any such costs, fees and expenses arising
under or referenced in SECTIONS 2.11 and 10.4, but excluding Attorney Costs of
in-house counsel to the Agent incurred prior to the Closing Date.
(i) NO MATERIAL ADVERSE CHANGE. Since December 31, 1995, no event shall
have occurred which could have a Material Adverse Effect.
(j) CERTIFICATE. A certificate signed by a Responsible Officer, dated as
of the Closing Date, stating that:
(i) the representations and warranties contained in ARTICLE V and in
the Pledge and Security Agreement are true and correct on and as of such
date, as though made on and as of such date; and
(ii) no Event of Default or Unmatured Event of Default exists or would
result from a Borrowing on such date.
(k) FINANCING STATEMENTS. (i) Acknowledgment copies of properly filed
Uniform Commercial Code financing statements (Form UCC-1), or such other
evidence of filing as may be acceptable to the Agent, naming the Company as the
debtor and the Agent as the secured party, or other similar instruments or
documents, filed under the Uniform Commercial Code of all jurisdictions as may
be necessary or, in the opinion of the Agent, desirable to perfect the security
interest of the Agent pursuant to the Pledge and Security Agreement;
-41-
<PAGE>
(ii) executed copies of proper Uniform Commercial Code Form UCC-3
termination statements, if any, necessary to release all Liens and other
rights of any Person
(1) in any collateral described in the Pledge and Security
Agreement previously granted by any Person, and
(2) securing any of the Indebtedness under the Prior Credit
Agreement,
together with such other Uniform Commercial Code Form UCC-3 termination
statements as the Agent may reasonably request from the Company; and
(iii) certified copies of Uniform Commercial Code Requests for
Information or Copies (Form UCC-11), or a similar search report certified by
a party acceptable to the Agent, dated a date reasonably near to the date
of the initial Borrowing, listing all effective financing statements which
name the Company (under its present name and any previous names) as the
debtor and which are filed in the jurisdictions in which filings were made
pursuant to CLAUSE (i) above, together with copies of such financing
statements (none of which (other than those described in CLAUSE (i), if such
Form UCC-11 or search report, as the case may be, is current enough to list
such financing statements described in CLAUSE (i)) shall cover any
collateral described in the Pledge and Security Agreement).
(l) OTHER DOCUMENTS. Such other approvals, opinions, documents or
materials as the Agent or any Lender may reasonably request.
4.2 CONDITIONS TO ALL LOANS. The obligation of each Lender to make any
Loan is subject to the satisfaction of the following conditions precedent on the
relevant Borrowing Date:
(a) NOTICE. The Agent shall have received a Notice of Borrowing.
(b) CONTINUATION OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties in ARTICLE V (other than as set forth in the
last sentence of SECTION 5.5) and in the Pledge and Security Agreement shall be
true and correct on and as of such Borrowing Date with the same effect as if
made on and as of such Borrowing Date (except to the extent such
representations and warranties expressly refer to an earlier date, in which
case they shall be true and correct as of such earlier date).
-42-
<PAGE>
(c) NO EXISTING DEFAULT. No Event of Default or Unmatured Event of
Default shall exist or shall result from such Borrowing.
Each Notice of Borrowing submitted by the Company hereunder shall constitute a
representation and warranty by the Company that, as of the date of such notice
or request and as of the applicable Borrowing Date, the conditions in this
SECTION 4.2 are satisfied.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to the Agent and each Lender that:
5.1 ORGANIZATION, STANDING, ETC. The Company and each of its corporate
Subsidiaries are corporations duly incorporated, validly existing and in good
standing under the laws of the jurisdiction of their respective incorporation
and have all requisite corporate power and authority to carry on their
respective businesses as now conducted, and (in the case of the Company) to
enter into the Loan Documents and to perform its obligations under the Loan
Documents. Each of the Company and its Subsidiaries is duly qualified and in
good standing as a foreign corporation in each jurisdiction in which the
character of the properties owned, leased or operated by it or the business
conducted by it makes such qualification necessary.
5.2 AUTHORIZATION AND VALIDITY. The execution, delivery and performance
by the Company of the Loan Documents have been duly authorized by all necessary
corporate action by the Company, and the Loan Documents constitute the legal,
valid and binding obligations of the Company, enforceable against the Company
in accordance with their respective terms, subject to limitations as to
enforceability which might result from bankruptcy, insolvency, moratorium and
other similar laws affecting creditors' rights generally and subject to general
principles of equity.
5.3 NO CONFLICT, NO DEFAULT. The execution, delivery and performance by
the Company of the Loan Documents will not (a) violate any provision of any
law, statute, rule or regulation or any order, writ, judgment, injunction,
decree, determination or award of any court, governmental agency or
arbitrator presently in effect having applicability to the Company, (b) violate
or contravene any provisions of the Articles of Incorporation or bylaws of the
Company or (c) result in a breach of or constitute a default under any
indenture, loan or credit agreement or any other agreement, lease or instrument
to which the Company is a party or by which it or any of its properties may be
bound or result in the
-43-
<PAGE>
creation of any Lien on any asset of the Company or any Subsidiary. Neither
the Company nor any Subsidiary is in default under or in violation of any such
law, statute, rule or regulation, order, writ, judgment, injunction, decree,
determination or award or any such indenture, loan or credit agreement or other
agreement, lease or instrument in any case in which the consequences of such
default or violation could have a Material Adverse Effect. No Unmatured Event
of Default or Event of Default has occurred and is continuing.
5.4 GOVERNMENT CONSENT. No order, consent, approval, license,
authorization or validation of, or filing, recording or registration with, or
exemption by, any governmental or public body or authority is required on the
part of the Company to authorize, or is required in connection with, the
execution, delivery and performance of, or the legality, validity, binding
effect or enforceability of, the Loan Documents, except for the filing of
financing statements to perfect the Lien granted to the Agent under the Loan
Documents.
5.5 FINANCIAL STATEMENTS AND CONDITION. The Company's audited
consolidated financial statements as at December 31, 1995, and its unaudited
consolidated financial statements as at March 31, 1996, as heretofore furnished
to the Lenders, have been prepared in accordance with GAAP on a consistent
basis and fairly present the financial condition of the Company and its
consolidated Subsidiaries as at such dates and the results of their operations
and changes in financial position for the respective periods then ended. As of
the dates of such financial statements, neither the Company nor any Subsidiary
had any material obligation, contingent liability, liability for taxes or
long-term lease obligation which is not reflected in such financial statements
or in the notes thereto. Since December 31, 1995, no event has occurred which
could have a Material Adverse Effect.
5.6 LITIGATION AND CONTINGENT LIABILITIES. Except as described in
SCHEDULE 5.6, there are no actions, suits, investigations or proceedings
pending or, to the knowledge of the Company, threatened against or affecting
the Company or any Subsidiary or any of their properties before any court or
arbitrator, or any Governmental Authority which, if determined adversely to the
Company or such Subsidiary, could have a Material Adverse Effect. Except as
described in SCHEDULE 5.6, neither the Company nor any Subsidiary has any
contingent liabilities which are material to the Company and the Subsidiaries
as a consolidated enterprise.
5.7 COMPLIANCE. The Company and its Subsidiaries are in material
compliance with all statutes and governmental rules and regulations applicable
to them, except to the extent that the use of the name "Olympic" violates the
provisions of 36 U.S.C. Section 380.
-44-
<PAGE>
5.8 ENVIRONMENTAL, HEALTH AND SAFETY LAWS. There does not exist any
violation by the Company or any Subsidiary of any applicable Environmental
Laws which will or threatens to impose a material liability on the Company or
a Subsidiary or which would require a material expenditure by the Company or
such Subsidiary to cure. Neither the Company nor any Subsidiary has received
any notice to the effect that any part of its operations or properties is not
in material compliance with any such Environmental Law that it or its
property is the subject of any governmental investigation evaluating whether
any remedial action is needed to respond to any release of any toxic or
hazardous waste or substance into the environment, the consequences of which
noncompliance or remedial action could have a Material Adverse Effect.
5.9 ERISA. Each Plan complies with all material applicable requirements
of ERISA and the Code and with all material applicable rulings and
regulations issued under the provisions of ERISA and the Code setting forth
those requirements. No Reportable Event has occurred and is continuing with
respect to any Plan. All of the minimum funding standards applicable to such
Plans have been satisfied and there exists no event or condition which would
permit the institution of proceedings to terminate any Plan under Section
4042 of ERISA. The current value of the Plans' benefits guaranteed under
Title IV of ERISA does not exceed the current value of the Plan's assets
allocable to such benefits.
5.10 OWNERSHIIP OF PROLPERTY; LIENS. Each of the Company and the
Subsidiaries has good and marketable title to its real properties and good
and sufficient title to its other properties, including all properties and
assets referred to as owned by the Company and its Subsidiaries in the
audited financial statements of the Company referred to in SECTION 5.5 (other
than property disposed of since the date of such financial statements in the
ordinary course of business or as otherwise permitted hereunder). None of
the properties, revenues or assets of the Company or any of its Subsidiaries
is subject to a Lien, except for Permitted Liens.
5.11 TAXES. Each of the Company and the Subsidiaries has filed all
federal, state and local tax returns required to be filed and has paid or
made provision for the payment of all taxes due and payable pursuant to such
returns and pursuant to any assessments made against it or any of its
property and all other taxes, fees and other charges imposed on it or any of
its property by any governmental authority (other than taxes, fees or charges
the amount or validity of which is currently being contested in good faith by
appropriate proceedings and with respect to which reserves in accordance with
GAAP have been provided on the books of the Company). No tax Liens have been
filed and no material claims are being asserted with respect to any such
taxes, fees or charges. The charges, accruals and reserves on the books of
the Company in respect of taxes and other governmental charges are adequate.
Each
-45-
<PAGE>
of the Company and the Subsidiaries has made all required withholding
payments.
5.12 TRADEMARKS, PATENTS, ETC. Each of the Company and the Subsidiaries
possesses or has the right to use all of the patents, trademarks, trade
names, service marks and copyrights, and applications therefor, and all
technology, know-how, processes, methods and designs used in or necessary for
the conduct of its business, without known conflict with the rights of
others, except as set forth in SECTION 5.7.
5.13 SUBSIDIARIES. SCHEDULE 5.13 sets forth as of the Effective Date a
list of all Subsidiaries and the number and percentage of the shares of each
class of capital stock owned beneficially or of record by the Company or any
Subsidiary therein and the jurisdiction of incorporation of each Subsidiary.
5.14 PARTNERSHIPS AND JOINT VENTURES. SCHEDULE 5.14 sets forth as of the
Effective Date a list of all partnerships or joint ventures in which the
Company or any Subsidiary is a partner (limited or general) or joint venturer.
5.15 FEDERAL RESERVE REGULATIONS. (a) The Company is not and will not be
engaged principally in the business of extending credit for the purpose of
"purchasing" or "carrying" (within the meaning of Regulation U or X of the
FRB) any margin stock (as defined in Regulation U or X of the FRB).
(b) No part of the proceeds of the Loans will be used for any purpose
that violates, or which is inconsistent with, the provisions of Regulation U
or X of the FRB.
5.16 REGULATED ENTITIES. None of the Company, any Person controlling the
Company, or any Subsidiary is an "Investment Company" within the meaning of
the Investment Company Act of 1940. The Company is not subject to regulation
under the Public Utility Holding Company Act of 1935, the Federal Power Act,
any state public utilities code or to any other federal or state statue or
regulation limiting its ability to incur indebtedness.
5.17 FULL DISCLOSURE. None of the representations or warranties made by
the Company in this Agreement and in the Pledge and Security Agreement as of
the date such representations and warranties are made or deemed made, and
none of the statements contained in any exhibit, report, statement or
certificate furnished by or on behalf of the Company in connection with this
Agreement (including the offering and disclosure materials delivered by or on
behalf of the Company to the Lenders prior to the Closing Date), contains any
untrue statement of a material fact or omits any material fact required to be
stated therein or necessary to make the statements made therein, in light of
the
-46-
<PAGE>
circumstances under which they are made, not misleading as of the time when made
or deemed made.
5.18 USE OF PROCEEDS. The proceeds of the Loans will be used by the
Company exclusively to finance Auto Receivables.
ARTICLE VI
AFFIRMATIVE COVENANTS
So long as any Lender shall have any Commitment hereunder, or any Loan or
other Obligation shall remain unpaid or unsatisfied, unless the Required Lenders
waive compliance in writing the Company shall, and shall cause each Subsidiary
(except in case of SECTION 6.1) to:
6.1 FINANCIAL STATEMENTS AND REPORTS. Furnish to each Lender:
(a) As soon as available and in any event within 90 days after the
end of each fiscal year, the annual audit report of the Company and its
Subsidiaries prepared on a consolidated basis and in conformity with GAAP,
consisting of at least statements of income, cash flows and stockholders'
equity, and a consolidated balance sheet as at the end of such year, setting
forth in each case in comparative form corresponding figures from the previous
annual audit, certified without qualification by Ernst & Young or other
independent certified public accountants of recognized standing selected by the
Company and acceptable to the Required Lenders, together with any management
letters, management reports or other supplementary comments or reports to the
Company or its board of directors furnished by such accountants.
(b) As soon as available and in any event within 45 days after the
end of each fiscal quarter, a copy of the unaudited financial statement of the
Company and its Subsidiaries prepared in the same manner as the audit report
referred to in SECTION 6.1(a), signed by the Company's chief financial officer,
treasurer or controller, consisting of at least consolidated statements of
income, cash flows and stockholders' equity for the Company and the Subsidiaries
for such fiscal quarter and for the period from the beginning of such fiscal
year to the end of such fiscal quarter, and a consolidated balance sheet of the
Company as at the end of such fiscal quarter.
(c) Together with the financial statements furnished by the Company
under SECTIONS 6.1(a) and 6.1(b), a Compliance Certificate signed by the chief
financial officer, treasurer or controller of the Company demonstrating in
reasonable detail compliance (or noncompliance, as the case may be) with each of
the
-47-
<PAGE>
financial ratios and restrictions contained in ARTICLE VII and stating that as
at the date of each such financial statements there did not exist any Unmatured
Event of Default or Event of Default or, if such Unmatured Event of Default or
Event of Default existed, specifying the nature and period of existence thereof
and what action the Company proposes to take with respect thereto.
(d) On the first day of each month, a borrowing base certificate in
the form of EXHIBIT D attached hereto and made a part hereof (a "BORROWING BASE
CERTIFICATE") as of the immediately preceding Business Day, together with a list
of each Contract File relating to the Pledged Auto Receivables that the
Collateral Monitor has determined to be a Rejected File subsequent to the
delivery of the immediately preceding Borrowing Base Certificate to the Agent,
certified as true and accurate by a designated financial officer of the Company.
Notwithstanding any other provision of this SECTION 6.1(d), if, on any day on
which a Borrowing Base Certificate would otherwise be required, the aggregate
outstanding principal amount of the Loans is $0.00, then the Company shall not
be required to deliver a Borrowing Base Certificate on such day.
(e) Not later than the last day of each month, a calculation of the
Portfolio Loss Ratio and Delinquency Ratio, an aging for all Pledged Auto
Receivables, and a portfolio analysis of all Auto Receivables owned or serviced
by the Company or any of its Subsidiaries detailing delinquency, default, loan
loss and repossessed asset statistics, in each case as of the last day of the
immediately preceding month, each certified as true and accurate by a designated
financial officer of the Company.
(f) Not later than 45 days after the end of each fiscal quarter of
each fiscal year, a static pool analysis detailing delinquency, default, loan
loss and repossessed asset statistics for each securitization trust, as of the
last day of the immediately preceding fiscal quarter for all Auto Receivables
owned or serviced by the Company or any of its Subsidiaries, certified as true
and accurate by a designated financial officer of the Company.
(g) Immediately upon becoming aware of any Unmatured Event of Default
or Event of Default, a notice describing the nature thereof and the action the
Company proposes to take with respect thereto.
(h) Immediately upon becoming aware of the occurrence of (x) any
Reportable Event or (y) to the extent the same is reasonably likely to have a
Material Adverse Effect, any "prohibited transaction" (as defined in Section
4975 of the Code), a notice specifying the nature thereof and the action the
Company proposes to take with respect thereto, and, when received, copies of any
notice from the PBGC of intention to terminate or have a trustee appointed for
any Plan.
-48-
<PAGE>
(i) Promptly upon the mailing or filing thereof, copies of all
financial statements, reports and proxy statements mailed to the Company's
shareholders, and copies of all registration statements, periodic reports and
other documents filed with the SEC (or any successor thereto) or any national
securities exchange.
(j) Immediately upon becoming aware of the occurrence thereof, notice
of the institution of any litigation, arbitration or governmental investigation
or proceeding, or the rendering of a judgment or decision in such litigation,
investigation or proceeding, which is reasonably likely to, if adversely
determined, have a Material Adverse Effect on the Company and its Subsidiaries
as a consolidated enterprise, and the steps being taken by each Person affected
by such proceeding.
(k) On the first Business Day of each fiscal quarter, and at such
other times as the Agent may request, cause the Collateral Monitor to deliver
an Agreed-upon Procedures Report applying the Agreed-upon Procedures to Auto
Receivables that are first pledged to the Agent by the Company during the
relevant Agreed-upon Procedures Reporting Period; PROVIDED, that, so long as
no Event of Default or Unmatured Event of Default exists, the Agent may not
request an Agreed-upon Procedures Report more than six times in a fiscal
year. Notwithstanding any other provision of this SECTION 6.1(k), if, on any
day on which an Agreed-upon Procedures Report would otherwise be required,
the aggregate outstanding principal amount of the Loans is $0.00, then the
Company shall not be required to cause the delivery of such Agreed-upon
Procedures Report on such day, but the Agreed-upon Procedures will be
performed with respect to the next report no later than the first Business
Day of the second week after any Loan is made subsequent to the date the
report otherwise would be delivered or at such other time as the Agent and
the Company shall mutually agree.
(l) By no later than 90 days after the commencement of each fiscal
year, projections for the then-current fiscal year consisting of monthly and
year-to-date balance sheets, income statements and statements of cash flows,
accompanied by a statement of the assumptions used in the preparation of such
projections, certified by a designated financial officer of the Company as
having been prepared in good faith on the basis of reasonable assumptions as
to the course of the Company's business during such fiscal year.
(m) From time to time, such other information regarding the business,
operation and financial condition of the Company and the Subsidiaries as the
Agent or any Lender may reasonably request.
6.2 CORPORATE EXISTENCE. Maintain its corporate existence in good
standing under the laws of its jurisdiction of incorporation
-49-
<PAGE>
and its qualification to transact business in each jurisdiction in which the
character of the properties owned, leased or operated by it or the business
conducted by it makes such qualification necessary.
6.3 INSURANCE. Maintain with financially sound and reputable insurance
companies such insurance as may be required by law and such other insurance in
such amounts and against such hazards as is customary in the case of reputable
corporations engaged in the same or similar business and similarly situated.
6.4 PAYMENT OF TAXES AND CLAIMS. File all tax returns and reports which
are required by law to be filed by it and pay before they become delinquent all
taxes, assessments and governmental charges and levies imposed upon it or its
property and all claims or demands of any kind (including those of suppliers,
mechanics, carriers, warehousemen, landlords and other like Persons) which, if
unpaid, might result in the creation of a Lien upon its property; PROVIDED that
the foregoing items need not be paid if they are being diligently contested in
good faith by appropriate proceedings, and as long as the Company's or such
Subsidiary's title to its property is not materially adversely affected, its use
of such property in the ordinary course of its business is not materially
interfered with and adequate reserves with respect thereto have been set aside
on the Company's or such Subsidiary's books in accordance with GAAP.
6.5 INSPECTION. Permit any Person designated by any Lender to visit and
inspect any of its properties, corporate books and financial records, to examine
and to make copies of its books of accounts and other financial records, and to
discuss the affairs, finances and accounts of the Company and the Subsidiaries
with, and to be advised as to the same by, its officers and by its independent
public accountants (and by this provision, the Company authorizes its
independent public accountants to participate in such discussions) at such
reasonable times and intervals as any Lender may designate. So long as no Event
of Default exists, the expenses of any Lender for such visits, inspections and
examinations shall be at the expense of such Lender, but any such visits,
inspections, and examinations made while any Event of Default is continuing
shall be at the expense of the Company.
6.6 MAINTENANCE OF PROPERTIES. Maintain its properties used or useful in
the conduct of its business in good condition, repair and working order, and
supplied with all necessary equipment, and make all necessary repairs, renewals,
replacements, betterments and improvements thereto, all as may be necessary so
that the business carried on in connection therewith may be properly and
advantageously conducted at all times.
-50-
<PAGE>
6.7 BOOKS AND RECORDS. Keep adequate and proper records and books of
account in which full and correct entries will be made of its dealings,
business and affairs.
6.8 COMPLIANCE. Comply in all material respects with all laws, rules,
regulations, orders, writs, judgments, injunctions, decrees or awards to which
it may be subject.
6.9 ERISA. Maintain each Plan in compliance with all material applicable
requirements of ERISA and of the Code and with all material applicable rulings
and regulations issued under the provisions of ERISA and of the Code.
6.10 ENVIRONMENTAL MATTERS. Observe and comply with all Environmental Laws
to the extent noncompliance could result in a material liability or otherwise
constitute or result in a Material Adverse Effect.
6.11 COLLATERAL MONITOR. The Agent shall engage on behalf of the Lenders a
Collateral Monitor pursuant to the Collateral Monitoring Agreement to perform
the Agreed-upon Procedures and to file with the Agent the Agreed-upon Procedures
Reports required by SECTION 6.1(k) of this Agreement. In connection with such
engagement, the Company agrees:
(a) to permit the Collateral Monitor or any Person designated by the
Collateral Monitor to visit and inspect any of the Company's properties,
corporate books and financial records, to examine and to make copies of its
books of accounts and other financial records, and to discuss the affairs,
finances and accounts of the Company and the Subsidiaries with, and to be
advised as to the same by, its officers in order to allow the Collateral
Monitor to comply with SECTION 6.1(k);
(b) to (i) pay the Collateral Monitor's compensation described in the
Collateral Monitoring Agreement, as such compensation may be amended from time
to time (but no more frequently than annually) by the Company and the Collateral
Monitor, and if any Unmatured Event of Default or Event of Default has occurred
and is continuing, with the Agent's prior written consent and (ii) provide the
Agent with a copy of any such amendment;
(c) not to remove or discharge the Collateral Monitor without the
prior written consent of the Agent and the Required Lenders, PROVIDED, HOWEVER,
that it is understood and agreed that the Agent's engagement of a successor
collateral monitor satisfactory to the Agent and the Required Lenders, in their
reasonable discretion, shall be a condition precedent to obtaining the Agent's
and the Required Lenders' consent to such removal; and
-51-
<PAGE>
(d) not to amend or modify any of the Agreed-upon Procedures or
waive the Collateral Monitor's obligations to apply the Agreed-upon
Procedures or deliver the Agreed-upon Procedures Reports in accordance
with SECTION 6.1(k) without the prior written consent of the Agent and
the Required Lenders.
The Agent and the Required Lenders with cause or, after the occurrence of an
Event of Default or Unmatured Event of Default, with or without cause, may
remove and discharge the Collateral Monitor upon giving thirty days' prior
notice to the Company and the Collateral Monitor. Having given notice of such
removal, the Agent shall consult with the Company about the engagement of a
successor collateral monitor. If the Agent, the Required Lenders and the
Company agree to the engagement of a successor collateral monitor during the
notice period, the Company shall engage such successor collateral monitor on
terms satisfactory to the Agent and the Required Lenders. If the Agent, the
Required Lenders and the Company cannot agree to the engagement of a successor
collateral monitor, the Agent, in its sole discretion, but at the Company's sole
cost and expense, may engage a successor collateral monitor which shall be a
nationally recognized firm of independent public accountants or other entity
routinely engaged in collateral auditing in the ordinary course of its business
and which shall be acceptable to the Required Lenders.
ARTICLE VII
NEGATIVE COVENANTS
So long as any Lender shall have any Commitment hereunder, or any Loan or
other Obligation shall remain unpaid or unsatisfied, unless the Required Lenders
waive compliance in writing, the Company will not, and will not permit any
Subsidiary to:
7.1 MERGER. Merge or consolidate or enter into any analogous
reorganization or transaction with any Person, except for mergers of
Subsidiaries with and into the Company (provided that the Company is the
surviving corporation), mergers of Subsidiaries with Wholly-Owned Subsidiaries
(provided that a Wholly-Owned Subsidiary is the surviving corporation) and
mergers of Persons with Wholly-Owned Subsidiaries to effect Permitted
Acquisitions (provided that a Wholly-Owned Subsidiary is the survivor of any
such merger).
7.2 SALE OF ASSETS. Sell, transfer, lease or otherwise convey all or any
substantial part of its assets except for: (a) sales or pledges of Auto
Receivables; (b) sales of Finance Income Receivable, PROVIDED that (i) the
Company (or a Subsidiary, as the case may be) receives consideration at the time
of such sale at least equal to the fair market value of the Finance Income
Receivable sold (as evidenced by, among other things, a resolution
-52-
<PAGE>
of the Company's board of directors if the consideration for a sale or related
series of sales exceeds $500,000 in the aggregate), (ii) at least 90% of the
consideration therefor received by the Company or such Subsidiary is in the form
of Cash Equivalents and (iii) within ten Business Days after the Company's or
such Subsidiary's receipt of the Net Proceeds from such sale, the Company
applies such Net Proceeds first to the payment of the outstanding principal
balance of the Loans in full or, if less, to the extent of such Net Proceeds
and, after such payment, as permitted by the Senior Notes Indenture; and (c) any
Subsidiary may sell, transfer, lease or convey all or a substantial part of its
assets to the Company or a Wholly-Owned Subsidiary.
7.3 PURCHASE OF ASSETS. Purchase or lease or otherwise acquire all or
substantially all of the assets of any Person, except for Permitted
Acquisitions.
7.4 PLANS. Permit any condition to exist in connection with any Plan
which might constitute grounds for the PBGC to institute proceedings to have
such Plan terminated or a trustee appointed to administer such Plan; permit any
Plan to terminate under any circumstances which would cause the lien provided
for in Section 4068 of ERISA to attach to any property, revenue or assets of the
Company or any Subsidiary; or permit the underfunded amount of Plan benefits
guaranteed under Title IV of ERISA to exceed $100,000.
7.5 CHANGE IN NATURE OF BUSINESS. Make any material change in the nature
of its business as carried on, or in its method of accounting as in effect, at
the Effective Date.
7.6 SUBSIDIARIES, PARTNERSHIPS AND JOINT VENTURES. Either:
(a) form or acquire any corporation which would thereby become a
Subsidiary other than Subsidiaries formed in the ordinary course of the
Company's business in order to effect Auto Loan Securitizations or
Permitted Acquisitions or which are in the same or similar line of
business as the Company is in on the Effective Date; or (b) form or enter
into any partnership as a limited or general partner or into any joint
venture other than those permitted by SECTION 7.9.
7.7 OTHER AGREEMENTS. Enter into any agreement, bond, note or other
instrument with or for the benefit of any Person other than the Lenders which
would (a) prohibit the Company from granting, or otherwise limit the ability of
the Company to grant to the Lenders any Lien on Pledged Auto Receivables and
other Collateral, (b) impose any restriction or limitation on any of the
Company's Subsidiaries that is prohibited to be imposed by Section 4.08 of the
Senior Notes Indenture or (c) be violated or breached by the Company's
performance of its obligations under the Loan Documents.
-53-
<PAGE>
7.8 RESTRICTED PAYMENTS. Purchase or redeem any shares of its stock,
declare or pay any dividends thereon (other than dividends payable solely in the
Company's common stock and dividends payable to the Company), make any
distribution to stockholders as such (other than the Company) or set aside any
funds for any such purpose, or prepay, purchase or redeem any Subordinated Debt;
PROVIDED, HOWEVER, that, so long as no Event of Default has occurred and is
continuing, the Company may (a) exchange shares of Preferred Stock for
Debentures, (b) make regularly scheduled dividend payments on the Preferred
Stock and (c) redeem Subordinated Debt in accordance with the mandatory
redemption provisions thereof in effect on the date of issuance thereof and make
any mandatory sinking fund payment on, any mandatory defeasance deposit with
respect to, or any mandatory redemption payment on any series of Subordinated
Debt in accordance with the stated terms of such series in effect on the date of
issuance thereof.
7.9 INVESTMENTS. Acquire for value, make, have or hold any Investments,
except:
(a) Investments outstanding on the Effective Date and listed on
SCHEDULE 7.9;
(b) Travel advances to officers and employees in the ordinary course
of business;
(c) (i) Investments in readily marketable direct obligations of the
United States of America (or guaranteed by the United States of America)
having maturities of one year or less from the date of acquisition, (ii)
money market funds investing solely in investments of the type described
in CLAUSE (i), above and (iii) repurchase agreements or similar
financial arrangements the payment of principal of and interest on which
are fully secured by obligations of the type described in CLAUSE (i)
above;
(d) Certificates of deposit or bankers' acceptances, each maturing
within one year from the date of acquisition, issued by any commercial
bank described in CLAUSE (c) of the definition of "Cash Equivalent";
(e) Commercial paper maturing within 270 days from the date of
issuance and given the highest rating by a nationally recognized rating
service;
(f) Auto Receivables created or acquired in the ordinary course of
the Company's or a Subsidiary's business;
-54-
<PAGE>
(g) Shares of stock, obligations or other securities received in
settlement of claims arising in the ordinary course of business;
(h) Investments in the ordinary course of the Company's business in
connection with warehousing or securitizing Auto Receivables;
(i) Investments, including Investments in general or limited
partnerships and joint ventures, in an amount not to exceed $10,000,000
at any one time outstanding;
(j) Investments that are Permitted Acquisitions; and
(k) Other Investments in securities having a rating of at least BBB-
from S&P or Baa3 from Moody's.
7.10 INDEBTEDNESS. Incur, create, issue, assume or suffer to exist any
Indebtedness, except:
(a) Indebtedness under this Agreement;
(b) Indebtedness incurred by the Company or a Subsidiary in
connection with warehousing and/or securitizing Auto Receivables in the
ordinary course of its business;
(c) (i) current liabilities, other than for borrowed money, incurred
in the ordinary course of business and (ii) deferred taxes which, in
accordance with GAAP, are shown as a liability on the Company's
consolidated balance sheet;
(d) Existing Indebtedness listed on SCHEDULE 7.10 hereto;
(e) Indebtedness evidenced by the Debentures arising from the
conversion of Preferred Stock in accordance with its terms;
(f) Indebtedness evidenced by the Senior Notes and other Indebtedness
incurred after the Effective Date that is not Subordinated Debt, is not
secured by any Lien on any asset of the Company or any of its
Subsidiaries and is issued pursuant to an instrument no less favorable to
the Company and the Lenders than the Senior Notes Indenture (PROVIDED
that any such Indebtedness in excess of $145,000,O0O outstanding at any
time less the amount of any payments of principal of the Senior Notes
must have a Weighted Average Life to Maturity after 2000);
(g) Subordinated Debt so long as the aggregate outstanding principal
amount of such Subordinated Debt does
-55-
<PAGE>
not exceed at any time the amount set forth in Section 4.09(b)(xi) of the
Senior Notes Indenture plus, in the event that no Unmatured Event of
Default or Event of Default exists at the time of incurrence thereof, the
additional amount of Subordinated Debt, if any, permitted to be incurred
by the Company pursuant to Sections 4.09(a) and (b) of the Senior Notes
Indenture (PROVIDED, HOWEVER, that (i) no series of Subordinated Debt shall
require any repayment, redemption or sinking fund payment not permitted
by the Senior Notes Indenture and (ii) the Company shall not optionally
redeem, purchase or make a deposit to defease, or make an optional
sinking fund payment on any Subordinated Debt without the prior written
consent of the Required Lenders);
(h) Indebtedness arising from now existing or hereafter arising
Capitalized Leases which in the aggregate does not exceed $10,000,000
outstanding at any time (PROVIDED, that the aggregate principal amount of
Capitalized Leases permitted by this CLAUSE (H) shall be $20,000,000 if
and only if the Senior Notes Indenture has been amended to permit such
increased principal amount of Capitalized Leases thereunder);
(i) Indebtedness under Hedging Obligations entered into in the
ordinary course that are bona fide and not for speculation and which
relate to Indebtedness otherwise permitted by this SECTION 7.10 to be
outstanding; and
(j) Other Indebtedness which in the aggregate does not exceed
$15,000,000 outstanding at any time.
7.11 LIENS. Create, incur, assume or suffer to exist any Lien with respect
to any property, revenues or assets now owned or hereafter arising or acquired,
except for Permitted Liens.
7.12 CONTINGENT LIABILITIES. Either: (a) endorse, guarantee, contingently
agree to purchase or to provide funds for the payment of, or otherwise become
contingently liable upon, any obligation of any other Person, except (i) the
endorsement of negotiable instruments for deposit or collection (or similar
transactions) in the ordinary course of business, (ii) warranties given in the
ordinary course of warehousing and/or securitizing Auto Receivables and (iii)
guaranties of Indebtedness of Subsidiaries which Indebtedness does not violate
SECTION 7.10; or (b) agree to maintain the net worth or working capital of, or
provide funds to satisfy any other financial test applicable to, any other
Person.
7.13 UNCONDITIONAL PURCHASE OBLIGATIONS. Enter into or be a party to any
contract for the purchase or lease of materials, supplies or other property or
services, if such contract requires that payment be made by it regardless of
whether or not delivery is
-56-
<PAGE>
ever made of such materials, supplies or other property or services.
7.14 TRANSACTIONS WITH RELATED PARTIES. Enter into or be a party to any
transaction or arrangement, including the purchase, sale, lease or exchange of
property or the rendering of any service, with any Related Party, except in the
ordinary course of and pursuant to the reasonable requirements of the Company's
or the applicable Subsidiary's business and upon fair and reasonable terms
which, except in the case of transactions in the ordinary course of the
Company's business in connection with warehousing or securitizing Auto
Receivables, shall be no less favorable to the Company or such Subsidiary than
would be obtained in a comparable arm's-length transaction with a Person not a
Related Party.
7.15 USE OF PROCEEDS. Use any portion of the proceeds of any Loan,
directly or indirectly, (a) for the purpose, whether immediate, incidental or
ultimate, of "purchasing or carrying any margin stock" within the meaning of FRB
Regulation U, (b) to engage in any transaction having as its purpose the
Acquisition of any Person if such Acquisition is a Hostile Acquisition or (c) to
(i) knowingly purchase Ineligible Securities from the Arranger during any period
in which the Arranger makes a market in such Ineligible Securities, (ii)
knowingly purchase during the underwriting or placement period Ineligible
Securities being underwritten or privately placed by the Arranger or (iii) make
payments of principal or interest on Ineligible Securities underwritten or
privately placed by the Arranger and issued by or for the benefit of the Company
or any Affiliate of the Company. The Arranger is a registered broker-dealer and
permitted to underwrite and deal in certain Ineligible Securities; and
"INELIGIBLE SECURITIES" means securities which may not be underwritten or dealt
in by member banks of the Federal Reserve System under Section 16 of the Banking
Act of 1933 (12 U.S.C. Section 24, Seventh), as amended. The Company will
furnish to any Lender on request a statement in conformity with the requirements
of Federal Reserve Form U-1 referred to in FRB Regulation U.
7.16 SELECTION PROCEDURES. Make any material change in its underwriting
standards from those in effect on the Effective Date (INTER ALIA, not enter the
sub-prime market).
7.17 CAPITAL BASE.
(a) Permit its consolidated Capital Base, on the last day of its
fiscal year, to be less than the sum of (i) its consolidated Capital Base
on the last day of the immediately preceding fiscal year, PLUS (ii) to
the extent Net Income for such fiscal year is greater than zero, Net
Income for such fiscal year PLUS (iii) Capital Base Proceeds for such
fiscal year.
-57-
<PAGE>
(b) Permit its consolidated Capital Base, on the last day of any
fiscal quarter other than the last day of its fiscal year, to be less
than the sum of (i) 95% of its consolidated Capital Base on the last day
of the immediately preceding fiscal year PLUS (ii) Capital Base Proceeds
since the last day of the immediately preceding fiscal year.
7.18 LEVERAGE RATIO. Permit the ratio (the "LEVERAGE RATIO") of (a) the
Company's consolidated interest bearing Indebtedness (including (i) the
portion of any Capitalized Lease allocable to principal in accordance with
GAAP and (ii) all Indebtedness issued at any discount from face value) minus
the Company's Warehouse Debt to (b) the Company's Net Worth to be greater
than 2.0 on the last day of any fiscal quarter.
7.19 PORTFOLIO LOSS RATIO. Permit the Company's Portfolio Loss Ratio to
exceed 2.50% as of the end of any month.
7.20 DELINQUENCY RATIO. Permit the Delinquency Ratio on the last
day of any month to exceed 3.5%.
ARTICLE VIII
EVENTS OF DEFAULT
8.1 EVENT OF DEFAULT. Any of the following shall constitute an "EVENT OF
DEFAULT":
(a) NON-PAYMENT. The Company shall fail to make when due, whether by
acceleration or otherwise, any payment of principal of any Loan or the Company
shall fail (and such failure shall continue unremedied for a period of five
days) to make when due, whether by acceleration or otherwise, any payment of
interest on any Loan or any fee or other amount required to be made to the Agent
or any Lender pursuant to the Loan Documents.
(b) REPRESENTATION OR WARRANTY. Any representation or warranty made
or deemed to have been made by or on behalf of the Company or any Subsidiary in
any of the Loan Documents or by or on behalf of the Company or any Subsidiary in
any certificate, statement, report or other writing furnished by or on behalf of
the Company to the Agent or any Lender pursuant to the Loan Documents shall
prove to have been false or misleading in any material respect on the date as of
which the facts set forth are stated or certified or deemed to have been stated
or certified.
(c) CERTAIN COVENANTS. The Company shall fail to comply with SECTION
6.1, 6.2 or 6.11 or any provision of ARTICLE VII.
-58-
<PAGE>
(d) OTHER DEFAULTS. The Company shall fail to comply with any
agreement, covenant, condition, provision or term contained in the Loan
Documents (and such failure shall not constitute an Event of Default under any
of the other provisions of this SECTION 8.1) and such failure to comply shall
continue for 30 days.
(e) INSOLVENCY; VOLUNTARY PROCEEDINGS. The Company or any
Subsidiary: (i) generally fails to pay, or admits in writing its inability to
pay, its debts as they become due, subject to applicable grace periods, if any,
whether at stated maturity or otherwise; (ii) voluntarily ceases to conduct its
business in the ordinary course; (iii) commences any Insolvency Proceeding with
respect to itself; or (iv) takes any action to effectuate or authorize any of
the foregoing.
(f) INVOLUNTARY PROCEEDINGS. (i) Any involuntary Insolvency
Proceeding is commenced or filed against the Company or any Subsidiary, or any
writ, judgment, warrant of attachment, execution or similar process is issued or
levied against a substantial part of the Company's or any Subsidiary's
properties, and any such proceeding or petition shall not be dismissed, or such
writ, judgment, warrant of attachment, execution or similar process shall not be
released, vacated or fully bonded, within 30 days after commencement, filing,
issuance or levy; (ii) the Company or any Subsidiary admits in writing the
material allegations of a petition against it in any Insolvency Proceeding, or
an order for relief (or similar order under non-U.S. law) is ordered in any
Insolvency Proceeding; or (iii) the Company or any Subsidiary acquiesces in the
appointment of a receiver, trustee, custodian, conservator, liquidator,
mortgagee in possession (or agent therefor), or other similar Person for itself
or a substantial portion of its property or business.
(g) JUDGMENTS. A judgment or judgments for the payment of money in
excess of the sum of $1,000,000 in the aggregate shall be rendered against the
Company or a Subsidiary and the Company or such Subsidiary shall not discharge
the same or provide for its discharge in accordance with its terms, or procure a
stay of execution thereof, prior to any execution on such judgments by such
judgment creditor, within 30 days from the date of entry thereof, and within
said period of 30 days, or such longer period during which execution of such
judgment shall be stayed, appeal therefrom and cause the execution thereof to be
stayed during such appeal.
(h) ERISA. Steps to terminate any Plan shall be instituted by the
Company or any ERISA Affiliate if, in order to effectuate such termination, the
Company or any ERISA Affiliate would be required to make a contribution to such
Plan, or would incur a liability or obligation to such Plan in excess of
$1,000,000 or the PBGC shall institute steps to terminate any Plan.
-59-
<PAGE>
(i) CROSS DEFAULT. The maturity of any Indebtedness in an amount in
excess of $5,000,000 of the Company (other than Indebtedness under this
Agreement) or a Subsidiary shall be accelerated, or the Company or a Subsidiary
shall fail to pay any such Indebtedness when due or, in the case of such
Indebtedness payable on demand, when demanded, or the Company or a Subsidiary
shall fail to pay any installment of interest on any series of Master
Subordinated Indenture Notes and such failure shall remain uncured for 20 days,
or any event shall occur or condition shall exist and shall continue for more
than the period of grace, if any, applicable thereto and shall have the effect
of causing, or permitting (any required notice having been given and grace
period having expired) the holder of any such Indebtedness or any trustee or
other Person acting on behalf of such holder to cause such Indebtedness to
become due prior to its stated maturity or to realize upon any collateral given
as security therefor, or there shall occur any default or event or condition
permitting the liquidation, winding-up or early termination of any Auto Loan
Securitization of the Company or any Subsidiary.
(j) COMMON STOCK. The Company's common stock shall cease to be
either listed on a national securities exchange or authorized to be quoted on an
inter-dealer quotation system of a registered national securities association.
(k) FINANCE INCOME RECEIVABLE. The Company fails to reinvest the Net
Proceeds arising from the sale of any Finance Income Receivable in any manner
which requires the Company to make an offer to purchase any Senior Note under
Section 4.10 of the Senior Notes Indenture.
(l) CHANGE OF CONTROL. Any Change of Control shall occur.
(m) SENIOR NOTE OFFERS. The Company is required to make one or more
Portfolio Reduction Offers or Change of Control Offers (each as defined in the
Senior Notes Indenture) pursuant to Sections 4.14 and 4.18 of the Senior Notes
Indenture and Senior Notes in an aggregate principal amount greater than
$20,000,000 are tendered from time to time to the Company in response to any
such offer or offers.
(n) SUBORDINATED DEBT OFFERS. The Company is required pursuant to
the terms of any instrument governing any Subordinated Debt to make one or more
offers to redeem or repurchase any Subordinated Debt prior to its expressed
maturity and Subordinated Debt in an aggregate principal amount greater than
$7,500,000 is tendered from time to time to the Company in response to any such
offer or offers.
-60-
<PAGE>
8.2 REMEDIES. If any Event of Default occurs, the Agent shall at the
request of, or may, with the consent of, the Required Lenders:
(a) declare the Commitment of each Lender to make Loans
to be terminated, whereupon such Commitments shall be terminated;
(b) declare the unpaid principal amount of all outstanding Loans, all
interest accrued and unpaid thereon, and all other amounts owing or payable
hereunder or under any other Loan Document to be immediately due and payable,
without presentment, demand, protest or other notice of any kind, all of which
are hereby expressly waived by the Company; and
(c) exercise on behalf of itself and the Lenders all rights and
remedies available to it and the Lenders under this Agreement, the other Loan
Documents and applicable law;
PROVIDED, HOWEVER, that upon the occurrence of any event specified in
SUBSECTION (e) or (f) of SECTION 8.1 (in the case of CLAUSE (i) of
SUBSECTION (f) upon the expiration of the 30-day period mentioned therein),
the obligation of each Lender to make Loans shall automatically terminate and
the unpaid principal amount of all outstanding Loans and all interest and
other amounts as aforesaid shall automatically become due and payable without
further act of the Agent or any Lender.
8.3 RIGHTS NOT EXCLUSIVE. The rights provided for in this Agreement and
the other Loan Documents are cumulative and are not exclusive of any other
rights, powers, privileges or remedies provided by law or in equity, or under
any other instrument, document or agreement now existing or hereafter arising.
ARTICLE IX
THE AGENT
9.1 APPOINTMENT AND AUTHORIZATION; "AGENT". Each Lender hereby
irrevocably (subject to SECTION 9.9) appoints, designates and authorizes the
Agent to take such action on its behalf under the provisions of this
Agreement and each other Loan Document and to exercise such powers and
perform such duties as are expressly delegated to it by the terms of this
Agreement and each other Loan Document, together with such powers as are
reasonably incidental thereto. Notwithstanding any provision to the contrary
contained elsewhere in this Agreement or in any other Loan Document, the
Agent shall not have any duties or responsibilities, except those expressly
set forth herein, nor shall the Agent have or be deemed to have any fiduciary
relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or
-61-
<PAGE>
liabilities shall be read into this Agreement or any other Loan Document or
otherwise exist against the Agent. Without limiting the generality of the
foregoing sentence, the use of the term "agent" in this Agreement with
reference to the Agent is not intended to connote any fiduciary or other
implied (or express) obligations arising under agency doctrine of any
applicable law. Instead, such term is used merely as a matter of market
custom, and is intended to create or reflect only an administrative
relationship between independent contracting parties.
9.2 DELEGATION OF DUTIES. The Agent may execute any of its duties under
this Agreement or any other Loan Document by or through agents, employees or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Agent shall not be responsible to any of
the Lenders for the negligence or misconduct of any agent or attorney-in-fact
that it selects with reasonable care.
9.3 LIABILITY OF AGENT. None of the Agent-Related Persons shall (a) be
liable for any action taken or omitted to be taken by any of them under or in
connection with this Agreement or any other Loan Document or the transactions
contemplated hereby (except for its own gross negligence or willful misconduct)
or (b) be responsible in any manner to any of the Lenders for any recital,
statement, representation or warranty made by the Company or any Subsidiary or
Affiliate of the Company, or any officer thereof, contained in this Agreement,
in any other Loan Document or in any certificate, report, statement or other
document referred to or provided for in, or received by the Agent under or in
connection with, this Agreement or any other Loan Document, or the validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement or
any other Loan Document or the existence, creation, validity, attachment,
perfection, enforceability, value or sufficiency of any collateral security for
the Obligations or for any failure of the Company or any other party hereto to
perform its obligations hereunder or thereunder. No Agent-Related Person shall
be under any obligation to any Lender to ascertain or to inquire as to the
observance or performance of any of the agreements contained in, or conditions
of, this Agreement or any other Loan Document, or to inspect the properties,
books or records of the Company or any of the Company's Subsidiaries or
Affiliates.
9.4 RELIANCE BY AGENT. (a) The Agent shall be entitled to rely, and shall
be fully protected in relying, upon any writing, resolution, notice, consent,
certificate, affidavit, letter, telegram, facsimile, telex or telephone message,
statement or other document or conversation believed by it to be genuine and
correct and to have been signed, sent or made by the proper Person or Persons,
and upon advice and statements of legal counsel (including counsel to the
Company), independent accountants and other experts selected by the Agent.
The Agent shall be fully justified in
-62-
<PAGE>
failing or refusing to take any action under this Agreement unless it shall
first receive such advice or concurrence of the Required Lenders as it deems
appropriate and, if it so requests, it shall first be indemnified to its
satisfaction by the Lenders against any and all liability and expense which may
be incurred by it by reason of taking or continuing to take any such action.
The Agent shall in all cases be fully protected in acting, or in refraining from
acting, under this Agreement in accordance with a request or consent of the
Required Lenders and such request and any action taken or failure to act
pursuant thereto shall be binding upon all of the Lenders.
(b) For purposes of determining compliance with the conditions
specified in SECTION 4.1, each Lender that has executed this Agreement shall be
deemed to have consented to, approved or accepted or to be satisfied with, each
document or other matter either sent by the Agent to such Lender for consent,
approval, acceptance or satisfaction, or required thereunder to be consented to
or approved by or acceptable or satisfactory to the Lender.
9.5 NOTICE OF DEFAULT. The Agent shall not be deemed to have knowledge or
notice of the occurrence of any Event of Default or Unmatured Event of Default
(except with respect to defaults in the payment of principal, interest and fees
required to be paid to the Agent for the account of the Lenders) unless the
Agent shall have received written notice from a Lender or the Company referring
to this Agreement, describing such Event of Default or Unmatured Event of
Default and stating that such notice is a "notice of default." The Agent will
notify the Lenders of its receipt of such notice. The Agent shall take such
action with respect to such Event of Default or Unmatured Event of Default as
may be requested by the Required Lenders in accordance with SECTION 8.2;
PROVIDED, HOWEVER, that unless and until the Agent has received any such
request, the Agent may (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to such Event of Default or
Unmatured Event of Default as it shall deem advisable or in the best interest of
the Lenders.
9.6 CREDIT DECISION. Each Lender acknowledges that none of the
Agent-Related Persons has made any representation or warranty to it, and that
no act by the Agent hereafter taken, including any review of the affairs of
the Company and its Subsidiaries, shall be deemed to constitute any
representation or warranty by any Agent-Related Person to any Lender. Each
Lender represents to the Agent that it has, independently and without
reliance upon any Agent-Related Person and based on such documents and
information as it has deemed appropriate, made its own appraisal of and
investigation into the business, prospects, operations, property, financial
and other condition and creditworthiness of the Company and its Subsidiaries,
and all applicable bank regulatory laws relating to the transactions
contemplated hereby, and made its own decision to
-63-
<PAGE>
enter into this Agreement and to extend credit to the Company hereunder. Each
Lender also represents that it will, independently and without reliance upon any
Agent-Related Person and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit analysis,
appraisals and decisions in taking or not taking action under this Agreement or
any other Loan Document, and to make such investigations as it deems necessary
to inform itself as to the business, prospects, operations, property, financial
and other condition and creditworthiness of the Company. Except for notices,
reports and other documents expressly herein required to be furnished to the
Lenders by the Agent, no Agent shall have any duty or responsibility to provide
any Lender with any credit or other information concerning the business,
prospects, operations, property, financial and other condition or
creditworthiness of the Company which may come into the possession of any
Agent-Related Person.
9.7 INDEMNIFICATION OF AGENT. Whether or not the transactions
contemplated hereby are consummated, the Lenders shall indemnify upon demand the
Agent-Related Persons (to the extent not reimbursed by or an behalf of the
Company and without limiting the obligation of the Company to do so), PRO RATA,
from and against any and all Indemnified Liabilities; PROVIDED, HOWEVER, that no
Lender shall be liable for the payment to any Agent-Related Person of any
portion of the Indemnified Liabilities resulting solely from such Person's gross
negligence or willful misconduct. Without limitation of the foregoing, each
Lender shall reimburse the Agent upon demand for its ratable share of any costs
or out-of-pocket expenses (including Attorney Costs) incurred by the Agent in
connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement, any other Loan Document or any document
contemplated by or referred to herein, to the extent that the Agent is not
reimbursed for such expenses by or on behalf of the Company. The undertaking in
this Section shall survive the payment of all Obligations hereunder and the
resignation or replacement of the Agent.
9.8 AGENT IN INDIVIDUAL CAPACITY. BofA and its Affiliates may make loans
to, issue letters of credit for the account of, accept deposits from, acquire
equity interests in and generally engage in any kind of banking, trust,
financial advisory, underwriting or other business with the Company and its
Subsidiaries and Affiliates as though BofA were not the Agent hereunder and
without notice to or consent of the Lenders. The Lenders acknowledge that,
pursuant to such activities, BofA or its Affiliates may receive information
regarding the Company or its Affiliates (including information that may be
subject to
-64-
<PAGE>
confidentiality obligations in favor of the Company or such Affiliates) and
acknowledge that the Agent shall not be under any obligation to provide such
information to them. With respect to their respective Loans, BofA and its
Affiliates shall have the same rights and powers under this Agreement as any
other Lender and may exercise the same as though BofA were not the Agent
hereunder.
9.9 RESIGNATION; REMOVAL; SUCCESSOR AGENT. The Agent may, and at the
request of the Required Lenders shall, resign as an Agent upon 30 days' notice
to the Lenders. If the Agent resigns, the Required Lenders shall appoint from
among the Lenders a successor agent for the Lenders; PROVIDED, HOWEVER, that at
all times when an Event of Default or Unmatured Event of Default does not exist,
the consent of the Company (not to be unreasonably withheld or delayed) shall be
required to the appointment of any such successor agent. If no successor agent
is appointed prior to the effective date of the resignation of the Agent, the
Agent may appoint, after consulting with the Lenders and the Company, a
successor agent from among the Lenders. Upon the acceptance of its appointment
as successor agent hereunder, such successor agent shall succeed to all the
rights, powers and duties of the retiring Agent and the term "Agent" shall mean
such successor administrative and the retiring Agent's appointment, powers and
duties as Agent shall be terminated. After any retiring Agent's resignation
hereunder as Agent, the provisions of this ARTICLE IX and SECTIONS 10.4 and 10.5
shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was Agent under this Agreement. If no successor agent has accepted
appointment as Agent by the date which is 30 days following a retiring Agent's
notice of resignation, the retiring Agent's resignation shall nevertheless
thereupon become effective and the Lenders shall perform all of the duties cf
the Agent hereunder until such time, if any, as the Required Lenders appoint a
successor agent as provided for above.
9.10 WITHHOLDING TAX. (a) If any Lender is a "foreign corporation,
partnership or trust" within the meaning of the Code and such Lender claims
exemption from, or a reduction of, U.S. withholding tax under Section 1441 or
1442 of the Code, such Lender agrees with and in favor of the Agent, to deliver
to the Agent:
(i) if such Lender claims an exemption from, or a reduction of,
withholding tax under a United States tax treaty, properly completed IRS
Forms 1001 and W-8 before the payment of any interest in the first calendar
year and before the payment of any interest in each third succeeding
calendar year during which interest may be paid under this Agreement;
(ii) if such Lender claims that interest paid under this Agreement
is exempt from United States withholding tax because it is effectively
connected with a United States trade or business of such Lender, two
properly completed and
-65-
<PAGE>
executed copies of IRS Form 4224 before the payment of any interest is due
in the first taxable year of such Lender and in each succeeding taxable
year of such Lender during which interest may be paid under this Agreement,
and IRS Form W-9; and
(iii) such other form or forms as may be required under the Code
or other laws of the United States as a condition to exemption from, or
reduction of, United States withholding tax.
Each such Lender agrees to promptly notify the Agent of any change in
circumstances which would modify or render invalid any claimed exemption or
reduction.
(b) If any Lender claims exemption from, or reduction of, withholding
tax under a United States tax treaty by providing IRS Form 1001 and such Lender
sells, assigns, grants a participation in, or otherwise transfers, all or part
of the Obligations owed by the Company to such Lender, such Lender agrees to
notify the Agent of the percentage amount in which it is no longer the
beneficial owner of Obligations owed by the Company to such Lender. To the
extent of such percentage amount, the Agent will treat such Lender's IRS Form
1001 as no longer valid.
(c) If any Lender claiming exemption from United States withholding
tax by filing IRS Form 4224 with the Agent sells, assigns, grants a
participation in, or otherwise transfers, all or part of the Obligations owed by
the Company to such Lender, such Lender agrees to undertake sole responsibility
for complying with the withholding tax requirements imposed by Sections 1441 and
1442 of the Code.
(d) If any Lender is entitled to a reduction in the applicable
withholding tax, the Agent may withhold from any interest payment to such Lender
an amount equivalent to the applicable withholding tax after taking into account
such reduction. If the forms or other documentation required by SUBSECTION (a)
of this Section are not delivered to the Agent, then the Agent may withhold
from any interest payment to such Lender not providing such forms or other
documentation an amount equivalent to the applicable withholding tax without
deduction.
(e) If the IRS or any other Governmental Authority of the United
States or other jurisdiction asserts a claim that the Agent did not properly
withhold tax from amounts paid to or for the account of any Lender (because the
appropriate form was not delivered or was not properly executed, or because such
Lender failed to notify the Agent of a change in circumstances which rendered
the exemption from, or reduction of, withholding tax ineffective, or for any
other reason) such Lender shall indemnify
-66-
<PAGE>
the Agent fully for all amounts paid, directly or indirectly, by the Agent as
tax or otherwise, including penalties and interest, and including any taxes
imposed by any jurisdiction on the amounts payable to the Agent under this
Section, together with all costs and expenses (including Attorney Costs).
The obligation of the Lenders under this subsection shall survive the payment
of all Obligations and the resignation or replacement of the Agent.
9.11 THE CO-MANAGER. The Co-Manager shall have no rights or duties in such
capacity.
ARTICLE X
MISCELLANEOUS
10.1 AMENDMENTS AND WAIVERS. No amendment or waiver of any provision of
this Agreement or any other Loan Document, and no consent with respect to any
departure by the Company or any applicable Subsidiary therefrom, shall be
effective unless the same shall be in writing and signed by the Required Lenders
(or by the Agent at the written request of the Required Lenders) and the Company
and acknowledged by the Agent, and then any such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given; PROVIDED that no such waiver, amendment or consent shall, unless in
writing and signed by all of the Lenders and the Company and acknowledged by the
Agent, do any of the following:
(a) postpone or delay any date fixed by this Agreement or any other
Loan Document for any payment of principal, interest, fees or other amounts
due to the Lenders (or any of them) hereunder or under any other Loan Document;
(b) reduce the principal of, or the rate of interest specified herein
on, any Loan, or reduce any fees (other than fees referred to in SUBSECTION
2.9(a)) or other amounts payable hereunder;
(c) change the percentage of the Commitments or of the aggregate
unpaid principal amount of the Loans which is required for the Lenders or any of
them to take any action hereunder;
(d) release any material Collateral except as otherwise expressly
permitted by the terms of the Loan Documents; or
(e) amend this Section, or SECTION 2.13, or any provision herein
providing for consent or other action by all Lenders;
-67-
<PAGE>
and PROVIDED, FURTHER, that (i) no amendment, waiver or consent shall extend or
increase the Commitment of any Lender, unless in writing and signed by such
Lender, and (ii) no amendment, waiver or consent shall, unless in writing and
signed by the Agent in addition to the Required Lenders or all Lenders, as the
case may be, affect the rights or duties of the Agent under this Agreement or
any other Loan Document.
10.2 NOTICES. (a) All notices, requests and other communications shall
be in writing (including, unless the context expressly otherwise provides, by
facsimile transmission, provided that any matter transmitted by the Company by
facsimile (i) shall be immediately confirmed by a telephone call to the
recipient at the number specified on SCHEDULE 10.2 and (ii) shall be followed
promptly by delivery of a hard copy original thereof) and mailed, faxed or
delivered to the address or facsimile number specified for notices on SCHEDULE
10.2; or, as directed to the Company or the Agent, to such other address as
shall be designated by such party in a written notice to the other parties, and
as directed to any other party, at such other address as shall be designated by
such party in a written notice to the Company and the Agent.
(b) All such notices, requests and communications shall, when
transmitted by overnight delivery, or faxed, be effective when delivered or
transmitted in legible form by facsimile machine, respectively, or if mailed,
upon the third Business Day after the date deposited into the U.S. mail; except
that notices pursuant to ARTICLE II or IX to the Agent shall not be effective
until actually received by the Agent.
(c) Any agreement of the Agent and the Lenders herein to receive
certain notices by telephone or facsimile is solely for the convenience and at
the request of the Company. The Agent and the Lenders shall be entitled to rely
on the authority of any Person purporting to be a Person authorized by the
Company to give such notice and the Agent and the Lenders shall not have any
liability to the Company or any other Person on account of any action taken or
not taken in good faith by the Agent or the Lenders in reliance upon such
telephonic or facsimile notice. The obligation of the Company to repay the
Loans shall not be affected in any way or to any extent by any failure by the
Agent and the Lenders to receive written confirmation of any telephonic or
facsimile notice or the receipt by the Agent and the Lenders of a confirmation
which is at variance with the terms understood by the Agent and the Lenders to
be contained in the telephonic or facsimile notice.
10.3 NO WAIVER; CUMULATIVE REMEDIES. No failure to exercise and no
delay in exercising, on the part of the Agent or any Lender, any right, remedy,
power or privilege hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, remedy, power or privilege hereunder
preclude any other or
-68-
<PAGE>
further exercise thereof or the exercise of any other right, remedy, power or
privilege.
10.4 COSTS AND EXPENSES. The Company shall:
(a) whether or not the transactions contemplated hereby are
consummated, pay or reimburse the Agent and the Arranger within five Business
Days after demand (subject to SUBSECTION 4.1(h)) for all reasonable costs and
expenses incurred by the Agent and the Arranger in connection with the
development, preparation, delivery, administration and execution of, and any
amendment, supplement, waiver or modification to (in each case, whether or not
consummated), this Agreement, any other Loan Document and any other document
prepared in connection herewith or therewith, and the consummation of the
transactions contemplated hereby and thereby, including Attorney Costs incurred
by the Agent and the Arranger with respect thereto (excluding Attorney Costs of
in-house counsel to the Agent and the Arranger incurred prior to the Effective
Date); and
(b) pay or reimburse the Agent, the Arranger and each Lender
within five Business Days after demand for all reasonable costs and expenses
(including Attorney Costs) incurred by them in connection with the enforcement,
attempted enforcement or preservation of any rights or remedies under this
Agreement or any other Loan Document during the existence of an Event of Default
or after acceleration of the Loans (including in connection with any "workout"
or restructuring regarding the Loans and including in any Insolvency Proceeding
or any appellate proceeding).
10.5 COMPANY INDEMNIFICATION. Whether or not the transactions
contemplated hereby are consummated, the Company shall indemnify and hold
harmless the Agent-Related Persons, and each Lender and each of their respective
officers, directors, employees, counsel, agents and attorneys-in-fact (each an
"INDEMNIFIED PERSON"), from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, charges, expenses
and disbursements (including Attorney Costs) of any kind or nature whatsoever
which may at any time (including at any time following repayment of the Loans
and the termination, resignation or replacement of the Agent or replacement of
any Lender) be imposed on, incurred by or asserted against any such Person in
any way relating to or arising out of this Agreement or any document
contemplated by or referred to herein, or the transactions contemplated hereby
or thereby, or any action taken or omitted by any such Person under or in
connection with any of the foregoing, including with respect to any
investigation, litigation or proceeding (including any Insolvency Proceeding or
appellate proceeding) related to or arising out of this Agreement or the Loans
or the use of the proceeds thereof, whether or not any Indemnified Person is a
party thereto (all the foregoing,
-69-
<PAGE>
collectively, the "INDEMNIFIED LIABILITIES"); PROVIDED that (a) the Company
shall have no obligation hereunder to any Indemnified Person with respect to
Indemnified Liabilities to the extent incurred by reason of the gross
negligence or willful misconduct of such Indemnified Person and (b) the
Company shall not be liable to any Indemnified Person for any such loss,
claim, damage, liability or expense to the extent caused by or relating to
any legal proceedings commenced against any Indemnified Person by any
security holder, depositor or creditor of such Indemnified Person or his or
her employer arising out of and based upon rights afforded any such security
holder, depositor or creditor solely in its capacity as such. The agreements
in this Section shall survive payment of all other Obligations.
10.6 PAYMENTS SET ASIDE. To the extent that the Company makes a payment
to the Agent or any Lender, or the Agent or any Lender exercises its right of
set-off, and such payment or the proceeds of such set-off or any part thereof
are subsequently invalidated, declared to be fraudulent or preferential, set
aside or required (including pursuant to any settlement entered into by the
Agent or such Lender in its discretion) to be repaid to a trustee, receiver or
any other party, in connection with any Insolvency Proceeding or otherwise, then
(a) to the extent of such recovery the obligation or part thereof originally
intended to be satisfied shall be revived and continued in full force and effect
as if such payment had not been made or such set-off had not occurred and (b)
each Lender severally agrees to pay to the Agent upon demand its pro rata share
of any amount so recovered from or repaid by the Agent.
10.7 SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns, except that the Company may not assign or transfer any
of its rights or obligations under this Agreement without the prior written
consent of the Agent and each Lender.
10.8 ASSIGNMENTS, PARTICIPATIONS, ETC. (a) Any Lender may, with the
prior written consent of the Agent and the Company (which consents shall not be
unreasonably withheld or delayed), at any time assign and delegate to one or
more Eligible Assignees (PROVIDED that no written consent of the Agent shall be
required in connection with any assignment and delegation by a Lender to an
Eligible Assignee that is an Affiliate of such Lender) (each an "ASSIGNEE") all,
or any ratable part of all, of the Loans, the Commitment and the other rights
and obligations of such Lender hereunder, in a minimum amount equal to the
lesser of (x) $10,000,000 and (y) all of such Lender's remaining rights and
obligations hereunder (or, if assigning to another Lender or an Affiliate of any
Lender, without regard to any minimum amount); PROVIDED, that the Company and
the Agent may continue to deal
-70-
<PAGE>
solely and directly with such Lender in connection with the interest so
assigned to an Assignee until (i) written notice of such assignment, together
with payment instructions, addresses and related information with respect to
the Assignee, shall have been given to the Company and the Agent by such
Lender and the Assignee; (ii) such Lender and its Assignee shall have
delivered to the Company and the Agent an Assignment and Acceptance in the
form of EXHIBIT H ("ASSIGNMENT AND ACCEPTANCE") together with any Note or
Notes subject to such assignment and (iii) the assignor Lender or Assignee
has paid to the Agent a processing fee in the amount of $3,500.
(b) From and after the date that the Agent notifies the assignor
Lender that it has received and provided its consent (and received, if
applicable, the consent of the Company) with respect to an executed Assignment
and Acceptance and payment of the above-referenced processing fee, (i) the
Assignee thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such Assignment and
Acceptance, shall have the rights and obligations of a Lender under the Loan
Documents and (ii) the assignor Lender shall, to the extent that rights and
obligations under the Loan Documents have been assigned by it pursuant to such
Assignment and Acceptance, relinquish its rights and be released from its
obligations under the Loan Documents.
(c) Any Lender may at any time sell to one or more Eligible
Assignees that are commercial banks and not Affiliates of the Company (a
"PARTICIPANT") participating interests in any Loans, the Commitment of such
Lender and the other interests of such Lender (the "originating Lender")
hereunder and under the other Loan Documents; PROVIDED, HOWEVER, that (i) the
originating Lender's obligations under this Agreement and the other Loan
Documents shall remain unchanged, (ii) the originating Lender shall remain
solely responsible for the performance of such obligations, (iii) the Company
and the Agent shall continue to deal solely and directly with the originating
Lender in connection with the originating Lender's rights and obligations under
this Agreement and the other Loan Documents and (iv) no Lender shall transfer or
grant any participating interest under which the Participant has rights to
approve any amendment to, or any consent or waiver with respect to, this
Agreement or any other Loan Document, except to the extent such amendment,
consent or waiver would require unanimous consent of the Lenders as described in
CLAUSES (a) or (b) of the FIRST PROVISO to SECTION 10.1 or CLAUSE (i) of the
SECOND PROVISO to SECTION 10.1 (if an increase in the originating Lender's
Commitment would cause an increase in the Participant's commitment with respect
to its participating interest). In the case of any such participation, the
Participant shall be entitled to the benefit of SECTIONS 3.1, 3.3, 3.4, 10.4
and 10.5 as though it were also a Lender hereunder (PROVIDED that no Participant
shall be
-71-
<PAGE>
entitled to receive any greater amount pursuant to such Sections than the
originating Lender would have been entitled to receive if no such participation
had been sold), and if amounts outstanding under this Agreement are due and
unpaid, or shall have been declared or shall have become due and payable upon
the occurrence of an Event of Default, each Participant shall be deemed to have
the right of set-off in respect of its participating interest in amounts owing
under this Agreement to the same extent as if the amount of its participating
interest were owing directly to it as a Lender under this Agreement. Each
Lender may furnish any information concerning the Company and its Subsidiaries
in the possession of such Lender from time to time to participants and
prospective participants and may furnish information in response to credit
inquiries consistent with general banking practice.
(d) Notwithstanding any other provision in this Agreement,
any Lender may at any time create a security interest in, or pledge,all or any
portion of its rights under and interest in this Agreement and any Note held by
it in favor of any Federal Reserve Bank in accordance with Regulation A of the
FRB or U.S. Treasury Regulation 31 CFR Section 203.14, and such Federal Reserve
Bank may enforce such pledge or security interest in any manner permitted under
applicable law.
10.9 CONFIDENTIALITY. Each Lender agrees that all information
concerning the Company or its Subsidiaries that is furnished or has previously
been furnished to such Lender by or on behalf of the Company or any Subsidiary,
or by the Agent or the Arranger on the Company's or such Subsidiary's behalf, in
connection with this Agreement will be held in confidence and treated as
confidential by such Lender and its Affiliates and will not, except as
hereinafter provided, without the prior written consent of the Company, be
disclosed by such Lender or its Affiliates in any manner whatsoever, in whole or
in part, or be used by such Lender or its Affiliates other than in connection
with or in enforcement of this Agreement and the other Loan Documents or in
connection with other business now or hereafter existing or contemplated by such
Lender or any of its Affiliates with the Company or any Subsidiary; except to
the extent such information (i) was or becomes generally available to the public
other than as a result of disclosure by such Lender or any of its Affiliates, or
(ii) was or becomes available on a non-confidential basis from a source other
than the Company, provided that, insofar as known to such Lender, such source is
not prohibited from providing such information by any contractual, legal or
fiduciary obligation to the Company; PROVIDED, HOWEVER, that any Lender may
disclose such information (A) at the request or pursuant to any requirement of
any Governmental Authority to which such Lender is subject or in connection with
an examination of such Lender by any such authority; (B) pursuant to subpoena or
other court process; (C) when required to do so in accordance with the
provisions of any
-72-
<PAGE>
applicable Requirement of Law; (D) to the extent reasonably required in
connection with any litigation or proceeding relating to this Agreement to which
the Agent or any Lender or any of their respective Affiliates may be party; (E)
to the extent reasonably required in connection with the exercise of any remedy
hereunder or under any other Loan Document; (F) to such Lender's independent
auditors and other professional advisors (each of which shall be required to
keep such information confidential to the extent provided in this SECTION 10.9);
(G) to any Participant or Assignee, actual or prospective provided that such
Person agrees in writing to keep such information confidential to the same
extent required of the Lenders hereunder and (in the case of a prospective
Participant or Assignee) agrees to return such information if such Person does
not become a Participant or Assignee; (H) as to any Lender or its Affiliate, as
expressly permitted under the terms of any other document or agreement regarding
confidentiality to which the Company or any Subsidiary is party with such Lender
or such Affiliate; and (I) to its Affiliates (each of which shall be required to
keep such information confidential to the extent provided in this SECTION 10.9).
10.10 SET-OFF. In addition to any rights and remedies of the Lenders
provided by law, if an Event of Default exists, or the Loans have been
accelerated, each Lender is authorized at any time and from time to time,
without prior notice to the Company, any such notice being waived by the Company
to the fullest extent permitted by law, to set off and apply any and all
deposits (general or special, time or demand, provisional or final) at any time
held by, and other indebtedness at any time owing by, such Lender to or for the
credit or the account of the Company against any and all Obligations owing to
such Lender, now or hereafter existing, irrespective of whether or not the Agent
or such Lender shall have made demand under this Agreement or any other Loan
Document and although such Obligations may be contingent or unmatured. Each
Lender agrees promptly to notify the Company and the Agent after any such
set-off and application made by such Lender; PROVIDED that the failure to give
such notice shall not affect the validity of such set-off and application.
10.11 AUTOMATIC DEBITS OF FEES. With respect to any commitment fee,
arrangement fee or other fee, or any other cost or expense (including Attorney
Costs) due and payable to the Agent or BAI under the Loan Documents, the Company
hereby irrevocably authorizes BofA (and, if requested by BofA, BAI) to debit any
deposit account of the Company with BofA or BAI in an amount such that the
aggregate amount debited from all such deposit accounts does not exceed such fee
or other cost or expense; PROVIDED that BofA or BAI shall notify the Company one
Business Day prior to any such debit. If there are insufficient funds in such
deposit accounts to cover the amount of the fee or other cost or expense then
due, such debits will be reversed (in whole or in part, in
-73-
<PAGE>
BofA's sole discretion) and such amount not debited shall be deemed to be
unpaid. No such debit under this Section shall be deemed a set-off.
10.12 NOTIFICATION OF ADDRESSES, LENDING OFFICES, ETC. Each Lender shall
notify the Agent in writing of any change in the address to which notices to
such Lender should be directed, of addresses of any Lending Office, of payment
instructions in respect of all payments to be made to it hereunder and of such
other administrative information as the Agent shall reasonably request.
10.13 COUNTERPARTS. This Agreement may be executed in any number of
separate counterparts, each of which, when so executed, shall be deemed an
original, and all of which taken together shall be deemed to constitute but one
and the same instrument.
10.14 SEVERABILITY. The illegality or unenforceability of any provision
of this Agreement or any instrument or agreement required hereunder shall not in
any way affect or impair the legality or enforceability of the remaining
provisions of this Agreement or such instrument or agreement.
10.15 NO THIRD PARTIES BENEFITED. This Agreement is made and entered
into for the sole protection and legal benefit of the Company, the Lenders, the
Agent and the Agent-Related Persons, and their permitted successors and assigns,
and no other Person shall be a direct or indirect legal beneficiary of, or have
any direct or indirect cause of action or claim in connection with, this
Agreement or any other Loan Document.
10.16 GOVERNING LAW AND JURISDICTION. (a) THIS AGREEMENT AND EACH OTHER
LOAN DOCUMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW
OF THE STATE OF NEW YORK; PROVIDED THAT THE AGENT AND THE LENDERS SHALL
RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE
STATE OF NEW YORK OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW
YORK, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE COMPANY,
THE AGENT AND THE LENDERS CONSENTS, FOR ITSELF AND IN RESPECT OF ITS
PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF SUCH COURTS. EACH OF THE
COMPANY, THE AGENT AND THE LENDERS IRREVOCABLY WAIVES ANY OBJECTION,
INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF
FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF
ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS AGREEMENT OR
ANY DOCUMENT RELATED HERETO. THE COMPANY, THE AGENT AND THE LENDERS EACH
WAIVE PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY
BE MADE BY ANY OTHER MEANS PERMITTED BY NEW YORK LAW.
-74-
<PAGE>
10.17 WAIVER OF JURY TRIAL. THE COMPANY, THE LENDERS AND THE AGENT EACH
WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER
LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY
ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE
PARTIES AGAINST ANY OTHER PARTY OR ANY AGENT-RELATED PERSON, PARTICIPANT OR
ASSIGNEE, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS OR OTHERWISE.
THE COMPANY, THE LENDERS AND THE AGENT EACH AGREE THAT ANY SUCH CLAIM OR
CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT
LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT
TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION,
COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO
CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT OR ANY PROVISION HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENT, RENEWAL, SUPPLEMENT OR MODIFICATION TO THIS AGREEMENT
AND ANY OTHER LOAN DOCUMENT.
10.18 ENTIRE AGREEMENT. This Agreement, together with the other Loan
Documents, embodies the entire agreement and understanding among the Company,
the Lenders and the Agent, and supersedes all prior or contemporaneous
agreements and understandings of such Persons, verbal or written, relating to
the subject matter hereof and thereof.
10.19 USE OF NAME. The parties hereto agree that, so long as the
Company is not enjoined, restrained or in any way prevented from conducting
all or any material part of its business affairs, the use of the name
"Olympic" by the Company, notwithstanding the provisions of 36 U.S.C. Section
380 or any similar or related provision of any federal, state or local law,
shall not be deemed to constitute an Unmatured Event of Default or an Event
of Default; PROVIDED, HOWEVER, that nothing contained in this Section shall
be deemed to waive any Event of Default which arises after the date of this
Agreement which would constitute a violation of SECTION 8.1(g) of this
Agreement.
-75-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as
of the day and year first above written.
OLYMPIC FINANCIAL LTD.
By: /s/ John A. Witham
-------------------------------
Title: Executive Vice President
----------------------------
and Chief Financial Officer
----------------------------
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Agent
By: /s/ Mark N. Hurley
-------------------------------
Title: Managing Director
----------------------------
BANK OF AMERICA ILLINOIS, as a
Lender
BY: /s/ Mark N. Hurley
-------------------------------
Title: Managing Director
----------------------------
FIRST BANK NATIONAL ASSOCIATION, as
Co-Manager and as a Lender
By: /s/ Carol M. Preisinger
-------------------------------
Title: Senior Vice President
----------------------------
COMERICA BANK
By: /s/ David L. Morrison
-------------------------------
Title: Assistant Vice President
----------------------------
-76-
<PAGE>
DG BANK DEUTSCHE
GENOSSENSCHAFTSBANK, CAYMAN ISLAND
BRANCH
By: /s/ Mark Connelly
-------------------------------
Title: Vice President
----------------------------
By: /s/ Karen A. Brinkman
-------------------------------
Title: Vice President
----------------------------
DRESDNER BANK AG, NEW YORK AND
GRAND CAYMAN BRANCHES
By: /s/
-------------------------------
Title: Vice President
----------------------------
By: /s/
-------------------------------
Title: Associate Vice President
----------------------------
FIRST BANK NATIONAL ASSOCIATION
By: /s/ Carol M. Preisinger
-------------------------------
Title: Senior Vice President
----------------------------
THE SUMITOMO BANK, LIMITED
By: /s/ Michael J. Philippe
-------------------------------
Title: Vice President & Manager
----------------------------
By: /s/ Doug Pudvah
-------------------------------
Title: Vice President
----------------------------
-77-
<PAGE>
FIRST AMENDMENT
AND WAIVER
TO
CREDIT AGREEMENT
THIS FIRST AMENDMENT AND WAIVER TO CREDIT AGREEMENT (this "AMENDMENT") is
entered into as of September 18, 1996 among OLYMPIC FINANCIAL LTD., a Minnesota
corporation (the "COMPANY"), the financial institutions signatory hereto
(collectively, the "LENDERS"), and BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, as agent for the Lenders (the "AGENT").
W I T N E S S E T H:
WHEREAS, the Company, the Agent and the Lenders are parties to a Credit
Agreement dated as of July 11, 1996 (the "CREDIT AGREEMENT"); and
WHEREAS, the Company has requested that the Credit Agreement be amended in
certain respects and has also requested the waiver of certain provisions of the
Credit Agreement.
NOW, THEREFORE, in consideration of the premises and mutual agreements
herein contained, the parties hereto agree as follows:
SECTION 1. DEFINED TERMS.
Terms defined in the Credit Agreement and not otherwise defined herein are
used herein as therein defined.
SECTION 2. AMENDMENTS AND WAIVER TO CREDIT AGREEMENT. On the Effective
Date (defined below):
2.1 AMENDMENTS TO CREDIT AGREEMENT. (i) Section 2.3(a)(A) of the Credit
Agreement shall be amended to read in its entirety as follows:
(A) the amount of the Borrowing, which shall be in an
aggregate amount of $1,000,000 or a higher amount;
(ii) Section 2.4(a)(i) of the Credit Agreement shall be amended to read in
its entirety as follows:
(i) elect, as of any Business Day, in the case of Base Rate
Loans or Resetting Rate Loans, or as of the last
<PAGE>
day of the applicable Interest Period, in the case of Offshore Rate Loans,
to convert any such Loans (or any part thereof in an aggregate amount of
$1,000,000 or a higher amount) into Loans of another Type;
2.2 WAIVER TO CREDIT AGREEMENT. Effective the Effective Date, the
Required Lenders waive compliance with the requirements of Section 7.8 of the
Credit Agreement to the extent necessary to permit the Company to redeem for
cash any or all of 701,353 shares of Preferred Stock for a redemption price not
to exceed $26.875 per share, so long as (i) such redemption occurs on or prior
to January 31, 1997 and (ii) the total amount of cash paid by the Company in
such redemption does not exceed $18,848,861.88.
SECTION 3. CONDITIONS PRECEDENT.
The amendments and waiver to the Credit Agreement set forth in SECTION 2 of
this Amendment shall become effective on such date (the "EFFECTIVE DATE") when
the Agent shall have received all of the following, each duly executed and dated
the date hereof, and each in a sufficient number of signed counterparts to
provide one to each Lender:
(a) AMENDMENT. An original of this Amendment, duly executed by
the Company and the Required Lenders.
(b) OTHER. Such other documents as the Agent or any Lender may
reasonably request.
SECTION 4. MISCELLANEOUS.
4.1 WARRANTIES TRUE AND ABSENCE OF DEFAULTS. In order to induce the Agent
and the Lenders to enter into this Amendment, the Company hereby warrants to the
Agent and the Lenders that, as of the date hereof and the Effective Date:
(a) The representations and warranties set forth in Article V of
the Credit Agreement (other than as set forth in the last sentence of
Section 5.5 of the Credit Agreement) and in the Pledge and Security
Agreement are true and correct (except to the extent such
representations and warranties expressly refer to an earlier date, in
which case they shall be true and correct as of such earlier date).
(b) No Event of Default or Unmatured Event of Default exists.
4.2 GOVERNING LAW. This Amendment shall be a contract made under and
governed by the law of the State of New York.
-2-
<PAGE>
4.3 COUNTERPARTS. This Amendment may be executed in any number of
counterparts, and by the parties hereto on the same or separate counterparts,
and each such counterpart, when so executed and delivered, shall be deemed to be
an original, but all such counterparts shall together constitute but one and the
same instrument.
4.4 REFERENCES TO DOCUMENTS. Except as amended hereby, the Credit
Agreement shall remain in full force and effect and is hereby ratified and
confirmed in all respects. On and after the effectiveness hereof, each reference
in the Credit Agreement to "this Agreement," "hereunder," "hereof," "herein" or
words of like import, and each reference to the Credit Agreement in any Note or
in any other Loan Document, shall be deemed a reference to the Credit Agreement,
as amended hereby.
-3-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized as of the date
and year first above written.
OLYMPIC FINANCIAL LTD.
By: /s/ [Illegible]
------------------------------------
Title: Executive Vice President/CFO
---------------------------------
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Agent
By: /s/ [Illegible]
------------------------------------
Title: Managing Director
---------------------------------
BANK OF AMERICA ILLINOIS, as a
Lender
By: /s/ [Illegible]
------------------------------------
Title: Managing Director
---------------------------------
FIRST BANK NATIONAL ASSOCIATION, as
Co-Manager and as a Lender
By: /s/ Carol M. [Illegible]
------------------------------------
Title: Senior Vice President
---------------------------------
COMERICA BANK
By: /s/ David L. [Illegible]
------------------------------------
Title: Assistant Vice President
---------------------------------
-4-
<PAGE>
DG BANK DEUTSCHE
GENOSSENSCHAFTSBANK, CAYMAN ISLAND
BRANCH
By: /s/ [Illegible]
---------------------------------
Title: Vice President
------------------------------
By: /s/ [Illegible]
---------------------------------
Title: VP.
------------------------------
DRESDNER BANK AG, NEW YORK AND
GRAND CAYMAN BRANCHES
By: /s/ [Illegible]
---------------------------------
Title: Vice President
------------------------------
By: /s/ John W. Sweeney
---------------------------------
Title: A.V.P.
------------------------------
THE SUMITOMO BANK, LIMITED
By: /s/ Michael J. Philippe
---------------------------------
Title: Vice President & Manager
------------------------------
By: /s/ John W. Howard, Jr.
---------------------------------
Title: Vice President
------------------------------
-5-
<PAGE>
EXECUTION COPY
TRUST AGREEMENT
Dated as of December 28, 1995
between
OLYMPIC RECEIVABLES FINANCE CORP. II
and
WILMINGTON TRUST COMPANY
Owner Trustee
OLYMPIC AUTOMOBILE RECEIVABLES WAREHOUSE TRUST
<PAGE>
TABLE OF CONTENTS
SECTION PAGE
- ------- ----
ARTICLE I
DEFINITIONS
Section 1.1. Definitions. . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.2. Usage of Terms . . . . . . . . . . . . . . . . . . . . . 4
Section 1.3. Section References . . . . . . . . . . . . . . . . . . . 4
Section 1.4. Action by or Consent of Certificateholders . . . . . . . 5
ARTICLE II
CREATION OF TRUST
Section 2.1. Creation of Trust. . . . . . . . . . . . . . . . . . . . 5
Section 2.2. Office . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 2.3. Purposes and Powers. . . . . . . . . . . . . . . . . . . 5
Section 2.4. Appointment of Owner Trustee . . . . . . . . . . . . . . 6
Section 2.5. Initial Capital Contribution of Trust Estate . . . . . . 6
Section 2.6. Declaration of Trust . . . . . . . . . . . . . . . . . . 7
Section 2.7. Liability of the Certificateholders. . . . . . . . . . . 7
Section 2.8. Title to Trust Property. . . . . . . . . . . . . . . . . 8
Section 2.9. Situs of Trust . . . . . . . . . . . . . . . . . . . . . 8
Section 2.10. Representations and Warranties of the Depositor and the
General Partner. . . . . . . . . . . . . . . . . . . . . 8
Section 2.11. Federal Income Tax Treatment . . . . . . . . . . . . . . 9
Section 2.12. Covenants of the General Partner . . . . . . . . . . . . 11
Section 2.13. Covenants of the Holders . . . . . . . . . . . . . . . . 12
ARTICLE III
THE CERTIFICATES
Section 3.1. Initial Ownership. . . . . . . . . . . . . . . . . . . . 13
Section 3.2. The Certificates . . . . . . . . . . . . . . . . . . . . 13
Section 3.3. Authentication of Certificates . . . . . . . . . . . . . 14
Section 3.4. Registration of Transfer and Exchange of Certificates. . 14
Section 3.5. Mutilated, Destroyed, Lost or Stolen Certificates. . . . 15
Section 3.6. Persons Deemed Owners. . . . . . . . . . . . . . . . . . 15
Section 3.7. Maintenance of Office or Agency. . . . . . . . . . . . . 16
Section 3.8. Appointment of Paying Agent. . . . . . . . . . . . . . . 16
-i-
<PAGE>
ARTICLE IV
ACTIONS BY OWNER TRUSTEE
Section 4.1. Restriction on Power of Certificateholder. . . . . . . . 17
Section 4.2. Prior Notice to Certificateholders with Respect to
Certain Matters. . . . . . . . . . . . . . . . . . . . . 17
Section 4.3. Action by Certificateholders with Respect to
Bankruptcy . . . . . . . . . . . . . . . . . . . . . . . 17
Section 4.4. Restrictions on Certificateholders' Power. . . . . . . . 17
ARTICLE V
APPLICATION OF TRUST FUNDS; CERTAIN DUTIES
Section 5.1. Trust Accounts . . . . . . . . . . . . . . . . . . . . . 18
Section 5.2. Application of Funds in Certificate Distribution
Account. . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 5.3. Method of Payment. . . . . . . . . . . . . . . . . . . . 22
Section 5.4. No Segregation of Monies; No Interest. . . . . . . . . . 22
Section 5.5. Accounting; Reports; Tax Returns . . . . . . . . . . . . 22
ARTICLE VI
AUTHORITY AND DUTIES OF OWNER TRUSTEE
Section 6.1. General Authority. . . . . . . . . . . . . . . . . . . . 23
Section 6.2. General Duties . . . . . . . . . . . . . . . . . . . . . 23
Section 6.3. Action upon Instruction. . . . . . . . . . . . . . . . . 24
Section 6.4. No Duties Except as Specified in this Agreement or in
Instructions . . . . . . . . . . . . . . . . . . . . . . 25
Section 6.5. No Action Except under Specified Documents or
Instructions . . . . . . . . . . . . . . . . . . . . . . 25
Section 6.6. Restrictions . . . . . . . . . . . . . . . . . . . . . . 25
Section 6.7. Administration Agreement . . . . . . . . . . . . . . . . 26
ARTICLE VII
CONCERNING THE OWNER TRUSTEE
Section 7.1. Acceptance of Trustee and Duties . . . . . . . . . . . . 26
Section 7.2. Furnishing of Documents. . . . . . . . . . . . . . . . . 28
Section 7.3. Representations and Warranties . . . . . . . . . . . . . 28
Section 7.4. Reliance; Advice of Counsel. . . . . . . . . . . . . . . 29
Section 7.5. Not Acting in Individual Capacity. . . . . . . . . . . . 29
Section 7.6. Owner Trustee Not Liable for Certificates, Notes or
Receivables. . . . . . . . . . . . . . . . . . . . . . . 29
Section 7.7. Owner Trustee May Own Certificates and Notes . . . . . . 30
-ii-
<PAGE>
ARTICLE VIII
COMPENSATION OF OWNER TRUSTEE
Section 8.1. Owner Trustee's Fees and Expenses. . . . . . . . . . . . 30
Section 8.2. Indemnification. . . . . . . . . . . . . . . . . . . . . 30
Section 8.3. Non-recourse Obligations . . . . . . . . . . . . . . . . 31
ARTICLE IX
TERMINATION; RECAPITALIZATION
Section 9.1. Termination of the Trust . . . . . . . . . . . . . . . . 31
Section 9.2. Dissolution Events with respect to the General Partner . 33
Section 9.3. Securitized Offering . . . . . . . . . . . . . . . . . . 33
ARTICLE X
SUCCESSOR OWNER TRUSTEES AND ADDITIONAL OWNER TRUSTEES
Section 10.1. Eligibility Requirements for Owner Trustee . . . . . . . 34
Section 10.2. Resignation or Removal of Owner Trustee. . . . . . . . . 34
Section 10.3. Successor Owner Trustee. . . . . . . . . . . . . . . . . 35
Section 10.4. Merger or Consolidation of Owner Trustee . . . . . . . . 36
Section 10.5. Appointment of Co-Trustee or Separate Trustee. . . . . . 36
ARTICLE XI
MISCELLANEOUS PROVISIONS
Section 11.1. Amendment. . . . . . . . . . . . . . . . . . . . . . . . 37
Section 11.2. No Recourse. . . . . . . . . . . . . . . . . . . . . . . 39
Section 11.3. Governing Law. . . . . . . . . . . . . . . . . . . . . . 39
Section 11.4. Severability of Provisions . . . . . . . . . . . . . . . 39
Section 11.5. Certificates Nonassessable and Fully Paid. . . . . . . . 39
Section 11.6. Third-Party Beneficiaries. . . . . . . . . . . . . . . . 40
Section 11.7. Counterparts . . . . . . . . . . . . . . . . . . . . . . 40
Section 11.8. Notices. . . . . . . . . . . . . . . . . . . . . . . . . 40
-iii-
<PAGE>
EXHIBITS
Exhibit A -- Form of Certificate of Trust
Exhibit B -- Form of Certificate
-iv-
<PAGE>
THIS TRUST AGREEMENT, dated as of December 28, 1995, is made between
Olympic Receivables Finance Corp. II, a Delaware corporation (the "Seller") and
Wilmington Trust Company, a Delaware corporation, as Owner Trustee (in such
capacity, the "Owner Trustee").
In consideration of the mutual agreements herein contained, and of
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1. DEFINITIONS. All terms defined in the Sale and
Servicing Agreement (as defined below) shall have the same meaning in this
Agreement. Whenever capitalized and used in this Agreement, the following
words and phrases, unless otherwise specified, shall have the following
meanings:
ADMINISTRATION AGREEMENT: The Administration Agreement, dated as
of December 28, 1995, between the Administrator and the Trust, as the same
may be amended and supplemented from time to time.
ADMINISTRATOR: Wilmington Trust Company, a Delaware corporation,
or any successor Administrator under the Administration Agreement.
AGREEMENT OR "THIS AGREEMENT": This Trust Agreement, all
amendments and supplements thereto and all exhibits and schedules to any of
the foregoing.
AUTHENTICATION AGENT: Wilmington Trust Company, or its successor
in interest, and any successor authentication agent appointed as provided in
this Agreement.
BENEFIT PLAN: The meaning assigned in Section 3.4(e).
BUSINESS TRUST STATUTE: Chapter 38 of Title 12 of the Delaware
Code, 12 Del. Code Section 3801 et seq., as the same may be amended from time
to time.
CERTIFICATE: A certificate executed by the Owner Trustee
evidencing a fractional undivided interest in the Trust, substantially in the
form of Exhibit B.
CERTIFICATE BALANCE: At any time, as to any Certificate, the
outstanding principal amount of that Certificate; as set forth in the records
maintained by the Trustee; and as to the Certificates as a whole, the sum of
the Certificate Balances for each outstanding Certificate.
<PAGE>
CERTIFICATE DISTRIBUTION ACCOUNT: The account designated as the
Certificate Distribution Account in, and which is established and maintained
pursuant to, Section 5.1.
CERTIFICATE MAJORITY: The meaning assigned in Section 1.4(a); see
also Section 1.4(b).
CERTIFICATE OF TRUST: The Certificate of Trust in the form of
Exhibit A hereto filed for the Trust pursuant to Section 3810(a) of the
Business Trust Statute.
CERTIFICATE PURCHASE AGREEMENT: The Certificate Purchase
Agreement, if any, among the Trust, OFL, the investors who execute the
signature pages thereto and J.P. Morgan Delaware, as agent for such
investors, evidencing the commitment of the Investors to purchase
Certificates,as the same may be amended and supplemented from time to time.
CERTIFICATE REGISTER AND CERTIFICATE REGISTRAR: The register
maintained and the registrar appointed pursuant to Section 3.4.
CERTIFICATEHOLDER OR HOLDER: A Person in whose name a Certificate
is registered in the Certificate Register.
CODE: The Internal Revenue Code of 1986, as amended.
CORPORATE TRUST OFFICE: The principal office of the Owner Trustee
at which at any particular time its corporate trust business shall be
administered, which office at the Closing Date is located at Rodney Square
North, 1100 North Market Street, Wilmington, Delaware 19890-0001, Attention:
Corporate Trust Administration; the telecopy number for the Corporate Trust
Office on the date of the execution of this Agreement is (302) 651-8882.
DEMAND NOTE: The Demand Note, dated December 28, 1995, issued by
OFL to the General Partner.
DEPOSITOR: The Seller in its capacity as depositor hereunder.
DISSOLUTION EVENT: With respect to the General Partner, means the
withdrawal or expulsion of such Person as General Partner of the Trust or the
termination or dissolution of such Person, or the occurrence of an Insolvency
Event with respect to such Person.
EXPENSES: The meaning assigned to such term in Section 8.2.
GENERAL PARTNER: Initially, the Seller, or any subsequent Holder of a
General Partner Certificate.
-2-
<PAGE>
GENERAL PARTNER CERTIFICATES: The meaning assigned to such term in
Section 3.2(a).
INDEMNIFIED PARTIES: The meaning assigned to such term in Section
8.2.
INVESTOR CERTIFICATE: Each Certificate (excluding the General
Partner Certificates).
INVESTOR CERTIFICATEHOLDER: Each Certificateholder (excluding the
General Partner as Holder of the General Partner Certificates).
MAXIMUM CERTIFICATE BALANCE: $19,800,000.00.
MINIMUM NET WORTH: At any time of determination, and with respect
to the General Partner, net worth equal to the sum of 7.7% of the Maximum
Certificate Balance. For the purpose of the determination of Minimum Net
Worth: (i) the Demand Note issued to the General Partner shall be valued at
par, (ii) assets subject to a lien shall be valued at zero, (iii)
Certificates or any other interests in any entity taxable as a partnership
for federal income tax purposes shall be valued at zero, (iv) investments
shall be valued at their respective purchase prices plus accrued interest and
(v) demand notes of OFL issued as contributions to the General Partner in
connection with its status as a general partner of any other partnership
formed pursuant to trust agreements substantially similar to this Agreement
shall be valued at an amount equal to the excess, if any, of (a) the
aggregate current amount of all such demand notes over (b) 7.7% of the
aggregate Certificate Balance (as such term is defined in the related trust
agreement) of all certificates issued by such partnerships, as of such date
of determination.
NOTE OWNER: The meaning assigned to such term in the Indenture.
OFL: Olympic Financial Ltd., a Minnesota corporation, and its
successors in interest.
OWNER TRUSTEE: Wilmington Trust Company, or its successor in
interest, acting not individually but solely as trustee, and any successor
trustee appointed as provided in this Agreement.
PAYING AGENT: Any paying agent or co-paying agent appointed
pursuant to Section 3.8, which initially shall be Wilmington Trust Company.
RECORD DATE: With respect to any Distribution Date, the close of
business on the last Business Day immediately preceding such Distribution
Date.
-3-
<PAGE>
RELATED DOCUMENTS: The Sale and Servicing Agreement, the
Indenture, the Certificates, the Notes, the Purchase Agreement, each Transfer
Agreement, each Assignment Agreement, the Custodian Agreement, the
Administration Agreement, the Certificate Purchase Agreement and the Note
Purchase Agreement. The Related Documents executed by any party are referred
to herein as "such party's Related Documents," "its Related Documents" or by
a similar expression.
SALE AND SERVICING AGREEMENT: The Sale and Servicing Agreement,
dated as of December 28, 1995 among the Trust, the Seller, OFL, in its
individual capacity and as Servicer, and Norwest Bank Minnesota, National
Association, as Backup Servicer, as the same may be amended and supplemented
from time to time.
SECRETARY OF STATE: The Secretary of State of the State of
Delaware.
SELLER: Olympic Receivables Finance Corp. II, a Delaware
corporation, or its successor in interest.
TRUST: The trust created by this Agreement, the estate of which
consists of the Trust Property.
TRUST PROPERTY: The property and proceeds of every description
conveyed pursuant to Section 2.5 hereof and Section 2.1 of the Sale and
Servicing Agreement, together with the Trust Accounts (including all Eligible
Investments therein and all proceeds therefrom).
Section 1.2. USAGE OF TERMS. With respect to all terms used in
this Agreement, the singular includes the plural and the plural the singular;
words importing any gender include the other genders; references to "writing"
include printing, typing, lithography, and other means of reproducing words
in a visible form; references to agreements and other contractual instruments
include all subsequent amendments thereto or changes therein entered into in
accordance with their respective terms and not prohibited by this Agreement;
references to Persons include their permitted successors and assigns; and the
terms "include" or "including" mean "include without limitation" or
"including without limitation." To the extent that definitions are contained
in this Agreement, or in any such certificate or other document, such
definitions shall control.
Section 1.3. SECTION REFERENCES. All references to Articles,
Sections, paragraphs, subsections, exhibits and schedules shall be to such
portions of this Agreement unless otherwise specified.
-4-
<PAGE>
Section 1.4. ACTION BY OR CONSENT OF CERTIFICATEHOLDERS.
(a) Except as expressly provided herein (i) any action that may be
taken by the Certificateholders under this Agreement may be taken by
Certificateholders holding Certificates that evidence a majority of the
Certificate Balance (a "Certificate Majority"), and (ii) any written notice
or consent of the Certificateholders delivered pursuant to this Agreement
shall be effective for such class if signed by Holders of Certificates
evidencing not less than a majority of the Certificate Balance.
(b) Whenever any provision of this Agreement refers to action to be
taken, or consented to, by Certificateholders, such provision shall be
deemed to refer to Certificateholders of record as of the Record Date
immediately preceding the date on which such action is to be taken, or
consent given, by Certificateholders. Solely for the purposes of any
action to be taken, or consented to, by the Certificateholders (including
for purposes of determining whether a Certificate Majority has approved any
action), any Certificate registered in the name of the General Partner, OFL
or any Affiliate thereof shall be deemed not to be outstanding, and the
Certificate Balance represented thereby shall not be taken into account in
determining whether the requisite percentage of the Certificate Balance
necessary to effect any such action or consent has been obtained; PROVIDED,
HOWEVER, that until any Investor Certificates are issued in accordance with
the terms of this Agreement, all references herein or in any Related
Document to a "Certificate Majority" shall mean the holders of the General
Partner Certificates, PROVIDED, FURTHER, that, solely for the purpose of
determining whether the Owner Trustee is entitled to rely upon any such
action or consent, only Certificates which the Owner Trustee knows to be so
owned shall be so disregarded.
ARTICLE II
CREATION OF TRUST
Section 2.1. CREATION OF TRUST. There is hereby formed a trust to
be known as "Olympic Automobile Receivables Warehouse Trust," in which name
the Trust may conduct business, make and execute contracts and other
instruments and sue and be sued.
Section 2.2. OFFICE. The office of the Trust shall be in care of
the Owner Trustee at the Corporate Trust Office or at such other address in
Delaware as the Owner Trustee may designate by written notice to the
Certificateholders and the Depositor.
Section 2.3. PURPOSES AND POWERS. The purpose of the Trust is,
and the Trust shall have the power and authority, to engage in the following
activities:
-5-
<PAGE>
(i) to issue the Notes pursuant to the Indenture and the Certificates
pursuant to this Agreement and to sell the Notes and the Certificates; to
redeem Notes and Certificates in accordance with the terms and conditions
set forth herein and in the Indenture;
(ii) with the proceeds of the sale of the Notes and the Certificates,
to pay the organizational, start-up and transactional expenses of the Trust
and to pay the balance to the Seller from time to time pursuant to the Sale
and Servicing Agreement;
(iii) to assign, grant, transfer, pledge, mortgage and convey the
Trust Property to the Indenture Trustee pursuant to the Indenture for the
benefit of the Noteholders and to hold, manage and distribute to the
Certificateholders pursuant to the terms of the Sale and Servicing
Agreement any portion of the Trust Property released from the Lien of, and
remitted to the Trust pursuant to, the Indenture; and, in connection with a
purchase of the Trust Property, to assign, grant, transfer, pledge,
mortgage and convey the Trust Property to such purchaser or purchasers and
upon receipt of proceeds from such sale release the Lien of the Indenture;
(iv) to enter into and perform its obligations under the Related
Documents to which it is to be a party;
(v) to engage in those activities, including entering into
agreements, that are necessary, suitable or convenient to accomplish the
foregoing or are incidental thereto or connected therewith; and
(vi) subject to compliance with the Related Documents, to engage in
such other activities as may be required in connection with conservation of
the Trust Property and the making of distributions to the
Certificateholders and the Noteholders.
The Trust is hereby authorized to engage in the foregoing activities. The
Trust shall not engage in any activity other than in connection with the
foregoing or other than as required or expressly authorized by the terms of
this Agreement or the Related Documents.
Section 2.4. APPOINTMENT OF OWNER TRUSTEE. The Depositor hereby
appoints the Owner Trustee as trustee of the Trust effective as of the date
hereof, to have all the rights, powers and duties set forth herein, and the
Owner Trustee hereby accepts such appointment.
Section 2.5. INITIAL CAPITAL CONTRIBUTION OF TRUST ESTATE. The
Depositor hereby sells, assigns, transfers, conveys and sets over to the
Owner Trustee, as of the date hereof, the sum of $10. The Owner Trustee
hereby acknowledges receipt in trust from the Depositor, as of the date
hereof, of the foregoing contribution, which shall constitute the
-6-
<PAGE>
initial Trust Property and shall be deposited in the Certificate Distribution
Account. The Depositor shall pay organizational expenses of the Trust as
they may arise or shall, upon the request of the Owner Trustee, promptly
reimburse the Owner Trustee for any such expenses paid by the Owner Trustee.
Section 2.6. DECLARATION OF TRUST. The Owner Trustee hereby
declares that it will hold the Trust Property in trust upon and subject to
the conditions set forth herein for the use and benefit of the Holders,
subject to the interests and rights in the Trust Property granted to other
Persons by the Related Documents. It is the intention and agreement of the
parties hereto that the Trust constitute a business trust under the Business
Trust Statute and that this Agreement constitute the governing instrument of
such business trust. It is the intention and agreement of the parties hereto
that, solely for income and franchise tax purposes, the Trust shall be
treated as a partnership. The parties agree that, unless otherwise required
by appropriate tax authorities, the Trust will file or cause to be filed
annual or other necessary returns, reports and other forms consistent with
the characterization of the Trust as a partnership for such tax purposes. On
the date hereof, the Owner Trustee shall file the Certificate of Trust
required by Section 3810(a) of the Business Trust Statute in the Office of
the Secretary of State. Effective as of the date hereof, the Owner Trustee
shall have all rights, powers and duties set forth herein and in the Business
Trust Statute with respect to accomplishing the purposes of the Trust.
Section 2.7. LIABILITY OF THE CERTIFICATEHOLDERS.
(a) The General Partner shall be liable directly to indemnify each
injured party for all losses, claims, damages, liabilities and expenses of
the Trust, to the extent not paid out of the Trust Property, to the extent
that such Person would be liable if the Trust were a partnership under the
Delaware Revised Uniform Limited Partnership Act and such Person were a
general partner; PROVIDED, HOWEVER, that the General Partner shall not be
liable for any losses incurred by a Certificateholder in the capacity of an
investor in the Certificates or a Note Owner in the capacity of an investor
in the Notes; PROVIDED, FURTHER, that the General Partner shall not be
liable to indemnify any injured party if such party has agreed that its
recourse against the Trust for any obligation or liability of the Trust to
such party shall be limited to the assets of the Trust. In addition, any
third party creditors of the Trust (other than in connection with the
obligations described in the provisos to the preceding sentence for which
the General Partner shall not be liable) shall be deemed third party
beneficiaries of this paragraph. The obligations of the General Partner
under this paragraph shall be evidenced by the General Partner
Certificates, which for purposes of the Business Trust Statute shall be
deemed to be a separate class of Certificates from the Investor
Certificates.
(b) No Certificateholder, other than to the extent set forth in
paragraph (a), shall have any personal liability for any liability or
obligation of the Trust or by
-7-
<PAGE>
reason of any action taken by the parties to this Agreement pursuant to any
provisions of this Agreement or any Related Document.
Section 2.8. TITLE TO TRUST PROPERTY.
(a) Legal title to all the Trust Property shall be vested at all
times in the Trust as a separate legal entity except where applicable law
in any jurisdiction requires title to any part of the Trust Property to be
vested in a trustee or trustees, in which case title shall be deemed to be
vested in the Owner Trustee, a co-trustee and/or a separate trustee, as the
case may be.
(b) The Certificateholders shall not have legal title to any part of
the Trust Property. The Certificateholders shall be entitled to receive
distributions with respect to their undivided ownership interest therein
only in accordance with Articles V and IX. No transfer, by operation of
law or otherwise, of any right, title or interest by any Certificateholder
of its ownership interest in the Trust Property shall operate to terminate
this Agreement or the trusts hereunder or entitle any transferee to an
accounting or to the transfer to it of legal title to any part of the Trust
Property.
Section 2.9. SITUS OF TRUST. The Trust will be located and
administered in the State of Delaware. All bank accounts maintained by the
Owner Trustee on behalf of the Trust shall be located in the State of
Delaware. The Trust shall not have any employees in any state other than
Delaware; PROVIDED, HOWEVER, that nothing herein shall restrict or prohibit
the Owner Trustee, the Servicer or any agent of the Trust from having
employees within or without the State of Delaware. Payments will be received
by the Trust only in Delaware, and payments will be made by the Trust only
from Delaware. The only office of the Trust will be at the Corporate Trust
Office in Delaware.
Section 2.10. REPRESENTATIONS AND WARRANTIES OF THE DEPOSITOR AND
THE GENERAL PARTNER. By execution of this Agreement, each of the Depositor
and the General Partner makes the following representations and warranties
with respect to itself on which the Owner Trustee relies in accepting the
Trust Property in trust and issuing the Certificates. These representations
and warranties shall be deemed to be repeated on each day on which Investor
Certificates are issued pursuant to Section 3.2.
(a) ORGANIZATION AND GOOD STANDING. It has been duly organized and
is validly existing as a corporation in good standing under the laws of the
State of Delaware, with power and authority to own its properties and to
conduct its business as such properties are currently owned and as such
business is currently conducted and is proposed to be conducted pursuant to
this Agreement and the Related Documents.
-8-
<PAGE>
(b) DUE QUALIFICATION. It is duly qualified to do business as a
foreign corporation in good standing, and has obtained all necessary
licenses and approvals, in all jurisdictions in which the ownership or
lease of its property, the conduct of its business and the performance of
its obligations under this Agreement and the Related Documents requires
such qualification.
(c) POWER AND AUTHORITY. It has the power and authority to execute
and deliver this Agreement and its Related Documents and to perform its
obligations pursuant thereto; and the execution, delivery and performance
of this Agreement and its Related Documents have been duly authorized by
all necessary corporate action.
(d) NO CONSENT REQUIRED. No consent, license, approval or
authorization or registration or declaration with, any Person or with any
governmental authority, bureau or agency is required in connection with the
execution, delivery or performance of this Agreement and the Related
Documents, except for such as have been obtained, effected or made.
(e) NO VIOLATION. The consummation of the transactions contemplated
by this Agreement and its Related Documents and the fulfillment of its
obligations under this Agreement and its Related Documents shall not
conflict with, result in any breach of any of the terms and provisions of
or constitute (with or without notice, lapse of time or both) a default
under, its certificate of incorporation or by-laws, or any indenture,
agreement, mortgage, deed of trust or other instrument to which it is a
party or by which it is bound, or result in the creation or imposition of
any Lien upon any of its properties pursuant to the terms of any such
indenture, agreement, mortgage, deed of trust or other instrument, or
violate any law, order, rule or regulation applicable to it of any court or
of any federal or state regulatory body, administrative agency or other
governmental instrumentality having jurisdiction over it or any of its
properties.
(f) NO PROCEEDINGS. There are no proceedings or investigations
pending or, to its knowledge threatened against it before any court,
regulatory body, administrative agency or other tribunal or governmental
instrumentality having jurisdiction over it or its properties (A) asserting
the invalidity of this Agreement or any of the Related Documents, (B)
seeking to prevent the issuance of the Certificates or the Notes or the
consummation of any of the transactions contemplated by this Agreement or
any of the Related Documents, (C) seeking any determination or ruling that
might materially and adversely affect its performance of its obligations
under, or the validity or enforceability of, this Agreement or any of the
Related Documents, or (D) seeking to adversely affect the federal income
tax or other federal, state or local tax attributes of the Certificates.
Section 2.11. FEDERAL INCOME TAX TREATMENT. The Seller has
structured this Agreement and the Investor Certificates with the intention
that the Investor Certificates will
-9-
<PAGE>
qualify under applicable federal, state, local and foreign tax law as
indebtedness. The Seller, the Servicer, the Holder of the General Partner
Certificate, and each Investor Certificateholder agree to treat and to take
no action inconsistent with the treatment of the Investor Certificates (or
beneficial interest therein) as indebtedness for purposes of federal, state,
local and foreign income or franchise taxes and any other tax imposed on or
measured by income. Each Investor Certificateholder, and the Holder of the
General Partner Certificate, by acceptance of its Certificate, agree to be
bound by the provisions of this Section 2.11. Furthermore, subject to
Section 5.5, the Trustee shall treat the Trust as a security device only, and
shall not file tax returns or obtain an employer identification number on
behalf of the Trust.
In the event that the Investor Certificates are deemed for federal
income tax purposes to represent an equity interest in the Trust, the Trust
shall be treated for federal income tax purposes as a partnership among the
Holders of such Investor Certificates and the Seller. In the event such a
partnership is deemed to exist, the net income of the Trust for any month as
determined for Federal income tax purposes (and each item of income, gain,
loss and deduction entering into the computation thereof) shall be allocated:
(a) among the Investor Certificateholders as of the first Record
Date following the end of such month, in proportion to their ownership
of principal amount of Investor Certificates on such date, an amount of
net income up to the Certificateholders' Interest Distributable Amount
for such month; and
(b) next, to the General Partner (with respect to the General
Partner Certificates) in accordance with the Certificate Balance
represented by the General Partner Certificates to the extent of any
remaining net income.
If the net income of the Trust for any month is insufficient for the
allocations described in clause (a) above, subsequent net income shall first
be allocated to make up such shortfall before being allocated as provided in
clause (b). Net losses of the Trust, if any, for any month as determined for
Federal income tax purposes (and each item of income, gain, loss and
deduction entering into the computation thereof) shall be allocated to the
General Partner to the extent it is reasonably expected to bear the economic
burden of such net losses, then net losses shall be allocated among the other
Certificateholders as of the first Record Date following the end of such
month in proportion to their ownership of principal amount of Certificates on
such Record Date until the total amount of losses allocated to those
Certificateholders pursuant to this Section 2.11 plus the total principal
amount distributed to them equals the aggregate initial principal balance of
the Investor Certificates and any remaining net losses shall be allocated to
the General Partner. Notwithstanding anything in this Agreement to the
contrary, the General Partner shall be allocated an aggregate of at least 1%
of each item of income, profit, gain or loss of the Trust. The General
Partner is authorized to modify the allocations in this paragraph if
necessary or appropriate, in its sole discretion, for the allocations to
fairly reflect the economic income, gain or loss to the
-10-
<PAGE>
General Partner or the other Certificateholders, or to comply with the
provisions of the Code and the accompanying Treasury Regulations.
Section 2.12. COVENANTS OF THE GENERAL PARTNER. The General
Partner agrees and covenants for the benefit of each Certificateholder and
the Owner Trustee, during the term of this Agreement, and to the fullest
extent permitted by applicable law, that:
(a) it shall not (i) assign, sell, convey, pledge, transfer,
reconvey, cancel, forgive, compromise or otherwise dispose of the Demand
Note held by it, in whole or in part, (ii) make any distribution other
than to the Trust or unless the aggregate net worth of the General
Partner following such distribution shall be at least equal to the
Minimum Net Worth or (iii) except as specifically permitted by this
Agreement, sell, transfer, assign, give or encumber by operation of law
or otherwise any of its assets;
(b) it shall not, except as permitted by Section 9.2, sell,
assign, transfer, give or encumber, by operation of law or otherwise, in
whole or in part, the interest evidenced by any General Partner
Certificate;
(c) it shall not create, incur or suffer to exist any indebtedness
or engage in any business, except, in each case, as permitted by its
certificate of incorporation and the Related Documents;
(d) it shall not, for any reason, institute proceedings for the
Trust to be adjudicated a bankrupt or insolvent, or consent to the
institution of bankruptcy or insolvency proceedings against the Trust,
or file a petition seeking or consenting to reorganization or relief
under any applicable federal or state law relating to the bankruptcy of
the Trust, or consent to the appointment of a receiver, liquidator,
assignee, trustee, sequestrator (or other similar official) of the Trust
or a substantial part of the property of the Trust or cause or permit
the Trust to make any assignment for the benefit of creditors, or admit
in writing the inability of the Trust to pay its debts generally as they
become due, or declare or effect a moratorium on the debt of the Trust
or take any action in furtherance of any such action;
(e) it shall obtain from each counterparty to each Related
Document to which it or the Trust is a party and each other agreement
entered into on or after the date hereof to which it or the Trust is a
party, an agreement by each such counterparty that prior to the
occurrence of the event specified in Section 9.1(e) such counterparty
shall not institute against, or join any other Person in instituting
against, it or the Trust, any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings or other similar proceedings under
the laws of the United States or any state of the United States; and
-11-
<PAGE>
(f) it shall not, for any reason, withdraw or attempt to withdraw
from this Agreement, dissolve, institute proceedings for it to be
adjudicated a bankrupt or insolvent, or consent to the institution of
bankruptcy or insolvency proceedings against it, or file a petition
seeking or consenting to reorganization or relief under any applicable
federal or state law relating to bankruptcy, or consent to the
appointment of a receiver, liquidator, assignee, trustee, sequestrator
(or other similar official) of it or a substantial part of its property,
or make any assignment for the benefit of creditors, or admit in writing
its inability to pay its debts generally as they become due, or declare
or effect a moratorium on its debt or take any action in furtherance of
any such action.
Section 2.13. COVENANTS OF THE HOLDERS. Each Holder by purchasing
its Certificate agrees:
(a) to be bound by the terms and conditions of its Certificate and
of this Agreement, including any supplements or amendments hereto and to
perform the obligations of a Certificateholder as set forth therein or
herein, in all respects as if it were a signatory hereto. This
undertaking is made for the benefit of the Trust, the Owner Trustee and
all other Certificateholders present and future.
(b) to treat and to take no action inconsistent with the treatment
of the Investor Certificates as indebtedness for purposes of federal,
state, local and foreign income or franchise taxes and any other tax
imposed on or measured by income. In the event the Investor
Certificates are deemed for federal income tax purposes to represent an
equity interest in the Trust, each Certificateholder hereby agrees to
appoint the General Partner as such Certificateholder's agent and
attorney-in-fact to sign any federal income tax information return filed
on behalf of the Trust and agree that, if requested by the Trust, it
will sign such federal income tax information return in its capacity as
holder of an interest in the Trust. Each Certificateholder also hereby
agrees that in its tax returns it will not take any position
inconsistent with those taken in any tax returns filed by the Trust.
(c) if such Certificateholder is other than an individual or other
entity holding its Certificate through a broker who reports securities
sales on Form 1099-B, to notify the Owner Trustee of any transfer by it
of a Certificate in a taxable sale or exchange, within 30 days of the
date of the transfer.
(d) until the completion of the events specified in Section
9.1(e), not to, for any reason, institute proceedings for the Trust or a
General Partner to be adjudicated bankrupt or insolvent, or consent to
the institution of bankruptcy or insolvency proceedings against the
Trust, or file a petition seeking or consenting to reorganization or
relief under any applicable federal or state law relating to bankruptcy,
or consent to the appointment of a receiver, liquidator, assignee,
trustee,
-12-
<PAGE>
sequestrator (or other similar official) of the Trust or a substantial
part of its property, or cause or permit the Trust to make any
assignment for the benefit of its creditors, or admit in writing its
inability to pay its debts generally as they become due, or declare or
effect a moratorium on its debt or take any action in furtherance of any
such action.
ARTICLE III
THE CERTIFICATES
Section 3.1. INITIAL OWNERSHIP. Upon the formation of the Trust by
the contribution by the Depositor pursuant to Section 2.5 and until the issuance
of the Certificates, the Depositor shall be the sole beneficiary of the Trust.
Section 3.2. THE CERTIFICATES. Certificates shall be issued as
follows:
(a) On the Closing Date, Certificates (the "General Partner
Certificates") shall be issued for adequate consideration to the General
Partner with an aggregate initial principal balance of $200,000.00,
representing in excess of 1% of the Maximum Certificate Balance. At all
times following the Closing Date until a liquidation of the Trust, the
General Partner Certificates shall represent in excess of 1% of the
Maximum Certificate Balance. The General Partner shall retain
beneficial and record ownership of such Certificates. The General
Partner Certificates shall be non-transferable and any attempted
transfer of the General Partner Certificates shall be void; PROVIDED
that a General Partner Certificate may be transferred to a successor
General Partner as provided in Section 9.2. The Owner Trustee shall
cause each General Partner Certificate to contain a legend stating "THIS
CERTIFICATE IS NOT TRANSFERABLE, EXCEPT UNDER THE LIMITED CONDITIONS
SPECIFIED IN THE TRUST AGREEMENT."
(b) Upon Depositor's demand (with no less than five Business Days
prior notice), Investor Certificates with Certificate Balances totalling
up to the remaining Maximum Certificate Balance shall be issued to
Persons designated by the Depositor to the Owner Trustee, PROVIDED,
HOWEVER, that no Investor Certificates shall be issued unless and until
General Partner Certificates in excess of 1% of the Maximum Certificate
Balance shall have been issued.
The Certificates shall be executed on behalf of the Owner Trustee
by manual or facsimile signature of any authorized signatory of the Owner
Trustee having such authority under the Owner Trustee's seal imprinted or
otherwise affixed thereon and attested on behalf of the Owner Trustee by the
manual or facsimile signature of any authorized signatory of the Owner
Trustee. Certificates bearing the manual or facsimile signatures of
individuals who were, at the time when such signatures were affixed,
authorized to sign on
-13-
<PAGE>
behalf of the Owner Trustee shall be validly issued and entitled to the
benefits of this Agreement, notwithstanding that such individuals or any of
them have ceased to be so authorized prior to the authentication and delivery
of such Certificates. The Investor Certificates shall be issued in initial
denominations and in such integral multiples as are necessary to comply with
the terms of this Agreement and of the Related Documents.
Section 3.3. AUTHENTICATION OF CERTIFICATES. Simultaneously with
the initial sale, assignment and transfer to the Trust of the Receivables and
the delivery to the Owner Trustee of the Receivable Files and the other Trust
Property pursuant to the Sale and Servicing Agreement, the Owner Trustee
shall cause the General Partner Certificates, and upon Depositor's order
(with no less than five Business Days prior notice) the Owner Trustee shall
cause Investor Certificates as described in Section 3.2(b), to be executed on
behalf of the Trust, authenticated and delivered to or upon the order of the
Depositor. No Certificate shall entitle its holder to any benefit under this
Agreement, or shall be valid for any purpose, unless there shall appear on
such Certificate a certificate of authentication substantially in the form
set forth in Exhibit B executed by the Owner Trustee or the Authentication
Agent, by manual or facsimile signature; such authentication shall constitute
conclusive evidence that such Certificate shall have been duly authenticated
and delivered hereunder. Wilmington Trust Company is hereby initially
appointed Authentication Agent. All Certificates shall be dated the date of
their authentication.
Section 3.4. REGISTRATION OF TRANSFER AND EXCHANGE OF CERTIFICATES.
(a) The Certificate Registrar shall maintain, or cause to be
maintained, at the office or agency maintained pursuant to Section 3.7,
a Certificate Register in which, subject to such reasonable regulations
as it may prescribe, the Owner Trustee shall provide for the
registration of Certificates and of transfers and exchanges of
Certificates as provided in this Agreement. Wilmington Trust Company is
hereby initially appointed Certificate Registrar for the purpose of
registering Certificates and transfers and exchanges of Certificates as
provided in this Agreement.
(b) Upon surrender for registration of transfer of any Certificate
at the office or agency maintained pursuant to Section 3.7 (and subject
to the transfer restrictions contained in the Certificate Purchase
Agreement and in Section 9.2 with respect to General Partner
Certificates), the Owner Trustee shall execute, authenticate and deliver
(or shall cause the Authentication Agent to authenticate and deliver),
in the name of the designated transferee or transferees, one or more new
Certificates in authorized denominations of like Certificate Balance,
dated the date of authentication by the Owner Trustee or any
authenticating agent. At the option of a Holder, Certificates may be
exchanged for other Certificates in authorized denominations of a like
Certificate Balance upon surrender of the Certificates to be exchanged
at the office or agency maintained pursuant to Section 3.7.
-14-
<PAGE>
(c) Every Certificate presented or surrendered for registration of
transfer or exchange shall be accompanied by a written instrument of
transfer in form satisfactory to the Owner Trustee and the Certificate
Registrar duly executed by the Holder or his attorney duly authorized in
writing. Each Certificate surrendered for registration of transfer or
exchange shall be canceled and subsequently disposed of by the Owner
Trustee in accordance with its customary practice.
(d) No service charge shall be made for any registration of
transfer or exchange of Certificates, but the Owner Trustee or the
Certificate Registrar may require payment of a sum sufficient to cover
any tax or governmental charge that may be imposed in connection with
any transfer or exchange of Certificates.
(e) Notwithstanding anything in this Agreement to the contrary,
the Investor Certificates shall be issued only in transactions which are
not required to be registered under the Securities Act of 1933, and the
Seller may prevent any transfer, participation or other disposition of
any interest in any Investor Certificate if the Seller, in its sole and
absolute discretion, determines that such transfer, participation or
other disposition, if effected, would cause the Trust to be treated as a
publicly traded partnership under Section 7704 of the Code or the
Treasury Regulations issued thereunder.
Section 3.5. MUTILATED, DESTROYED, LOST OR STOLEN CERTIFICATES.
If (a) any mutilated Certificate is surrendered to the Certificate Registrar,
or the Certificate Registrar receives evidence to its satisfaction of the
destruction, loss or theft of any Certificate, and (b) there is delivered to
the Certificate Registrar and the Owner Trustee such security or indemnity as
may be required by them to save each of them harmless, then, in the absence
of notice to the Certificate Registrar or the Owner Trustee that such
Certificate has been acquired by a bona fide purchaser, the Owner Trustee on
behalf of the Trust shall execute, authenticate and deliver (or the
Authentication Agent shall authenticate and deliver), in exchange for or in
lieu of any such mutilated, destroyed, lost or stolen Certificate, a new
Certificate of like Certificate Balance. In connection with the issuance of
any new Certificate under this Section 3.5, the Owner Trustee may require the
payment of a sum sufficient to cover any tax or other governmental charge
that may be imposed in relation thereto and any other expenses (including the
fees and expenses of the Owner Trustee and the Certificate Registrar)
connected therewith. Any duplicate Certificate issued pursuant to this
Section 3.5 shall constitute conclusive evidence of ownership in the Trust,
as if originally issued, whether or not the lost, stolen or destroyed
Certificate shall be found at any time.
Section 3.6. PERSONS DEEMED OWNERS. Prior to due presentation of
a Certificate for registration of transfer, the Owner Trustee, the
Certificate Registrar and any agent of the Owner Trustee or the Certificate
Registrar may treat the person in whose name any Certificate is registered as
the owner of such Certificate for the purpose of receiving
-15-
<PAGE>
distributions pursuant to Section 5.2 and for all other purposes whatsoever,
and neither the Owner Trustee, the Certificate Registrar, nor any agent of
the Owner Trustee or the Certificate Registrar shall be affected by any
notice to the contrary.
Section 3.7. MAINTENANCE OF OFFICE OR AGENCY. The Owner Trustee
shall maintain in Wilmington, Delaware, an office or offices or agency or
agencies where Certificates may be surrendered for registration of transfer
or exchange and where notices and demands to or upon the Owner Trustee in
respect of the Certificates and the Related Documents may be served. The
Owner Trustee initially designates Wilmington Trust Company, Rodney Square
North, 1100 North Market Street, Wilmington, Delaware 19890-0001 as its
principal corporate trust office for such purposes. The Owner Trustee shall
give prompt written notice to the Depositor and to the Certificateholders of
any change in the location of the Certificate Register or any such office of
agency.
Section 3.8. APPOINTMENT OF PAYING AGENT. The Paying Agent shall
make distributions to Certificateholders from the Certificate Distribution
Account pursuant to Section 5.2 and shall report the amounts of such
distributions to the Owner Trustee. Any Paying Agent shall have the
revocable power to withdraw funds from the Certificate Distribution Account
for the purpose of making the distributions referred to above. The Owner
Trustee may revoke such power and remove the Paying Agent if the Owner
Trustee determines in its sole discretion that the Paying Agent shall have
failed to perform its obligations under this Agreement in any material
respect. The Paying Agent shall initially be Wilmington Trust Company, and
any co-paying agent chosen by Wilmington Trust Company and acceptable to the
Owner Trustee. Wilmington Trust Company shall be permitted to resign as
Paying Agent upon 30 days' written notice to the Owner Trustee. In the event
that Wilmington Trust Company shall no longer be the Paying Agent, the Owner
Trustee shall appoint a successor to act as Paying Agent (which shall be a
bank or trust company). The Owner Trustee shall cause such successor Paying
Agent or any additional Paying Agent appointed by the Owner Trustee to
execute and deliver to the Owner Trustee an instrument in which such
successor Paying Agent or additional Paying Agent shall agree with the Owner
Trustee that as Paying Agent, such successor Paying Agent or additional
Paying Agent will hold all sums, if any, held by it for payment to the
Certificateholders in trust for the benefit of the Certificateholders
entitled thereto until such sums shall be paid to such Certificateholders.
The Paying Agent shall return all unclaimed funds to the Owner Trustee, and
upon removal of a Paying Agent, such Paying Agent shall also return all funds
in its possession to the Owner Trustee. The provisions of Sections 7.1, 7.3,
7.4 and 8.2 shall apply to the Owner Trustee also in its role as Paying Agent
for so long as the Owner Trustee shall act as Paying Agent and, to the extent
applicable, to any other paying agent appointed hereunder. Any reference in
this Agreement to the Paying Agent shall include any co-paying agent unless
the context requires otherwise.
-16-
<PAGE>
ARTICLE IV
ACTIONS BY OWNER TRUSTEE
Section 4.1. RESTRICTION ON POWER OF CERTIFICATEHOLDER. No
Certificateholder shall have any right to vote or in any manner otherwise
control the operation and management of the Trust except as expressly
provided in this Agreement.
Section 4.2. PRIOR NOTICE TO CERTIFICATEHOLDERS WITH RESPECT TO
CERTAIN MATTERS. The Owner Trustee shall not take any of the following
actions unless, at least 30 days before the taking of such action, the Owner
Trustee shall have notified the Certificateholders in writing of the proposed
action and the Certificateholders shall not have notified the Owner Trustee
in writing prior to the 30th day after such notice is given that such
Certificateholders have withheld consent or provided alternative direction:
(a) the election by the Trust to file an amendment to the
Certificate of Trust unless such amendment is required to be filed under
the Business Trust Statute or unless such amendment would not materially
and adversely affect the interests of the Certificateholders;
(b) the amendment of the Indenture by a supplemental indenture in
circumstances where the consent of any Noteholder is required unless (i)
such amendment would not materially and adversely affect the interests
of the Certificateholders or (ii) such amendment is made in connection
with a Securitized Offering in accordance with the final sentence of
Section 11.1; or
(c) the amendment, change or modification of the Administration
Agreement, unless (i) such amendment would not materially and adversely
affect the interests of the Certificateholders or (ii) such amendment is
made in connection with a Securitized Offering in accordance with the
final sentence of Section 11.1.
Section 4.3. ACTION BY CERTIFICATEHOLDERS WITH RESPECT TO
BANKRUPTCY. The Owner Trustee shall not have the power to commence a
voluntary proceeding in bankruptcy relating to the Trust without the
unanimous prior approval of all Certificateholders and the delivery to the
Owner Trustee by each such Certificateholder of a certificate certifying that
such Certificateholder reasonably believes that the Trust is insolvent.
Section 4.4. RESTRICTIONS ON CERTIFICATEHOLDERS' POWER. No
Certificateholder shall have any right by virtue or by availing itself of any
provisions of this Agreement to institute any suit, action, or proceeding in
equity or at law upon or under or with respect to this Agreement or any
Related Document, unless such Certificateholder previously shall have given
to the Owner Trustee a written notice of default and of the continuance
thereof, as provided in this Agreement and unless Certificateholders
evidencing not less than 25% of the Certificate Balance represented by the
Certificates shall have made written request upon the
-17-
<PAGE>
Owner Trustee to institute such action, suit or proceeding in its own name as
Owner Trustee under this Agreement and shall have offered to the Owner
Trustee such reasonable indemnity as it may require against the costs,
expenses and liabilities to be incurred therein or thereby, and the Owner
Trustee, for 30 days after its receipt of such notice, request, and offer of
indemnity, shall have neglected or refused to institute any such action,
suit, or proceeding, and during such 30-day period no request or waiver
inconsistent with such written request has been given to the Owner Trustee
pursuant to and in compliance with this Section or Section 6.3; it being
understood and intended, and being expressly covenanted by each
Certificateholder with every other Certificateholder and the Owner Trustee,
that no one or more Holders of Certificates shall have any right in any
manner whatever by virtue or by availing itself or themselves of any
provisions of this Agreement to affect, disturb, or prejudice the rights of
the Holders of any other of the Certificates, or to obtain or seek to obtain
priority over or preference to any other such Holder, or to enforce any right
under this Agreement, except in the manner provided in this Agreement and for
the equal, ratable, and common benefit of all Certificateholders. For the
protection and enforcement of the provisions of this Section 4.4, each and
every Certificateholder and the Owner Trustee shall be entitled to such
relief as can be given either at law or in equity.
ARTICLE V
APPLICATION OF TRUST FUNDS; CERTAIN DUTIES
Section 5.1. TRUST ACCOUNTS.
(a) The Owner Trustee, for the benefit of the Certificateholders,
shall establish and maintain the Certificate Distribution Account in the
name of the Trust for the benefit of the Certificateholders. The
Certificate Distribution Account shall be an Eligible Account and
initially shall be a segregated trust account established with the Owner
Trustee and maintained with the Owner Trustee.
(b) The Owner Trustee shall possess all right, title and interest
in all funds on deposit from time to time in the Certificate
Distribution Account and in all proceeds thereof. If, at any time, the
Certificate Distribution Account ceases to be an Eligible Account, the
Owner Trustee shall within 5 Business Days (or such longer period, not
to exceed 30 calendar days, as to which each Rating Agency may consent)
establish a new Certificate Distribution Account as an Eligible Account
and shall transfer any cash and/or any investments to such new
Certificate Distribution Account.
(c) All amounts held in the Certificate Distribution Account
shall, to the extent permitted by applicable laws, rules and
regulations, be invested, by the Owner Trustee, in Eligible Investments
that mature not later than one Business Day prior to the Distribution
Date for the Monthly Period to which such amounts relate. Investments
in Eligible Investments shall be made in the name of the Trust, and such
-18-
<PAGE>
investments shall not be sold or disposed of prior to their maturity.
Any investment of funds in the Trust Accounts 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 Trustee,
(b) with respect to securities held in such account, such securities
shall be (i) certificated securities (as such term is used in N.Y. UCC
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 Trustee'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 Trustee on the
records of such institution, and such institution shall have sent the
Trustee 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 Trustee 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
Trustee. Subject to the other provisions hereof, the Trustee shall have
sole control over each such investment and the income thereon, and any
certificate or other instrument evidencing any such investment, if any,
shall be delivered directly to the Trustee or its agent, together with
each document of transfer, if any, necessary to transfer title to such
investment to the Trustee in a manner which complies with this Section
5.1. All interest, dividends, gains upon sale and other income from, or
earnings on investment of funds in the Certificate Distribution Account
shall be distributed on the next Distribution Date pursuant to Section
4.6 of the Sale and Servicing Agreement. The Servicer shall deposit in
the Certificate Distribution Account an amount equal to any net loss on
such investments immediately as realized.
Section 5.2. APPLICATION OF FUNDS IN CERTIFICATE DISTRIBUTION
ACCOUNT.
(a) On each Distribution Date the Owner Trustee will, based on the
information contained in the Servicer's Certificate delivered on the
related Determination Date pursuant to Section 3.9(a) of the Sale and
Servicing Agreement, distribute to the Certificateholders, on a pro rata
basis, to the extent of the funds
-19-
<PAGE>
available, amounts deposited in the Certificate Distribution Account
pursuant to Section 4.6 of the Sale and Servicing Agreement on such
Distribution Date in the following order of priority:
(i) first, an amount equal to the Certificateholders' Interest
Distributable Amount;
(ii) second, (x) an amount equal to the Certificateholders'
Percentage of any Principal Funding Excess Amount and (y) an amount
equal to the Certificateholders' Principal Distributable Amount; and
(iii) third, any amounts due and owing to any Indemnified Party
(as such term is used in the Certificate Purchase Agreement) under
Section 11.01, Section 11.04 or Section 11.05 of the Certificate
Purchase Agreement.
(b) On the date on which a Securitized Offering occurs, the Owner
Trustee will, based on the information contained in the Servicer's
Certificate delivered with respect to such Securitized Offering pursuant
to Section 3.9(a) of the Sale and Servicing Agreement, distribute to the
Investor Certificateholders, on a pro rata basis, to the extent of the
funds available, amounts deposited in the Certificate Distribution
Account pursuant to Section 4.6 of the Sale and Servicing Agreement on
such Distribution Date in the following order of priority taking into
account any concurrent distribution made pursuant to Section 5.2(a):
(i) first, an amount equal to the Certificateholders' Interest
Distributable Amount;
(ii) second, an amount equal to the Certificate Balance
(excluding any portion thereof attributable to the General Partner
Certificates); and
(iii) third, any amounts due and owing to any Indemnified Party
(as such term is used in the Certificate Purchase Agreement) under
Section 11.01, Section 11.04 or Section 11.05 of the Certificate
Purchase Agreement.
On such date, the Owner Trustee shall also, after making the
distributions referred to above, distribute to the General Partner such
funds and/or replacement certificates as shall be called for in the
agreements pursuant to which the Securitized Offering is completed.
(c) On the Distribution Date (i) following the date on which
amounts received in respect of the Seller's or the Servicer's exercise
of its option to purchase the corpus of the Trust pursuant to Sections
9.1(a) or (b) of the Sale and Servicing Agreement are deposited in the
Certificate Distribution Account, (ii) on which Insolvency
-20-
<PAGE>
Proceeds are deposited in the Certificate Distribution Account pursuant
to Section 9.1(c) of the Sale and Servicing Agreement (or on the
Distribution Date immediately following such deposit if such proceeds
are not deposited in the Certificate Distribution Account on a
Distribution Date), or (iii) following the date on which the Indenture
Trustee makes payments of money or property in respect of liquidation of
the Trust Property pursuant to Section 5.06 of the Indenture and
deposits funds received in connection with such liquidation in the
Certificate Distribution Account, in each case based upon information
contained in a Servicer's Certificate delivered pursuant to Section
3.9(b) of the Sale and Servicing Agreement, the Owner Trustee will
distribute to the Certificateholders, on a pro rata basis, such amounts
taking into account any concurrent distribution made pursuant to Section
5.2(a):
(i) first, an amount equal to the Certificateholders' Interest
Distributable Amount;
(ii) second, an amount equal to the Certificate Balance; and
(iii) third, any amounts due and owing to any Indemnified Party
(as such term is used in the Certificate Purchase Agreement) under
Section 11.01, Section 11.04 or Section 11.05 of the Certificate
Purchase Agreement.
(d) On each Distribution Date, the Owner Trustee shall send to
each Certificateholder the statement required pursuant to Section 4.9 of
the Sale and Servicing Agreement.
(e) In the event that any withholding tax is imposed on the
Trust's payment (or allocations of income) to a Certificateholder, such
tax shall reduce the amount otherwise distributable to the
Certificateholder in accordance with this Section. The Owner Trustee is
hereby authorized and directed to retain from amounts otherwise
distributable to the Certificateholders sufficient funds for the payment
of any tax that is legally owed by the Trust (but such authorization
shall not prevent the Owner Trustee from contesting any such tax in
appropriate proceedings, and withholding payment of such tax, if
permitted by law, pending the outcome of such proceedings). The amount
of any withholding tax imposed with respect to a Certificateholder shall
be treated as cash distributed to such Certificateholder at the time it
is withheld by the Trust and remitted to the appropriate taxing
authority. If there is a possibility that withholding tax is payable
with respect to a distribution (such as a distribution to a non-U.S.
Certificateholder), the Owner Trustee may in its sole discretion
withhold such amounts in accordance with this paragraph (e). In the
event that a Certificateholder wishes to apply for a refund of any such
withholding tax, the Owner Trustee shall reasonably cooperate with such
Certificateholder in making such claim so long as such Certificateholder
agrees to reimburse the Owner Trustee for any out-of-pocket expenses
incurred.
-21-
<PAGE>
(f) Upon final liquidation of the Trust, by notice given to the
Owner Trustee by the Seller or the Servicer pursuant to Section 9.1 of
the Sale and Servicing Agreement, any funds remaining in the Certificate
Distribution Account after distribution of all amounts specified in this
Section 5.2 shall be distributed to the General Partner.
Section 5.3. METHOD OF PAYMENT. Subject to Section 9.1(c) and
9.3(b), distributions required to be made to Certificateholders on any
Distribution Date shall be made to each Certificateholder of record on the
preceding Record Date by wire transfer, in immediately available funds, to
the account of such Holder at a bank or other entity having appropriate
facilities therefor, which such Certificateholder shall have designated to
the Certificate Registrar, with appropriate written wire transfer
instructions, at least five Business Days prior to such Distribution Date.
Section 5.4. NO SEGREGATION OF MONIES; NO INTEREST. Subject to
Sections 5.1 and 5.2, monies received by the Owner Trustee hereunder need not
be segregated in any manner except to the extent required by law or by the
Sale and Servicing Agreement and may be deposited under such general
conditions as may be prescribed by law, and the Owner Trustee shall not be
liable for any interest thereon.
Section 5.5. ACCOUNTING; REPORTS; TAX RETURNS.
(a) The Administrator has agreed pursuant to the Administration
Agreement that the Administrator shall (i) maintain (or cause to be
maintained) the books of the Trust on a calendar year basis on the
accrual method of accounting, (ii) deliver to each Certificateholder, as
may be required by the Code and applicable Treasury Regulations, such
information as may be required (including Form 1099 or Schedule K-1) to
enable each Certificateholder to prepare its Federal and state income
tax returns, (iii) if the Investor Certificates are deemed for federal
income tax purposes to represent an equity interest in the Trust, to
file or cause to be filed such tax returns relating to the Trust
(including a partnership information return, Form 1065), and direct the
Owner Trustee to make such elections as may from time to time be
required or appropriate under any applicable state or Federal statute or
rule or regulation thereunder so as to maintain the Trust's
characterization as a partnership for Federal income tax purposes, (iv)
collect or cause to be collected any withholding tax as described in and
in accordance with Section 5.2(c) with respect to income or
distributions to Certificateholders and (v) file or cause to be filed
all documents required to be filed by the Trust with the Securities and
Exchange Commission and otherwise take or cause to be taken all such
actions as are notified by the Servicer to the Administrator as being
required for the Trust's compliance with all applicable provisions of
state and federal securities laws.
-22-
<PAGE>
(b) The Owner Trustee shall make all elections pursuant to this
Section 5.5 as directed in writing by the General Partner, with the
consent of JPMD. The Owner Trustee shall elect under Section 1278 of
the Code to include in income currently any market discount that accrues
with respect to the Receivables. The Owner Trustee shall not make the
election provided under Section 754 of the Code.
(c) The Owner Trustee shall sign on behalf of the Trust the tax
returns of the Trust, unless applicable law requires a Certificateholder
to sign such documents, in which case such documents shall be signed by
the General Partner. In signing any tax return of the Trust, the Owner
Trustee shall rely entirely upon, and shall have no liability for,
information or calculations provided by the General Partner.
(d) The General Partner shall be the "tax matters partner" of the
Trust pursuant to the Code.
ARTICLE VI
AUTHORITY AND DUTIES OF OWNER TRUSTEE
Section 6.1. GENERAL AUTHORITY. The Owner Trustee is authorized
and directed to execute and deliver the Related Documents to which the Trust
is to be a party and each certificate or other document attached as an
exhibit to or contemplated by the Related Documents to which the Trust is to
be a party and any amendment thereto (including any amendment entered into in
connection with a Securitized Offering in accordance with the final sentence
of Section 11.1 and any additional agreements called for by each such
amendment), and on behalf of the Trust, to direct the Indenture Trustee to
authenticate and deliver the Notes in the aggregate maximum principal amount
of $200,000,000. In addition to the foregoing, the Owner Trustee is
authorized, but shall not be obligated, to take all actions required of the
Trust pursuant to the Related Documents. The Owner Trustee is further
authorized, on behalf of the Trust, to enter into the Administration
Agreement, to appoint, with the consent of JPMD, a successor Administrator
and to take from time to time such action as JPMD recommends with respect to
the Related Documents so long as such actions are consistent with the terms
of the Related Documents.
Section 6.2. GENERAL DUTIES. It shall be the duty of the Owner
Trustee to discharge (or cause to be discharged through the Administrator or
such agents as shall be appointed with the consent of JPMD) all of its
responsibilities pursuant to the terms of this Agreement and the Related
Documents and to administer the Trust in the interest of the
Certificateholders, subject to the Related Documents and in accordance with
the provisions of this Agreement. Notwithstanding the foregoing, the Owner
Trustee shall be deemed to have discharged its duties and responsibilities
hereunder and under the Related Documents to the extent the Administrator has
agreed in the Administration Agreement to perform any act or to discharge any
duty of the Owner Trustee hereunder or under any Related Document, and
-23-
<PAGE>
the Owner Trustee shall not be liable for the default or failure of the
Administrator to carry out its obligations under the Administration
Agreement.
Section 6.3. ACTION UPON INSTRUCTION.
(a) Subject to Article IV, the Certificate Majority shall have the
exclusive right to direct the actions of the Owner Trustee in the
management of the Trust, so long as such instructions are not inconsistent
with the express terms set forth herein or in any Related Document. The
Certificate Majority shall not instruct the Owner Trustee in a manner
inconsistent with this Agreement or the Related Documents.
(b) The Owner Trustee shall not be required to take any action
hereunder or under any Related Document if the Owner Trustee shall have
reasonably determined, or shall have been advised by counsel, that such
action is contrary to the terms hereof or of any Related Document or is
otherwise contrary to law.
(c) Whenever the Owner Trustee is unable to decide between
alternative courses of action permitted or required by the terms of this
Agreement or any Related Document, the Owner Trustee shall promptly give
notice (in such form as shall be appropriate under the circumstances) to
the Certificateholders requesting instruction as to the course of action to
be adopted, and to the extent the Owner Trustee acts in good faith in
accordance with any written instruction received from the Certificate
Majority, the Owner Trustee shall not be liable on account of such action
to any Person. If the Owner Trustee shall not have received appropriate
instruction within ten days of such notice (or within such shorter period
of time as reasonably may be specified in such notice or may be necessary
under the circumstances) it may, but shall be under no duty to, take or
refrain from taking such action, not inconsistent with this Agreement or
the Related Documents, as it shall deem to be in the best interests of the
Certificateholders, and shall have no liability to any Person for such
action or inaction.
(d) In the event that the Owner Trustee is unsure as to the
application of any provision of this Agreement or any Related Document or
any such provision is ambiguous as to its application, or is, or appears to
be, in conflict with any other applicable provision, or in the event that
this Agreement permits any determination by the Owner Trustee or is silent
or is incomplete as to the course of action that the Owner Trustee is
required to take with respect to a particular set of facts, the Owner
Trustee may give notice (in such form as shall be appropriate under the
circumstances) to the Certificateholders requesting instruction and, to the
extent that the Owner Trustee acts or refrains from acting in good faith in
accordance with any such instruction received from a Certificate Majority,
the Owner Trustee shall not be liable, on account of such action or
inaction, to any Person. If the Owner Trustee shall not have received
appropriate instruction within 10 days of such notice (or
-24-
<PAGE>
within such shorter period of time as reasonably may be specified in such
notice or may be necessary under the circumstances) it may, but shall be
under no duty to, take or refrain from taking such action, not inconsistent
with this Agreement or the Related Documents, as it shall deem to be in the
best interests of the Certificateholders, and shall have no liability to
any Person for such action or inaction.
Section 6.4. NO DUTIES EXCEPT AS SPECIFIED IN THIS AGREEMENT OR IN
INSTRUCTIONS. The Owner Trustee shall not have any duty or obligation to
manage, make any payment with respect to, register, record, sell, dispose of, or
otherwise deal with the Trust Property, or to otherwise take or refrain from
taking any action under, or in connection with, any document contemplated hereby
to which the Trust is a party, except as expressly provided by the terms of this
Agreement (including as provided in Section 6.2) or in any written instruction
received by the Owner Trustee pursuant to Section 6.3; and no implied duties or
obligations shall be read into this Agreement or any Related Document against
the Owner Trustee. The Owner Trustee shall have no responsibility for
preparing, monitoring or filing any financing or continuation statements in any
public office at any time or otherwise to perfect or maintain the perfection of
any security interest or lien granted to it hereunder or to record this
Agreement or any Related Document; however, the Owner Trustee will from time to
time execute and deliver such financing or continuation statements as are
prepared by the Servicer and delivered to the Owner Trustee for its execution on
behalf of the Trust for the purpose of perfecting or maintaining the perfection
of such a security interest or lien or effecting such a recording. The Owner
Trustee nevertheless agrees that it will, at its own cost and expense (and not
at the expense of the Trust), promptly take all action as may be necessary to
discharge any liens on any part of the Trust Property that are attributable to
claims against the Owner Trustee in its individual capacity that are not related
to the ownership or the administration of the Trust Property.
Section 6.5. NO ACTION EXCEPT UNDER SPECIFIED DOCUMENTS OR
INSTRUCTIONS. The Owner Trustee shall not manage, control, use, sell, dispose
of or otherwise deal with any part of, the Trust Property except (i) in
accordance with the powers granted to and the authority conferred upon the Owner
Trustee pursuant to this Agreement, (ii) in accordance with the Related
Documents and (iii) in accordance with any document or instruction delivered to
the Owner Trustee pursuant to Section 6.3.
Section 6.6. RESTRICTIONS. The Owner Trustee shall not take any
action (a) that is inconsistent with the purposes of the Trust set forth in
Section 2.3 or (b) that, to the actual knowledge of the Owner Trustee, would
result in the Trust's becoming taxable as a corporation for Federal income tax
purposes. The Certificateholders shall not direct the Owner Trustee to take
action that would violate the provisions of this Section.
-25-
<PAGE>
Section 6.7. ADMINISTRATION AGREEMENT.
(a) The Administrator is authorized to execute on behalf of the Trust
all documents, reports, filings, instruments, certificates and opinions as
it shall be the duty of the Trust to prepare, file or deliver pursuant to
the Related Documents. Upon written request, the Owner Trustee shall
execute and deliver to the Administrator a power of attorney appointing the
Administrator its agent and attorney-in-fact to execute all such documents,
reports, filings, instruments, certificates and opinions.
(b) If the Administrator shall resign or be removed pursuant to the
terms of the Administration Agreement, the Owner Trustee may, and is hereby
authorized and empowered to, subject to obtaining the prior written consent
of JPMD, appoint or consent to the appointment of a successor Administrator
pursuant to the Administration Agreement.
(c) If the Administration Agreement is terminated, the Owner Trustee
may, and is hereby authorized and empowered to, subject to obtaining the
prior written consent of JPMD, appoint or consent to the appointment of a
Person to perform substantially the same duties as are assigned to the
Administrator in the Administration Agreement pursuant to an agreement
containing substantially the same provisions as are contained in the
Administration Agreement.
(d) The Owner Trustee shall promptly notify each Certificateholder of
any default by or misconduct of the Administrator under the Administration
Agreement of which the Owner Trustee has received written notice or of
which a Responsible Officer has actual knowledge.
ARTICLE VII
CONCERNING THE OWNER TRUSTEE
Section 7.1. ACCEPTANCE OF TRUSTEE AND DUTIES. The Owner Trustee
accepts the trusts hereby created and agrees to perform its duties hereunder
with respect to such trusts but only upon the terms of this Agreement. The
Owner Trustee also agrees to disburse all monies actually received by it
constituting part of the Trust Property upon the terms of the Related Documents
and this Agreement. The Owner Trustee shall not be answerable or accountable
hereunder or under any Related Document under any circumstances, except (i) for
its own willful misconduct or gross negligence, (ii) in the case of the
inaccuracy of any representation or warranty contained in Section 7.3, (iii) for
liabilities arising from the failure of the Owner Trustee to perform obligations
expressly undertaken by it in the last sentence of Section 6.4 hereof, (iv) for
any investments issued by the Owner Trustee or any branch or affiliate thereof
in its commercial capacity or (v) for taxes, fees or other charges on, based on
or measured by, any fees, commissions or compensation received by the Owner
-26-
<PAGE>
Trustee in connection with any of the transactions contemplated by this
Agreement or any Related Document. In particular, but not by way of limitation
(and subject to the exceptions set forth in the preceding sentence):
(a) the Owner Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer of the Owner Trustee;
(b) the Owner Trustee shall not be liable with respect to any action
taken or omitted to be taken by it in good faith in accordance with the
instructions of the Certificate Majority;
(c) no provision of this Agreement or any Related Document shall
require the Owner Trustee to expend or risk funds or otherwise incur any
financial liability in the performance of any of its rights or powers
hereunder or under any Related Document if the Owner Trustee shall have
reasonable grounds for believing that repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured or
provided to it;
(d) under no circumstances shall the Owner Trustee be liable for
indebtedness evidenced by or arising under this Agreement or any of the
Related Documents, including the principal of and interest on the
Certificates or the Notes;
(e) the Owner Trustee shall not be responsible for or in respect of
the validity or sufficiency of this Agreement or for the due execution
hereof by the Depositor or the General Partner or for the form, character,
genuineness, sufficiency, value or validity of any of the Trust Property or
for or in respect of the validity or sufficiency of the Related Documents,
other than the certificate of authentication on the Certificates, and the
Owner Trustee shall in no event assume or incur any liability, duty, or
obligation to the Custodian, the Indenture Trustee, any Noteholder or to
any Certificateholder, other than as expressly provided for herein and in
the Related Documents;
(f) the Owner Trustee shall not be liable for the default or
misconduct of the Administrator, the Custodian, the Indenture Trustee or
the Servicer under any of the Related Documents or otherwise and the Owner
Trustee shall have no obligation or liability to perform the obligations of
the Trust under this Agreement or the Related Documents that are required
to be performed by the Administrator under the Administration Agreement,
the Custodian under the Custodian Agreement, the Indenture Trustee under
the Indenture or the Servicer under the Sale and Servicing Agreement; and
(g) the Owner Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Agreement, or to institute,
conduct or defend any
-27-
<PAGE>
litigation under this Agreement or otherwise or in relation to this
Agreement or any Related Document, at the request, order or direction of
the Certificate Majority, unless such Certificate Majority has offered
to the Owner Trustee security or indemnity satisfactory to it against
the costs, expenses and liabilities that may be incurred by the Owner
Trustee therein or thereby. The right of the Owner Trustee to perform
any discretionary act enumerated in this Agreement or in any Related
Document shall not be construed as a duty, and the Owner Trustee shall
not be answerable for other than its gross negligence or willful
misconduct in the performance of any such act.
Section 7.2. FURNISHING OF DOCUMENTS. The Owner Trustee shall
furnish to the Certificateholders promptly upon receipt of a written request
therefor, duplicates or copies of all reports, notices, requests, demands,
certificates, financial statements and any other instruments furnished to the
Owner Trustee under the Related Documents unless the Certificateholders have
previously received such items.
Section 7.3. REPRESENTATIONS AND WARRANTIES. The Owner Trustee
hereby represents and warrants to the Depositor and the Certificateholders that:
(a) It is a banking corporation duly organized and validly existing
in good standing under the laws of the State of Delaware. It has all
requisite corporate power and authority and all franchises, grants,
authorizations, consents, orders and approvals from all governmental
authorities necessary to execute, deliver and perform its obligations under
this Agreement and each Related Document to which the Trust is a party.
(b) It has taken all corporate action necessary to authorize the
execution and delivery by it of this Agreement and each Related Document to
which the Trust is a party, and this Agreement and each Related Document
will be executed and delivered by one of its officers who is duly
authorized to execute and deliver this Agreement on its behalf.
(c) Neither the execution nor the delivery by it of this Agreement,
nor the consummation by it of the transactions contemplated hereby nor
compliance by it with any of the terms or provisions hereof will contravene
any Federal or Delaware law, governmental rule or regulation governing the
banking or trust powers of the Owner Trustee or any judgment or order
binding on it, or constitute any default under its charter documents or
by-laws or any indenture, mortgage, contract, agreement or instrument to
which it is a party or by which any of its properties may be bound or
result in the creation or imposition of any lien, charge or encumbrance on
the Trust Property resulting from actions by or claims against the Owner
Trustee individually which are unrelated to this Agreement or the Related
Documents.
-28-
<PAGE>
Section 7.4. RELIANCE; ADVICE OF COUNSEL.
(a) The Owner Trustee shall incur no liability to anyone in acting
upon any signature, instrument, notice, resolution, request, consent,
order, certificate, report, opinion, bond, or other document or paper
believed by it to be genuine and believed by it to be signed by the proper
party or parties. The Owner Trustee may accept a certified copy of a
resolution of the board of directors or other governing body of any
corporate party as conclusive evidence that such resolution has been duly
adopted by such body and that the same is in full force and effect. As to
any fact or matter the method of the determination of which is not
specifically prescribed herein, the Owner Trustee may for all purposes
hereof rely on a certificate, signed by the president or any vice president
or by the treasurer or other authorized officers of the relevant party, as
to such fact or matter, and such certificate shall constitute full
protection to the Owner Trustee for any action taken or omitted to be taken
by it in good faith in reliance thereon.
(b) In the exercise or administration of the trusts hereunder and in
the performance of its duties and obligations under this Agreement or the
Related Documents, the Owner Trustee (i) may act directly or through its
agents or attorneys pursuant to agreements entered into with any of them,
and the Owner Trustee shall not be liable for the conduct or misconduct of
such agents or attorneys if such agents or attorneys shall have been
selected by the Owner Trustee with reasonable care, and (ii) may consult
with counsel, accountants and other skilled persons to be selected with
reasonable care and employed by it. The Owner Trustee shall not be liable
for anything done, suffered or omitted in good faith by it in accordance
with the written opinion or advice of any such counsel, accountants or
other such persons and not contrary to this Agreement or any Related
Document.
Section 7.5. NOT ACTING IN INDIVIDUAL CAPACITY. Except as provided
in this Article VII, in accepting the trusts hereby created Wilmington Trust
Company acts solely as Owner Trustee hereunder and not in its individual
capacity and all Persons having any claim against the Owner Trustee by reason of
the transactions contemplated by this Agreement or any Related Document shall
look only to the Trust Property for payment or satisfaction thereof.
Section 7.6. OWNER TRUSTEE NOT LIABLE FOR CERTIFICATES, NOTES OR
RECEIVABLES. The recitals contained herein and in the Certificates (other than
the signature and counter-signature of the Owner Trustee on the Certificates)
shall be taken as the statements of the Depositor (other than the signature or
countersignature of the Owner Trustee on the Notes), and the Owner Trustee
assumes no responsibility for the correctness thereof. The Owner Trustee makes
no representations as to the validity or sufficiency of this Agreement, of any
Related Document or of the Certificates (other than the signature and
counter-signature of the Owner Trustee on the Certificates) or the Notes (other
than the
-29-
<PAGE>
signature or counter-signature of the Owner Trustee on the Notes), or of any
Receivable or related documents. The Owner Trustee shall at no time have any
responsibility or liability for or with respect to the legality, validity and
enforceability of any Receivable, or the perfection and priority of any
security interest created by any Receivable in any Financed Vehicle or the
maintenance of any such perfection and priority of any security interest
created by any Receivable in any Financed Vehicle or the maintenance of any
such perfection and priority, or for or with respect to the sufficiency of
the Trust Property or its ability to generate the payments to be distributed
to Certificateholders under this Agreement or the Noteholders under the
Indenture, including, without limitation: the existence, condition and
ownership of any Financed Vehicle; the existence and enforceability of any
insurance thereon; the existence and contents of any Receivable or any
computer or other record thereof; the validity of the assignment of any
Receivable to the Trust or of any intervening assignment; the completeness of
any Receivable; the performance or enforcement of any Receivable; the
compliance by the Seller or the Servicer with any warranty or representation
made under any Related Document or in any related document or the accuracy of
any such warranty or representation or any action of the Indenture Trustee,
the Custodian or the Servicer taken in the name of the Owner Trustee.
Section 7.7. OWNER TRUSTEE MAY OWN CERTIFICATES AND NOTES. The Owner
Trustee in its individual or any other capacity may become the owner or pledgee
of Certificates or Notes and may deal with the Depositors, the Seller, the
Indenture Trustee and the Servicer in banking or other transactions with the
same rights as it would have if it were not Owner Trustee.
ARTICLE VIII
COMPENSATION OF OWNER TRUSTEE
Section 8.1. OWNER TRUSTEE'S FEES AND EXPENSES. The Owner Trustee
shall receive as compensation for its services hereunder such fees as have been
separately agreed upon before the date hereof between OFL and the Owner Trustee,
and the Owner Trustee shall be entitled to be reimbursed by OFL for its other
reasonable expenses hereunder, including the reasonable compensation, expenses
and disbursements of such agents, representatives, experts and counsel as the
Owner Trustee may employ in connection with the exercise and performance of its
rights and its duties hereunder; PROVIDED, HOWEVER, that the Owner Trustee shall
only be entitled to reimbursement for expenses hereunder to the extent such
expenses (i) are fees of outside counsel engaged by the Owner Trustee in respect
of the performance of its obligations hereunder or (ii) relate to the
performance of its obligations pursuant to Section 5.5 hereof.
Section 8.2. INDEMNIFICATION. OFL shall be liable as primary obligor
for, and shall indemnify the Owner Trustee in its individual capacity and its
successors, assigns, agents and servants, and any co-trustee (including William
J. Wade) (collectively, the
-30-
<PAGE>
"Indemnified Parties") from and against, any and all liabilities,
obligations, losses, damages, taxes, claims, actions and suits, and any and
all reasonable costs, expenses and disbursements (including reasonable legal
fees and expenses) of any kind and nature whatsoever (collectively,
"Expenses") which may at any time be imposed on, incurred by, or asserted
against the Owner Trustee or any Indemnified Party in any way relating to or
arising out of this Agreement, the Related Documents, the Trust Property, the
administration of the Trust Property or the action or inaction of the Owner
Trustee hereunder, except only that OFL shall not be liable for or required
to indemnify the Owner Trustee from and against Expenses arising or resulting
from any of the matters described in the third sentence of Section 7.1. The
indemnities contained in this Section shall survive the resignation or
termination of the Owner Trustee or the termination of this Agreement.
Section 8.3. NON-RECOURSE OBLIGATIONS. Notwithstanding anything in
this Agreement or any Related Document, the Owner Trustee agrees in its
individual capacity and in its capacity as Owner Trustee for the Trust that all
obligations of the Trust to the Owner Trustee individually or as Owner Trustee
for the Trust shall be recourse to the Trust Property only and specifically
shall not be recourse to the assets of any Certificateholder.
ARTICLE IX
TERMINATION; RECAPITALIZATION
Section 9.1. TERMINATION OF THE TRUST.
(a) The respective obligations and responsibilities of the Depositor,
the General Partner and the Owner Trustee created by this Agreement and the
Trust created by this Agreement shall terminate upon the latest of (i) the
maturity or other liquidation of the last Receivable (including the
purchase as of any Accounting Date by the Seller or the Servicer at its
option of the corpus of the Trust as described in Section 9.1(a) and, if so
specified by the Seller in writing, Section 9.1(b) of the Sale and
Servicing Agreement) and the subsequent distribution of amounts in respect
of such Receivables as provided in the Related Documents, (ii) the payment
to Certificateholders of all amounts required to be paid to them pursuant
to this Agreement (other than in connection with a Securitized Offering and
an optional purchase under Section 9.1(b) of the Sale and Servicing
Agreement where the Seller has not indicated that the Trust will
terminate), or (iii) at the time provided in Section 9.2. In any case,
there shall be delivered to the Owner Trustee, the Indenture Trustee and
the Rating Agencies an Opinion of Counsel that all applicable preference
periods under federal, state and local bankruptcy, insolvency and similar
laws have expired with respect to the payments pursuant to clause (ii);
PROVIDED, HOWEVER, that in no event shall the trust created by this
Agreement continue beyond the expiration of 21 years from the death of the
last survivor of the descendants living on the date of this Agreement of
Rose Kennedy of the Commonwealth of Massachusetts; and PROVIDED,
-31-
<PAGE>
FURTHER, that the rights to indemnification under Section 8.2 shall survive
the termination of the Trust. The Servicer shall promptly notify the Owner
Trustee of any prospective termination pursuant to this Section 9.1.
Except as provided in Section 9.2, the bankruptcy, liquidation,
dissolution, termination, resignation, expulsion, withdrawal, death or
incapacity of any Certificateholder, shall not (x) operate to terminate
this Agreement or the Trust, nor (y) entitle such Certificateholder's legal
representatives or heirs to claim an accounting or to take any action or
proceeding in any court for a partition or winding up of all or any part of
the Trust or Trust Property nor (z) otherwise affect the rights,
obligations and liabilities of the parties hereto.
(b) Except as provided in Section 9.1(a), neither the Depositor nor
any Certificateholder shall be entitled to revoke or terminate the Trust.
(c) Promptly upon receipt of notice of final distribution on the
Certificates from the Seller or the Servicer given pursuant to Section 9.1
of the Sale and Servicing Agreement, the Owner Trustee shall mail written
notice to the Certificateholders specifying (i) the Distribution Date upon
which final payment of the Certificates shall be made upon presentation and
surrender of Certificates at the office of the Paying Agent therein
specified, (ii) the amount of any such final payment, and (iii) that the
Record Date otherwise applicable to such Distribution Date is not
applicable, payments being made only upon presentation and surrender of the
Certificates at the office of the Paying Agent therein specified. The
Owner Trustee shall give such notice to the Certificate Registrar at the
time such notice is given to Certificateholders. In the event such notice
is given, the Indenture Trustee shall make deposits into the Certificate
Distribution Account in accordance with Section 4.6 of the Sale and
Servicing Agreement, or, in the case of an optional purchase of Receivables
pursuant to Section 9.1 of the Sale and Servicing Agreement, shall deposit
the amount specified in Section 9.1 of the Sale and Servicing Agreement.
Upon presentation and surrender of the Certificates, the Paying Agent shall
cause to be distributed to Certificateholders amounts distributable on such
Distribution Date pursuant to Section 5.2.
(d) In the event that all of the Certificateholders shall not
surrender their Certificates for cancellation within six months after the
date specified in the above-mentioned written notice, the Owner Trustee
shall give a second written notice to the remaining Certificateholders to
surrender their Certificates for cancellation and receive the final
distribution with respect thereto. If within one year after the second
notice all the Certificates shall not have been surrendered for
cancellation, the Owner Trustee may take appropriate steps, or may appoint
an agent to take appropriate steps, to contact the remaining
Certificateholders concerning surrender of their Certificates, and the cost
thereof shall be paid out of the funds and other assets that remain subject
to this Agreement. Any funds which are payable to Certificateholders
remaining in
-32-
<PAGE>
the Trust after exhaustion of such remedies shall be distributed by the
Owner Trustee to The United Way (but only upon termination of this
Agreement), and the Certificateholders, by acceptance of their
Certificates, hereby waive any rights with respect to such funds.
(e) Upon the winding up of the Trust and its termination, the Owner
Trustee shall cause the Certificate of Trust to be canceled by filing a
certificate of cancellation with the Secretary of State in accordance with
the provisions of Section 3810 of the Business Trust Statute.
Section 9.2. DISSOLUTION EVENTS WITH RESPECT TO THE GENERAL PARTNER.
In the event that a Dissolution Event shall occur with respect to the General
Partner, the Trust will terminate unless, within 90 days after the occurrence of
the Dissolution Event with respect to the General Partner (x) a Certificate
Majority agrees in writing to continue the business of the Trust and to the
appointment of a Person to hold the General Partner Certificates and to assume
the liabilities incident thereto and (y) the Owner Trustee requests and obtains
an opinion of counsel to the effect that a failure to terminate the Trust upon
the occurrence of such Dissolution Event (and the transfer, if any, of the
General Partner Certificates held by the General Partner that has suffered such
Dissolution Event) will not cause the Trust to be treated as an association (or
publicly traded partnership) taxable as a corporation for federal income tax
purposes. Promptly after the occurrence of the events referred to in the
preceding sentence, (i) the General Partner shall give the Indenture Trustee and
the Owner Trustee written notice of the occurrence of such event, (ii) the Owner
Trustee shall, upon the receipt of such written notice, give prompt written
notice to the Certificateholders and the Indenture Trustee of the occurrence of
such event and (iii) the Indenture Trustee shall, upon receipt of written notice
of the occurrence of such event from the Owner Trustee or the Seller, give
prompt written notice to the Noteholders of the occurrence of such event;
PROVIDED, HOWEVER, that any failure to give a notice required by this sentence
shall not prevent or delay, in any manner, a termination of the Trust pursuant
to the first sentence of this Section 9.2. Upon a termination pursuant to this
Section, the Owner Trustee shall direct the Indenture Trustee to sell the assets
of the Trust (other than the Trust Accounts) at one or more private or public
sales conducted in any manner permitted by law. The proceeds of such a sale of
the assets of the Trust shall be distributed as provided in Section 9.1(b) of
the Sale and Servicing Agreement.
Section 9.3. SECURITIZED OFFERING.
(a) The Certificates shall be subject to redemption, upon not less
than ten days prior notice from the General Partner to the Owner Trustee,
in connection with a Securitized Offering, PROVIDED that funds sufficient
to repay the Certificate Balance of the Investor Certificates and all
accrued interest on the Certificates are deposited in the Certificate
Distribution Account on or prior to the date of such Securitized Offering
and distributed to the Certificateholders in accordance with
Section 5.2(b).
-33-
<PAGE>
(b) Promptly upon receipt of notice of a Securitized Offering from
the General Partner, the Owner Trustee shall notify the Certificateholders
specifying (i) the date upon which final payment of the Certificates shall
be made upon presentation and surrender of Certificates at the office of
the Paying Agent therein specified, (ii) the amount of any such final
payment, and (iii) that the Record Date otherwise applicable to any
concurrent Distribution Date is not applicable, payments being made only
(unless such condition is waived by the General Partner) upon presentation
and surrender of the Certificates at the office of the Paying Agent therein
specified. Upon presentation and surrender of the Certificates (or without
presentation and surrender, if waived by the General Partner), the Paying
Agent shall cause to be distributed to Certificateholders amounts
distributable in connection with such Securitized Offering pursuant to
Section 5.2. Following any such distribution in connection with a
Securitized Offering, each Investor Certificateholder that has not
presented and surrendered its Certificate as described above shall do so
promptly, and the Investor Certificates shall be of no further force and
effect, whether or not so presented and surrendered.
ARTICLE X
SUCCESSOR OWNER TRUSTEES AND ADDITIONAL OWNER TRUSTEES
Section 10.1. ELIGIBILITY REQUIREMENTS FOR OWNER TRUSTEE. The Owner
Trustee shall at all times be a corporation (i) satisfying the provisions of
Section 3807(a) of the Business Trust Statute; (ii) authorized to exercise
corporate trust powers; (iii) having a combined capital and surplus of at least
$50,000,000 and subject to supervision or examination by Federal or State
authorities; and (iv) having (or having a parent which has) a rating of at least
Baa3 by Moody's or BBB by Standard & Poor's. If such corporation shall publish
reports of condition at least annually, pursuant to law or to the requirements
of the aforesaid supervising or examining authority, then for the purpose of
this Section, the combined capital and surplus of such corporation shall be
deemed to be its combined capital and surplus as set forth in its most recent
report of condition so published. In case at any time the Owner Trustee shall
cease to be eligible in accordance with the provisions of this Section, the
Owner Trustee shall resign immediately in the manner and with the effect
specified in Section 10.2.
Section 10.2. RESIGNATION OR REMOVAL OF OWNER TRUSTEE. The Owner
Trustee may at any time resign and be discharged from the trusts hereby created
by giving written notice thereof to the General Partner and the Servicer at
least 30 days before the date specified in such instrument. Upon receiving such
notice of resignation, the General Partner shall promptly appoint a successor
Owner Trustee meeting the qualifications set forth in Section 10.1 by written
instrument, in duplicate, one copy of which instrument shall be delivered to the
resigning Owner Trustee and one copy to the successor Owner Trustee. If no
successor Owner Trustee shall have been so appointed and have accepted
appointment
-34-
<PAGE>
within 30 days after the giving of such notice of resignation, the resigning
Owner Trustee may petition any court of competent jurisdiction for the
appointment of a successor Owner Trustee.
If at any time the Owner Trustee shall cease to be eligible in
accordance with the provisions of Section 10.1 and shall fail to resign after
written request therefor by the General Partner or if at any time the Owner
Trustee shall be legally unable to act, or shall be adjudged bankrupt or
insolvent, or a receiver of the Owner Trustee or of its property shall be
appointed, or any public officer shall take charge or control of the Owner
Trustee or of its property or affairs for the purpose of rehabilitation,
conservation or liquidation, then the General Partner, with the consent of JPMD
may remove the Owner Trustee. If the General Partner shall remove the Owner
Trustee under the authority of the immediately preceding sentence, the General
Partner shall promptly appoint a successor Owner Trustee meeting the
qualification requirements of Section 10.1 by written instrument, in duplicate,
one copy of which instrument shall be delivered to the outgoing Owner Trustee so
removed and one copy to the successor Owner Trustee and payment of all fees owed
to the outgoing Owner Trustee.
Any resignation or removal of the Owner Trustee and appointment of a
successor Owner Trustee pursuant to any of the provisions of this Section shall
not become effective until all fees and expenses, including any indemnity
payments, due to the outgoing Owner Trustee have been paid and until acceptance
of appointment by the successor Owner Trustee pursuant to Section 10.3. The
General Partner shall provide notice of such resignation or removal of the Owner
Trustee to each of the Rating Agencies.
Section 10.3. SUCCESSOR OWNER TRUSTEE. Any successor Owner Trustee
appointed pursuant to Section 10.2 shall execute, acknowledge and deliver to the
General Partner and to its predecessor Owner Trustee an instrument accepting
such appointment under this Agreement, and thereupon the resignation or removal
of the predecessor Owner Trustee shall become effective and such successor Owner
Trustee, without any further act, deed or conveyance, shall become fully vested
with all the rights, powers, duties, and obligations of its predecessor under
this Agreement, with like effect as if originally named as Owner Trustee. The
predecessor Owner Trustee shall deliver to the successor Owner Trustee all
documents and statements and monies held by it under this Agreement; and the
General Partner and the predecessor Owner Trustee shall execute and deliver such
instruments and do such other things as may reasonably be required for fully and
certainly vesting and confirming in the successor Owner Trustee all such rights,
powers, duties, and obligations.
No successor Owner Trustee shall accept appointment as provided in
this Section unless at the time of such acceptance such successor Owner Trustee
shall be eligible pursuant to Section 10.1.
-35-
<PAGE>
Upon acceptance of appointment by a successor Owner Trustee pursuant
to this Section, the General Partner shall mail notice of the successor of such
Owner Trustee to all Certificateholders, the Indenture Trustee, the Noteholders
and the Rating Agencies. If the General Partner shall fail to mail such notice
within 10 days after acceptance of appointment by the successor Owner Trustee,
the successor Owner Trustee shall cause such notice to be mailed at the expense
of the General Partner.
Section 10.4. MERGER OR CONSOLIDATION OF OWNER TRUSTEE. Any
corporation into which the Owner Trustee may be merged or converted or with
which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Owner Trustee shall be a party, or any
corporation succeeding to all or substantially all of the corporate trust
business of the Owner Trustee, shall be the successor of the Owner Trustee
hereunder, provided such corporation shall be eligible pursuant to Section 10.1,
without the execution or filing of any instrument or any further act on the part
of any of the parties hereto, anything herein to the contrary notwithstanding,
and provided further that the Owner Trustee shall mail notice of such merger or
consolidation to the Rating Agencies.
Section 10.5. APPOINTMENT OF CO-TRUSTEE OR SEPARATE TRUSTEE.
Notwithstanding any other provisions of this Agreement, at any time, for the
purpose of meeting any legal requirements of any jurisdiction in which any part
of the Trust Property or any Financed Vehicle may at the time be located, the
Administrator and the Owner Trustee acting jointly shall have the power and
shall execute and deliver all instruments to appoint one or more Persons
approved by the Owner Trustee to act as co-trustee, jointly with the Owner
Trustee, or separate trustee or separate trustees, of all or any part of the
Trust Property, and to vest in such Person, in such capacity, such title to the
Trust, or any part thereof, and, subject to the other provisions of this
Section, such powers, duties, obligations, rights and trusts as the
Administrator and the Owner Trustee may consider necessary or desirable. If the
Administrator shall not have joined in such appointment within 15 days after the
receipt by it of a request so to do, the Owner Trustee shall have the power to
make such appointment. No co-trustee or separate trustee under this Agreement
shall be required to meet the terms of eligibility as a successor trustee
pursuant to Section 10.1 and no notice of the appointment of any co-trustee or
separate trustee shall be required pursuant to Section 10.1.
Each separate trustee and co-trustee shall, to the extent permitted by
law, be appointed and act subject to the following provisions and conditions:
(i) all rights, powers, duties, and obligations conferred or imposed
upon the Owner Trustee shall be conferred upon and exercised or performed
by the Owner Trustee and such separate trustee or co-trustee jointly (it
being understood that such separate trustee or co-trustee is not authorized
to act separately without the Owner Trustee joining in such act), except to
the extent that under any law of any
-36-
<PAGE>
jurisdiction in which any particular act or acts are to be performed the
Owner Trustee shall be incompetent or unqualified to perform such act or
acts, in which event such rights, powers, duties, and obligations
(including the holding of title to the Trust Property or any portion
thereof in any such jurisdiction) shall be exercised and performed singly
by such separate trustee or co-trustee, but solely at the direction of the
Owner Trustee;
(ii) no trustee under this Agreement shall be personally liable by
reason of any act or omission of any other trustee under this Agreement;
and
(iii) the Administrator and the Owner Trustee acting jointly may at
any time accept the resignation of or remove any separate trustee or
co-trustee.
Any notice, request or other writing given to the Owner Trustee shall
be deemed to have been given to each of the then separate trustees and
co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Agreement and
the conditions of this Article. Each separate trustee and co-trustee, upon its
acceptance of the trusts conferred, shall be vested with the estates or property
specified in its instrument of appointment, either jointly with the Owner
Trustee or separately, as may be provided therein, subject to all the provisions
of this Agreement, specifically including every provision of this Agreement
relating to the conduct of, affecting the liability of, or affording protection
to, the Owner Trustee. Each such instrument shall be filed with the Owner
Trustee and a copy thereof given to the Administrator.
Any separate trustee or co-trustee may at any time appoint the Owner
Trustee, its agent or attorney-in-fact with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of this
Agreement on its behalf and in its name. If any separate trustee or co-trustee
shall die, become incapable of acting, resign or be removed, all of its estates,
properties, rights, remedies and trusts shall vest in and be exercised by the
Owner Trustee, to the extent permitted by law, without the appointment of a new
or successor trustee.
ARTICLE XI
MISCELLANEOUS PROVISIONS
Section 11.1. AMENDMENT.
(a) This Agreement may be amended by the Depositor, the General
Partner and the Owner Trustee, but without the consent of any of the
Investor Certificateholders or Noteholders, (i) to cure any ambiguity, or
(ii) to correct, supplement or modify any provisions in this Agreement;
PROVIDED, HOWEVER, that such
-37-
<PAGE>
action shall not, as evidenced by an Opinion of Counsel, adversely affect
in any material respect the interests of any Certificateholder or
Noteholder. In addition, this Agreement and any Related Document may be
amended by the Depositor, the General Partner and the Owner Trustee (or,
in the case of a Related Document, the parties thereto), but without the
consent of any of the Investor Certificateholders, in connection with any
Securitized Offering, so long as it is a condition precedent to the
effectiveness of such amendment that the Certificate Balance and all
interest accrued on the Certificates be paid in full and that any
commitment to purchase additional Certificates or Notes under the
Certificate Purchase Agreement or the Note Purchase Agreement,
respectively, has been terminated.
(b) This Agreement may also be amended from time to time by the
Depositor, the General Partner and the Owner Trustee with the consent of a
Certificate Majority and, if such amendment materially and adversely
affects the interests of Noteholders, the consent of a Note Majority (which
consent of any Holder of a Certificate or Note given pursuant to this
Section or pursuant to any other provision of this Agreement shall be
conclusive and binding on such Holder and on all future Holders of such
Investor Certificate or Note and of any Investor Certificate or Note issued
upon the transfer thereof or in exchange thereof or in lieu thereof whether
or not notation of such consent is made upon the Investor Certificate or
Note) for the purpose of adding any provisions to or changing in any manner
or eliminating any of the provisions of this Agreement, or of modifying in
any manner the rights of the Holders of Certificates or Notes; PROVIDED,
HOWEVER, that, no such amendment shall (a) increase or reduce in any manner
the amount of, or accelerate or delay the timing of, collections of
payments on Receivables or distributions that shall be required to be made
on any Certificate or Note or the Certificate Rate or the Note Interest
Rate or (b) reduce the aforesaid percentage required to consent to any such
amendment or any waiver hereunder, without the consent of the Holders of
all Certificates and Notes then outstanding.
(c) Prior to the execution of any such amendment or consent (other
than an amendment described in the final sentence of Section 11.1(a)), the
General Partner shall furnish written notification of the substance of such
amendment or consent to each Rating Agency.
(d) Promptly after the execution of any such amendment or consent
(other than an amendment described in the final sentence of Section
11.1(a)), the Owner Trustee shall furnish written notification of the
substance of such amendment or consent to each Certificateholder and the
Indenture Trustee unless such parties have previously received such
notification.
(e) It shall not be necessary for the consent of Certificateholders
or Noteholders pursuant to Section 11.1(b) to approve the particular form
of any
-38-
<PAGE>
proposed amendment or consent, but it shall be sufficient if such consent
shall approve the substance thereof. The manner of obtaining such
consents (and any other consents of Certificateholders and Noteholders
provided for in this Agreement) and of evidencing the authorization of the
execution thereof by Certificateholders shall be subject to such reasonable
requirements as the Owner Trustee may prescribe, including the
establishment of record dates.
(f) Prior to the execution of any amendment to this Agreement (other
than an amendment described in the final sentence of Section 11.1(a)), the
Owner Trustee shall be entitled to receive and rely upon an Opinion of
Counsel stating that the execution of such amendment is authorized or
permitted by this Agreement and that all conditions precedent to the
execution and delivery of such amendment have been satisfied. The Owner
Trustee may, but shall not be obligated to, enter into any such amendment
which affects the Owner Trustee's own rights, duties or immunities under
this Agreement or otherwise.
Section 11.2. NO RECOURSE. Each Certificateholder by accepting a
Certificate acknowledges that such Certificateholder's Certificates represent
beneficial interests in the Trust only and do not represent interests in or
obligations of the Seller, the General Partner, the Servicer, the Owner Trustee,
the Indenture Trustee or any Affiliate of any of the foregoing and no recourse
may be had against such parties or their assets, except as may be expressly set
forth or contemplated in this Agreement, the Certificates or the Related
Documents.
Section 11.3. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware without regard to
the principles of conflicts of laws thereof and the obligations, rights and
remedies of the parties under this Agreement shall be determined in accordance
with such laws.
Section 11.4. SEVERABILITY OF PROVISIONS. If any one or more of the
covenants, agreements, provisions or terms of this Agreement shall be for any
reason whatsoever held invalid, then such covenants, agreements, provisions or
terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement or of the Certificates
or the rights of the Holders thereof.
Section 11.5. CERTIFICATES NONASSESSABLE AND FULLY PAID.
Certificateholders shall not, except as expressly provided for herein with
respect to the General Partner, be personally liable for obligations of the
Trust, the fractional undivided interests in the Trust represented by the
Certificates shall be nonassessable for any losses or expenses of the Trust or
for any reason whatsoever, and Certificates upon execution thereof by the Owner
Trustee pursuant to Section 3.3 are and shall be deemed fully paid.
-39-
<PAGE>
Section 11.6. THIRD-PARTY BENEFICIARIES. This Agreement shall inure
to the benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns. Except as otherwise provided in this
Agreement, no other Person shall have any right or obligation hereunder.
Section 11.7. COUNTERPARTS. For the purpose of facilitating its
execution and for other purposes, this Agreement may be executed simultaneously
in any number of counterparts, each of which counterparts shall be deemed to be
an original, and all of which counterparts shall constitute but one and the same
instrument.
Section 11.8. NOTICES. All demands, notices and communications under
this Agreement shall be in writing, personally delivered or mailed by certified
mail-return receipt requested, and shall be deemed to have been duly given upon
receipt (a) in the case of the General Partner or the Depositor, at the
following address: 7825 Washington Avenue South, Minneapolis, Minnesota
55439-2435, with copies to: Olympic Financial Ltd., 7825 Washington Avenue
South, Minneapolis, Minnesota 55439-2435, Attention: President, (b) in the
case of the Owner Trustee, at the Corporate Trust Office and (c) in the case of
JPMD, at the following address: 902 Market Street, Wilmington, Delaware 19801,
Attention: Asset Finance Group, or at such other address as shall be designated
by any such party in a written notice to the other parties. Notwithstanding the
foregoing, any notice required or permitted to be mailed to a Certificateholder
shall be given by first class mail, postage prepaid, at the address of such
Holder as shown in the Certificate Register, and any notice so mailed within the
time prescribed in this Agreement shall be conclusively presumed to have been
duly given, whether or not the Certificateholder receives such notice.
-40-
<PAGE>
IN WITNESS WHEREOF, the Depositor, the General Partner and the Owner
Trustee have caused this Trust Agreement to be duly executed by their respective
officers as of the day and year first above written.
OLYMPIC RECEIVABLES FINANCE CORP. II
By /s/ John A. Witham
----------------------------------------------------
Name: John A. Witham
Title: Senior Vice President and
Chief Financial Officer
WILMINGTON TRUST COMPANY
By____________________________________________________
Name: Emmett R. Harmon
Title: Vice President
<PAGE>
IN WITNESS WHEREOF, the Depositor, the General Partner and the Owner
Trustee have caused this Trust Agreement to be duly executed by their respective
officers as of the day and year first above written.
OLYMPIC RECEIVABLES FINANCE CORP. II
By____________________________________________________
Name: John A. Witham
Title: Senior Vice President and
Chief Financial Officer
WILMINGTON TRUST COMPANY
By /s/ Emmett R. Harmon
----------------------------------------------------
Name: Emmett R. Harmon
Title: Vice President
<PAGE>
EXHIBIT A
CERTIFICATE OF TRUST OF
OLYMPIC AUTOMOBILE RECEIVABLES WAREHOUSE TRUST
THIS Certificate of Trust of OLYMPIC AUTOMOBILE RECEIVABLES WAREHOUSE
TRUST (the "Trust"), dated as of December 28, 1995, is being duly executed and
filed by Wilmington Trust Company, a Delaware corporation, as trustee, to form a
business trust under the Delaware Business Trust Act (12 DEL. CODE, Section 3801
ET SEQ.).
1. NAME. The name of the business trust formed hereby is OLYMPIC
AUTOMOBILE RECEIVABLES WAREHOUSE TRUST.
2. DELAWARE TRUSTEE. The name and business address of the trustee
of the Trust in the State of Delaware is Wilmington Trust Company, Rodney Square
North, 1100 North Market Street, Wilmington, Delaware 19890-0001, Attention:
Corporate Trust Administration.
3. This Certificate of Trust will be effective December 28, 1995.
IN WITNESS WHEREOF, the undersigned, being the sole trustee of the
Trust, has executed this Certificate of Trust as of the date first above
written.
Wilmington Trust Company, not in its individual
capacity but solely as owner trustee under a Trust
Agreement dated as of December 28, 1995.
By____________________________________________________
Name: Emmett R. Harmon
Title: Vice President
<PAGE>
EXHIBIT B
[FORM OF CERTIFICATE]
OLYMPIC AUTOMOBILE RECEIVABLES WAREHOUSE TRUST
VARIABLE FUNDING CERTIFICATE
THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), IN RELIANCE UPON EXEMPTIONS PROVIDED BY
THE SECURITIES ACT. NO RESALE OR OTHER TRANSFER OF THIS CERTIFICATE MAY BE MADE
EXCEPT IN COMPLIANCE WITH THE REGISTRATION PROVISIONS UNDER STATE BLUE SKY OR
SECURITIES LAWS OR PURSUANT TO AN AVAILABLE EXEMPTION FROM SUCH PROVISIONS. THE
TRANSFER OF THIS CERTIFICATE IS SUBJECT TO CERTAIN CONDITIONS SET FORTH IN THE
TRUST AGREEMENT REFERRED TO HEREIN.
THE CERTIFICATES MAY NOT BE ACQUIRED BY (A) AN EMPLOYEE BENEFIT PLAN
(AS DEFINED IN SECTION 3(3) OF ERISA) THAT IS SUBJECT TO THE PROVISIONS OF TITLE
1 OF ERISA, (B) A PLAN DESCRIBED IN SECTION 4975(E)(1) OF THE CODE OR (C) ANY
ENTITY WHOSE UNDERLYING ASSETS INCLUDE PLAN ASSETS BY REASON OF A PLAN'S
INVESTMENT IN THE ENTITY (EACH, A "BENEFIT PLAN"). BY ACCEPTING AND HOLDING
THIS CERTIFICATE, THE HOLDER HEREOF SHALL BE DEEMED TO HAVE REPRESENTED AND
WARRANTED THAT IT IS NOT A BENEFIT PLAN.
OLYMPIC RECEIVABLES FINANCE CORP. II MAY PREVENT ANY TRANSFER,
PARTICIPATION OR OTHER DISPOSITION OF ANY INTEREST IN THIS CERTIFICATE IF
OLYMPIC RECEIVABLES FINANCE CORP. II, IN ITS SOLE AND ABSOLUTE DISCRETION,
DETERMINES THAT SUCH TRANSFER, PARTICIPATION OR OTHER DISPOSITION, IF EFFECTED,
WOULD CAUSE THE TRUST TO BE TREATED AS A PUBLICLY TRADED PARTNERSHIP UNDER
SECTION 7704 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED, OR THE TREASURY
REGULATIONS ISSUED THEREUNDER.
This Certificate evidences a fractional undivided interest in the
Trust, as defined below, the property of which includes certain retail
installment sale contracts and promissory notes secured by new and used
automobiles and light trucks and sold to the Trust by Olympic Receivables
Finance Corp. II
(This Certificate does not represent an obligation of, or an interest
in, Olympic Receivables Finance Corp. II, Olympic Financial Ltd. or any
affiliate of either of them.)
Certificate No. Certificate Balance: $
<PAGE>
OWNER TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Certificates referred to in the within-mentioned
Trust Agreement.
WILMINGTON TRUST COMPANY, WILMINGTON TRUST COMPANY,
not in its individual capacity but not in its individual capacity but
solely as Owner Trustee or solely as Owner Trustee
By Wilmington Trust Company,
Authenticating Agent
by_________________________________ by________________________________
-2-
<PAGE>
THIS CERTIFIES THAT______________________________is the registered
owner of a nonassessable, fully-paid, fractional undivided interest in the
Olympic Automobile Receivables Warehouse Trust (the "Trust"). The Trust was
created pursuant to a Trust Agreement, dated as of December 28, 1995 (the
"Trust Agreement"), between Olympic Receivables Finance Corp. II and Wilmington
Trust Company, not in its individual capacity but solely as owner trustee (the
"Owner Trustee"). To the extent not otherwise defined herein, the capitalized
terms used herein have the meanings assigned to them in the Trust Agreement or
the Sale and Servicing Agreement, dated as of December 28, 1995 (the "Sale and
Servicing Agreement"), among the Trust, Olympic Receivables Finance Corp. II
(the "Seller"), Olympic Financial Ltd., in its individual capacity and as
servicer ("OFL" or the "Servicer"), and Norwest Bank Minnesota, National
Association, as backup servicer, as applicable.
This Certificate is one of the duly authorized Certificates designated
as "Variable Funding Certificates" (herein called the "Certificates"). The
Trust has also issued under the Indenture, dated as of December 28, 1995, among
the Trust and Norwest Bank Minnesota, National Association, as trustee and
indenture collateral agent, Notes designated as Variable Funding Notes (the
"Notes"). This Certificate is issued under and is subject to the terms,
provisions and conditions of the Trust Agreement, to which Trust Agreement the
holder of this Certificate by virtue of the acceptance hereof assents and by
which such holder is bound.
[ADD GRID AND REFERENCE TO SAME.]
The Seller has structured the Agreement, the Certificates and the
Trust with the intention that the Certificates will qualify under applicable tax
law as indebtedness of the Seller, and both the Seller and each holder of a
Certificate or any interest therein by acceptance of its certificate or any
interest therein, agrees to treat the Certificates as indebtedness for purposes
of federal, state and local income or franchise taxes and any other tax imposed
on or measured by income.
The recitals contained herein shall be taken as the statements of the
Depositor, the General Partner or the Servicer, as the case may be, and the
Owner Trustee assumes no responsibility for the correctness thereof. The Owner
Trustee makes no representations as to the validity or sufficiency of this
Certificate or of any Receivable or related document.
Unless the certificate of authentication hereon shall have been
executed by an authorized officer of the Owner Trustee, by manual or facsimile
signature, this Certificate shall not entitle the holder hereof to any benefit
under the Trust Agreement or the Sale and Servicing Agreement or be valid for
any purpose.
B-3
<PAGE>
IN WITNESS WHEREOF, the Owner Trustee on behalf of the Trust and not
in its individual capacity has caused this Certificate to be duly executed.
Dated:______, 199_ OLYMPIC AUTOMOBILE RECEIVABLES
WAREHOUSE TRUST
By: WILMINGTON TRUST COMPANY,
not in its individual capacity but solely
as Owner Trustee
By:_________________________________________
Name:
Title:
Attest:
_______________
Name:
Title:
B-4
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers
unto
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
OF ASSIGNEE
(Please print or typewrite name and address, including postal zip code, of
assignee)
the within Certificate, and all rights thereunder, hereby irrevocably
constituting and appointing
Attorney to transfer said Certificate on the books of the Certificate Registrar,
with full power of substitution in the premises.
Dated:
* ______________________________________________
Signature Guaranteed:
* ______________________________________________
*NOTICE: The signature to this assignment must correspond with the name as it
appears upon the face of the within Certificate in every particular, without
alteration, enlargement or any change whatsoever. Such signature must be
guaranteed by a member firm of The New York Stock Exchange, Inc. or a commercial
bank or trust company.
B-5
<PAGE>
EXECUTION COPY
AMENDMENT
Dated as of June 12, 1996
to
TRUST AGREEMENT
Dated as of December 28, 1995
between
OLYMPIC RECEIVABLES FINANCE CORP. II
and
WILMINGTON TRUST COMPANY
Owner Trustee
OLYMPIC AUTOMOBILE RECEIVABLES WAREHOUSE TRUST
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I
DEFINITIONS
ARTICLE II
AMENDMENT
SECTION 2.1. Amendment to Section 1.1 of the Trust Agreement . . . . . 1
SECTION 2.2. Amendment to Section 3.2 of the Trust Agreement . . . . . 1
SECTION 2.3. Amendment to Section 6.1 of the Trust Agreement . . . . . 2
SECTION 2.4. Amendment to Section 11.8 of the Trust Agreement. . . . . 2
ARTICLE III
MISCELLANEOUS
SECTION 3.1. Counterparts. . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 3.2. Governing Law; Entire Agreement . . . . . . . . . . . . . 2
SECTION 3.3. Headings. . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 3.4. Trust Agreement in Full Force and Effect as Amended . . . 2
-i-
<PAGE>
AMENDMENT dated as of June 12, 1996 (the "AMENDMENT") to TRUST AGREEMENT
dated as of December 28, 1995 (the "TRUST AGREEMENT"), between Olympic
Receivables Finance Corp. II, a Delaware corporation (the "SELLER"), and
Wilmington Trust Company, a Delaware Corporation, as Owner Trustee (in such
capacity, the "OWNER TRUSTEE").
WHEREAS, the Depositor, the General Partner and the Owner Trustee have
entered into the Trust Agreement;
WHEREAS, pursuant to Section 11.1(b) of the Trust Agreement, the Depositor,
the General Partner and the Owner Trustee desire to amend the Trust Agreement in
certain respects as provided below;
WHEREAS, a Certificate Majority and a Note Majority each has consented to
the terms of this Amendment as required by Section 11.1(b) of the Trust
Agreement;
WHEREAS, it is the intent of the parties that this Amendment be effective
as of the date set forth above (the "EFFECTIVENESS DATE");
NOW, THEREFORE, the parties to this Amendment hereby agree as follows:
ARTICLE I
DEFINITIONS
Unless otherwise defined herein or the context otherwise requires, defined
terms used herein shall have the meanings ascribed thereto in the Trust
Agreement.
ARTICLE II
AMENDMENT
SECTION 2.1. AMENDMENT TO SECTION 1.1 OF THE TRUST AGREEMENT. The
definition of "MAXIMUM CERTIFICATE BALANCE" in Section 1.1 of the Trust
Agreement is hereby amended to read in its entirety as follows:
MAXIMUM CERTIFICATE BALANCE: $29,700,000.
<PAGE>
SECTION 2.2. AMENDMENT TO SECTION 3.2 OF THE TRUST AGREEMENT.
(a) Section 3.2 of the Trust Agreement is hereby amended by deleting the
reference to the amount "$200,000" and substituting therefor "$300,000."
(b) Section 3.2 of the Trust Agreement is hereby further amended by adding
the following new subsection (c):
(c) Following a Trust Property Liquidation Date and payment in full
of the Notes and Investor Certificates and any other expenses of the Trust,
the General Partner may instruct the Owner Trustee to pay to the General
Partner all or any portion of the funds remaining in the Collection
Account. The principal balance of the General Partner Certificates will be
reduced by any amount so paid, and will thereafter be increased by any
amount of funds deposited by the General Partner in the Collection Account.
No Investor Certificates may thereafter be issued pursuant to Section
3.2(b) unless the General Partner Certificates represent in excess of 1% of
the Maximum Certificate Balance.
SECTION 2.3. AMENDMENT TO SECTION 6.1 OF THE TRUST AGREEMENT. Section 6.1
of the Trust Agreement is hereby amended by deleting the reference to the amount
"$200,000,000" and substituting therefor "$300,000,000."
SECTION 2.4. AMENDMENT TO SECTION 11.8 OF THE TRUST AGREEMENT. Section
11.8 of the Trust Agreement is hereby amended by deleting the words "902 Market
Street, Wilmington, Delaware 19801" and substituting therefor "500 Stanton
Christiana Road, Newark, Delaware 19713-2107."
ARTICLE III
MISCELLANEOUS
SECTION 3.1. COUNTERPARTS. This Amendment may be executed by the parties
hereto in several counterparts, each of which shall be deemed to be an original
and all of which shall constitute together but one and the same agreement. This
Amendment shall become effective when the Owner Trustee shall have received
(a) counterparts hereof executed on behalf of the Seller, the General Partner
and the Owner Trustee, (b) the consents of JPMD, as sole Certificateholder, and
as Administrative Agent for Delaware Funding Corporation, the sole Noteholder,
to the terms of this Amendment and (c) evidence of written notice to each of
S & P, Moody's and Norwest Bank Minnesota, National Association, as Indenture
Trustee, of this Amendment.
SECTION 3.2. GOVERNING LAW; ENTIRE AGREEMENT. THIS AMENDMENT SHALL BE
DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE
-2-
<PAGE>
INTERNAL LAWS OF THE STATE OF DELAWARE. This Amendment and the Trust
Agreement (and all exhibits, annexes and schedules thereto) constitute the
entire understanding among the parties hereto with respect to the subject
matter hereof and supersede any prior agreements, written or oral, with
respect thereto.
SECTION 3.3. HEADINGS. The various headings of this Amendment are
inserted for convenience only and shall not affect the meaning or interpretation
of this Amendment or any provisions hereof or thereof.
SECTION 3.4. TRUST AGREEMENT IN FULL FORCE AND EFFECT AS AMENDED. Except
as specifically stated herein, all of the terms and conditions of the Trust
Agreement shall remain in full force and effect. All references to the Trust
Agreement in any other document or instrument shall be deemed to mean the Trust
Agreement, as amended by this Amendment. This Amendment shall not constitute a
novation of the Trust Agreement, but shall constitute an amendment thereto. The
parties hereto agree to be bound by the terms and obligations of the Trust
Agreement, as amended by this Amendment, as though the terms and conditions of
the Trust Agreement were set forth herein.
-3-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their authorized officers, all as of the date and
year first above written.
DEPOSITOR AND GENERAL PARTNER:
OLYMPIC RECEIVABLES FINANCE CORP. II
By: __________________________________
Name:
Title:
OWNER TRUSTEE:
WILMINGTON TRUST COMPANY
not in its individual capacity but solely as
Owner Trustee
By: __________________________________
Name:
Title:
CONSENTS:
MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as sole Certificateholder, and as
Administrative Agent for Delaware Funding Corporation, as sole Noteholder
By:
Name:
Title:
-4-
<PAGE>
EXECUTION COPY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
OLYMPIC AUTOMOBILE RECEIVABLES WAREHOUSE TRUST
Variable Funding Notes
-----------------------------------
INDENTURE
Dated as of December 28, 1995
-----------------------------------
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
Trustee
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions. . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.02. Rules of Construction. . . . . . . . . . . . . . . . . . 9
ARTICLE II
THE NOTES
SECTION 2.01. Form . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 2.02. Execution, Authentication and Delivery . . . . . . . . . 10
SECTION 2.03. Additional Issuances . . . . . . . . . . . . . . . . . . 11
SECTION 2.04. Registration; Registration of Transfer and Exchange. . . 11
SECTION 2.05. Mutilated, Destroyed, Lost or Stolen Notes . . . . . . . 13
SECTION 2.06. Person Deemed Owner. . . . . . . . . . . . . . . . . . . 14
SECTION 2.07. Payment of Principal and Interest; Defaulted Interest. . 14
SECTION 2.08. Cancellation . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE III
COVENANTS
SECTION 3.01. Payment of Principal, Interest and Premium . . . . . . . 15
SECTION 3.02. Maintenance of Office or Agency. . . . . . . . . . . . . 15
SECTION 3.03. Money for Payments To Be Held in Trust . . . . . . . . . 16
SECTION 3.04. Existence. . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 3.05. Protection of Trust Estate . . . . . . . . . . . . . . . 17
SECTION 3.06. Opinions as to Trust Estate. . . . . . . . . . . . . . . 18
SECTION 3.07. Performance of Obligations; Servicing of Receivables . . 18
SECTION 3.08. Negative Covenants . . . . . . . . . . . . . . . . . . . 19
SECTION 3.09. Annual Statement as to Compliance. . . . . . . . . . . . 20
SECTION 3.10. Issuer May Consolidate, etc. Only on Certain Terms . . . 20
SECTION 3.11. Successor or Transferee. . . . . . . . . . . . . . . . . 22
SECTION 3.12. No Other Business. . . . . . . . . . . . . . . . . . . . 22
SECTION 3.13. No Borrowing . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 3.14. Servicer's Obligations . . . . . . . . . . . . . . . . . 23
- i -
<PAGE>
Page
----
SECTION 3.15. Guarantees, Loans, Advances and Other Liabilities. . . . 23
SECTION 3.16. Capital Expenditures . . . . . . . . . . . . . . . . . . 23
SECTION 3.17. Restricted Payments. . . . . . . . . . . . . . . . . . . 23
SECTION 3.18. Notice of Events of Default. . . . . . . . . . . . . . . 23
SECTION 3.19. Further Instruments and Acts . . . . . . . . . . . . . . 24
SECTION 3.20. Compliance with Laws . . . . . . . . . . . . . . . . . . 24
SECTION 3.21. Amendments of Sale and Servicing Agreement and Trust
Agreement. . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 3.22. [Reserved] . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 3.23. Income Tax Characterization. . . . . . . . . . . . . . . 24
ARTICLE IV
SATISFACTION AND DISCHARGE
SECTION 4.01. Satisfaction and Discharge of Indenture. . . . . . . . . 24
SECTION 4.02. Application of Trust Money . . . . . . . . . . . . . . . 25
SECTION 4.03. Repayment of Moneys Held by Paying Agent . . . . . . . . 25
SECTION 4.04. Release of Trust Estate. . . . . . . . . . . . . . . . . 25
ARTICLE V
REMEDIES
SECTION 5.01. Events of Default. . . . . . . . . . . . . . . . . . . . 26
SECTION 5.02. Rights upon Event of Default . . . . . . . . . . . . . . 27
SECTION 5.03. Collection of Indebtedness and Suits for Enforcement by
Trustee; Authority of Controlling Party. . . . . . . . . 27
SECTION 5.04. Remedies . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 5.05. Optional Preservation of the Receivables . . . . . . . . 30
SECTION 5.06. Priorities . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 5.07. Limitation of Suits. . . . . . . . . . . . . . . . . . . 31
SECTION 5.08. [Reserved]. . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 5.09. Restoration of Rights and Remedies . . . . . . . . . . . 32
SECTION 5.10. Rights and Remedies Cumulative . . . . . . . . . . . . . 32
SECTION 5.11. Delay or Omission Not a Waiver . . . . . . . . . . . . . 33
SECTION 5.12. Control by Noteholders . . . . . . . . . . . . . . . . . 33
SECTION 5.13. Waiver of Past Defaults. . . . . . . . . . . . . . . . . 33
SECTION 5.14. Undertaking for Costs. . . . . . . . . . . . . . . . . . 34
SECTION 5.15. Waiver of Stay or Extension Laws . . . . . . . . . . . . 34
SECTION 5.16. Action on Notes. . . . . . . . . . . . . . . . . . . . . 34
- ii -
<PAGE>
Page
----
SECTION 5.17. Performance and Enforcement of Certain Obligations . . . 35
ARTICLE VI
THE TRUSTEE
SECTION 6.01. Duties of Trustee. . . . . . . . . . . . . . . . . . . . 36
SECTION 6.02. Rights of Trustee. . . . . . . . . . . . . . . . . . . . 38
SECTION 6.03. Individual Rights of Trustee . . . . . . . . . . . . . . 39
SECTION 6.04. Trustee's Disclaimer . . . . . . . . . . . . . . . . . . 39
SECTION 6.05. Notice of Defaults . . . . . . . . . . . . . . . . . . . 39
SECTION 6.06. Reports by Trustee to Holders. . . . . . . . . . . . . . 39
SECTION 6.07. Compensation and Indemnity . . . . . . . . . . . . . . . 39
SECTION 6.08. Replacement of Trustee . . . . . . . . . . . . . . . . . 40
SECTION 6.09. Successor Trustee by Merger. . . . . . . . . . . . . . . 42
SECTION 6.10. Appointment of Co-Trustee or Separate Trustee. . . . . . 42
SECTION 6.11. Eligibility; Disqualification. . . . . . . . . . . . . . 43
ARTICLE VII
NOTEHOLDERS' LISTS AND REPORTS
SECTION 7.01. Issuer to Furnish to Trustee Names and Addresses of
Noteholders. . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 7.02. Preservation of Information; Communications to
Noteholders. . . . . . . . . . . . . . . . . . . . . . . 44
ARTICLE VIII
ACCOUNTS, DISBURSEMENTS AND RELEASES
SECTION 8.01. Collection of Money. . . . . . . . . . . . . . . . . . . 44
SECTION 8.02. Trust Accounts . . . . . . . . . . . . . . . . . . . . . 45
SECTION 8.03. General Provisions Regarding Accounts. . . . . . . . . . 45
ARTICLE IX
SUPPLEMENTAL INDENTURES
SECTION 9.01. Supplemental Indentures Without Consent of Noteholders . 46
SECTION 9.02. Supplemental Indentures With Consent of Noteholders. . . 47
SECTION 9.03. Execution of Supplemental Indentures . . . . . . . . . . 49
- iii -
<PAGE>
Page
----
SECTION 9.04. Effect of Supplemental Indenture . . . . . . . . . . . . 49
SECTION 9.05. [Reserved] . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 9.06. Reference in Notes to Supplemental Indentures. . . . . . 49
ARTICLE X
REDEMPTION OF NOTES
SECTION 10.01. Redemption . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 10.02. Form of Redemption Notice. . . . . . . . . . . . . . . . 51
SECTION 10.03. Notes Payable on Redemption Date . . . . . . . . . . . . 52
ARTICLE XI
MISCELLANEOUS
SECTION 11.01. Compliance Certificates and Opinions, etc. . . . . . . . 52
SECTION 11.02. Form of Documents Delivered to Trustee . . . . . . . . . 54
SECTION 11.03. Acts of Noteholders. . . . . . . . . . . . . . . . . . . 54
SECTION 11.04. Notices, etc., to Trustee, Issuer, JPMD and the Rating
Agencies . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 11.05. Notices to Noteholders; Waiver . . . . . . . . . . . . . 56
SECTION 11.06. Alternate Payment and Notice Provisions. . . . . . . . . 56
SECTION 11.07. [Reserved] . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 11.08. Effect of Headings and Table of Contents . . . . . . . . 57
SECTION 11.09. Successors and Assigns . . . . . . . . . . . . . . . . . 57
SECTION 11.10. Severability . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 11.11. Benefits of Indenture. . . . . . . . . . . . . . . . . . 57
SECTION 11.12. Legal Holidays . . . . . . . . . . . . . . . . . . . . . 57
SECTION 11.13. Governing Law. . . . . . . . . . . . . . . . . . . . . . 57
SECTION 11.14. Counterparts . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 11.15. Recording of Indenture . . . . . . . . . . . . . . . . . 58
SECTION 11.16. Trust Obligation . . . . . . . . . . . . . . . . . . . . 58
SECTION 11.17. No Petition. . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 11.18. Inspection . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 11.19. Limitation of Liability. . . . . . . . . . . . . . . . . 59
Exhibit A Schedule of Receivables
Exhibit B Form of Variable Funding Note
Exhibit C Letter Agreement Between OFL and the Trustee and Other Fee
Letters
- iv -
<PAGE>
INDENTURE, dated as of December 28, 1995, between OLYMPIC AUTOMOBILE
RECEIVABLES WAREHOUSE TRUST, a Delaware business trust (the "Issuer"), and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, a national banking association, in
its capacities as trustee (the "Trustee") and not in its individual capacity.
Each party agrees as follows for the benefit of the other party and for the
equal and ratable benefit of the Holders of the Issuer's Variable Funding Notes
(the "Notes"):
As security for the payment and performance by the Issuer of its
obligations under this Indenture and the Notes, the Issuer has agreed to assign
the Indenture Collateral (as defined below) as collateral to the Trustee for the
benefit of the Noteholders.
GRANTING CLAUSE
The Issuer hereby Grants to Trustee at the Closing Date for the benefit of
the Noteholders to secure the performance of the Secured Obligations, all of the
Issuer's right, title and interest in and to (a) the Receivables and all moneys
paid or payable thereon or in respect thereof after the applicable Cutoff Date
(including amounts due on or before the applicable Cutoff Date but received by
OFL, the Seller or the Issuer after such Cutoff Date); (b) an assignment of the
security interests of OFL in the Financed Vehicles; (c) the Insurance Policies
and any proceeds from any Insurance Policies relating to the Receivables, the
Obligors or the Financed Vehicles, including rebates of premiums, all Collateral
Insurance and any Force-Placed Insurance relating to the Receivables; (d) an
assignment of the rights of OFL or the Seller against Dealers with respect to
the Receivables under the Dealer Agreements and the Dealer Assignments, (e) all
items contained in the Receivable Files and any and all other documents or
election records that OFL keeps on file in accordance with its customary
procedures relating to the Receivables, the Obligors or the Financed Vehicles,
(f) an assignment of the rights of the Seller under the Purchase Agreement,
(g) property (including the right to receive future Liquidation Proceeds) that
secures a Receivable and that has been acquired by or on behalf of the Trust
pursuant to liquidation of such Receivable, (h) the Trust Accounts and all funds
on deposit therein from time to time (other than the Certificate Distribution
Account), and in all investments and proceeds thereof (including all income
thereon), (i) the Purchase Agreement and each Assignment Agreement, including
the right assigned to the Issuer to cause OFL to repurchase Receivables from the
Seller under certain circumstances, (j) the Sale and Servicing Agreement and
each Transfer Agreement (including all rights of the Seller under the Purchase
Agreement and each Assignment Agreement assigned to the Issuer pursuant to the
Sale and Servicing Agreement), and (k) all present and future claims, demands,
causes and choses in action in respect of the Receivables and any or all of the
foregoing and all payments on or under and all proceeds of every kind and nature
whatsoever in respect of the Receivables and any or all of the foregoing,
including all proceeds of the conversion, voluntary or involuntary, into cash or
other liquid property, all cash proceeds, accounts, accounts receivable, notes,
drafts, acceptances, chattel
<PAGE>
paper, checks, deposit accounts, insurance proceeds, condemnation awards,
rights to payment of any and every kind and other forms of obligations and
receivables, instruments and other property which at any time constitute all
or part of or are included in the proceeds of the Receivables and any of the
foregoing (collectively, the "Indenture Collateral").
The Trustee for the benefit of the Holders of the Notes acknowledges such
Grant. The Trustee on behalf of the Holders of the Notes accepts the trusts
under this Indenture in accordance with the provisions of this Indenture and
agrees to perform its duties required in this Indenture to the best of its
ability to the end that the interests of the Holders of the Notes may be
adequately and effectively protected.
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. DEFINITIONS.
(a) Except as otherwise specified herein or as the context may otherwise
require, the following terms have the respective meanings set forth below for
all purposes of this Indenture.
"ACT" has the meaning specified in Section 11.03(a).
"ADMINISTRATOR" has the meaning specified therefor in the Trust Agreement.
"AFFILIATE" means, with respect to any Person, any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such Person. For the purposes of this definition, "control" when
used with respect to such specified Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"AUTHORIZED OFFICER" means, with respect to the Issuer, any officer of the
Owner Trustee who is authorized to act for the Owner Trustee in matters relating
to the Issuer and who is identified on the list of Authorized Officers delivered
by the Owner Trustee to the Trustee on the Closing Date (as such list may be
modified or supplemented from time to time thereafter).
"BUSINESS DAY" means any day other than a Saturday, Sunday, legal holiday
or other day on which commercial banking institutions in Minneapolis, Minnesota,
New York, New York, Wilmington, Delaware or any other location of any successor
Servicer, successor
- 2 -
<PAGE>
Owner Trustee or successor Trustee are authorized or obligated by law,
executive order or governmental decree to remain closed.
"CERTIFICATEHOLDER" has the meaning specified therefor in the Trust
Agreement.
"CLOSING DATE" means December 28, 1995.
"CODE" means the Internal Revenue Code of 1986, as amended from time to
time, and Treasury Regulations promulgated thereunder.
"CONTROLLING PARTY" means the Note Majority and JPMD.
"CORPORATE TRUST OFFICE" means the principal office of the Trustee at which
at any particular time its corporate trust business shall be administered which
office at date of the execution of this Agreement is located at Sixth Street and
Marquette Avenue, Minneapolis, Minnesota 55479-0069, Attention: Corporate
Trust Department; or at such other address as the Trustee may designate from
time to time by notice to the Noteholders, JPMD and the Issuer, or the principal
corporate trust office of any successor Trustee (the address of which the
successor Trustee will notify the Noteholders and the Issuer).
"DEFAULT" means any occurrence that is, or with notice or the lapse of time
or both would become, an Event of Default.
"EVENT OF DEFAULT" has the meaning specified in Section 5.01.
"EXECUTIVE OFFICER" means, with respect to any corporation, the Chief
Executive Officer, Chief Operating Officer, Chief Financial Officer, President,
Executive Vice President, any Vice President, any Responsible Officer, the
Secretary or the Treasurer of such corporation; and with respect to any
partnership, any general partner thereof.
"FINAL MATURITY DATE" means the earlier of (i) the Payment Date that is 85
months from the Purchase Termination Date and (ii) the date on which the Notes
are fully redeemed in accordance with this Indenture (or, if such day is not a
Business Day, the next succeeding Business Day).
"GENERAL PARTNER" means Seller in its capacity as general partner of the
Trust, and any successors thereto as permitted by the Trust Agreement.
"GRANT" means mortgage, pledge, bargain, sell, warrant, alienate, remise,
release, convey, assign, transfer, create, and grant a lien upon and a security
interest in and right of set-off against, deposit, set over and confirm pursuant
to this Indenture. A Grant of the Indenture Collateral or of any other
agreement or instrument shall include all rights, powers and options (but none
of the obligations) of the Granting party thereunder, including the
- 3 -
<PAGE>
immediate and continuing right to claim for, collect, receive and give
receipt for principal and interest payments in respect of the Indenture
Collateral and all other moneys payable thereunder, to give and receive
notices and other communications, to make waivers or other agreements, to
exercise all rights and options, to bring Proceedings in the name of the
Granting party or otherwise and generally to do and receive anything that the
Granting party is or may be entitled to do or receive thereunder or with
respect thereto.
"HOLDER" or "NOTEHOLDER" means the Person in whose name a Note is
registered on the Note Register.
"INDEBTEDNESS" means, with respect to any Person at any time,
(a) indebtedness or liability of such Person for borrowed money whether or not
evidenced by bonds, debentures, notes or other instruments, or for the deferred
purchase price of property or services (including trade obligations);
(b) obligations of such Person as lessee under leases which should have been or
should be, in accordance with generally accepted accounting principles, recorded
as capital leases; (c) current liabilities of such Person in respect of unfunded
vested benefits under plans covered by Title IV of the Employee Retirement
Income Security Act of 1974, as amended; (d) obligations issued for or
liabilities incurred on the account of such Person; (e) obligations or
liabilities of such Person arising under acceptance facilities; (f) obligations
of such Person under any guarantees, endorsements (other than for collection or
deposit in the ordinary course of business) and other contingent obligations to
purchase, to provide funds for payment, to supply funds to invest in any Person
or otherwise to assure a creditor against loss; (g) obligations of such Person
secured by any lien on property or assets of such Person, whether or not the
obligations have been assumed by such Person; or (h) obligations of such Person
under any interest rate or currency exchange agreement.
"INDENTURE" means this Indenture as amended or supplemented from time to
time.
"INDENTURE COLLATERAL" has the meaning specified in the Granting Clause of
this Indenture.
"INDEPENDENT" means, when used with respect to any specified Person, that
the Person (a) is in fact independent of the Issuer, any other obligor upon the
Notes, the Seller and any Affiliate of any of the foregoing Persons, (b) does
not have any direct financial interest or any material indirect financial
interest in the Issuer, any such other obligor, the Seller or any Affiliate of
any of the foregoing Persons and (c) is not connected with the Issuer, any such
other obligor, the Seller or any Affiliate of any of the foregoing Persons as an
officer, employee, promoter, underwriter, trustee, partner, director or person
performing similar functions.
"INDEPENDENT CERTIFICATE" means a certificate or opinion to be delivered to
the Trustee under the circumstances described in, and otherwise complying with,
the applicable requirements of Section 11.01, made by an Independent appraiser
or other expert appointed
- 4 -
<PAGE>
by an Issuer Order and approved by the Trustee in the exercise of reasonable
care, and such opinion or certificate shall state that the signer has read
the definition of "Independent" in this Indenture and that the signer is
Independent within the meaning thereof.
"INTEREST RATE" means the Note Interest Rate.
"ISSUER" means the party named as such in this Indenture until a successor
replaces it and, thereafter, means the successor and each other obligor on the
Notes.
"ISSUER ORDER" and "ISSUER REQUEST" means a written order or request signed
in the name of the Issuer by any one of its Authorized Officers and delivered to
the Trustee.
"LETTER AGREEMENT" has the meaning specified in Section 6.07.
"NON-CALLABLE NOTE" means a Note issued in connection with a
Recapitalization that is not subject to any right of OFL to purchase such Note
from its Holder pursuant to the Note Purchase Agreement or otherwise.
"NOTE" means the Variable Funding Notes substantially in the form of
Exhibit B.
"NOTE OWNER" means with respect to any Notes, the Holder.
"NOTE REGISTER" and "NOTE REGISTRAR" have the respective meanings specified
in Section 2.04.
"OFFICER'S CERTIFICATE" means a certificate signed by any Authorized
Officer of the Issuer, under the circumstances described in, and otherwise
complying with, the applicable requirements of Section 11.01, and delivered to,
the Trustee. Unless otherwise specified, any reference in this Indenture to an
Officer's Certificate shall be to an Officer's Certificate of any Authorized
Officer of the Issuer.
"OPINION OF COUNSEL" means one or more written opinions of counsel who may,
except as otherwise expressly provided in this Indenture, be employees of or
counsel to the Issuer and who shall be satisfactory to the Trustee and which
shall comply with any applicable requirements of Section 11.01, and shall be in
form and substance satisfactory to the Trustee.
"OUTSTANDING" means, as of the date of determination, all Notes theretofore
authenticated and delivered under this Indenture except:
(i) Notes theretofore canceled by the Note Registrar or delivered to
the Note Registrar for cancellation;
- 5 -
<PAGE>
(ii) Notes or portions thereof the payment for which money in the
necessary amount has been theretofore deposited with the Trustee or any
Paying Agent in trust for the Holders of such Notes (provided, however,
that if such Notes are to be redeemed, notice of such redemption has been
duly given pursuant to this Indenture or provision therefor, satisfactory
to the Trustee, has been made); and
(iii) Notes in exchange for or in lieu of other Notes which have
been authenticated and delivered pursuant to this Indenture unless proof
satisfactory to the Trustee is presented that any such Notes are held by a
bona fide purchaser;
PROVIDED, HOWEVER, that in determining whether the Holders of the requisite
percentage of the Outstanding Amount of the Notes have given any request,
demand, authorization, direction, notice, consent or waiver hereunder or under
any Related Document, Notes owned by the Issuer, any other obligor upon the
Notes, the Seller or any Affiliate of any of the foregoing Persons shall be
disregarded and deemed not to be Outstanding, except that, in determining
whether the Trustee shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Notes that the Trustee
knows to be so owned shall be so disregarded. Notes so owned that have been
pledged in good faith may be regarded as Outstanding if the pledgee establishes
to the satisfaction of the Trustee the pledgee's right so to act with respect to
such Notes and that the pledgee is not the Issuer, any other obligor upon the
Notes, the Seller or any Affiliate of any of the foregoing Persons.
"OUTSTANDING AMOUNT" means the aggregate principal amount of all Notes
Outstanding at the date of determination.
"OWNER TRUSTEE" means Wilmington Trust Company, not in its individual
capacity but solely as Owner Trustee under the Trust Agreement, or any successor
trustee under the Trust Agreement.
"PAYING AGENT" means the Trustee or any other Person that meets the
eligibility standards for the Trustee specified in Section 6.11 and is
authorized by the Issuer to make the distributions from the Note Distribution
Account, including payment of principal of or interest on the Notes on behalf of
the Issuer.
"PAYMENT DATE" means a Distribution Date.
"PERSON" means any legal person including any individual, corporation,
estate, partnership, joint venture, association, joint stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof, or any other entity.
"PROCEEDING" means any suit in equity, action at law or other judicial or
administrative proceeding.
- 6 -
<PAGE>
"RECORD DATE" means, with respect to a Payment Date or Redemption Date, the
close of business on the last Business Day immediately preceding such Payment
Date or Redemption Date.
"REDEMPTION DATE" means (a) in the case of a redemption of the Notes
pursuant to Section 10.01(a) or a payment to Noteholders pursuant to
Section 10.01(c), the date specified in the notice of redemption sent by the
Servicer or the Issuer pursuant to Section 10.01(a) or 10.01(c), as applicable,
and Section 10.02 or (b) in the case of a redemption of Notes pursuant to
Section 10.01(b) or 10.01(d), the date specified in the notice of redemption
sent in accordance with Section 10.02.
"REDEMPTION PRICE" means (a) in the case of a redemption of the Notes
pursuant to Section 10.01 (a), (b) or (d), an amount equal to the principal
amount of the Notes redeemed plus accrued and unpaid interest on the principal
amount of Notes at the Interest Rate to but excluding the Redemption Date and
plus, any breakage payments (including the amounts to be deposited in the
Commercial Paper Funding Account pursuant to the Note Purchase Agreement)
specified in the Note Purchase Agreement, or (b) in the case of a payment made
to Noteholders pursuant to Section 10.01(c), the amount on deposit in the Note
Distribution Account, but not in excess of the amount specified in clause (a)
above.
"RELATED DOCUMENTS" means the Trust Agreement, the Certificates, the Notes,
the Purchase Agreement, the Sale and Servicing Agreement, each Assignment
Agreement, the Lockbox Agreement, the Administration Agreement, the Note
Purchase Agreement, and the Certificate Purchase Agreement. The Related
Documents executed by any party are referred to herein as "such party's Related
Documents," "its Related Documents" or by a similar expression.
"RESPONSIBLE OFFICER" means, with respect to the Trustee, any officer of
the Trustee assigned by the Trustee to administer its corporate trust affairs
relating to the Trust Estate.
"SALE AND SERVICING AGREEMENT" means the Sale and Servicing Agreement,
dated as of December 28, 1995, among the Issuer, the Seller, the Servicer and
the Backup Servicer.
"SECURED OBLIGATIONS" means all amounts and obligations which the Issuer
may at any time owe to or on behalf of the Trustee for the benefit of the
Noteholders under this Indenture or the Notes.
"STATE" means any one of the 50 states of the United States of America or
the District of Columbia.
"TERMINATION DATE" means the date on which the Trustee shall have received
payment and performance of all Secured Obligations.
- 7 -
<PAGE>
"TRUST ESTATE" means all money, instruments, rights and other property that
are subject or intended to be subject to the lien and security interest of this
Indenture for the benefit of the Noteholders (including, without limitation, the
Indenture Collateral Granted to the Trustee), including all proceeds thereof.
"TRUSTEE" means Norwest Bank Minnesota, National Association, a national
banking association, as Trustee under this Indenture, or any successor Trustee
under this Indenture.
"UCC" means, unless the context otherwise requires, the Uniform Commercial
Code, as in effect in the relevant jurisdiction, as amended from time to time.
(b) Except as otherwise specified herein or as the context may otherwise
require, the following terms have the respective meanings set forth in the Sale
and Servicing Agreement as in effect on the Closing Date for all purposes of
this Indenture, and the definitions of such terms are equally applicable both to
the singular and plural forms of such terms:
Section of Sale and
Term Servicing Agreement
- ---- -------------------
Administration Agreement . . . . . . . . . . Section 1.1
Assignment Agreement . . . . . . . . . . . . Section 1.1
Backup Servicer. . . . . . . . . . . . . . . Section 1.1
Certificate Balance. . . . . . . . . . . . . Section 1.1
Certificate Distribution Account . . . . . . Section 1.1
Certificates . . . . . . . . . . . . . . . . Section 1.1
Collateral Insurance . . . . . . . . . . . . Section 1.1
Collection Account . . . . . . . . . . . . . Section 1.1
Custodian. . . . . . . . . . . . . . . . . . Section 1.1
Cutoff Date. . . . . . . . . . . . . . . . . Section 1.1
Dealer . . . . . . . . . . . . . . . . . . . Section 1.1
Dealer Agreement . . . . . . . . . . . . . . Section 1.1
Dealer Assignment. . . . . . . . . . . . . . Section 1.1
Distribution Date. . . . . . . . . . . . . . Section 1.1
Eligible Account . . . . . . . . . . . . . . Section 1.1
Eligible Investments . . . . . . . . . . . . Section 1.1
Facility Balance . . . . . . . . . . . . . . Section 1.1
Facility Limit . . . . . . . . . . . . . . . Section 1.1
Financed Vehicle . . . . . . . . . . . . . . Section 1.1
Forced-Placed Insurance. . . . . . . . . . . Section 1.1
Insurance Policies . . . . . . . . . . . . . Section 1.1
JPMD . . . . . . . . . . . . . . . . . . . . Section 1.1
Lien . . . . . . . . . . . . . . . . . . . . Section 1.1
- 8 -
<PAGE>
Liquidation Proceeds . . . . . . . . . . . . Section 1.1
Lockbox Agreement. . . . . . . . . . . . . . Section 1.1
Lockbox Bank . . . . . . . . . . . . . . . . Section 1.1
Monthly Period . . . . . . . . . . . . . . . Section 1.1
Moody's. . . . . . . . . . . . . . . . . . . Section 1.1
Note Distribution Account. . . . . . . . . . Section 1.1
Note Interest Rate . . . . . . . . . . . . . Section 1.1
Note Majority. . . . . . . . . . . . . . . . Section 1.1
Note Purchase Agreement. . . . . . . . . . . Section 1.1
Obligor. . . . . . . . . . . . . . . . . . . Section 1.1
OFL. . . . . . . . . . . . . . . . . . . . . Section 1.1
Principal Funding Excess Amount. . . . . . . Section 1.1
Purchase Agreement . . . . . . . . . . . . . Section 1.1
Purchase Termination Date. . . . . . . . . . Section 1.1
Rating Agency. . . . . . . . . . . . . . . . Section 1.1
Rating Agency Condition. . . . . . . . . . . Section 1.1
Recapitalization . . . . . . . . . . . . . . Section 1.1
Receivable . . . . . . . . . . . . . . . . . Section 1.1
Receivable File. . . . . . . . . . . . . . . Section 1.1
Schedule of Receivables. . . . . . . . . . . Section 1.1
Securitized Offering . . . . . . . . . . . . Section 1.1
Seller . . . . . . . . . . . . . . . . . . . Section 1.1
Servicer . . . . . . . . . . . . . . . . . . Section 1.1
Servicer Termination Event . . . . . . . . . Section 1.1
Standard & Poor's. . . . . . . . . . . . . . Section 1.1
Transfer Agreement . . . . . . . . . . . . . Section 1.1
Transfer Date. . . . . . . . . . . . . . . . Section 1.1
Trust Accounts . . . . . . . . . . . . . . . Section 1.1
Trust Agreement. . . . . . . . . . . . . . . Section 1.1
SECTION 1.02. RULES OF CONSTRUCTION. Unless otherwise specified:
(i) a term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the meaning
assigned to it in accordance with generally accepted accounting
principles as in effect from time to time;
(iii) "or" is not exclusive;
(iv) "including" means including without limitation;
- 9 -
<PAGE>
(v) words in the singular include the plural and words in the
plural include the singular; and
(vi) references to Sections, Subsections, Schedules and Exhibits
shall refer to such portions of this Indenture.
ARTICLE II
THE NOTES
SECTION 2.01. FORM. The Notes, together with the Trustee's certificate of
authentication, shall be in substantially the form set forth in Exhibit B, with
such appropriate insertions, omissions, substitutions and other variations as
are required or permitted by this Indenture and may have such letters, numbers
or other marks of identification and such legends or endorsements placed thereon
as may, consistently herewith, be determined by the officers executing such
Notes, as evidenced by their execution of the Notes. Any portion of the text of
any Note may be set forth on the reverse thereof, with an appropriate reference
thereto on the face of the Note.
The Notes shall be typewritten, printed, lithographed or engraved or
produced by any combination of these methods (with or without steel engraved
borders), all as determined by the officers executing such Notes, as evidenced
by their execution of such Notes.
Each Note shall be dated the date of its authentication. The terms of the
Notes set forth in Exhibit B are part of the terms of this Indenture.
SECTION 2.02. EXECUTION, AUTHENTICATION AND DELIVERY. The Notes shall be
executed on behalf of the Issuer by any of its Authorized Officers. The
signature of any such Authorized Officer on the Notes may be manual or
facsimile.
Notes bearing the manual or facsimile signature of individuals who were at
any time Authorized Officers of the Issuer shall bind the Issuer,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Notes or did not hold
such offices at the date of such Notes.
The Trustee shall upon receipt of the Issuer Order authenticate and deliver
Notes for original issue in an aggregate principal amount of up to $200,000,000.
The aggregate principal amount of Notes outstanding at any time may not exceed
that amount.
Each Note shall be dated the date of its authentication. The Notes shall
be issued in minimum initial denominations and in such integral multiples as are
necessary to comply with the terms of this Agreement and the Related Documents.
- 10 -
<PAGE>
No Note shall be entitled to any benefit under this Indenture or be valid
or obligatory for any purpose, unless there appears on such Note a certificate
of authentication substantially in the form provided for herein executed by the
Trustee by the manual signature of one of its authorized signatories, and such
certificate upon any Note shall be conclusive evidence, and the only evidence,
that such Note has been duly authenticated and delivered hereunder.
SECTION 2.03. ADDITIONAL ISSUANCES.
(a) On each Business Day that is a Transfer Date under the Sale and
Servicing Agreement and upon meeting all conditions precedent to the purchase of
additional principal amounts of Notes under the Note Purchase Agreement, the
Issuer may instruct the Trustee by rendering an Issuer Order to indicate or
cause the Note Registrar to indicate in the Note Register that the outstanding
principal amount of Notes held by each Noteholder is increased pro rata, in
accordance with the outstanding principal balance held by such Noteholder, by an
aggregate amount for all Notes equal to (x) the aggregate outstanding principal
balance of Receivables transferred to the Trust on such Transfer Date, less (y)
the amount of any increase in the outstanding Certificate Balance of
Certificates related to such Receivables transferred on the Transfer Date. The
Trustee shall, upon receipt of the Issuer Order and funds in the amount of the
increase in principal balance of Notes from the Noteholders or their agent,
instruct the Note Registrar to indicate in the Note Register such increase in
the principal amount of Notes. The Outstanding Amount of Notes may never exceed
the maximum aggregate principal amount of Notes as specified in the Note
Purchase Agreement. No increase in the principal balance of Notes shall be
effective until the Outstanding Amount of Certificates equals $19,800,000.00.
(b) Upon any Recapitalization, upon satisfaction of the applicable
requirements of Article X of this Indenture, (i) the Trustee shall upon receipt
of the Issuer Order authenticate and deliver to the Holders (determined as of
the related Record Date) Non-Callable Notes in an aggregate principal amount
specified in the Issuer Order (which shall not exceed the then-outstanding
principal amount of the Notes and shall be allocated pro rata among the
Noteholders in accordance with outstanding principal amount of Notes held by
each), and (ii) the Issuer shall instruct the Trustee by rendering an Issuer
Order to indicate or cause the Note Registrar to indicate in the Note Register
that the outstanding principal amount of Notes represented by the physical Notes
issued prior to the Recapitalization and held by each Noteholder is decreased by
the principal amount of the Non-Callable Notes issued to such Noteholder in that
Recapitalization, and Trustee shall make, or cause to be made such indication.
After any Recapitalization, any increase made pursuant to paragraph (a) above
shall be made to Non-Callable Notes only to the extent specified in the Issuer
Order relating to that Recapitalization and otherwise shall be applied ratably
to the other outstanding Notes.
SECTION 2.04. REGISTRATION; REGISTRATION OF TRANSFER AND EXCHANGE. The
Issuer shall cause to be kept a register (the "Note Register") in which, subject
to such reasonable
- 11 -
<PAGE>
regulations as it may prescribe, the Issuer shall provide for the
registration of Notes and the registration of transfers of Notes. The
Trustee shall be "Note Registrar" for the purpose of registering Notes and
transfers of Notes as herein provided. Upon any resignation of any Note
Registrar, the Issuer shall promptly appoint a successor or, if it elects not
to make such an appointment, assume the duties of Note Registrar.
If a Person other than the Trustee is appointed by the Issuer as Note
Registrar, the Issuer will give the Trustee prompt written notice of the
appointment of such Note Registrar and of the location, and any change in the
location, of the Note Register, and the Trustee shall have the right to inspect
the Note Register at all reasonable times and to obtain copies thereof, and the
Trustee shall have the right to rely upon a certificate executed on behalf of
the Note Registrar by an Executive Officer thereof as to the names and addresses
of the Holders of the Notes and the principal amounts and number of such Notes.
Upon surrender for registration of transfer of any Note at the office or
agency of the Issuer to be maintained as provided in Section 3.02, the Issuer
shall execute, and the Trustee shall authenticate and the Noteholder shall
obtain from the Trustee, in the name of the designated transferee or
transferees, one or more new Notes in any authorized denominations, of a like
aggregate principal amount.
At the option of the Holder, Notes may be exchanged for other Notes in any
authorized denominations, of a like aggregate principal amount, upon surrender
of the Notes to be exchanged at such office or agency. Whenever any Notes are
so surrendered for exchange, the Issuer shall execute, and the Trustee shall
authenticate and the Noteholder shall obtain from the Trustee, the Notes which
the Noteholder making the exchange is entitled to receive.
All Notes issued upon any registration of transfer or exchange of Notes
shall be the valid obligations of the Issuer, evidencing the same debt, and
entitled to the same benefits under this Indenture, as the Notes surrendered
upon such registration of transfer or exchange.
Every Note presented or surrendered for registration of transfer or
exchange shall be duly endorsed by, or be accompanied by a written instrument of
transfer in form satisfactory to the Trustee duly executed by, the Holder
thereof or such Holder's attorney duly authorized in writing, with such
signature guaranteed by a commercial bank or trust company located, or having a
correspondent located, in The City of New York or the city in which the
Corporate Trust Office is located, or by a member firm of a national securities
exchange, and such other documents as the Trustee may require.
No service charge shall be made to a Holder for any registration of
transfer or exchange of Notes, but the Issuer or the Trustee may require payment
of a sum sufficient to cover any tax or other governmental charge that may be
imposed in connection with any
- 12 -
<PAGE>
registration of transfer or exchange of Notes, other than exchanges pursuant
to Section 2.03 or 9.06 not involving any transfer.
The preceding provisions of this section notwithstanding, the Issuer shall
not be required to make and the Note Registrar need not register transfers or
exchanges of Notes selected for redemption or of any Note for a period of 15
days preceding the due date for any payment with respect to the Note.
SECTION 2.05. MUTILATED, DESTROYED, LOST OR STOLEN NOTES. If (i) any
mutilated Note is surrendered to the Trustee, or the Trustee receives evidence
to its satisfaction of the destruction, loss or theft of any Note, and (ii)
there is delivered to the Trustee such security or indemnity as may be required
by them to hold the Issuer and the Trustee harmless, then, in the absence of
notice to the Issuer, the Note Registrar or the Trustee that such Note has been
acquired by a bona fide purchaser, the Issuer shall execute and upon its request
the Trustee shall authenticate and deliver, in exchange for or in lieu of any
such mutilated, destroyed, lost or stolen Note, a replacement Note; PROVIDED,
HOWEVER, that if any such destroyed, lost or stolen Note, but not a mutilated
Note, shall have become or within seven days shall be due and payable, or shall
have been called for redemption, instead of issuing a replacement Note, the
Issuer may pay such destroyed, lost or stolen Note when so due or payable or
upon the Redemption Date without surrender thereof. If, after the delivery of
such replacement Note or payment of a destroyed, lost or stolen Note pursuant to
the proviso to the preceding sentence, a bona fide purchaser of the original
Note in lieu of which such replacement Note was issued presents for payment such
original Note, the Issuer and the Trustee shall be entitled to recover such
replacement Note (or such payment) from the Person to whom it was delivered or
any Person taking such replacement Note from such Person to whom such
replacement Note was delivered or any assignee of such Person, except a bona
fide purchaser, and shall be entitled to recover upon the security or indemnity
provided therefor to the extent of any loss, damage, cost or expense incurred by
the Issuer or the Trustee in connection therewith.
Upon the issuance of any replacement Note under this Section, the Issuer or
the Trustee may require the payment by the Holder of such Note of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
relation thereto and any other reasonable expenses (including the fees and
expenses of the Trustee or the Note Registrar) connected therewith.
Every replacement Note issued pursuant to this Section in replacement of
any mutilated, destroyed, lost or stolen Note shall constitute an original
additional contractual obligation of the Issuer, whether or not the mutilated,
destroyed, lost or stolen Note shall be at any time enforceable by anyone, and
shall be entitled to all the benefits of this Indenture equally and
proportionately with any and all other Notes duly issued hereunder.
- 13 -
<PAGE>
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Notes.
SECTION 2.06. PERSON DEEMED OWNER. Prior to due presentment for
registration of transfer of any Note, the Issuer, the Trustee and any agent of
the Issuer or the Trustee may treat the Person in whose name any Note is
registered (as of the day of determination) as the owner of such Note for the
purpose of receiving payments of principal of and interest, if any, on such Note
and for all other purposes whatsoever, whether or not such Note be overdue, and
none of the Issuer, the Trustee nor any agent of the Issuer or the Trustee shall
be affected by notice to the contrary.
SECTION 2.07. PAYMENT OF PRINCIPAL AND INTEREST; DEFAULTED INTEREST.
(a) The Notes shall accrue interest as provided herein and in the
form of Note set forth in Exhibit B, and such interest shall be payable on
each Payment Date and Redemption Date as specified herein and therein. Any
installment of interest or principal, if any, payable on any Note which is
punctually paid or duly provided for by the Issuer on the applicable
Payment Date and Redemption Date shall be paid to the Person in whose name
such Note (or one or more predecessor Notes) is registered on the Record
Date, by wire transfer in immediately available funds to the account
designated by such Person and except for (i) the final installment of
principal payable with respect to such Note on a Payment Date and (ii) the
Redemption Price for any Note called for redemption pursuant to Section
10.01(a), which shall be payable as provided below. Any funds for which
proper wire instructions have not been received shall be held in accordance
with Section 3.03.
(b) The principal of each Note shall be payable in installments on
Payment Dates and Redemption Dates as provided herein and in the form of
the Notes. Notwithstanding the foregoing, the entire unpaid principal
amount of the Notes shall be due and payable, if not previously paid, on
the date on which an Event of Default shall have occurred and be
continuing, so long as the Controlling Party has declared the Notes to be
immediately due and payable in the manner provided in Section 5.02. All
principal payments on the Notes shall be made pro rata to the Noteholders.
If Non-Callable Notes are issued, principal payments shall also be made pro
rata between the Non-Callable Notes and any other outstanding Notes, based
upon their respective principal amounts on the Record Date preceding the
applicable Payment Date or Redemption Date. The Trustee shall notify the
Person in whose name a Note is registered at the close of business on the
Record Date preceding the Payment Date on which the Issuer expects that the
final installment of principal of and interest on such Note will be paid.
Such notice shall be mailed no later than five days prior to such final
Payment Date and shall specify that such final installment will be payable
only upon presentation and surrender of such Note and shall specify the
place where
- 14 -
<PAGE>
such Note may be presented and surrendered for payment of such
installment. Notices in connection with redemptions of Notes shall be
mailed to Noteholders as provided in Section 10.02.
SECTION 2.08. CANCELLATION. All Notes surrendered for payment,
registration of transfer, exchange or redemption shall, if surrendered to any
Person other than the Trustee, be delivered to the Trustee and shall be promptly
canceled by the Trustee. The Issuer may at any time deliver to the Trustee for
cancellation any Notes previously authenticated and delivered hereunder which
the Issuer may have acquired in any manner whatsoever, and all Notes so
delivered shall be promptly canceled by the Trustee. No Notes shall be
authenticated in lieu of or in exchange for any Notes canceled as provided in
this Section, except as expressly permitted by this Indenture. All canceled
Notes may be held or disposed of by the Trustee in accordance with its standard
retention or disposal policy as in effect at the time unless the Issuer shall
direct by an Issuer Order that they be destroyed or returned to it, provided
that such Issuer Order is timely and the Notes have not been previously disposed
of by the Trustee.
ARTICLE III
COVENANTS
SECTION 3.01. PAYMENT OF PRINCIPAL, INTEREST AND PREMIUM. The Issuer will
duly and punctually pay the principal, interest and premium, if any, on the
Notes in accordance with the terms of the Notes and this Indenture. Without
limiting the foregoing, the Issuer will cause to be distributed all amounts on
deposit in the Note Distribution Account on a Payment Date in accordance with
Section 8.02(b). Amounts properly withheld under the Code by any Person from a
payment to any Noteholder of interest and/or principal shall be considered as
having been paid by the Issuer to such Noteholder for all purposes of this
Indenture.
SECTION 3.02. MAINTENANCE OF OFFICE OR AGENCY. The Issuer will maintain
in Minneapolis or St. Paul, Minnesota, an office or agency where Notes may be
surrendered for registration of transfer or exchange, and where notices and
demands to or upon the Issuer in respect of the Notes and this Indenture may be
served. The Issuer hereby initially appoints the Trustee to serve as its agent
for the foregoing purposes. The Issuer will give prompt written notice to the
Trustee of the location, and of any change in the location, of any such office
or agency. If at any time the Issuer shall fail to maintain any such office or
agency or shall fail to furnish the Trustee with the address thereof, such
surrenders, notices and demands may be made or served at the Corporate Trust
Office, and the Issuer hereby appoints the Trustee as its agent to receive all
such surrenders, notices and demands.
- 15 -
<PAGE>
SECTION 3.03. MONEY FOR PAYMENTS TO BE HELD IN TRUST. As provided in
Section 8.02, all payments of amounts due and payable with respect to any Notes
that are to be made from amounts withdrawn from the Note Distribution Account
pursuant to Section 8.02(b) shall be made on behalf of the Issuer by the Trustee
or by another Paying Agent, and no amounts so withdrawn from the Note
Distribution Account for payments of Notes shall be paid over to the Issuer.
On or before each Payment Date and Redemption Date, the Issuer shall
deposit or cause to be deposited in the Note Distribution Account an aggregate
sum sufficient to pay the amounts then becoming due, such sum to be held in
trust for the benefit of the Persons entitled thereto and (unless the Paying
Agent is the Trustee) shall promptly notify the Trustee of its action or failure
so to act.
The Issuer will cause each Paying Agent other than the Trustee to execute
and deliver to the Trustee an instrument in which such Paying Agent shall agree
with the Trustee (and if the Trustee acts as Paying Agent, it hereby so agrees),
subject to the provisions of this Section, that such Paying Agent will:
(i) hold all sums held by it for the payment of amounts due with
respect to the Notes in trust for the benefit of the Persons entitled
thereto until such sums shall be paid to such Persons or otherwise
disposed of as herein provided and pay such sums to such Persons as
herein provided;
(ii) give the Trustee notice of any default (of which it has
actual knowledge) by the Issuer (or any other obligor upon the Notes)
in the making of any payment required to be made with respect to the
Notes;
(iii) at any time during the continuance of any such default,
upon the written request of the Trustee, forthwith pay to the Trustee
all sums so held in trust by such Paying Agent;
(iv) immediately resign as a Paying Agent and forthwith pay to
the Trustee all sums held by it in trust for the payment of Notes if
at any time it ceases to meet the standards required to be met by a
Paying Agent at the time of its appointment; and
(v) comply with all requirements of the Code with respect to the
withholding from any payments made by it on any Notes of any
applicable withholding taxes imposed thereon and with respect to any
applicable reporting requirements in connection therewith.
The Issuer may at any time, for the purpose of obtaining the satisfaction
and discharge of this Indenture or for any other purpose, by Issuer Order direct
any Paying
- 16 -
<PAGE>
Agent to pay to the Trustee all sums held in trust by such Paying Agent, such
sums to be held by the Trustee upon the same trusts as those upon which the
sums were held by such Paying Agent; and upon such payment by any Paying
Agent to the Trustee, such Paying Agent shall be released from all further
liability with respect to such money.
SECTION 3.04. EXISTENCE. The Issuer will keep in full effect its
existence, rights and franchises as a business trust under the laws of the State
of Delaware (unless it becomes, or any successor Issuer hereunder is or becomes,
organized under the laws of any other state or of the United States of America,
in which case the Issuer will keep in full effect its existence, rights and
franchises under the laws of such other jurisdiction) and will obtain and
preserve its qualification to do business in each jurisdiction in which such
qualification is or shall be necessary to protect the validity and
enforceability of this Indenture, the Notes, the Indenture Collateral and each
other instrument or agreement included in the Trust Estate.
SECTION 3.05. PROTECTION OF TRUST ESTATE. The Issuer intends the security
interest Granted pursuant to this Indenture in favor of the Trustee to be prior
to all other liens in respect of the Trust Estate, and the Issuer shall take all
actions necessary to obtain and maintain, in favor of the Trustee, a first lien
on and a first priority, perfected security interest in the Trust Estate. The
Issuer will from time to time execute and deliver all such supplements and
amendments hereto and all such financing statements, continuation statements,
instruments of further assurance and other instruments, all as prepared by the
Servicer and delivered to the Issuer, and will take such other action necessary
or advisable to:
(i) grant more effectively all or any portion of the Trust
Estate;
(ii) maintain or preserve the lien and security interest (and the
priority thereof) in favor of the Trustee created by this Indenture or
carry out more effectively the purposes hereof;
(iii) perfect, publish notice of or protect the validity of
any Grant made or to be made by this Indenture;
(iv) enforce any of the Indenture Collateral;
(v) preserve and defend title to the Trust Estate and the rights
of the Trustee in such Trust Estate against the claims of all persons
and parties; or
(vi) pay all taxes or assessments levied or assessed upon the
Trust Estate when due.
- 17 -
<PAGE>
The Issuer hereby designates the Trustee its agent and attorney-in-fact to
execute any financing statement, continuation statement or other instrument
required by the Trustee pursuant to this Section.
SECTION 3.06. OPINIONS AS TO TRUST ESTATE. On the Closing Date, the
Issuer shall furnish to the Trustee an Opinion of Counsel either stating that,
in the opinion of such counsel, such action has been taken with respect to the
recording and filing of this Indenture, any indentures supplemental hereto, and
any other requisite documents, and with respect to the execution and filing of
any financing statements and continuation statements, as are necessary to
perfect and make effective the first priority lien and security interest in
favor of the Trustee, created by this Indenture and reciting the details of such
action, or stating that, in the opinion of such counsel, no such action is
necessary to make such lien and security interest effective.
SECTION 3.07. PERFORMANCE OF OBLIGATIONS; SERVICING OF RECEIVABLES.
(a) The Issuer will not take any action and will use its best efforts
not to permit any action to be taken by others that would release any
Person from any of such Person's material covenants or obligations under
any instrument or agreement included in the Trust Estate or that would
result in the amendment, hypothecation, subordination, termination or
discharge of, or impair the validity or effectiveness of, any such
instrument or agreement, except as expressly provided in this Indenture,
the Sale and Servicing Agreement or such other instrument or agreement.
(b) The Issuer may contract with other Persons acceptable to the
Controlling Party to assist it in performing its duties under this
Indenture, and any performance of such duties by a Person identified to the
Trustee in an Officer's Certificate of the Issuer shall be deemed to be
action taken by the Issuer. Initially, the Issuer has contracted with the
Servicer and the Administrator to assist the Issuer in performing its
duties under this Indenture. The Owner Trustee shall not be responsible
for the action or inaction of the Servicer or the Administrator.
(c) The Issuer will punctually perform and observe all of its
obligations and agreements contained in this Indenture, the Related
Documents and in the instruments and agreements included in the Trust
Estate, including but not limited to filing or causing to be filed all UCC
financing statements and continuation statements required to be filed by
the terms of this Indenture and the Sale and Servicing Agreement in
accordance with and within the time periods provided for herein and
therein.
(d) If the Issuer shall have knowledge of the occurrence of a
Servicer Termination Event under the Sale and Servicing Agreement, the
Issuer shall promptly notify the Trustee, JPMD and the Rating Agencies
thereof, and shall specify in such
- 18 -
<PAGE>
notice the action, if any, the Issuer is taking with respect of such
default. If a Servicer Termination Event shall arise from the failure
of the Servicer or the Seller to perform any of their respective duties
or obligations under the Sale and Servicing Agreement with respect to
the Receivables, the Issuer shall take all reasonable steps available to
it to remedy such failure.
(e) Upon any termination of the Servicer's rights and powers pursuant
to the Sale and Servicing Agreement, the Issuer shall promptly notify the
Trustee. As soon as a successor Servicer is appointed, the Issuer shall
notify the Trustee and JPMD of such appointment, specifying in such notice
the name and address of such successor Servicer.
(f) The Issuer agrees that it will not waive timely performance or
observance by the Servicer, the Backup Servicer, the Seller or OFL of their
respective duties under the Related Documents without the prior consent of
the Controlling Party.
SECTION 3.08. NEGATIVE COVENANTS. Until the Termination Date, the Issuer
shall not:
(i) except as expressly permitted by this Indenture, the
Purchase Agreement or the Sale and Servicing Agreement, sell,
transfer, exchange or otherwise dispose of any of the properties or
assets of the Issuer, including those included in the Trust Estate,
unless directed to do so by the Controlling Party;
(ii) claim any credit on, or make any deduction from the
principal, interest or premium payable in respect of, the Notes (other
than amounts properly withheld from such payments under the Code) or
assert any claim against any present or former Noteholder by reason of
the payment of the taxes levied or assessed upon any part of the Trust
Estate; or
(iii) (A) permit the validity or effectiveness of this
Indenture to be impaired, or permit the lien in favor of the Trustee
created by this Indenture to be amended, hypothecated, subordinated,
terminated or discharged, or permit any Person to be released from any
covenants or obligations with respect to the Notes under this
Indenture except as may be expressly permitted hereby, (B) permit any
lien, charge, excise, claim, security interest, mortgage or other
encumbrance (other than the lien in favor of the Trustee created by
this Indenture) to be created on or extend to or otherwise arise upon
or burden the Trust Estate or any part thereof or any interest therein
or the proceeds thereof (other than tax liens, mechanics' liens and
other liens that arise by operation of law, in each case on a Financed
Vehicle and arising solely as a result of an
- 19 -
<PAGE>
action or omission of the related Obligor), (C) permit the lien
in favor of the Trustee created by this Indenture not to
constitute a valid first priority (other than with respect to any
such tax, mechanics' or other lien) security interest in the
Trust Estate, or (D) amend, modify or fail to comply with the
provisions of the Related Documents without the prior written
consent of the Controlling Party.
SECTION 3.09. ANNUAL STATEMENT AS TO COMPLIANCE. The Issuer will deliver
to the Trustee and JPMD, within 120 days after the end of each fiscal year of
the Issuer (commencing with the fiscal year ended December 31, 1996), an
Officer's Certificate stating, as to the Authorized Officer signing such
Officer's Certificate, that
(i) a review of the activities of the Issuer during such year
and of performance under this Indenture has been made under such
Authorized Officer's supervision; and
(ii) to the best of such Authorized Officer's knowledge, based on
such review, the Issuer has complied with all conditions and covenants
under this Indenture throughout such year, or, if there has been a
default in the compliance of any such condition or covenant,
specifying each such default known to such Authorized Officer and the
nature and status thereof.
SECTION 3.10. ISSUER MAY CONSOLIDATE, ETC. ONLY ON CERTAIN TERMS.
(a) The Issuer shall not consolidate or merge with or into any other
Person, unless
(i) the Person (if other than the Issuer) formed by or surviving
such consolidation or merger shall be a Person organized and existing
under the laws of the United States of America or any State and shall
expressly assume, by an indenture supplemental hereto, executed and
delivered to the Trustee, in form and substance satisfactory to the
Trustee and JPMD, the due and punctual payment of the principal of and
interest on all Notes and the performance or observance of every
agreement and covenant of this Indenture and each other Related
Document on the part of the Issuer to be performed or observed, all as
provided herein;
(ii) immediately after giving effect to such transaction, no
Default or Event of Default shall have occurred and be continuing;
(iii) the Rating Agency Condition shall have been satisfied
with respect to such transaction;
- 20 -
<PAGE>
(iv) the Issuer shall have received an Opinion of Counsel which
shall be delivered to and shall be satisfactory to the Trustee to the
effect that such transaction will not have any material adverse tax
consequence to the Trust, any Noteholder or any Certificateholder;
(v) any action as is necessary to maintain the lien and security
interest created in favor of the Trustee by this Indenture shall have
been taken;
(vi) the Issuer shall have delivered to the Trustee an Officer's
Certificate and an Opinion of Counsel (which shall describe the
actions taken as required by clause (a)(v) of this Section 3.10 or
that no such actions will be taken) each stating that such
consolidation or merger and such supplemental indenture comply with
this Article III and that all conditions precedent herein provided for
relating to such transaction have been compiled with; and
(vii) the Issuer or the Person (if other than the Issuer) formed
by or surviving such consolidation or merger has a net worth,
immediately after such consolidation or merger, that is (a) greater
than zero and (b) not less than the net worth of the Issuer
immediately prior to giving effect to such consolidation or merger.
(b) The Issuer shall not convey or transfer all or substantially all
of its properties or assets, including those included in the Trust Estate,
to any Person (except as expressly permitted by the Indenture, the Purchase
Agreement or the Sale and Servicing Agreement), unless
(i) the Person that acquires by conveyance or transfer the
properties and assets of the Issuer shall (A) be a United States
citizen or a Person organized and existing under the laws of the
United States of America or any State, (B) expressly assume, by an
indenture supplemental hereto, executed and delivered to the Trustee,
in form and substance satisfactory to the Trustee and the Note
Majority, the due and punctual payment of the principal of and
interest on all Notes and the performance or observance of every
agreement and covenant of this Indenture and each Related Document on
the part of the Issuer to be performed or observed, all as provided
herein, (C) expressly agree by means of such supplemental indenture
that all right, title and interest so conveyed or transferred shall be
subject and subordinate to the rights of Holders of the Notes and (D)
unless otherwise provided in such supplemental indenture, expressly
agree to indemnify, defend and hold harmless the Issuer against and
from any loss, liability or expense arising under or related to this
Indenture and the Notes;
- 21 -
<PAGE>
(ii) immediately after giving effect to such transaction, no
Default or Event of Default shall have occurred and be continuing;
(iii) the Rating Agency Condition shall have been satisfied
with respect to such transaction;
(iv) the Issuer shall have received an Opinion of Counsel which
shall be delivered to and shall be satisfactory to the Trustee and
JPMD to the effect that such transaction will not have any material
adverse tax consequence to the Trust, any Noteholder or any
Certificateholder;
(v) any action as is necessary to maintain the lien and security
interest created in favor of the Trustee by this Indenture shall have
been taken;
(vi) the Issuer shall have delivered to the Trustee an Officer's
Certificate and an Opinion of Counsel (which shall describe the
actions taken as required by clause (b)(v) of this Section 3.10 or
that no such actions will be taken) each stating that such conveyance
or transfer and such supplemental indenture comply with this Article
III and that all conditions precedent herein provided for relating to
such transaction have been complied with; and
(vii) the Person acquiring by conveyance or transfer the
properties or assets of the Issuer has a net worth, immediately after
such conveyance or transfer, that is (a) greater than zero and (b) not
less than the net worth of the Issuer immediately prior to giving
effect to such conveyance or transfer.
SECTION 3.11. SUCCESSOR OR TRANSFEREE.
(a) Upon any consolidation or merger of the Issuer in accordance with
Section 3.10(a), the Person formed by or surviving such consolidation or
merger (if other than the Issuer) shall succeed to, and be substituted for,
and may exercise every right and power of, the Issuer under this Indenture
with the same effect as if such Person had been named as the Issuer herein.
(b) Upon a conveyance or transfer of all the assets and properties of
the Issuer pursuant to Section 3.10(b), Olympic Automobile Receivables
Warehouse Trust will be released from every covenant and agreement of this
Indenture to be observed or performed on the part of the Issuer with
respect to the Notes immediately upon the delivery of written notice to the
Trustee stating that Olympic Automobile Receivables Warehouse Trust is to
be so released.
SECTION 3.12. NO OTHER BUSINESS. The Issuer shall not engage in any
business other than financing, purchasing, owning, selling and managing the
Receivables in the
- 22 -
<PAGE>
manner contemplated by this Indenture and the Related Documents and activities
incidental thereto.
SECTION 3.13. NO BORROWING. The Issuer shall not issue, incur, assume,
guarantee or otherwise become liable, directly or indirectly, for any
Indebtedness except for (i) the Notes, (ii) any other Indebtedness permitted by
or arising under the Related Documents and (iii) a Securitized Offering. The
proceeds of the Notes and the Certificates shall be used exclusively to fund the
Issuer's purchase of the Receivables and the other assets specified in the Sale
and Servicing Agreement and to pay the Issuer's organizational, transactional
and start-up expenses.
SECTION 3.14. SERVICER'S OBLIGATIONS. The Issuer shall cause the Servicer
to comply with Sections 3.9, 3.10, 3.11 and 4.9(b) of the Sale and Servicing
Agreement.
SECTION 3.15. GUARANTEES, LOANS, ADVANCES AND OTHER LIABILITIES. Except
as contemplated by the Sale and Servicing Agreement or this Indenture, the
Issuer shall not make any loan or advance or credit to, or guarantee (directly
or indirectly or by an instrument having the effect of assuming another's
payment or performance on any obligation or capability of so doing or
otherwise), endorse or otherwise become contingently liable, directly or
indirectly, in connection with the obligations, stocks or dividends of, or own,
purchase, repurchase or acquire (or agree contingently to do so) any stock,
obligations, assets or securities of, any other interest in, or make any capital
contribution to, any other Person.
SECTION 3.16. CAPITAL EXPENDITURES. The Issuer shall not make any
expenditure (by long-term or operating lease or otherwise) for capital assets
(either realty or personalty).
SECTION 3.17. RESTRICTED PAYMENTS. Except as expressly permitted by this
Indenture or the Sale and Servicing Agreement, the Issuer shall not, directly or
indirectly, (i) make any distribution (by reduction of capital or otherwise),
whether in cash, property, securities or a combination thereof, to the Owner
Trustee or any owner of a beneficial interest in the Issuer or otherwise with
respect to any ownership or equity interest or security in or of the Issuer or
to the Servicer, (ii) redeem, purchase, retire or otherwise acquire for value
any such ownership or equity interest or security or (iii) set aside or
otherwise segregate any amounts for any such purpose. The Issuer will not,
directly or indirectly, make payments to or distributions from the Collection
Account except in accordance with this Indenture and the Related Documents.
SECTION 3.18. NOTICE OF EVENTS OF DEFAULT. The Issuer agrees to give the
Trustee, the Controlling Party, JPMD and the Rating Agencies prompt written
notice of each Event of Default hereunder, each default on the part of the
Servicer or the Seller of its obligations under the Sale and Servicing Agreement
and each default on the part of OFL of its obligations under the Purchase
Agreement.
- 23 -
<PAGE>
SECTION 3.19. FURTHER INSTRUMENTS AND ACTS. Upon request of the Trustee,
the Issuer will execute and deliver such further instruments and do such further
acts as may be reasonably necessary or proper to carry out more effectively the
purpose of this Indenture.
SECTION 3.20. COMPLIANCE WITH LAWS. The Issuer shall comply with the
requirements of all applicable laws, the non-compliance with which would,
individually or in the aggregate, materially and adversely affect the ability of
the Issuer to perform its obligations under the Notes, this Indenture or any
Related Document.
SECTION 3.21. AMENDMENTS OF SALE AND SERVICING AGREEMENT AND TRUST
AGREEMENT. The Issuer shall not agree to any amendment to Section 10.1 of the
Sale and Servicing Agreement or Section 11.1 of the Trust Agreement to eliminate
the requirements thereunder that the Trustee or the Holders of the Notes consent
to amendments thereto as provided therein.
SECTION 3.22. [Reserved].
SECTION 3.23. INCOME TAX CHARACTERIZATION. For purposes of federal
income, state and local income and franchise and any other income taxes, the
Issuer and the Trustee hereby agree, and the Noteholders will agree by their
acceptance of the Notes or any interest therein, to treat the Notes as
indebtedness.
ARTICLE IV
SATISFACTION AND DISCHARGE
SECTION 4.01. SATISFACTION AND DISCHARGE OF INDENTURE. This Indenture
shall cease to be of further effect with respect to the Notes except as to (i)
rights of registration of transfer and exchange, (ii) substitution of mutilated,
destroyed, lost or stolen Notes, (iii) rights of Noteholders to receive payments
of principal, interest and premium, if any, thereon and breakage payments in
connection therewith, (iv) Sections 3.01, 3.03, 3.04, 3.05, 3.07, 3.08, 3.10,
3.12, 3.13, 3.20, 3.21 and 3.23, (v) the rights, obligations and immunities of
the Trustee hereunder (including the rights of the Trustee under Section 6.07
and the obligations of the Trustee under Section 4.02) and (vi) the rights of
Noteholders as beneficiaries hereof with respect to the property so deposited
with the Trustee payable to all or any of them, and the Trustee, on demand of
and at the expense of the Issuer, shall execute proper instruments acknowledging
satisfaction and discharge of this Indenture with respect to the Notes, when
(A) either
(1) all Notes theretofore authenticated and delivered (other
than (i) Notes that have been destroyed, lost or stolen and that have
been replaced or
- 24 -
<PAGE>
paid as provided in Section 2.05 and (ii) Notes for
whose payment money has theretofore been deposited in trust or
segregated and held in trust by the Issuer and thereafter repaid to
the Issuer or discharged from such trust, as provided in Section 3.03)
have been delivered to the Trustee for cancellation; or
(2) all Notes not theretofore delivered to the Trustee for
cancellation have become due and payable and the Issuer has
irrevocably deposited or caused to be irrevocably deposited with the
Trustee as part of the Trust Estate cash or direct obligations of or
obligations guaranteed by the United States of America (which will
mature prior to the date such amounts are payable), in trust in an
Eligible Account in the name of the Trustee for such purpose, in an
amount sufficient to pay and discharge the entire indebtedness on such
Notes not theretofore delivered to the Trustee for cancellation when
due to the Final Maturity Date;
(B) the Issuer has paid or caused to be paid all Secured Obligations;
and
(C) the Issuer has delivered to the Trustee an Officer's Certificate
and an Independent Certificate from a firm of certified public accountants,
each meeting the applicable requirements of Section 11.01(a) and each
stating that all conditions precedent herein provided for relating to the
satisfaction and discharge of this Indenture have been complied with and
the Rating Agency Condition has been satisfied.
SECTION 4.02. APPLICATION OF TRUST MONEY. All moneys deposited with the
Trustee pursuant to Section 4.01 hereof shall be held in trust and applied by
it, in accordance with the provisions of the Notes and this Indenture, to the
payment, either directly or through any Paying Agent, as the Trustee may
determine, to the Holders of the particular Notes for the payment or redemption
of which such moneys have been deposited with the Trustee, of all sums due and
to become due thereon for principal and interest; but such moneys need not be
segregated from other funds except to the extent required herein or in the Sale
and Servicing Agreement or required by law.
SECTION 4.03. REPAYMENT OF MONEYS HELD BY PAYING AGENT. In connection
with the satisfaction and discharge of this Indenture with respect to the Notes,
all moneys then held by any Paying Agent other than the Trustee under the
provisions of this Indenture with respect to such Notes shall, upon demand of
the Issuer, be paid to the Trustee to be held and applied according to Section
3.03 and thereupon such Paying Agent shall be released from all further
liability with respect to such moneys.
SECTION 4.04. RELEASE OF TRUST ESTATE. The Trustee shall, on or after the
Termination Date, release any remaining portion of the Trust Estate from the
lien created by this Indenture and deposit in the Collection Account any funds
then on deposit in any other
- 25 -
<PAGE>
Trust Account. The Trustee shall release property from the lien created by
this Indenture pursuant to this Section 4.04 only upon receipt of an Issuer
Request accompanied by an Officer's Certificate and, if requested by the
Trustee, an Opinion of Counsel satisfying the criteria set forth in Section
11.01(a)(ii).
ARTICLE V
REMEDIES
SECTION 5.01. EVENTS OF DEFAULT. "Event of Default," wherever used
herein, means any one of the following events (whatever the reason for such
Event of Default and whether it shall be voluntary or involuntary or be effected
by operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(i) default in the payment of any interest on any Note when the
same becomes due and payable; or
(ii) default in the payment of the principal of or any
installment of the principal of any Note when the same becomes due and
payable; or
(iii) default in the observance or performance of any
covenant or agreement of the Issuer made in this Indenture (other than
a covenant or agreement, a default in the observance or performance of
which is elsewhere in this Section specifically dealt with), or any
representation or warranty of the Issuer made in this Indenture or in
any certificate or other writing delivered pursuant hereto or in
connection herewith proving to have been incorrect in any material
respect as of the time when the same shall have been made, and such
default shall 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 Issuer by the Trustee or to the Issuer and the
Trustee by the Controlling Party, a written notice specifying such
default or incorrect representation or warranty and requiring it to be
remedied and stating that such notice is a "Notice of Default"
hereunder; or
(v) the commencement of an involuntary case against the Issuer
under any applicable Federal or state bankruptcy, insolvency or other
similar law now or hereafter in effect, and such case is not dismissed
within 60 days; or
- 26 -
<PAGE>
(vi) (A) the commencement by the Issuer of a voluntary case under
any applicable Federal or state bankruptcy, insolvency or other
similar law now or hereafter in effect, (B) the entry of an order for
relief in an involuntary case against the Issuer under any such law,
(C) the consent by the Issuer to the entry of any such order for
relief, (D) the consent by the Issuer to the appointment or taking
possession by a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official of the Issuer or for any substantial
part of the Trust Estate, (E) the making by the Issuer of any general
assignment for the benefit of creditors, (F) the failure by the Issuer
generally to pay its debts as such debts become due, or (G) the taking
of action by the Issuer in furtherance of any of the foregoing.
The Issuer shall deliver to the Trustee, within five days after obtaining
knowledge of the occurrence thereof, written notice in the form of an Officer's
Certificate of any event which with the giving of notice and the lapse of time
would become an Event of Default under clause (iii), its status and what action
the Issuer is taking or proposes to take with respect thereto.
SECTION 5.02. RIGHTS UPON EVENT OF DEFAULT.
If an Event of Default shall have occurred and be continuing, the Notes
shall become immediately due and payable, together with accrued interest
thereon. If an Event of Default shall have occurred and be continuing, the
Controlling Party may exercise any of the remedies specified in Section 5.04(a).
SECTION 5.03. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY
TRUSTEE; AUTHORITY OF CONTROLLING PARTY.
(a) The Issuer covenants that if any Notes are accelerated following
the occurrence of an Event of Default, the Issuer will, upon demand of the
Trustee, pay to it, for the benefit of the Holders of such Notes, the whole
amount then due and payable on such Notes for principal and interest, with
interest upon the overdue principal, and, to the extent payment at such
rate of interest shall be legally enforceable, upon overdue installments of
interest, at the Interest Rate and in addition thereto such further amount
as shall be sufficient to cover the costs and expenses of collection,
including the reasonable compensation, expenses, disbursements and advances
of the Trustee and its agents and counsel, and any breakage payments in
connection therewith.
(b) The Trustee hereby irrevocably and unconditionally appoints the
Controlling Party as the true and lawful attorney-in-fact of the Trustee
for so long as the Trustee is not the Controlling Party, with full power of
substitution, to execute, acknowledge and deliver any notice, document,
certificate, paper, pleading or
-27-
<PAGE>
instrument and to do in the name of the Controlling Party as well as in the
name, place and stead of the Trustee such acts, things and deeds for or on
behalf of and in the name of the Controlling Party under this Indenture
(including specifically under Section 5.04) and under the Related Documents
which the Trustee 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 under the Related Documents and,
without limitation, following the occurrence of an Event of Default,
exercise full right, power and authority to take, or defer from taking, any
and all acts with respect to the administration, maintenance or disposition
of the Trust Estate.
(c) If an Event of Default occurs and is continuing, the Trustee may
in its discretion but with the consent of the Controlling Party (except as
provided in Section 5.03(d) below or as required to comply with Section
6.01(a)), proceed to protect and enforce its rights and the rights of the
Noteholders, by such appropriate Proceedings as the Trustee shall deem most
effective to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy
or legal or equitable right vested in the Trustee by this Indenture or by
law.
(d) Notwithstanding anything to the contrary contained in this
Indenture (including without limitation Sections 5.04(a), 5.12, 5.13 and
5.17), if the Issuer fails to perform its obligations under Section
10.01(b) hereof when and as due, the Trustee may in its discretion (and
without the consent of the Controlling Party) proceed to protect and
enforce its rights and the rights of the Noteholders by such appropriate
Proceedings as the Trustee shall deem most effective to protect and enforce
any such rights, whether for specific performance of any covenant or
agreement in this Indenture or in aid of the exercise of any power granted
herein, or to enforce any other proper remedy or legal or equitable right
vested in the Trustee by this Indenture or by law; provided that the
Trustee shall only be entitled to take any such actions without the consent
of the Controlling Party to the extent such actions are taken only to
enforce to Issuer's obligations to redeem the principal amount of Notes.
(e) In case there shall be pending, relative to the Issuer or any
other obligor upon the Notes or any Person having or claiming an ownership
interest in the Trust Estate, Proceedings under Title 11 of the United
States Code or any other applicable Federal or state bankruptcy, insolvency
or other similar law, or in case a receiver, assignee or trustee in
bankruptcy or reorganization, liquidator, sequestrator or similar official
shall have been appointed for or taken possession of the Issuer or its
property or such other obligor or Person, or in case of any other
comparable judicial Proceedings relative to the Issuer or other obligor
upon the Notes, or to the creditors or property of the Issuer or such other
obligor, the Trustee, irrespective of whether the principal of any Notes
shall then be due and payable as therein expressed or by declaration or
otherwise and irrespective of whether the Trustee shall have
-28-
<PAGE>
made any demand pursuant to the provisions of this Section, shall be
entitled and empowered, by intervention in such Proceedings or otherwise:
(i) to file and prove a claim or claims for the whole amount of
principal, interest and premium, if any, owing and unpaid in respect
of the Notes and to file such other papers or documents as may be
necessary or advisable in order to have the claims of the Trustee
(including any claim for reasonable compensation to the Trustee and
each predecessor Trustee, and their respective agents, attorneys and
counsel, and for reimbursement of all expenses and liabilities
incurred, and all advances made, by the Trustee and each predecessor
Trustee, except as a result of negligence or bad faith) and of the
Noteholders allowed in such Proceedings;
(ii) unless prohibited by applicable law and regulations, to vote
on behalf of the Holders of Notes in any election of a trustee, a
standby trustee or Person performing similar functions in any such
Proceedings;
(iii) to collect and receive any moneys or other property
payable or deliverable on any such claims and to distribute all
amounts received with respect to the claims of the Noteholders and of
the Trustee on their behalf; and
(iv) to file such proofs of claim and other papers or documents
as may be necessary or advisable in order to have the claims of the
Trustee or the Holders of Notes allowed in any judicial proceedings
relative to the Issuer, its creditors and its property;
and any trustee, receiver, liquidator, custodian or other similar official
in any such Proceeding is hereby authorized by each of such Noteholders to
make payments to the Trustee, and, in the event that the Trustee shall
consent to the making of payments directly to such Noteholders, to pay to
the Trustee such amounts as shall be sufficient to cover reasonable
compensation to the Trustee, each predecessor Trustee and their respective
agents, attorneys and counsel, and all other expenses and liabilities
incurred, and all advances made, by the Trustee and each predecessor
Trustee except as a result of negligence or bad faith.
(f) Nothing herein contained shall be deemed to authorize the Trustee
to authorize or consent to or vote for or accept or adopt on behalf of any
Noteholder any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder thereof or to
authorize the Trustee to vote in respect of the claim of any Noteholder in
any such proceeding except, as aforesaid, to vote for the election of a
trustee in bankruptcy or similar Person.
-29-
<PAGE>
(g) All rights of action and of asserting claims under this Indenture
or under any of the Notes, may be enforced by the Trustee without the
possession of any of the Notes or the production thereof in any trial or
other Proceedings relative thereto, and any such action or Proceedings
instituted by the Trustee shall be brought in its own name as trustee of an
express trust, and any recovery of judgment, subject to the payment of the
expenses, disbursements and compensation of the Trustee, each predecessor
Trustee and their respective agents and attorneys, shall be for the ratable
benefit of the Holders of the Notes.
(h) In any Proceedings brought by the Trustee (including any
Proceedings involving the interpretation of any provision of this
Indenture), the Trustee shall be held to represent all the Holders of the
Notes, and it shall not be necessary to make any Noteholder a party to any
such Proceedings.
SECTION 5.04. REMEDIES. (a) If an Event of Default shall have occurred
and be continuing, the Controlling Party may:
(i) institute Proceedings in its own name and as or on behalf of
a trustee of an express trust for the collection of all amounts then
payable on the Notes or under this Indenture with respect thereto,
whether by declaration or otherwise, enforce any judgment obtained,
and collect from the Issuer and any other obligor upon such Notes
moneys adjudged due;
(ii) institute Proceedings from time to time for the complete or
partial foreclosure of this Indenture with respect to the Trust
Estate;
(iii) exercise any remedies of a secured party under the UCC
and any other remedy available to the Trustee and take any other
appropriate action to protect and enforce the rights and remedies of
the Trustee for the benefit of the Noteholders under this Indenture or
the Notes; and
(iv) direct the Trustee to sell the Trust Estate or any portion
thereof or rights or interest therein, at one or more public or
private sales called and conducted in any manner permitted by law;
SECTION 5.05. OPTIONAL PRESERVATION OF THE RECEIVABLES. If the Notes have
been declared to be due and payable under Section 5.02 following an Event of
Default and such declaration and its consequences have not been rescinded and
annulled, the Trustee may, but need not, unless otherwise directed by the
Controlling Party, maintain possession of the Trust Estate. It is the desire of
the parties hereto and the Noteholders that there be at all times sufficient
funds for the payment of principal of and interest on the Notes, and the Trustee
shall take such desire into account when determining whether or not to maintain
possession of the Trust Estate. In determining whether to maintain possession
of the Trust Estate, the
-30-
<PAGE>
Trustee may, but need not, obtain and rely upon an opinion of an Independent
investment banking or accounting firm of national reputation as to the
feasibility of such proposed action and as to the sufficiency of the Trust
Estate for such purpose.
SECTION 5.06. PRIORITIES.
If the Trustee collects any money or property pursuant to this Article V or
the Trustee receives proceeds of liquidation of the Trust Estate pursuant to
Section 5.04(a)(iv), the Trustee shall pay as promptly as practicable out the
money or property in the following order:
FIRST: amounts due and owing and required to be distributed to the
Servicer, the Owner Trustee, the Trustee, the Lockbox Bank, the Custodian and
the Backup Servicer, respectively, pursuant to priorities (i), (ii) and (iii) of
Section 4.6 of the Sale and Servicing Agreement and not previously distributed,
in the order of such priorities and without preference or priority of any kind
within such priorities;
SECOND: to the Noteholders for amounts due and unpaid on the Notes for
interest, ratably, without preference or priority of any kind, according to the
amounts due and payable on the Notes for interest;
THIRD: to the Noteholders for amounts due and unpaid on the Notes for
principal, ratably, without preference or priority of any kind, according to the
amounts due and payable on the Notes for principal;
FOURTH: amounts due and unpaid on the Certificates for interest and
principal, to the Owner Trustee for distribution to Certificateholders in
accordance with Section 5.2(d) of the Trust Agreement;
FIFTH: any amounts due and owing to any Indemnified Party (as such term is
used in the Note Purchase Agreement) under Section 11.01, Section 11.04 or
Section 11.05 of the Note Purchase Agreement; and
SIXTH: any amounts due and owing to any Indemnified Party (as such term is
used in the Certificate Purchase Agreement) under Section 11.01, Section 11.04
or Section 11.05 of the Certificate Purchase Agreement.
SECTION 5.07. LIMITATION OF SUITS. No Holder of any Notes shall have any
right to institute any Proceeding, judicial or otherwise, with respect to this
Indenture, or for the appointment of a receiver or trustee, or for any other
remedy hereunder, unless:
(i) such Holder has previously given written notice to the
Trustee of a continuing Event of Default;
-31-
<PAGE>
(ii) the Holders of not less than 25% of the Outstanding Amount
of such Notes have made written request to the Trustee to institute
such Proceeding in respect of such Event of Default in its own name as
Trustee hereunder;
(iii) such Holder or Holders have offered to the Trustee
reasonable indemnity against the costs, expenses and liabilities to be
incurred in complying with such request;
(iv) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute such
Proceedings; and
(v) no direction inconsistent with such written request has been
given to the Trustee during such 60-day period by the Holders of a
majority of the Outstanding Amount of such Notes;
it being understood and intended that no one or more Holders of Notes shall have
any right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture to affect, disturb or prejudice the rights of any other
Holders of Notes or to obtain or to seek to obtain priority or preference over
any other Holders or to enforce any right under this Indenture, except in the
manner herein provided.
In the event the Trustee shall receive conflicting or inconsistent requests
and indemnity from two or more groups of Holders of such Notes, each
representing less than a majority of the Outstanding Amount of such Notes, the
Trustee in its sole discretion may determine what action, if any, shall be
taken, notwithstanding any other provisions of this Indenture.
SECTION 5.08. [Reserved].
SECTION 5.09. RESTORATION OF RIGHTS AND REMEDIES. If the Controlling
Party or any Noteholder has instituted any Proceeding to enforce any right or
remedy under this Indenture and such Proceeding has been discontinued or
abandoned for any reason or has been determined adversely to the Controlling
Party or to such Noteholder, then and in every such case the Issuer, the
Controlling Party and the Noteholders shall, subject to any determination in
such Proceeding, be restored severally and respectively to their former
positions hereunder, and thereafter all rights and remedies of the Controlling
Party and the Noteholders shall continue as though no such Proceeding had been
instituted.
SECTION 5.10. RIGHTS AND REMEDIES CUMULATIVE. No right or remedy herein
conferred upon or reserved to the Controlling Party or to the Noteholders is
intended to be exclusive of any other right or remedy, and every right and
remedy shall, to the extent permitted by law, be cumulative and in addition to
every other right and remedy given
-32-
<PAGE>
hereunder or now or hereafter existing at law or in equity or otherwise. The
assertion or employment of any right or remedy hereunder, or otherwise, shall
not prevent the concurrent assertion or employment of any other appropriate
right or remedy.
SECTION 5.11. DELAY OR OMISSION NOT A WAIVER. No delay or omission of the
Controlling Party or any Holder of any Note to exercise any right or remedy
accruing upon any Default or Event of Default shall impair any such right or
remedy or constitute a waiver of any such Default or Event of Default or an
acquiescence therein. Every right and remedy given by this Article V or by law
to the Trustee or to the Noteholders may be exercised from time to time, and as
often as may be deemed expedient, by the Trustee or by the Noteholders, as the
case may be.
SECTION 5.12. CONTROL BY NOTEHOLDERS. The Controlling Party shall have
the right to direct the time, method and place of conducting any Proceeding for
any remedy available to the Trustee with respect to the Notes or exercising any
trust or power conferred on the Trustee; provided that
(i) such direction shall not be in conflict with any rule of law
or with this Indenture;
(ii) subject to the express terms of Section 5.04, any direction
to the Trustee to sell or liquidate all or any portion of the Trust
Estate shall be by the Holders of Notes representing not less than
100% of the Outstanding Amount of the Notes;
(iii) if the conditions set forth in Section 5.05 have been
satisfied and the Trustee elects to retain the Trust Estate pursuant
to such Section, then any direction to the Trustee by Holders of Notes
representing less than 100% of the Outstanding Amount of the Notes to
sell or liquidate all or any portion of the Trust Estate shall be of
no force and effect; and
(iv) the Trustee may take any other action deemed proper by the
Trustee that is not inconsistent with such direction; PROVIDED,
HOWEVER, that, subject to Section 6.01, the Trustee need not take any
action that it determines might involve it in liability or might
materially adversely affect the rights of any Noteholders not
consenting to such action.
SECTION 5.13. WAIVER OF PAST DEFAULTS.
The Controlling Party may waive any past Default or Event of Default and
its consequences except a Default (a) in payment of principal of or interest on
any of the Notes or (b) in respect of a covenant or provision hereof which
cannot be modified or amended without the consent of the Holder of each Note.
In the case of any such waiver, the Issuer,
-33-
<PAGE>
the Trustee and the Holders of the Notes shall be restored to their former
positions and rights hereunder, respectively; but no such waiver shall extend
to any subsequent or other Default or impair any right consequent thereto.
Upon any such waiver, such Default shall cease to exist and be deemed to
have been cured and not to have occurred, and any Event of Default arising
therefrom shall be deemed to have been cured and not to have occurred, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other Default or Event of Default or impair any right consequent thereto.
SECTION 5.14. UNDERTAKING FOR COSTS. All parties to this Indenture agree,
and each Holder of any Note by such Holder's acceptance thereof shall be deemed
to have agreed, that any court may in its discretion require, in any suit for
the enforcement of any right or remedy under this Indenture, or in any suit
against the Trustee for any action taken, suffered or omitted by it as Trustee,
the filing by any party litigant in such suit of an undertaking to pay the costs
of such suit and that such court may in its discretion assess reasonable costs,
including reasonable attorneys' fees, against any party litigant in such suit,
having due regard to the merits and good faith of the claims or defenses made by
such party litigant; but the provisions of this Section shall not apply to (a)
any suit instituted by the Trustee, (b) any suit instituted by any Noteholder,
or group of Noteholders, in each case holding in the aggregate more than 10% of
the Outstanding Amount of the Notes or (c) any suit instituted by any Noteholder
for the enforcement of the payment of principal of or interest on any Note on or
after the respective due dates expressed in such Note and in this Indenture (or,
in the case of redemption, on or after the Redemption Date).
SECTION 5.15. WAIVER OF STAY OR EXTENSION LAWS. The Issuer covenants (to
the extent that it may lawfully do so) that it will not at any time insist upon,
or plead or in any manner whatsoever, claim or take the benefit or advantage of,
any stay or extension law wherever enacted, now or at any time hereafter in
force, that may affect the covenants or the performance of this Indenture; and
the Issuer (to the extent that it may lawfully do so) hereby expressly waives
all benefit or advantages of any such law, and covenants that it will not
hinder, delay or impede the execution of any power herein granted to the
Trustee, but will suffer and permit the execution of every such power as though
no such law had been enacted.
SECTION 5.16. ACTION ON NOTES. The Trustee's right to seek and recover
judgment on the Notes or under this Indenture shall not be affected by the
seeking, obtaining or application of any other relief under or with respect to
this Indenture. Neither the lien of this Indenture nor any rights or remedies
of the Trustee or the Noteholders shall be impaired by the recovery of any
judgment by the Trustee against the Issuer or by the levy of any execution under
such judgment upon any portion of the Trust Estate or upon any of the assets of
the Issuer.
-34-
<PAGE>
SECTION 5.17. PERFORMANCE AND ENFORCEMENT OF CERTAIN OBLIGATIONS.
(a) Promptly following a request from the Trustee to do so and at the
Seller's expense, the Issuer agrees to take all such lawful action as the
Trustee may request to compel or secure the performance and observance by
the Seller, the Servicer and OFL, as applicable, of each of their
obligations to the Issuer under or in connection with the Sale and
Servicing Agreement or to the Seller under or in connection with the
Purchase Agreement in accordance with the terms thereof, and to exercise
any and all rights, remedies, powers and privileges lawfully available to
the Issuer under or in connection with the Sale and Servicing Agreement to
the extent and in the manner directed by the Trustee, including the
transmission of notices of default on the part of the Seller or the
Servicer thereunder and the institution of legal or administrative actions
or proceedings to compel or secure performance by the Seller or the
Servicer of each of their obligations under the Sale and Servicing
Agreement.
(b) If an Event of Default has occurred and is continuing, the
Trustee may, and at the direction (which direction shall be in writing,
including facsimile) of the Holders of 66-2/3% of the Outstanding Amount of
the Notes shall, exercise all rights, remedies, powers, privileges and
claims of the Issuer against the Seller or the Servicer under or in
connection with the Sale and Servicing Agreement, including the right or
power to take any action to compel or secure performance or observance by
the Seller or the Servicer of each of their obligations to the Issuer
thereunder and to give any consent, request, notice, direction, approval,
extension or waiver under the Sale and Servicing Agreement, and any right
of the Issuer to take such action shall be suspended.
(c) Promptly following a request from the Trustee to do so and at the
Seller's expense, the Issuer agrees to take all such lawful action as the
Trustee may request to compel or secure the performance and observance by
OFL of each of its obligations to the Seller under or in connection with
the Purchase Agreement in accordance with the terms thereof, and to
exercise any and all rights, remedies, powers and privileges lawfully
available to the Issuer under or in connection with the Purchase Agreement
to the extent and in the manner directed by the Trustee, including the
transmission of notices of default on the part of the Seller thereunder and
the institution of legal or administrative actions or proceedings to compel
or secure performance by OFL of each of its obligations under the Purchase
Agreement.
(d) If an Event of Default has occurred and is continuing the Trustee
may, and at the direction (which direction shall be in writing, including
facsimile) of the Holders of 66-2/3% of the Outstanding Amount of the Notes
shall, exercise all rights, remedies, powers, privileges and claims of the
Seller against OFL under or in connection with the Purchase Agreement,
including the right or power to take any action to compel or secure
performance or observance by OFL of each of its
-35-
<PAGE>
obligations to the Seller hereunder and to give any consent, request,
notice, direction, approval, extension or waiver under the Purchase
Agreement, and any right of the Seller to take such action shall be
suspended.
ARTICLE VI
THE TRUSTEE
SECTION 6.01. DUTIES OF TRUSTEE.
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise the rights and powers vested in it by this Indenture
and in the same degree of care and skill in their exercise as a prudent
person would exercise or use under the circumstances in the conduct of such
person's own affairs except to the extent that the Controlling Party has
directed the Trustee to act or assumes the duties and/or responsibilities
of the Trustee hereunder on behalf of the Noteholders.
(b) Except during the continuance of an Event of Default:
(i) the Trustee undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture and no implied
covenants or obligations shall be read into this Indenture against the
Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements
of this Indenture; however, the Trustee shall examine the certificates
and opinions to determine whether or not they conform to the
requirements of this Indenture and, if applicable, the Trustee's other
Related Documents.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of paragraph (b) of
this Section;
(ii) the Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer unless it is proved that
the Trustee was negligent in ascertaining the pertinent facts; and
-36-
<PAGE>
(iii) the Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance with a
direction received by it pursuant to Section 5.12.
(d) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b) and (c) of this Section.
(e) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Issuer.
(f) Money held in trust by the Trustee need not be segregated from
other funds except to the extent required by law or the terms of this
Indenture or the Sale and Servicing Agreement.
(g) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers, if it shall have reasonable grounds to believe that
repayments of such funds or adequate indemnity against such risk or
liability is not reasonably assured to it.
(h) In no event shall the Trustee be required to perform, or be
responsible for the manner of performance of, any of the obligations of the
Servicer, or any other party, under the Sale and Servicing Agreement,
except during such time, if any, as the Backup Servicer shall be the
successor to, and be vested with the rights, powers, duties and privileges
of the Servicer in accordance with the terms of, the Sale and Servicing
Agreement.
(i) The Trustee shall, and hereby agrees that it will, perform all of
the obligations and duties required of it under the Sale and Servicing
Agreement.
(j) Without limiting the generality of this Section 6.01, the Trustee
shall have no duty (i) to see to any recording, filing or depositing of
this Indenture or any agreement referred to herein or any financing
statement evidencing a security interest in the Financed Vehicles, or to
see to the maintenance of any such recording or filing or depositing or to
any recording, refiling or redepositing of any thereof, (ii) to see to any
insurance of the Financed Vehicles or Obligors or to effect or maintain any
such insurance, (iii) to see to the payment or discharge of any tax,
assessment or other governmental charge or any Lien or encumbrance of any
kind owing with respect to, assessed or levied against any part of the
Trust, (iv) to confirm or verify the contents of any reports or
certificates delivered to the Trustee pursuant to this Indenture or the
Sale and Servicing Agreement believed by the Trustee to be genuine and to
have been signed or presented by the proper party or parties, or (v) to
inspect the Financed Vehicles at any time or ascertain or inquire as to the
performance of observance of
-37-
<PAGE>
any of the Issuer's, the Seller's or the Servicer's representations,
warranties or covenants or the Servicer's duties and obligations as
Servicer and as custodian of the Receivable Files under the Agreement.
SECTION 6.02. RIGHTS OF TRUSTEE.
(a) The Trustee may rely on any document believed by it to be genuine
and to have been signed or presented by the proper person. The Trustee
need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require
an Officer's Certificate (with respect to factual matters) or an Opinion of
Counsel, as applicable. The Trustee shall not be liable for any action it
takes or omits to take in good faith in reliance on the Officer's
Certificate or Opinion of Counsel, as applicable, or as directed by the
requisite amount of Note Owners as provided herein.
(c) The Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys or a custodian or nominee, and the Trustee shall not be
responsible for any misconduct or negligence on the part of, or for the
supervision of, any such agent, attorney, custodian or nominee appointed
with due care by it hereunder.
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith which it believes to be authorized or within its
rights or powers; PROVIDED, HOWEVER, that the Trustee's conduct does not
constitute willful misconduct, negligence or bad faith.
(e) The Trustee may consult with counsel, and the advice or opinion
of counsel with respect to legal matters relating to this Indenture and the
Notes shall be full and complete authorization and protection from
liability in respect to any action taken, omitted or suffered by it
hereunder in good faith and in accordance with the advice or opinion of
such counsel.
(f) The Trustee shall be under no obligation to institute, conduct or
defend any litigation under this Indenture or in relation to this
Indenture, at the request, order or direction of any of the Holders of
Notes, pursuant to the provisions of this Indenture, unless such Holders of
Notes shall have offered to the Trustee reasonable security or indemnity
against the costs, expenses and liabilities that may be incurred therein or
thereby; PROVIDED, HOWEVER, that the Trustee shall, upon the occurrence of
an Event of Default (that has not been cured), exercise the rights and
powers vested in it by this Indenture with reasonable care and skill.
-38-
<PAGE>
(g) The Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, approval,
bond or other paper or document, unless requested in writing to do so by
the Holders of Notes evidencing not less than 25% of the Outstanding Amount
thereof; PROVIDED, HOWEVER, that if the payment within a reasonable time to
the Trustee of the costs, expenses or liabilities likely to be incurred by
it in the making of such investigation is, in the opinion of the Trustee,
not reasonably assured to the Trustee by the security afforded to it by the
terms of this Indenture or the Sale and Servicing Agreement, the Trustee
may require reasonable indemnity against such cost, expense or liability as
a condition to so proceeding; the reasonable expense of every such
examination shall be paid by the Person making such request, or, if paid by
the Trustee, shall be reimbursed by the Person making such request upon
demand.
SECTION 6.03. INDIVIDUAL RIGHTS OF TRUSTEE. The Trustee in its individual
or any other capacity may become the owner or pledgee of Notes and may otherwise
deal with the Issuer or its Affiliates with the same rights it would have if it
were not Trustee. Any Paying Agent, Note Registrar, co-registrar or co-paying
agent may do the same with like rights. However, the Trustee is required to
comply with Sections 6.11 and 6.12.
SECTION 6.04. TRUSTEE'S DISCLAIMER. The Trustee shall not be responsible
for and makes no representation as to the validity or adequacy of this
Indenture, the Trust Estate or the Notes, it shall not be accountable for the
Issuer's use of the proceeds from the Notes, and it shall not be responsible for
any statement of the Issuer in the Indenture or in any document issued in
connection with the sale of the Notes or in the Notes other than the Trustee's
certificate of authentication.
SECTION 6.05. NOTICE OF DEFAULTS. If a Default occurs and is continuing
and if it is known to a Responsible Officer of the Trustee, the Trustee shall
mail to JPMD and each Noteholder notice of the Default within 10 days after it
occurs. Except in the case of a Default in payment of principal of or interest
on any Note (including payments pursuant to the mandatory redemption provisions
of such Note), the Trustee may withhold the notice if and so long as a committee
of its Responsible Officers in good faith determines that withholding the notice
is in the interests of Noteholders.
SECTION 6.06. REPORTS BY TRUSTEE TO HOLDERS. The Trustee shall deliver to
each Noteholder such information as may be required to enable such holder to
prepare its federal and state income tax returns.
SECTION 6.07. COMPENSATION AND INDEMNITY.
(a) OFL in a separate letter agreement (the "Letter Agreement") has
covenanted and agreed to pay to the Trustee, and the Trustee shall be
entitled to,
-39-
<PAGE>
certain annual fees, which shall not be limited by any law on compensation
of a trustee of an express trust. In the Letter Agreement, OFL has also
agreed to reimburse the Trustee for all reasonable out-of-pocket expenses
incurred or made by it, including costs of collection, in addition to the
compensation for its services. Such expenses shall include the reasonable
compensation and expenses, disbursements and advances of the Trustee's
agents, counsel, accountants and experts. Pursuant to the Letter
Agreement, OFL has agreed to indemnify the Trustee against any and all
loss, liability or expense (including attorneys' fees) incurred by it in
connection with the administration of this trust and the performance of
its duties hereunder.
(b) If notwithstanding the provisions of the Letter Agreement, OFL
fails to pay any fees or expenses due to the Trustee pursuant to the terms
or the Letter Agreement, the Trustee shall be entitled to a distribution in
respect of such amount pursuant of Section 4.6(ii) of the Sale and
Servicing Agreement. The Issuer's payment obligations to the Trustee
pursuant to this Section shall survive the discharge of this Indenture.
When the Trustee incurs expenses after the occurrence of a Default
specified in Section 5.01(v) or (vi) with respect to the Issuer, the
expenses are intended to constitute expenses of administration under Title
11 of the United States Code or any other applicable Federal or state
bankruptcy, insolvency or similar law. Notwithstanding anything else set
forth in this Indenture or the Related Documents, the Trustee agrees that
the obligations of the Issuer (but not OFL) to the Trustee hereunder and
under the Related Documents shall be recourse to the Trust Estate only and
specifically shall not be recourse to the assets of the General Partner of
the Issuer or any Certificateholder.
SECTION 6.08. REPLACEMENT OF TRUSTEE. The Trustee may resign at any time
by so notifying the Issuer and the Controlling Party. The Issuer may, with the
consent of the Controlling Party, and, at the request of the Controlling Party
shall, remove the Trustee if:
(i) the Trustee fails to comply with Section 6.11;
(ii) a court having jurisdiction in the premises in respect of
the Trustee in an involuntary case or proceeding under federal or
state banking or bankruptcy laws, as now or hereafter constituted, or
any other applicable federal or state bankruptcy, insolvency or other
similar law, shall have entered a decree or order granting relief or
appointing a receiver, liquidator, assignee, custodian, trustee,
conservator, sequestrator (or similar official) for the Trustee or for
any substantial part of the Trustee's property, or ordering the
winding-up or liquidation of the Trustee's affairs;
(iii) an involuntary case under the federal bankruptcy laws,
as now or hereafter in effect, or another present or future federal or
state bankruptcy,
-40-
<PAGE>
insolvency or similar law is commenced with respect to the Trustee
and such case is not dismissed within 60 days;
(iv) the Trustee commences a voluntary case under any federal or
state banking or bankruptcy laws, as now or hereafter constituted, or
any other applicable federal or state bankruptcy, insolvency or other
similar law, or consents to the appointment of or taking possession by
a receiver, liquidator, assignee, custodian, trustee, conservator,
sequestrator (or other similar official) for the Trustee or for any
substantial part of the Trustee's property, or makes any assignment
for the benefit of creditors or fails generally to pay its debts as
such debts become due or takes any corporate action in furtherance of
any of the foregoing;
(v) the Trustee otherwise becomes incapable of acting; or
(vi) the rating assigned to the long-term unsecured debt
obligations of the Trustee (or the holding company thereof) by the
Rating Agencies shall be lowered below the rating of "BBB", "Baa3" or
equivalent rating or be withdrawn by either of the Rating Agencies.
If the Trustee resigns or is removed or if a vacancy exists in the office
of Trustee for any reason (the Trustee in such event being referred to herein as
the retiring Trustee), the Issuer shall promptly appoint a successor Trustee
acceptable to the Controlling Party. If the Issuer fails to appoint such a
successor Trustee, the Controlling Party may appoint a successor Trustee.
A successor Trustee shall deliver a written acceptance of its appointment
to the retiring Trustee and to the Issuer. Thereupon the resignation or removal
of the retiring Trustee shall become effective, and the successor Trustee shall
have all the rights, powers and duties of the Trustee under this Indenture. The
successor Trustee shall mail a notice of its succession to the Noteholders and
JPMD. The retiring Trustee shall promptly transfer all property held by it as
Trustee to the successor Trustee.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Controlling
Party or the Issuer may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
If the Trustee fails to comply with Section 6.11, any Noteholder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
Any resignation or removal of the Trustee and appointment of a successor
Trustee pursuant to any of the provisions of this Section shall not become
effective until acceptance
-41-
<PAGE>
of appointment by the successor Trustee pursuant to this Section and payment
of all fees and expenses owed to the outgoing Trustee. Notwithstanding the
replacement of the Trustee pursuant to this Section, the retiring Trustee
shall be entitled to payment or reimbursement of such amounts as such Person
is entitled pursuant to Section 6.07.
SECTION 6.09. SUCCESSOR TRUSTEE BY MERGER. If the Trustee consolidates
with, merges or converts into, or transfers all or substantially all its
corporate trust business or assets to, another corporation or banking
association, the resulting, surviving or transferee corporation without any
further act shall be the successor Trustee. The Trustee shall provide the
Rating Agencies prompt notice of any such transaction.
In case at the time such successor or successors by merger, conversion or
consolidation to the Trustee shall succeed to the trusts created by this
Indenture any of the Notes shall have been authenticated but not delivered, any
such successor to the Trustee may adopt the certificate of authentication of any
predecessor trustee, and deliver such Notes so authenticated; and in case at
that time any of the Notes shall not have been authenticated, any successor to
the Trustee may authenticate such Notes either in the name of any predecessor
hereunder or in the name of the successor to the Trustee; and in all such cases
such certificates shall have the full force which it is anywhere in the Notes or
in this Indenture provided that the certificate of the Trustee shall have.
SECTION 6.10. APPOINTMENT OF CO-TRUSTEE OR SEPARATE TRUSTEE.
(a) Notwithstanding any other provisions of this Indenture, at any
time, for the purpose of meeting any legal requirement of any jurisdiction
in which any part of the Trust may at the time be located, the Trustee,
with the consent of the Controlling Party, shall have the power and may
execute and deliver all instruments to appoint one or more Persons to act
as a co-trustee or co-trustees, or separate trustee or separate trustees,
of all or any part of the Trust, and to vest in such Person or Persons, in
such capacity and for the benefit of the Noteholders, such title to the
Trust, or any part hereof, and, subject to the other provisions of this
Section, such powers, duties, obligations, rights and trusts as the Trustee
may consider necessary or desirable. No co-trustee or separate trustee
hereunder shall be required to meet the terms of eligibility as a successor
Trustee under Section 6.11, and no notice to Noteholders of the appointment
of any co-trustee or separate trustee shall be required under Section 6.08
hereof.
(b) Every separate trustee and co-trustee shall, to the extent
permitted by law, be appointed and act subject to the following provisions
and conditions:
(i) all rights, powers, duties and obligations conferred or
imposed upon the Trustee shall be conferred or imposed upon and
exercised or performed by the Trustee and such separate trustee or
co-trustee jointly (it
-42-
<PAGE>
being understood that such separate trustee or co-trustee is not
authorized to act separately without the Trustee joining in such act),
except to the extent that under any law of any jurisdiction in which
any particular act or acts are to be performed the Trustee shall be
incompetent or unqualified to perform such act or acts, in which event
such rights, powers, duties and obligations (including the holding of
title to the Trust or any portion thereof in any such jurisdiction)
shall be exercised and performed singly by such separate trustee or
co-trustee, but solely at the direction of the Trustee;
(ii) no trustee hereunder shall be personally liable by reason
of any act or omission of any other trustee hereunder; and
(iii) the Trustee may at any time accept the resignation of or
remove any separate trustee or co-trustee.
(c) Any notice, request or other writing given to the Trustee shall
be deemed to have been given to each of the then separate trustees and
co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Agreement
and the conditions of this Article VI. Each separate trustee and
co-trustee, upon its acceptance of the trusts conferred, shall be vested
with the estates or property specified in its instrument of appointment,
either jointly with the Trustee or separately, as may be provided therein,
subject to all the provisions of this Indenture, specifically including
every provision of this Indenture relating to the conduct of, affecting the
liability of, or affording protection to, the Trustee. Every such
instrument shall be filed with the Trustee.
(d) Any separate trustee or co-trustee may at any time constitute the
Trustee, its agent or attorney-in-fact with full power and authority, to
the extent not prohibited by law, to do any lawful act under or in respect
of this Agreement on its behalf and in its name. If any separate trustee
or co-trustee shall die, become incapable of acting, resign or be removed,
all of its estates, properties, rights, remedies and trusts shall vest in
and be exercised by the Trustee, to the extent permitted by law, without
the appointment of a new or successor trustee.
SECTION 6.11. ELIGIBILITY; DISQUALIFICATION. The Trustee shall have a
combined capital and surplus of at least $50,000,000 as set forth in its most
recent published annual report of condition. The Trustee shall provide copies
of such reports to the Controlling Party upon request.
-43-
<PAGE>
ARTICLE VII
NOTEHOLDERS' LISTS AND REPORTS
SECTION 7.01. ISSUER TO FURNISH TO TRUSTEE NAMES AND ADDRESSES OF
NOTEHOLDERS. The Issuer will furnish or cause to be furnished to the Trustee
(a) not more than five days after the earlier of (i) each Record Date and
(ii) three months after the last Record Date, a list, in such form as the
Trustee may reasonably require, of the names and addresses of the Holders of
Notes as of such Record Date, (b) at such other times as the Trustee may
request in writing, within 30 days after receipt by the Issuer of any such
request, a list of similar form and content as of a date not more than 10
days prior to the time such list is furnished; PROVIDED, HOWEVER, that so
long as the Trustee is the Note Registrar, no such list shall be required to
be furnished. The Trustee or, if the Trustee is not the Note Registrar, the
Issuer shall furnish to the Controlling Party in writing on an annual basis
on each March 31 and at such other times as the Controlling Party may request
a copy of the list.
SECTION 7.02. PRESERVATION OF INFORMATION; COMMUNICATIONS TO NOTEHOLDERS.
The Trustee shall preserve, in as current a form as is reasonably practicable,
the names and addresses of the Holders of Notes contained in the most recent
list furnished to the Trustee as provided in Section 7.01 and the names and
addresses of Holders of Notes received by the Trustee in its capacity as Note
Registrar. The Trustee may destroy any list furnished to it as provided in such
Section 7.01 upon receipt of a new list so furnished.
ARTICLE VIII
ACCOUNTS, DISBURSEMENTS AND RELEASES
SECTION 8.01. COLLECTION OF MONEY. Except as otherwise expressly provided
herein, the Trustee may demand payment or delivery of, and shall receive and
collect, directly and without intervention or assistance of any fiscal agent or
other intermediary, all money and other property payable to or receivable by the
Trustee pursuant to this Indenture. The Trustee shall apply all such money
received by it as provided in this Indenture. Except as otherwise expressly
provided in this Indenture, if any default occurs in the making of any payment
or performance under any agreement or instrument that is part of this Indenture
or the Notes, the Trustee may take such action as may be appropriate to enforce
such payment or performance, including the institution and prosecution of
appropriate Proceedings. Any such action shall be without prejudice to any
right to claim a Default or Event of Default under this Indenture and any right
to proceed thereafter as provided in Article V.
-44-
<PAGE>
SECTION 8.02. TRUST ACCOUNTS.
(a) On or prior to the Closing Date, the Issuer shall cause the
Servicer to establish and maintain, in the name of the Trustee, for the
benefit of the Noteholders and the Certificateholders, the Trust Accounts
as provided in Section 4.1 of the Sale and Servicing Agreement. The
Trustee shall apply the moneys in such Trust Accounts in accordance with
the provisions of this Indenture and the Sale and Servicing Agreement.
(b) On each Payment Date and Redemption Date, the Trustee shall
distribute all amounts on deposit in the Note Distribution Account to
Noteholders in respect of the Notes to the extent of amounts due and unpaid
on the Notes for principal, interest and premium, if any, first to pay all
accrued and unpaid interest, and then to pay principal and premium, if any,
on the Notes in the following amounts and in the following order of
priority (except as otherwise provided in Section 5.06):
(i) accrued and unpaid interest on the Notes, provided that if
funds in the Note Distribution Account are not sufficient to pay the
entire amount of accrued but unpaid interest on the Notes, the amount
in the Note Distribution Account shall be applied to the payment of
such interest pro rata on the basis of the principal amount of Notes
held by each Noteholder;
(ii) (w) to the Holders of Notes in reduction of the Outstanding
Amount of the Notes, an amount equal to the Noteholders' Percentage of
any Principal Funding Excess Amount, (x) on a Payment Date prior to
the Purchase Termination Date on which the Facility Balance exceeds
the Facility Limit, to the Holders of the Notes in reduction of the
Outstanding Amount of the Notes, an amount equal to the excess of (1)
the Facility Balance over (2) the Facility Limit and (y) on each
Payment Date on or after the Purchase Termination Date, to the Holders
of the Notes in reduction of the Outstanding Amount of the Notes,
until the Outstanding Amount of the Notes is reduced to zero; and
(iii) any amounts due and owing to any Indemnified Party (as such
term is used in the Note Purchase Agreement) under Section 11.01,
Section 11.04 or Section 11.05 of the Note Purchase Agreement.
SECTION 8.03. GENERAL PROVISIONS REGARDING ACCOUNTS.
(a) So long as no Default or Event of Default shall have occurred and
be continuing, all or a portion of the funds in the Trust Accounts shall be
invested and reinvested in Eligible Investments in accordance with the
provisions of Section 4.1(e) of the Sale and Servicing Agreement.
-45-
<PAGE>
(b) Subject to Section 6.01(c), the Trustee shall not in any way be
held liable by reason of any insufficiency in any of the Trust Accounts
resulting from any loss on any Eligible Investment included therein except
for losses attributable to the Trustee's failure to make payments on such
Eligible Investments issued by the Trustee, in its commercial capacity as
principal obligor and not as Trustee, in accordance with their terms.
ARTICLE IX
SUPPLEMENTAL INDENTURES
SECTION 9.01. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF NOTEHOLDERS.
(a) Without the consent of the Holders of any Notes but with the
consent of JPMD and with prior notice to the Rating Agencies, the Issuer
and the Trustee, when authorized by an Issuer Order, at any time and from
time to time, may enter into one or more indentures supplemental hereto, in
form satisfactory to the Trustee, for any of the following purposes:
(i) to correct or amplify the description of any property at any
time subject to the lien of this Indenture, or better to assure,
convey and confirm unto the Trustee any property subject or required
to be subjected to the lien created by this Indenture, or to subject
to the lien created by this Indenture additional property;
(ii) to evidence the succession, in compliance with the
applicable provisions hereof, of another Person to the Issuer, and the
assumption by any such successor of the covenants of the Issuer herein
and in the Notes contained;
(iii) to add to the covenants of the Issuer, for the benefit of
the Holders of the Notes, or to surrender any right or power herein
conferred upon the Issuer;
(iv) to convey, transfer, assign, mortgage or pledge any property
to or with the Trustee;
(v) to cure any ambiguity, to correct or supplement any
provision herein or in any supplemental indenture which may be
inconsistent with any other provision herein or in any supplemental
indenture or to make any other provisions with respect to matters or
questions arising under this Indenture or
-46-
<PAGE>
in any supplemental indenture; PROVIDED that such action shall not
adversely affect the interests of the Holders of the Notes; or
(vi) to evidence and provide for the acceptance of the
appointment hereunder by a successor trustee with respect to the Notes
and to add to or change any of the provisions of this Indenture as
shall be necessary to facilitate the administration of the trusts
hereunder by more than one trustee, pursuant to the requirements of
Article VI.
The Trustee is hereby authorized to join in the execution of any such
supplemental indenture and to make any further appropriate agreements and
stipulations that may be therein contained.
(b) The Issuer and the Trustee, when authorized by an Issuer Order,
may, with the consent of the Controlling Party and with prior notice to the
Rating Agencies, enter into an indenture or indentures supplemental hereto
for the purpose of adding any provisions to, or changing in any manner or
eliminating any of the provisions of, this Indenture or of modifying in any
manner the rights of the Holders of the Notes under this Indenture;
PROVIDED, HOWEVER, that such action shall not, as evidenced by an Opinion
of Counsel, adversely affect in any material respect the interests of any
Noteholder.
SECTION 9.02. SUPPLEMENTAL INDENTURES WITH CONSENT OF NOTEHOLDERS. The
Issuer and the Trustee, when authorized by an Issuer Order, also may, with prior
notice to the Rating Agencies, with the consent of the Note Majority, by Act of
such Holders delivered to the Issuer and the Trustee, enter into an indenture or
indentures supplemental hereto for the purpose of adding any provisions to, or
changing in any manner or eliminating any of the provisions of, this Indenture
or of modifying in any manner the rights of the Holders of the Notes under this
Indenture; PROVIDED, HOWEVER, that, no such supplemental indenture shall,
without the consent of the Holder of each Outstanding Note affected thereby:
(i) change the date of payment of any installment of principal
of or interest on any Note, or reduce the principal amount thereof,
the interest rate thereon or the Redemption Price with respect
thereto, change the provision of this Indenture relating to the
application of collections on, or the proceeds of the sale of, the
Trust Estate to payment of principal of or interest on the Notes, or
change any place of payment where, or the coin or currency in which,
any Note or the interest thereon is payable, or impair the right to
institute suit for the enforcement of the provisions of this Indenture
requiring the application of funds available therefor, as provided in
Article V, to the payment of any such amount due on the Notes on or
after the respective due dates thereof (or, in the case of redemption,
on or after the Redemption Date);
-47-
<PAGE>
(ii) reduce the percentage of the Outstanding Amount of the
Notes, the consent of the Holders of which is required for any such
supplemental indenture, or the consent of the Holders of which is
required for any waiver of compliance with certain provisions of this
Indenture or certain defaults hereunder and their consequences
provided for in this Indenture;
(iii) modify or alter the provisions of the proviso to the
definition of the term "Outstanding";
(iv) reduce the percentage of the Outstanding Amount of the
Notes required to direct the Trustee to direct the Issuer to sell or
liquidate the Trust Estate pursuant to Section 5.04;
(v) modify any provision of this Section except to increase any
percentage specified herein or to provide that certain additional
provisions of this Indenture or the Related Documents cannot be
modified or waived without the consent of the Holder of each
Outstanding Note affected thereby;
(vi) modify any of the provisions of this Indenture in such
manner as to affect the calculation of the amount of any payment of
interest or principal due on any Note on any Payment Date (including
the calculation of any of the individual components of such
calculation) or to affect the rights of the Holders of Notes to the
benefit of any provisions for the mandatory redemption of the Notes
contained herein; or
(vii) permit the creation of any lien ranking prior to or on
a parity with the lien created by this Indenture with respect to any
part of the Trust Estate or, except as otherwise permitted or
contemplated herein, terminate the lien created by this Indenture on
any property at any time subject hereto or deprive the Holder of any
Note of the security provided by the lien created by this Indenture.
The Trustee may in its discretion determine whether or not any Notes would
be affected by any supplemental indenture, and any such determination shall be
conclusive upon the Holders of all Notes, whether theretofore or thereafter
authenticated and delivered hereunder. The Trustee shall not be liable for any
such determination made in good faith.
It shall not be necessary for any Act of Noteholders under this Section to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such Act shall approve the substance thereof.
Promptly after the execution by the Issuer and the Trustee of any
supplemental indenture pursuant to this Section, the Trustee shall mail to the
Holders of the Notes to
-48-
<PAGE>
which such amendment or supplemental indenture relates a notice setting forth
in general terms the substance of such supplemental indenture. Any failure
of the Trustee to mail such notice, or any defect therein, shall not,
however, in any way impair or affect the validity of any such supplemental
indenture.
SECTION 9.03. EXECUTION OF SUPPLEMENTAL INDENTURES. In executing, or
permitting the additional trusts created by, any supplemental indenture
permitted by this Article IX or the modifications thereby of the trusts created
by this Indenture, the Trustee shall be entitled to receive, and subject to
Sections 6.01 and 6.02 shall be fully protected in relying upon, an Opinion of
Counsel stating that the execution of such supplemental indenture is authorized
or permitted by this Indenture. The Trustee may, but shall not be obligated to,
enter into any such supplemental indenture that affects the Trustee's own
rights, duties, liabilities or immunities under this Indenture or otherwise.
SECTION 9.04. EFFECT OF SUPPLEMENTAL INDENTURE. Upon the execution of any
supplemental indenture pursuant to the provisions hereof, this Indenture shall
be and be deemed to be modified and amended in accordance therewith with respect
to the Notes affected thereby, and the respective rights, limitations of rights,
obligations, duties, liabilities and immunities under this Indenture of the
Trustee, the Issuer and the Holders of the Notes shall thereafter be determined,
exercised and enforced hereunder subject in all respects to such modifications
and amendments, and all the terms and conditions of any such supplemental
indenture shall be and be deemed to be part of the terms and conditions of this
Indenture for any and all purposes.
SECTION 9.05. [Reserved].
SECTION 9.06. REFERENCE IN NOTES TO SUPPLEMENTAL INDENTURES. Notes
authenticated and delivered after the execution of any supplemental indenture
pursuant to this Article IX may, and if required by the Trustee shall, bear a
notation in form approved by the Trustee as to any matter provided for in such
supplemental indenture. If the Issuer or the Trustee shall so determine, new
notes so modified as to conform, in the opinion of the Trustee and the Issuer,
to any such supplemental indenture may be prepared and executed by the Issuer
and authenticated and delivered by the Trustee in exchange for Outstanding
Notes.
-49-
<PAGE>
ARTICLE X
REDEMPTION OF NOTES
SECTION 10.01. REDEMPTION.
(a) In the event that the Seller or the Servicer pursuant to Sections
9.1(a) or 9.1(b) of the Sale and Servicing Agreement purchases the corpus
of the Trust, the Notes are subject to redemption in whole, but not in
part, on any Business Day on which such repurchase occurs, for a purchase
price equal to the Redemption Price; PROVIDED, HOWEVER, that the Issuer has
available funds sufficient to pay the Redemption Price. The Seller, the
Servicer or the Issuer shall furnish the Rating Agencies notice of such
redemption. If the Notes are to be redeemed pursuant to this Section
10.01(a), the Servicer or the Issuer shall furnish notice of such election
to the Trustee not later than 3 days prior to the Redemption Date, and the
Issuer shall deposit with the Trustee in the Note Distribution Account the
Redemption Price of the Notes to be redeemed, whereupon all such Notes
shall be due and payable on the Redemption Date upon the furnishing of a
notice complying with Section 10.02 to each Holder of the Notes. Notes
redeemed pursuant to Section 9.1(b) may be reissued in accordance with the
provisions of Article II hereof provided that neither the Seller nor the
Servicer shall have given notice of final termination of the Trust.
(b) The Issuer may, at any time upon giving proper notice as required
by Section 10.02 hereof, redeem in whole, but not in part, the Notes on any
Business Day in connection with a Securitized Offering for a price equal to
the Redemption Price; PROVIDED, HOWEVER, that the Issuer has available
funds sufficient to pay the Redemption Price; and PROVIDED FURTHER,
HOWEVER, that, in the case of a Redemption of all outstanding Notes in
connection with a Securitized Offering, the Seller has repurchased or is
simultaneously with the redemption repurchasing any Receivables that are
not eligible to be included in such Securitized Offering pursuant to
Section 6.5 of the Sale and Servicing Agreement. If the Notes are to be
redeemed pursuant to this Section 10.01(b), the Servicer or the Issuer
shall furnish notice of such election to the Trustee not later than ten
days prior to the Redemption Date, and the Issuer shall deposit with the
Trustee in the Note Distribution Account the Redemption Price of the Notes
to be redeemed, whereupon all such Notes shall be due and payable on the
Redemption Date upon furnishing of a notice complying with Section 10.02 to
each Holder of the Notes.
(c) In the event that the assets of the Trust are sold pursuant to
Section 9.2 of the Trust Agreement, the proceeds of such sale shall be
distributed as provided in Section 5.06. If amounts are to be paid to
Noteholders pursuant to this Section 10.01(c), the Servicer or the Issuer
shall, to the extent practicable, furnish notice of
-50-
<PAGE>
such event to the Trustee not later than ten days prior to the
Redemption Date whereupon all such amounts shall be payable on the
Redemption Date.
(d) The Issuer may, at any time upon giving proper notice as required
by Section 10.02 hereof, redeem in whole or in part, the Notes on any
Business Day in connection with a Recapitalization for a price equal to the
Redemption Price for the Notes that are redeemed. A portion of the
Redemption Price equal to the outstanding principal amount of the Notes
being redeemed shall be paid by issuance of new Non-Callable Notes in like
principal amount to each Noteholder; PROVIDED, HOWEVER, that the Issuer has
available funds sufficient to pay the remainder of the Redemption Price. If
all or any part of the Notes are to be redeemed pursuant to this Section
10.01(d), the Servicer or the Issuer shall furnish notice of such election
to the Trustee not later than 3 days prior to the Redemption Date, and the
Issuer shall deliver to the Trustee for authentication and delivery the
Non-Callable Notes being issued in the Recapitalization and deposit with
the Trustee in the Note Distribution Account the balance of the Redemption
Price of the Notes to be redeemed, whereupon such Notes to be redeemed
shall be due and payable on the Redemption Date upon furnishing of a notice
complying with Section 10.02 to each Holder of the Notes. Redemption of
any Notes in a Recapitalization shall be evidenced by the decreases marked
in the Note Register pursuant to Section 2.03(b).
Notwithstanding anything in this Section 10.01, no redemption pursuant
to Section 10.01 (a), (b) or (c) shall occur unless the Issuer shall have
deposited the amount, if any, required to be deposited in the Commercial
Paper Funding Account pursuant to Section 2.10 of the Note Purchase
Agreement.
SECTION 10.02. FORM OF REDEMPTION NOTICE.
(a) Notice of redemption under Section 10.01(a) or 10.01(b) shall be
given by the Trustee in writing (which may be by facsimile) not less than
three days prior to the applicable Redemption Date to each Holder of Notes,
as of the close of business on the Record Date with respect to the Payment
Date immediately preceding the applicable Redemption Date, at such Holder's
address appearing in the Note Register.
All notices of redemption shall state:
(i) the Redemption Date;
(ii) the Redemption Price; and
(iii) except in connection with a Recapitalization, the place
where such Notes are to be surrendered for payment of the Redemption
Price (which
-51-
<PAGE>
shall be the office or agency of the Issuer to be maintained as
provided in Section 3.02).
Notice of redemption of the Notes shall be given by the Trustee in the name
and at the expense of the Issuer. Failure to give notice of redemption, or any
defect therein, to any Holder of any Note shall not impair or affect the
validity of the redemption of any other Note.
(b) Prior notice of redemption under Section 10.01(c) is not required
to be given to Noteholders.
SECTION 10.03. NOTES PAYABLE ON REDEMPTION DATE. The Notes or portions
thereof to be redeemed shall, following notice of redemption (if any) as
required by Section 10.02, on the Redemption Date become due and payable at the
Redemption Price and (unless the Issuer shall default in the payment of the
Redemption Price) no interest shall accrue on the Redemption Price (other than
any portion thereof represented by Non-Callable Notes in accordance with Section
10.01(d), which shall accrue interest in accordance with the terms of such Non-
Callable Notes) for any period after the date to which accrued interest is
calculated for purposes of calculating the Redemption Price.
ARTICLE XI
MISCELLANEOUS
SECTION 11.01. COMPLIANCE CERTIFICATES AND OPINIONS, ETC.
(a) Upon any application or request by the Issuer to the Trustee to
take any action under any provision of this Indenture, the Issuer shall
furnish to the Trustee and to the Controlling Party (i) an Officer's
Certificate stating that all conditions precedent, if any, provided for in
this Indenture relating to the proposed action have been complied with and
(ii) an Opinion of Counsel stating that in the opinion of such counsel all
such conditions precedent, if any, have been complied with.
(b) (i) Prior to the deposit of any Indenture Collateral or other
property or securities with the Trustee that is to be made the basis for
the release of any property subject to the lien created by this Indenture,
the Issuer shall, in addition to any obligation imposed in Section 11.01(a)
or elsewhere in this Indenture, furnish to the Trustee and the Controlling
Party an Officer's Certificate certifying or stating the opinion of each
person signing such certificate as to the fair value (within 90 days of
such deposit) to the Issuer of the Indenture Collateral or other property
or securities to be so deposited.
-52-
<PAGE>
(ii) Whenever the Issuer is required to furnish to the Trustee
and the Controlling Party an Officer's Certificate certifying or
stating the opinion of any signer thereof as to the matters described
in clause (i) above, the Issuer shall also deliver to the Trustee and
the Controlling Party an Independent Certificate as to the same
matters, if the fair value to the Issuer of the property to be so
deposited and of all other such property made the basis of any such
withdrawal or release since the commencement of the then-current
fiscal year of the Issuer, as set forth in the certificates delivered
pursuant to clause (i) above and this clause (ii), is 10% or more of
the Outstanding Amount of the Notes, but such a certificate need not
be furnished with respect to any property so deposited, if the fair
value thereof to the Issuer as set forth in the related Officer's
Certificate is less than $25,000 or less than one percent of the
Outstanding Amount of the Notes.
(iii) Other than with respect to any release described in
clause (A) or (B) of Section 11.01(b)(v), whenever any property or
securities are to be released from the lien created by this Indenture,
the Issuer shall also furnish to the Trustee and the Controlling Party
an Officer's Certificate certifying or stating the opinion of each
person signing such certificate as to the fair value (within 90 days
of such release) of the property or securities proposed to be released
and stating that in the opinion of such person the proposed release
will not impair the security created by this Indenture in
contravention of the provisions hereof.
(iv) Whenever the Issuer is required to furnish to the Trustee
and the Controlling Party an Officer's Certificate certifying or
stating the opinion of any signer thereof as to the matters described
in clause (iii) above, the Issuer shall also furnish to the Trustee
and the Controlling Party an Independent Certificate as to the same
matters if the fair value of the property or securities and of all
other property or securities (other than property described in clauses
(A) or (B) of Section 11.01(b)(v)) released from the lien created by
this Indenture since the commencement of the then current fiscal year,
as set forth in the certificates required by clause (iii) above and
this clause (iv), equals 10% or more of the Outstanding Amount of the
Notes, but such certificate need not be furnished in the case of any
release of property or securities if the fair value thereof as set
forth in the related Officer's Certificate is less than $25,000 or
less than one percent of the then Outstanding Amount of the Notes.
(v) Notwithstanding any other provision of this Section, the
Issuer may, without compliance with the other provisions of this
Section (A), collect, liquidate, sell or otherwise dispose of
Receivables as and to the extent permitted or required by the Related
Documents (including as provided in Section 3.1 of the Sale and
Servicing Agreement) and (B) make cash payments
-53-
<PAGE>
out of the Trust Accounts as and to the extent permitted or
required by the Related Documents.
SECTION 11.02. FORM OF DOCUMENTS DELIVERED TO TRUSTEE. In any case where
several matters are required to be certified by, or covered by an opinion of,
any specified Person, it is not necessary that all such matters be certified by,
or covered by the opinion of, only one such Person, or that they be so certified
or covered by only one document, but one such Person may certify or give an
opinion with respect to some matters and one or more other such Persons as to
other matters, and any such Person may certify or give an opinion as to such
matters in one or several documents.
Any certificate or opinion of an Authorized Officer of the Issuer may be
based, insofar as it relates to legal matters, upon a certificate or opinion of,
or representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate of an Authorized Officer or Opinion of Counsel
may be based, insofar as it relates to factual matters, upon a certificate or
opinion of, or representations by, an officer or officers of the Servicer, the
Seller or the Issuer, stating that the information with respect to such factual
matters is in the possession of the Servicer, the Seller or the Issuer, unless
such counsel knows, or in the exercise of reasonable care should know, that the
certificate or opinion or representations with respect to such matters are
erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
Whenever in this Indenture, in connection with any application or
certificate or report to the Trustee, it is provided that the Issuer shall
deliver any document as a condition of the granting of such application, or as
evidence of the Issuer's compliance with any term hereof, it is intended that
the truth and accuracy, at the time of the granting of such application or at
the effective date of such certificate or report (as the case may be), of the
facts and opinions stated in such document shall in such case be conditions
precedent to the right of the Issuer to have such application granted or to the
sufficiency of such certificate or report. The foregoing shall not, however, be
construed to affect the Trustee's right to rely upon the truth and accuracy of
any statement or opinion contained in any such document as provided in
Article VI.
SECTION 11.03. ACTS OF NOTEHOLDERS.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given or taken by
Noteholders may be embodied in and evidenced by one or more instruments of
substantially similar tenor
-54-
<PAGE>
signed by such Noteholders in person or by agents duly appointed in
writing; and except as herein otherwise expressly provided, such action
shall become effective when such instrument or instruments are delivered
to the Trustee, and, where it is hereby expressly required, to the
Issuer. Such instrument or instruments (and the action embodied therein
and evidenced thereby) are herein sometimes referred to as the "Act" of
the Noteholders signing such instrument or instruments. Proof of
execution of any such instrument or of a writing appointing any such
agent shall be sufficient for any purpose of this Indenture and (subject
to Section 6.01) conclusive in favor of the Trustee and the Issuer, if
made in the manner provided in this Section.
(b) The fact and date of the execution by any person of any such
instrument or writing may be proved in any manner that the Trustee deems
sufficient.
(c) The ownership of Notes shall be proved by the Note Register.
(d) Any request, demand, authorization, direction, notice, consent,
waiver or other action by the Holder of any Notes shall bind the Holder of
every Note issued upon the registration thereof or in exchange therefor or
in lieu thereof, in respect of anything done, omitted or suffered to be
done by the Trustee or the Issuer in reliance thereon, whether or not
notation of such action is made upon such Note.
SECTION 11.04. NOTICES, ETC., TO TRUSTEE, ISSUER, JPMD AND THE RATING
AGENCIES. Any request, demand, authorization, direction, notice, consent, waiver
or Act of Noteholders or other documents provided or permitted by this Indenture
to be made upon, given or furnished to or filed with:
(a) the Trustee by any Noteholder or by the Issuer shall be
sufficient for every purpose hereunder if made, given, furnished or filed
in writing to or with the Trustee at its Corporate Trust Office,
(b) the Issuer by the Trustee or by any Noteholder shall be
sufficient for every purpose hereunder if in writing and mailed,
first-class, postage prepaid, to the Issuer addressed to: Olympic
Automobile Receivables Warehouse Trust, in care of Wilmington Trust
Company, as Owner Trustee, Rodney Square North, 1100 North Market Street,
Wilmington, Delaware 19890-0001, Attention: Corporate Trust Administration
or at any other address previously furnished in writing to the Trustee by
Issuer. The Issuer shall promptly transmit any notice received by it from
the Noteholders to the Trustee, or
(c) JPMD by the Trustee, by the Issuer or by any Noteholder shall be
sufficient for every purpose hereunder if in writing and mailed,
first-class, postage prepaid, to JPMD addressed to: J.P. Morgan Delaware,
902 Market Street, Wilmington, Delaware 19801, Attention: Asset Finance
Group, or at any other
-55-
<PAGE>
address previously furnished in writing to the Trustee and the Issuer by
JPMD. JPMD shall promptly transmit any notice received by it from the
Noteholders to the Trustee and the Issuer.
Notices required to be given to the Rating Agencies by the Issuer, the
Trustee or the Owner Trustee shall be in writing, personally delivered or mailed
by certified mail, return receipt requested to (i) in the case of Moody's, at
the following address: Moody's Investors Service, Inc., ABS Monitoring
Department, 99 Church Street, New York, New York 10007 and (ii) in the case of
Standard & Poor's, at the following address: Standard & Poor's Ratings Group, 26
Broadway (20th Floor), New York, New York 10004, Attention of Asset Backed
Surveillance Department; or as to each of the foregoing, at such other address
as shall be designated by written notice to the other parties.
SECTION 11.05. NOTICES TO NOTEHOLDERS; WAIVER. Where this Indenture
provides for notice to Noteholders of any event, such notice shall be
sufficiently given (unless otherwise herein expressly provided) if in writing
and mailed, first-class, postage prepaid to each Noteholder affected by such
event, at his address as it appears on the Note Register, not later than the
latest date, and not earlier than the earliest date, prescribed for the giving
of such notice. In any case where notice to Noteholders is given by mail,
neither the failure to mail such notice nor any defect in any notice so mailed
to any particular Noteholder shall affect the sufficiency of such notice with
respect to other Noteholders, and any notice that is mailed in the manner herein
provided shall conclusively be presumed to have been duly given.
Where this Indenture provides for notice in any manner, such notice may be
waived in writing by any Person entitled to receive such notice, either before
or after the event, and such waiver shall be the equivalent of such notice.
Waivers of notice by Noteholders shall be filed with the Trustee but such filing
shall not be a condition precedent to the validity of any action taken in
reliance upon such a waiver.
In case, by reason of the suspension of regular mail service as a result of
a strike, work stoppage or similar activity, it shall be impractical to mail
notice of any event of Noteholders when such notice is required to be given
pursuant to any provision of this Indenture, then any manner of giving such
notice as shall be satisfactory to the Trustee shall be deemed to be a
sufficient giving of such notice.
Where this Indenture provides for notice to the Rating Agencies, failure to
give such notice shall not affect any other rights or obligations created
hereunder, and shall not under any circumstance constitute a Default or Event of
Default.
SECTION 11.06. ALTERNATE PAYMENT AND NOTICE PROVISIONS. Notwithstanding
any provision of this Indenture or any of the Notes to the contrary, the Issuer
may enter into any agreement with any Holder of a Note providing for a method of
payment, or notice by the
-56-
<PAGE>
Trustee or any Paying Agent to such Holder, that is different from the
methods provided for in this Indenture for such payments or notices. The
Issuer will furnish to the Trustee a copy of each such agreement and the
Trustee will cause payments to be made and notices to be given in accordance
with such agreements.
SECTION 11.07. [Reserved].
SECTION 11.08. EFFECT OF HEADINGS AND TABLE OF CONTENTS. The Article and
Section headings herein and the Table of Contents are for convenience only and
shall not affect the construction hereof.
SECTION 11.09. SUCCESSORS AND ASSIGNS. All covenants and agreements in
this Indenture and the Notes by the Issuer shall bind its successors and
assigns, whether so expressed or not.
All agreements of the Trustee in this Indenture shall bind its successors.
SECTION 11.10. SEVERABILITY. In case any provision in this Indenture or
in the Notes shall be invalid, illegal or unenforceable, the validity, legality,
and enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
SECTION 11.11. BENEFITS OF INDENTURE. Nothing in this Indenture or in the
Notes, express or implied, shall give to any Person, other than the parties
hereto and their successors hereunder, and the Noteholders, and any other party
secured hereunder, and any other Person with an ownership interest in any part
of the Trust Estate, any benefit or any legal or equitable right, remedy or
claim under this Indenture.
SECTION 11.12. LEGAL HOLIDAYS. In any case where the date on which any
payment is due shall not be a Business Day, then (notwithstanding any other
provision of the Notes or this Indenture) payment need not be made on such date,
but may be made on the next succeeding Business Day with the same force and
effect as if made on the date on which nominally due, and no interest shall
accrue for the period from and after any such nominal date.
SECTION 11.13. GOVERNING LAW. THIS INDENTURE SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 11.14. COUNTERPARTS. This Indenture may be executed in any number
of counterparts, each of which so executed shall be deemed to be an original,
but all such counterparts shall together constitute but one and the same
instrument.
-57-
<PAGE>
SECTION 11.15. RECORDING OF INDENTURE. If this Indenture is subject to
recording in any appropriate public recording offices, such recording is to be
effected by the Issuer and at its expense accompanied by an Opinion of Counsel
(which may be counsel to the Trustee or any other counsel reasonably acceptable
to the Trustee, and the Controlling Party) to the effect that such recording is
necessary either for the protection of the Noteholders or any other Person
secured hereunder or for the enforcement of any right or remedy granted to the
Trustee under this Indenture.
SECTION 11.16. TRUST OBLIGATION. No recourse may be taken, directly or
indirectly, with respect to the obligations of the Issuer, the Owner Trustee or
the Trustee on the Notes or under this Indenture or any certificate or other
writing delivered in connection herewith or therewith, against (i) the Trustee
or the Owner Trustee in its individual capacity, (ii) any owner of a beneficial
interest in the Issuer or (iii) any partner, owner, beneficiary, agent, officer,
director, employee or agent of the Trustee or the Owner Trustee in its
individual capacity, any holder of a beneficial interest in the Issuer, the
Owner Trustee or the Trustee or of any successor or assign of the Trustee or the
Owner Trustee in its individual capacity, except as any such Person may have
expressly agreed (it being understood that the Trustee and the Owner Trustee
have no such obligations in their individual capacity) and except that any such
partner, owner or beneficiary shall be fully liable, to the extent provided by
applicable law, for any unpaid consideration for stock, unpaid capital
contribution or failure to pay any installment or call owing to such entity.
For all purposes of this Indenture, in the performance of any duties or
obligations of the Issuer hereunder, the Owner Trustee shall be subject to, and
entitled to the benefits of, the terms and provisions of Articles VI, VII and
VIII of the Trust Agreement.
SECTION 11.17. NO PETITION. The Trustee, by entering into this Indenture,
and each Noteholder, by accepting a Note, hereby covenant and agree that they
will not at any time institute against the Seller, the Issuer or the General
Partner, or join in any institution against the Seller, the Issuer or the
General Partner of, any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings, or other proceedings under any United States Federal or
state bankruptcy or similar law in connection with any obligations relating to
the Notes, this Indenture or any of the Related Documents.
SECTION 11.18. INSPECTION. The Issuer agrees that, on reasonable prior
notice, it will permit any representative of the Trustee or of the Controlling
Party, during the Issuer's normal business hours, to examine all the books of
account, records, reports, and other papers of the Issuer, to make copies and
extracts therefrom, to cause such books to be audited by independent certified
public accountants, and to discuss the Issuer's affairs, finances and accounts
with the Issuer's officers, employees, and independent certified public
accountants, all at such reasonable times and as often as may be reasonably
requested. The Trustee shall and shall cause its representatives to hold in
confidence all such information except to the extent disclosure may be required
by law (and all reasonable applications for
-58-
<PAGE>
confidential treatment are unavailing) and except to the extent that the
Trustee may reasonably determine that such disclosure is consistent with its
obligations hereunder.
SECTION 11.19. LIMITATION OF LIABILITY. It is expressly understood and
agreed by the parties hereto that (a) this Agreement is executed and
delivered by Wilmington Trust Company, not individually or personally but
solely as Owner Trustee of the Issuer under the Trust Agreement, in the
exercise of the powers and authority conferred and vested in it, (b) each of
the representations, undertakings and agreements herein made on the part of
the Issuer is made and intended not as personal representations, undertakings
and agreements by Wilmington Trust Company but is made and intended for the
purpose for binding only the Issuer, (c) nothing herein contained shall be
construed as creating any liability on Wilmington Trust Company, individually
or personally, to perform any covenant either expressed or implied contained
herein, all such liability, if any, being expressly waived by the parties to
this Agreement and by any person claiming by, through or under them and (d)
under no circumstances shall Wilmington Trust Company be personally liable
for the payment of any indebtedness or expenses of the Issuer or be liable
for the breach or failure of any obligation, representation, warranty or
covenant made or undertaken by the Issuer under this Agreement or any related
documents.
59
<PAGE>
IN WITNESS WHEREOF, the Issuer and the Trustee have caused this
Indenture to be duly executed by their respective officers, thereunto duly
authorized, all as of the day and year first above written.
OLYMPIC AUTOMOBILE RECEIVABLES
WAREHOUSE TRUST
By WILMINGTON TRUST COMPANY, not in its
individual capacity but solely as Owner
Trustee under the Trust Agreement,
By /s/ Emmett R. Harmon
--------------------------------------------
Name: Emmett R. Harmon
Title: Vice President
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, not
in its individual capacity but solely as Trustee,
By /s/ Robert N. Guimont
---------------------------------------------
Name: Robert N. Guimont
Title: Assistant Vice President
<PAGE>
EXHIBIT A
SCHEDULE OF RECEIVABLES
<PAGE>
EXHIBIT B
[Form of Variable Funding Note]
REGISTERED
No. __
OLYMPIC AUTOMOBILE RECEIVABLES WAREHOUSE TRUST
VARIABLE FUNDING NOTE
THIS NOTE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND HAS NOT BEEN
APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR
REGULATORY AUTHORITY OF ANY STATE. THIS NOTE HAS BEEN OFFERED AND SOLD
PRIVATELY. THE HOLDER HEREOF ACKNOWLEDGES THAT THESE SECURITIES ARE
"RESTRICTED SECURITIES" THAT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT AND AGREES FOR THE BENEFIT OF THE ISSUER AND ITS AFFILIATES THAT THESE
SECURITIES MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT
(A) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT
IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A OR (B) PURSUANT TO AN
EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF
AVAILABLE), OR PURSUANT TO ANY OTHER EXEMPTION FROM THE REGISTRATION
REQUIREMENTS UNDER SECTION 5 OF THE SECURITIES ACT PROVIDED THE ISSUER IS
PROVIDED WITH AN OPINION OF COUNSEL THAT SUCH TRANSFER IS SO EXEMPT, AND IN
EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF
THE UNITED STATES OR ANY OTHER JURISDICTION. THE TRANSFER OF THIS NOTE IS
SUBJECT TO CERTAIN CONDITIONS REFERRED TO IN THE NOTE PURCHASE AGREEMENT
PURSUANT TO WHICH THIS NOTE WAS PURCHASED.
NEITHER THIS NOTE NOR ANY INTEREST HEREIN MAY BE ACQUIRED BY (A) AN EMPLOYEE
BENEFIT PLAN (AS DEFINED IN SECTION 3(3) OF THE EMPLOYEE RETIREMENT SECURITY
ACT OF 1974, AS AMENDED ("ERISA")) THAT IS SUBJECT TO THE PROVISIONS OF TITLE
1 OF ERISA, (B) A PLAN DESCRIBED IN SECTION 4975 (E)(1) OF THE INTERNAL
REVENUE CODE OF 1986, AS AMENDED, OR (C) ANY ENTITY WHOSE UNDERLYING ASSETS
INCLUDE PLAN ASSETS BY REASON OF A PLAN'S INVESTMENT IN THE ENTITY (EACH A
"BENEFIT PLAN"). BY ACCEPTING AND HOLDING THIS NOTE OR ANY INTEREST HEREIN,
THE HOLDER HEREOF OR ANY OWNER OF AN INTEREST HEREIN SHALL BE DEEMED TO HAVE
REPRESENTED AND WARRANTED THAT IT IS NOT A BENEFIT PLAN.
THIS NOTE IS PREPAYABLE IN WHOLE OR IN PART ON ANY BUSINESS DAY.
THE PRINCIPAL ON THIS NOTE IS PAYABLE IN INSTALLMENTS ON PAYMENT DATES AND
REDEMPTION DATES IN THE AMOUNTS DESCRIBED IN THE INDENTURE REFERRED TO
HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF AND UNPAID INTEREST
ON THIS NOTE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE
HEREOF.
B-1
<PAGE>
OLYMPIC AUTOMOBILE RECEIVABLES WAREHOUSE TRUST
VARIABLE FUNDING NOTE
Olympic Automobile Receivables Warehouse Trust, a business trust
organized and existing under the laws of the State of Delaware (herein
referred to as the "ISSUER"), for value received, hereby promises to pay to
_____________________, the principal sum of [ ], payable in
installments on Payment Dates and Redemption Dates in the amounts described
in the Indenture referred to on the reverse hereof; PROVIDED, HOWEVER, that
the entire unpaid principal amount of this Note shall be due and payable, if
not previously paid, on the date on which an Event of Default shall have
occurred and be continuing, so long as the Controlling Party has declared the
Notes to be immediately due and payable in the manner provided in Section
5.02 of the Indenture referred to on the reverse hereof. The Issuer will pay
interest on this Note at the Note Interest Rate and the Note Interest
Arrearage on each Payment Date and Redemption Date, until the principal of
this Note is paid or made available for payment, on the principal amount of
this Note outstanding on the preceding Payment Date (after giving effect to
all payments of principal made on the preceding Payment Date) or, with
respect to the first Payment Date, on the Funding Date (as such term is
defined in the Note Purchase Agreement). Interest on this Note will accrue
for each Payment Date for the calendar month preceding the month in which
such Payment Date occurs or, with respect to the first Payment Date, for the
period commencing on the Funding Date and ending on the last day of the
calendar month preceding the month in which the first Payment Date occurs.
Such principal of and interest and premium, if any, on this Note shall be
paid in the manner specified on the reverse hereof.
The principal of and interest and premium, if any, on this Note are
payable in such coin or currency of the United States of America as at the
time of payment is legal tender for payment of public and private debts. All
payments made by the Issuer with respect to this Note shall be applied first
to interest due and payable on this Note as provided above and then to the
unpaid principal of this Note.
Unless the certificate of authentication hereon has been executed by the
Trustee whose name appears below by manual signature, this Note shall not be
entitled to any benefit under the Indenture referred to on the reverse
hereof, or be valid or obligatory for any purpose. THIS NOTE SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK.
REFERENCE IS MADE TO THE FURTHER PROVISIONS OF THIS NOTE SET FORTH ON
THE REVERSE HEREOF, WHICH SHALL HAVE THE SAME EFFECT AS THOUGH FULLY SET
FORTH ON THE FACE OF THIS NOTE.
IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed,
manually or in facsimile, by its Authorized Officer.
Dated: _______ OLYMPIC AUTOMOBILE RECEIVABLES
WAREHOUSE TRUST
By WILMINGTON TRUST COMPANY,
not in its individual capacity but solely as Owner
Trustee under the Trust
B-2
<PAGE>
Agreement,
By_________________________________
Name:
Title:
B-3
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the
within-mentioned Indenture.
Dated: _______ NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, not in its individual capacity
but solely as Trustee,
By
-----------------------------------------
Authorized Signatory
B-4
<PAGE>
[REVERSE OF NOTE]
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its Variable Funding Notes (herein called the "NOTES"), all
issued under an Indenture, dated as of December 28, 1995 (such indenture, as
supplemented or amended, herein called the "INDENTURE"), between the Issuer
and Norwest Bank Minnesota, National Association, as trustee (the "TRUSTEE",
which term includes any successor Trustee under the Indenture), to which the
Indenture and all indentures supplemental thereto reference is hereby made
for a statement of the respective rights and obligations thereunder of the
Issuer, the Trustee and the Holders of the Notes. The Notes are subject to
all terms of the Indenture. All terms used in this Note that are defined in
the Indenture, as supplemented or amended, shall have the meanings assigned
to them in or pursuant to the Indenture, as so supplemented or amended.
The Notes are and will be equally and ratably secured by the collateral
pledged as security therefor as provided in the Indenture.
Principal of the Notes will be payable on certain Payment Dates and on
each Redemption Date in an amount described in the Indenture. "PAYMENT DATE"
means the fifteenth day of each month, or, if any such date is not a Business
Day, the next succeeding Business Day, commencing February 15, 1996.
The entire unpaid principal amount of this Note shall be due and payable
on the earlier of the Final Scheduled Distribution Date and the Redemption
Date, if any, pursuant to Section 10.01(a), 10.01(b) or 10.01(c) of the
Indenture. All or a portion of the unpaid principal balance of this Note
shall be due and payable on the Redemption Date, if any, pursuant to Section
10.01(d) of the Indenture. Notwithstanding the foregoing, the entire unpaid
principal amount of the Notes shall be due and payable on the date on which
an Event of Default shall have occurred and be continuing, unless the
Controlling Party has waived such Event of Default in the manner provided in
Section 5.13 of the Indenture. All principal payments on the Notes shall be
made pro rata to the Noteholders entitled thereto.
Payments of interest on this Note due and payable on each Payment Date
and Redemption Date, together with the installment of principal, if any, to
the extent not in full payment of this Note, shall be paid to the Person in
whose name such Note is registered on the Record Date, by wire transfer in
immediately available funds to the account designated by such Person. Any
reduction in the principal amount of this Note affected by any payments made
on any Payment Date shall be binding upon all future Holders of this Note and
of any Note issued upon the registration of transfer hereof or in exchange
hereof or in lieu hereof, whether or not noted hereon. If funds are expected
to be available, as provided in the Indenture, for payment in full of the
then remaining unpaid principal amount of this Note on a Payment Date or
Redemption Date, then the Trustee, in the name of and on behalf of the
Issuer, will notify the Person in whose name a Note is registered at the
close of business on the Record Date with respect to such Payment Date or the
Payment Date immediately preceding such Redemption Date by notice mailed
within five days of such Payment Date or Redemption Date, as applicable, and
the amount then due and payable shall be payable only upon presentation and
surrender of this Note at the Trustee's principal Corporate Trust Office, at
the office of the Trustee's agent appointed for such purposes located in The
City of New York, or at the place specified in such notice.
As provided in the Indenture, the Notes may be redeemed (a) pursuant to
B-5
<PAGE>
Section 10.01(a) of the Indenture, in whole, but not in part, at the option
of the Seller or the Servicer, after the date on which the Seller or the
Servicer, pursuant to Section 9.1(a) or 9.1(b) of the Sale and Servicing
Agreement, purchases the corpus of the Trust, (b) pursuant to Section
10.01(b) of the Indenture, in whole, but not in part, on any Business Day, in
connection with a Securitized Offering, (c) in connection with Section
10.01(c) of the Indenture, and (d) pursuant to Section 10.01(d) of the
Indenture, in whole or in part, on any Business Day, in connection with a
Recapitalization, PROVIDED, HOWEVER, that any redemption of Notes in part
shall be made on a pro rata basis to the Holders of Notes.
As provided in the Indenture and subject to certain limitations set
forth therein, the transfer of this Note may be registered on the Note
Register upon surrender of this Note for registration of transfer at the
office or agency designated by the Issuer pursuant to the Indenture, duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Trustee duly executed by, the Holder hereof or his
attorney duly authorized in writing, with such signature guaranteed by a
commercial bank or trust company located, or having a correspondent located,
in the city in which the Corporate Trust Office is located, or a member firm
of a national securities exchange, and such other documents as the Trustee
may require, and thereupon one or more new Notes of authorized denominations
and in the same aggregate principal amount will be issued to the designated
transferee or transferees. No service charge will be charged for any
registration of transfer or exchange of this Note, but the transferor may be
required to pay a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection with any such registration of
transfer or exchange.
Each Noteholder, by acceptance of a Note covenants and agrees that no
recourse may be taken, directly or indirectly, with respect to the
obligations of the Issuer, the Owner Trustee or the Trustee on the Notes or
under the Indenture or any certificate or other writing delivered in
connection therewith, against (i) the Trustee or the Owner Trustee in its
individual capacity, (ii) any owner of a beneficial interest in the Issuer or
(iii) any partner, owner, beneficiary, agent, officer, director or employee
of the Trustee or the Owner Trustee in its individual capacity, any holder of
a beneficial interest in the Issuer, the Owner Trustee or the Trustee or of
any successor or assign of the Trustee or the Owner Trustee in its individual
capacity, except as any such Person may have expressly agreed and except that
any such partner, owner or beneficiary shall be fully liable, to the extent
provided by applicable law, for any unpaid consideration for stock, unpaid
capital contribution or failure to pay any installment or call owing to such
entity.
Each Noteholder by acceptance of a Note covenants and agrees that by
accepting the benefits of the Indenture and such Note that such Noteholder
will not at any time institute against the Seller, the Issuer or the General
Partner, or join in any institution against the Seller, the Issuer or the
General Partner of, any bankruptcy, reorganization, arrangement, insolvency
or liquidation proceedings under any United States Federal or state
bankruptcy or similar law in connection with any obligations relating to the
Notes, the Indenture or the Related Documents.
It is the intent and agreement of the Issuer, the Trustee and the
Noteholders that, for purposes of federal income, state and local income and
franchise and any other income taxes, the Notes will be treated as debt.
Each
B-6
<PAGE>
Noteholder by acceptance of this Note covenants and agrees to treat this Note
as debt for such tax purposes and to take no action inconsistent with such
treatment.
Prior to the due presentment for registration of transfer of this Note,
the Issuer, the Trustee and any agent of the Issuer or the Trustee may treat
the Person in whose name this Note (as of the day of determination or as of
such other date as may be specified in the Indenture) is registered as the
owner hereof for all purposes, whether or not this Note be overdue, and
neither the Issuer, the Trustee nor any such agent shall be affected by
notice to the contrary.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer with the consent of the Note Majority. The Indenture also
contains provisions permitting the Controlling Party, on behalf of the
Holders of all the Notes, to waive compliance by the Issuer with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by the Holder of this Note
(or any one or more Predecessor Notes) shall be conclusive and binding upon
such Holders and upon all future Holders of this Note and of any Note issued
upon the registration of transfer hereof or in exchange hereof or in lieu
hereof whether or not notation of such consent or waiver is made upon this
Note. The Indenture also permits the Trustee to amend or waive certain terms
and conditions set forth in the Indenture without the consent of Holders of
the Notes issued thereunder.
The term "Issuer" as used in this Note includes any successor to the
Issuer under the Indenture.
The Issuer is permitted by the Indenture, under certain circumstances,
to merge or consolidate, subject to the rights of the Trustee and the Holder
of Notes under the Indenture.
The Notes are issuable only in registered form in denominations as
provided in the Indenture, subject to certain limitations therein set forth.
This Note and the Indenture shall be construed in accordance with the
laws of the State of New York, without reference to its conflict of law
provisions, and the obligations, rights and remedies of the parties hereunder
and thereunder shall be determined in accordance with such laws.
No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note
at the times, place, and rate, and in the coin or currency herein prescribed.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Related Documents, neither Wilmington Trust Company in its
individual capacity, any owner of a beneficiary interest in the Issuer, nor
any of their respective partners, beneficiaries, agents, officers, directors,
employees or successors or assigns shall be personally liable for, nor shall
recourse be had to any of them for, the payment of principal of or interest
on, or performance of, or omission to perform, any of the covenants,
obligations or indemnifications contained in this Note or the Indenture, it
being expressly understood that said covenants, obligations and
B-7
<PAGE>
indemnifications have been made by the Owner Trustee for the sole purpose of
binding the interests of the Owner Trustee in the assets of the Issuer. The
Holder of this Note by the acceptance hereof agrees that except as expressly
provided in the Related Documents, in the case of an Event of Default under
the Indenture, the Holder shall have no claim against any of the foregoing
for any deficiency, loss or claim therefrom; PROVIDED, HOWEVER, that nothing
contained herein shall be taken to prevent recourse to, and enforcement
against, the assets of the Issuer for any and all liabilities, obligations
and undertakings contained in the Indenture or in this Note.
B-8
<PAGE>
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee:
- -----------------------------
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto_________________________________________________________________________
______________________________________
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints ______________ attorney, to transfer said Note on the books kept
for registration thereof, with full power of substitution in the premises.
Dated:
-----------------
Signature Guaranteed:
**
----------------------------
- --------------------------------
** NOTE: The signature to this assignment must correspond with the name
of the registered owner as it appears on the face of the within Note
in every particular, without alteration, enlargement or any change
whatsoever.
B-9
<PAGE>
EXECUTION COPY
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
SUPPLEMENTAL INDENTURE
Dated as of June 12, 1996
to
INDENTURE
Dated as of December 28, 1995
between
OLYMPIC AUTOMOBILES RECEIVABLES WAREHOUSE TRUST
Issuer
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
Trustee
and
MORGAN GUARANTY TRUST COMPANY OF NEW YORK
Administrative Agent
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
PAGE
----
ARTICLE I
DEFINITIONS
ARTICLE II
SUPPLEMENTAL INDENTURE
SECTION 2.1. Amendment to Section 2.02 of the Indenture......... 1
SECTION 2.2. Amendment to Section 2.03 of the Indenture......... 2
SECTION 2.3. Amendment to Section 2.07 of the Indenture......... 2
SECTION 2.4. Amendment to Section 3.18 of the Indenture......... 2
SECTION 2.5. Amendment to Section 5.03 of the Indenture......... 2
SECTION 2.6. Amendment to Section 5.05 of the Indenture......... 2
SECTION 2.7. Amendment to Section 5.09 of the Indenture......... 2
SECTION 2.8. Amendment to Section 7.01 of the Indenture......... 3
SECTION 2.9. Amendment to Section 9.01 of the Indenture......... 3
SECTION 2.10. Amendment to Section 11.01 of the Indenture........ 3
SECTION 2.11. Amendment to Section 11.04 of the Indenture........ 3
SECTION 2.12. Amendment to Section 11.15 of the Indenture........ 3
SECTION 2.13. Amendment to Section 11.18 of the Indenture........ 3
ARTICLE III
MISCELLANEOUS
SECTION 3.1. Counterparts....................................... 3
SECTION 3.2. Governing Law; Entire Agreement.................... 3
SECTION 3.3. Headings........................................... 4
SECTION 3.4. Effectiveness of Supplemental Indenture............ 4
SECTION 3.5. Effect of Supplemental Indenture................... 4
SECTION 3.6. Indenture in Full Force and Effect
as Supplemented................................. 4
-i-
<PAGE>
SUPPLEMENTAL INDENTURE dated as of June 12, 1996 (the "SUPPLEMENTAL
INDENTURE") to INDENTURE dated as of December 28, 1995 (the "INDENTURE"),
between Olympic Automobile Receivables Warehouse Trust, a Delaware business
trust (the "ISSUER") and Norwest Bank Minnesota, National Association, a
national banking association, in its capacities as trustee ("the "TRUSTEE")
and not in its individual capacity.
WHEREAS, the Issuer and the Trustee have entered into the Indenture;
WHEREAS, pursuant to Section 9.01(b) of the Indenture, the Issuer and the
Trustee desire to enter into this Supplemental Indenture;
WHEREAS, the Issuer has executed and delivered to the Trustee pursuant to
Section 9.01(b) of the Indenture an Issuer Order, authorizing this Supplemental
Indenture;
WHEREAS, each of JPMD and a Note Majority has consented to the execution
of this Supplemental Indenture as required by Section 9.01(b) of the Indenture;
WHEREAS, it is the intent of the parties that this Supplemental Indenture
be effective as of the date set forth above (the "EFFECTIVENESS DATE");
NOW, THEREFORE, the parties to this Supplemental Indenture hereby agree as
follows:
ARTICLE I
DEFINITIONS
Unless otherwise defined herein or the context otherwise requires, defined
terms used herein shall have the meanings ascribed thereto in the Indenture.
ARTICLE II
SUPPLEMENTAL INDENTURE
SECTION 2.1. AMENDMENT TO SECTION 2.02 OF THE INDENTURE. The third
paragraph of Section 2.02 of the Indenture is hereby amended by deleting the
reference to the amount "$200,000,000" and substituting therefor "$300,000,000."
SECTION 2.2. AMENDMENT TO SECTION 2.03 OF THE INDENTURE. Section
2.03(a) of the Indenture is hereby amended by deleting the reference to the
amount "$19,800,000" and substituting therefor "$29,700,000."
<PAGE>
SECTION 2.3. AMENDMENT TO SECTION 2.07 OF THE INDENTURE. Section
2.07(b) of the Indenture is hereby amended by deleting the words "so long as the
Controlling Party has declared the Notes to be immediately due and payable in
the manner provided in Section 5.02."
SECTION 2.4. AMENDMENT TO SECTION 3.18 OF THE INDENTURE. Section 3.18
of the Indenture is hereby amended by deleting the word "JPMD" and the comma
which precedes it.
SECTION 2.5. AMENDMENT TO SECTION 5.03 OF THE INDENTURE. Section
5.03(b) of the Indenture is hereby amended by deleting the words "for so long as
the Trustee is not the Controlling Party."
SECTION 2.6. AMENDMENT TO SECTION 5.05 OF THE INDENTURE. Section 5.05
of the Indenture is hereby amended to read in its entirety as follows:
"SECTION 5.05. OPTIONAL PRESERVATION OF THE RECEIVABLES. If the
Notes have become due and payable under Section 5.02 following an Event of
Default, the Trustee may, but need not, unless otherwise directed by the
Controlling Party, maintain possession of the Trust Estate. It is the
desire of the parties hereto and the Noteholders that there be at all
times sufficient funds for the payment of principal of and interest on the
Notes, and the Trustee shall take such desire into account when
determining whether or not to maintain possession of the Trust Estate. In
determining whether to maintain possession of the Trust Estate, the
Trustee may, but need not, obtain and rely upon an opinion of an
Independent investment banking or accounting firm of national reputation
as to the feasibility of such proposed action and as to the sufficiency of
the Trust Estate for such purpose".
SECTION 2.7. AMENDMENT TO SECTION 5.09 OF THE INDENTURE. Section 5.09
of the Indenture is hereby amended to read in its entirety as follows:
"SECTION 5.09 RESTORATION OF RIGHTS AND REMEDIES. If the Controlling
Party or any Noteholder has instituted any Proceeding to enforce any right
or remedy under this Indenture and such Proceeding has been discontinued
or abandoned for any reason or has been determined adversely to the
Controlling Party or to such Noteholder, then and in every such case the
Issuer, the Controlling Party and any such Noteholder shall, subject to
any determination in such Proceeding, be restored severally and
respectively to their former positions hereunder, and thereafter all
rights and remedies of the Controlling Party and any such Noteholder shall
continue as though no such Proceeding had been instituted".
SECTION 2.8. AMENDMENT TO SECTION 7.01 OF THE INDENTURE. Section 7.01
of the Indenture is hereby amended by deleting each reference to the words "the
Controlling Party" and substituting therefor "JPMD."
-2-
<PAGE>
SECTION 2.9. AMENDMENT TO SECTION 9.01 OF THE INDENTURE. Section
9.01(b) of the Indenture is hereby amended by deleting the words "the
Controlling Party" and substituting therefor "JPMD."
SECTION 2.10. AMENDMENT TO SECTION 11.01 OF THE INDENTURE. Section
11.01 of the Indenture is hereby amended by deleting each reference to the words
"the Controlling Party" and substituting therefor "JPMD."
SECTION 2.11. AMENDMENT TO SECTION 11.04 OF THE INDENTURE. Section
11.04(c) of the Indenture is hereby amended by deleting the words "902 Market
Street, Wilmington, Delaware 19801" and substituting therefor "500 Stanton
Christiana Road, Newark, Delaware 19713-2107."
SECTION 2.12. AMENDMENT TO SECTION 11.15 OF THE INDENTURE. Section
11.15 of the Indenture is hereby amended by deleting the words "the Controlling
Party" and substituting therefor "JPMD."
SECTION 2.13. AMENDMENT TO SECTION 11.18 OF THE INDENTURE. Section
11.18 of the Indenture is hereby amended by deleting the words "the Controlling
Party" and substituting therefor "JPMD."
ARTICLE III
MISCELLANEOUS
SECTION 3.1. COUNTERPARTS. This Supplemental Indenture may be executed
by the parties hereto in several counterparts, each of which shall be deemed to
be an original and all of which shall constitute together but one and the same
agreement.
SECTION 3.2. GOVERNING LAW; ENTIRE AGREEMENT. THIS SUPPLEMENTAL
INDENTURE SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE
INTERNAL LAWS OF THE STATE OF NEW YORK. This Supplemental Indenture and the
Indenture (and all exhibits, annexes and schedules thereto) constitute the
entire understanding among the parties hereto with respect to the subject matter
hereof and supersede any prior agreements, written or oral, with respect
thereto.
SECTION 3.3. HEADINGS. The various headings of this Supplemental
Indenture are inserted for convenience only and shall not affect the meaning or
interpretation of this Supplemental Indenture or any provisions hereof or
thereof.
SECTION 3.4. EFFECTIVENESS OF SUPPLEMENTAL INDENTURE. This
Supplemental Indenture shall become effective when the Trustee shall have
received (a) counterparts hereof executed on behalf of the Issuer and the
Trustee, and evidencing the consent of JPMD,
-3-
<PAGE>
(b) the consent of JPMD, on behalf of Delaware Funding Corporation, as sole
Noteholder, to the terms of this Supplemental Indenture and (c) evidence of
written notice to S&P and Moody's of this Supplemental Indenture. The Trustee
shall be entitled to receive, as a condition to the effectiveness of this
Supplemental Indenture, an Opinion of Counsel stating that this Supplemental
Indenture does not adversely affect in any material respect the interests of any
Noteholder.
SECTION 3.5. EFFECT OF SUPPLEMENTAL INDENTURE. Pursuant to Section
9.04 of the Indenture, upon the execution of this Supplemental Indenture
pursuant to the provisions of Article IX of the Indenture, the Indenture shall
be and be deemed to be modified and amended in accordance therewith with respect
to the Notes affected thereby, and the respective rights, limitations of rights,
obligations, duties, liabilities and immunities under the Indenture of the
Trustee, the Issuer and the Holders of the Notes shall thereafter be determined,
exercised and enforced hereunder subject in all respects to such modifications
and amendments, and all the terms and conditions of this Supplemental Indenture
shall be and be deemed to be part of the terms and conditions of the Indenture
for any and all purposes.
SECTION 3.6. INDENTURE IN FULL FORCE AND EFFECT AS SUPPLEMENTED.
Except as specifically stated herein, all of the terms and conditions of the
Indenture shall remain in full force and effect. All references to the
Indenture in any other document or instrument shall be deemed to mean the
Indenture, as supplemented by this Supplemental Indenture. This Supplemental
Indenture shall not constitute a novation of the Indenture, but shall constitute
an amendment thereto. The parties hereto agree to be bound by the terms and
obligations of the Indenture, as supplemented by this Supplemental Indenture, as
though the terms and obligations of the Indenture were set forth herein.
-4-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed and delivered by their authorized officers, all as
of the date and year first above written.
OLYMPIC AUTOMOBILE RECEIVABLES WAREHOUSE TRUST
By WILMINGTON TRUST COMPANY, not
in its individual capacity but solely as
Owner Trustee under the Trust Agreement
By: __________________________________
Name:
Title:
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, not
in its individual capacity but
solely as Trustee
By: __________________________________
Name:
Title:
AGREED AND CONSENTED:
MORGAN GUARANTY TRUST COMPANY OF NEW YORK
in its capacity as Administrative Agent for
DFC, as sole Noteholder, and the purchasers
under the DFC Asset Purchase Agreement and as
agent for the banks under the Program Facility
and as agent for the Investor Group
By: __________________________________
Name:
Title:
-5-
<PAGE>
EXECUTION COPY
RECEIVABLES PURCHASE AGREEMENT AND ASSIGNMENT
between
OLYMPIC RECEIVABLES FINANCE CORP. II
Purchaser
and
OLYMPIC FINANCIAL LTD.
Seller
dated as of
December 28, 1995
<PAGE>
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
SECTION 1.1 General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.2 Specific Terms . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.3 Usage of Terms . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 1.4 Certain References . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 1.5 No Recourse. . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 1.6 Action by or Consent of Noteholders or Certificateholders. . . . 4
ARTICLE II
CONVEYANCE OF THE RECEIVABLES
AND THE OTHER CONVEYED PROPERTY
SECTION 2.1 Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 2.2. Conveyance of Receivables . . . . . . . . . . . . . . . . . . . 5
SECTION 2.3. Delivery of Receivable Files. . . . . . . . . . . . . . . . . . 6
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 Representations and Warranties of OFL. . . . . . . . . . . . . . 7
SECTION 3.2 Representations and Warranties of ORFC II. . . . . . . . . . . . 9
ARTICLE IV
COVENANTS OF OFL
SECTION 4.1 Protection of Title of ORFC II and the Trust . . . . . . . . . . 11
SECTION 4.2 Other Liens or Interests . . . . . . . . . . . . . . . . . . . . 13
SECTION 4.3 Costs and Expenses . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 4.4 Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 4.5 Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
<PAGE>
ARTICLE V
REPURCHASES
SECTION 5.1 Repurchase of Receivables Upon Breach of Warranty or Covenant. . 16
SECTION 5.2 Reassignment of Purchased Receivables. . . . . . . . . . . . . . 16
SECTION 5.3 Repurchase of Ineligible Receivables Upon Securitized Offering . 17
SECTION 5.4 Waivers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE VI
MISCELLANEOUS
SECTION 6.1 Liability of OFL . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 6.2 [RESERVED]. . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 6.3 Merger or Consolidation of OFL or ORFC II. . . . . . . . . . . . 17
SECTION 6.4 Limitation on Liability of OFL and Others. . . . . . . . . . . . 18
SECTION 6.5 OFL May Own Notes or Certificates. . . . . . . . . . . . . . . . 18
SECTION 6.6 Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 6.7 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 6.8 Merger and Integration . . . . . . . . . . . . . . . . . . . . . 20
SECTION 6.9 Severability of Provisions . . . . . . . . . . . . . . . . . . . 20
SECTION 6.10 Intention of the Parties. . . . . . . . . . . . . . . . . . . . 20
SECTION 6.11 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 6.12 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 6.13 Conveyance of the Receivables and the Other Conveyed
Property to the Trust. . . . . . . . . . . . . . . . . . . . . . 21
SECTION 6.14 Nonpetition Covenant. . . . . . . . . . . . . . . . . . . . . . 21
ii
<PAGE>
RECEIVABLES PURCHASE AGREEMENT AND ASSIGNMENT
THIS RECEIVABLES PURCHASE AGREEMENT AND ASSIGNMENT, dated as of
December 28, 1995, executed between Olympic Receivables Finance Corp. II, a
Delaware corporation, as purchaser ("ORFC II"), and Olympic Financial Ltd., a
Minnesota corporation, as seller ("OFL").
W I T N E S S E T H:
WHEREAS, ORFC II has agreed from time to time to purchase from OFL and
OFL, pursuant to this Agreement, has agreed from time to time to sell and assign
to ORFC II the Receivables and Other Conveyed Property.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements hereinafter contained, and for other good and valuable consideration,
the receipt of which is acknowledged, ORFC II and OFL, intending to be legally
bound, hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 GENERAL. The specific terms defined in this Article
include the plural as well as the singular. The words "herein," "hereof" and
"hereunder" and other words of similar import refer to this Agreement as a whole
and not to any particular Article, Section or other subdivision, and Article,
Section, Schedule and Exhibit references, unless otherwise specified, refer to
Articles and Sections of and Schedules and Exhibits to this Agreement.
Capitalized terms used herein without definition shall have the respective
meanings assigned to such terms in the Sale and Servicing Agreement, dated as of
December 28, 1995, by and among Olympic Receivables Finance Corp. II (as
Seller), Olympic Financial Ltd. (in its individual capacity and as Servicer),
Olympic Automobile Receivables Warehouse Trust (as Issuer) (the "Trust") and
Norwest Bank Minnesota, National Association, a national banking association (as
Backup Servicer).
SECTION 1.2 SPECIFIC TERMS. Whenever used in this Agreement, the
following words and phrases, unless the context otherwise requires, shall have
the following meanings:
"Agreement" means this Receivables Purchase Agreement and Assignment
and all amendments hereof and supplements hereto.
<PAGE>
"Assignment Agreement" means, with respect to any Receivables and
related Other Conveyed Property, the assignment agreement between OFL and ORFC
II pursuant to which OFL sells and assigns Receivables and related Other
Conveyed Property to ORFC II, the form of which is attached hereto as Exhibit A.
"Closing Date" means December 28, 1995.
"Indenture Trustee" means Norwest Bank Minnesota, National
Association, a national banking association, as trustee and indenture collateral
agent under the Indenture, dated as of December 28, 1995, between the Trust and
the Indenture Trustee.
"ORFC II" means Olympic Receivables Finance Corp. II, a Delaware
corporation.
"Other Conveyed Property" means all monies at any time paid or payable
on the Receivables or in respect thereof after the applicable Cutoff Date
(including amounts due on or before the applicable Cutoff Date but receivable by
OFL after such Cutoff Date), the security interests of OFL in the Financed
Vehicles, the Insurance Policies and any proceeds from any Insurance Policies
relating to the Receivables, the Obligors or the Financed Vehicles, including
rebates of premiums, all Collateral Insurance and any Force-Placed Insurance
relating to the Receivables, rights of OFL against Dealers with respect to the
Receivables under the Dealer Agreements and the Dealer Assignments, all items
contained in the Receivable Files, any and all other documents or electronic
records that OFL keeps on file in accordance with its customary procedures
relating to the Receivables, the Obligors or the Financed Vehicles, property
(including the right to receive future Liquidation Proceeds) that secures a
Receivable and that has been acquired by or on behalf of OFL pursuant to
liquidation of such Receivable, all present and future claims, demands, causes
and chooses in action in respect of the Receivables and any or all of the
foregoing and all payments on or under and all proceeds of every kind and nature
whatsoever in respect of the Receivables and any and all of the foregoing,
including all proceeds of the conversion, voluntary or involuntary, into cash or
other liquid property, all cash proceeds, accounts, accounts receivables, notes,
drafts, acceptances, chattel paper, checks, deposit accounts, insurance
proceeds, condemnation awards, rights to payment of any and every kind and other
forms of obligations and receivables, instruments and other property which at
any time constitute all or part of or are included in the proceeds of the
Receivables and any of the foregoing.
"Owner Trustee" means Wilmington Trust Company, a Delaware
corporation, not in its individual capacity but solely as trustee of the Trust
and any successor trustee appointed and acting pursuant to the Trust Agreement.
"Purchase Price" means, with respect to any Receivables and related
Other Conveyed Property conveyed to ORFC II by OFL on any Transfer Date, an
amount equal to the sum of the Principal Balances of all such Receivables as of
the applicable Cutoff Date.
2
<PAGE>
"Receivable" means a retail installment sale contract or promissory
note (and related security agreement) for a new or used automobile or light
truck (and all accessories thereto) that is included in the Schedule of
Receivables, and all rights and obligations under such a contract.
"Related Documents" means the Notes, the Custodian Agreement, the Sale
and Servicing Agreement, the Lockbox Agreement and the Indenture. The Related
Documents to be executed by any party are referred to herein as "such party's
Related Documents," "its Related Documents" or by a similar expression.
"Repurchase Event" means the occurrence of a breach of any of OFL's
representations and warranties contained in Section 3.1(a) hereof or any other
event which requires the repurchase of a Receivable by OFL under the Sale and
Servicing Agreement or by ORFC II pursuant to Section 2.6 of the Sale and
Servicing Agreement.
"Sale and Servicing Agreement" means the Sale and Servicing Agreement,
dated as of December 28, 1995, executed and delivered by Olympic Receivables
Finance Corp. II, as Seller, Olympic Financial Ltd., in its individual capacity
and as Servicer, Olympic Automobile Receivables Warehouse Trust, as Issuer, and
Norwest Bank Minnesota, National Association, as Backup Servicer, together with
any Transfer Agreements executed pursuant thereto and in accordance with the
terms thereof.
"Schedule of Receivables" means the schedule of all automobile retail
installment loan contracts and promissory notes sold and transferred pursuant to
each Assignment Agreement which is attached hereto as Schedule A, as such
Schedule shall be supplemented from time to time (i) by each Schedule of
Receivables with respect to each Assignment Agreement, which Schedules of
Receivables shall be deemed incorporated and made a part of Schedule A hereto
and (ii) to reflect the repurchase from ORFC II of (a) Warranty Receivables and
(b) other Receivables purchased from ORFC II by OFL, such comprehensive schedule
to be maintained by the Indenture Trustee. With respect to an Assignment
Agreement, "Schedule of Receivables" shall mean the Schedule attached to such
Assignment Agreement as Exhibit A thereto.
"Schedule of Representations" means the Schedule of Representations
and Warranties attached hereto as Schedule B.
"Transfer Date" means any date on which Receivables and related Other
Conveyed Property are sold and assigned to ORFC II pursuant to Section 2.2.
"Trust" means the trust created by the Trust Agreement, the estate of
which consists of the Trust Property.
3
<PAGE>
"Trust Property" means the property and proceeds of every description
conveyed pursuant to Section 2.5 of the Trust Agreement, Sections 2.1 and 2.4 of
the Sale and Servicing Agreement and Section 2.2 hereof and pursuant to any
Assignment Agreement, together with the Trust Accounts (including all Eligible
Investments therein and all proceeds therefrom).
SECTION 1.3 USAGE OF TERMS. With respect to all terms used in this
Agreement, the singular includes the plural and the plural the singular; words
importing any gender include the other gender; references to "writing" include
printing, typing, lithography, and other means of reproducing words in a visible
form; references to agreements and other contractual instruments include all
subsequent amendments thereto or changes therein entered into in accordance with
their respective terms and not prohibited by this Agreement or the Sale and
Servicing Agreement; references to Persons include their permitted successors
and assigns; and the terms "include" or "including" mean "include without
limitation" or "including without limitation."
SECTION 1.4 CERTAIN REFERENCES. All references to the Principal
Balance of a Receivable as of an Accounting Date shall refer to the close of
business on such day, or as of the first day of a Monthly Period shall refer to
the opening of business on such day. All references to the last day of a
Monthly Period shall refer to the close of business on such day.
SECTION 1.5 NO RECOURSE. Without limiting the obligations of OFL
hereunder, no recourse may be taken, directly or indirectly, under this
Agreement or any certificate or other writing delivered in connection herewith
or therewith, against any stockholder, officer or director, as such, of OFL, or
of any predecessor or successor of OFL.
SECTION 1.6 ACTION BY OR CONSENT OF NOTEHOLDERS OR
CERTIFICATEHOLDERS. Whenever any provision of this Agreement refers to action
to be taken, or consented to, by Noteholders or Certificateholders, such
provision shall be deemed to refer to Noteholders or Certificateholders, as the
case may be, of record as of the Record Date immediately preceding the date on
which such action is to be taken, or consent given, by Noteholders or
Certificateholders, as the case may be. Solely for the purposes of any action
to be taken, or consented to, by Noteholders or Certificateholders, any Note or
Certificate registered in the name of ORFC II, OFL or any Affiliate thereof
shall be deemed not to be outstanding, and the related Outstanding Amount or
Certificate Balance, as applicable, evidenced thereby shall not be taken into
account in determining whether the requisite Outstanding Amount or Certificate
Balance necessary to effect any such action or consent has been obtained;
provided, however, that, solely for the purpose of determining whether the
Indenture Trustee or Owner Trustee is entitled to rely upon any such action or
consent, only Notes or Certificates which the Indenture Trustee or Owner Trustee
knows to be so owned shall be so disregarded.
4
<PAGE>
ARTICLE II
CONVEYANCE OF THE RECEIVABLES
AND THE OTHER CONVEYED PROPERTY
SECTION 2.1 PURCHASE PRICE. In consideration of the conveyance of
the Receivables and the related Other Conveyed Property to ORFC II on each
Transfer Date, ORFC II shall pay or cause to be paid to OFL an amount equal to
the Purchase Price. Such amount shall be paid by wire transfer of immediately
available funds on the date of such conveyance.
SECTION 2.2. CONVEYANCE OF RECEIVABLES.
(a) Subject to the conditions set forth in paragraph (b) below, OFL,
pursuant to the mutually agreed upon terms contained herein and pursuant to one
or more Assignment Agreements, shall sell, transfer, assign and otherwise convey
to ORFC II without recourse (but without limitation of its obligations in this
Agreement or the Sale and Servicing Agreement), all of the right, title and
interest of OFL, whether then existing or thereafter acquired, in and to the
Receivables listed on the related Schedule of Receivables and the related Other
Conveyed Property. It is the intention of ORFC II and OFL that the transfers
and assignments contemplated by this Agreement and each Assignment Agreement
shall constitute a sale of the Receivables and the Other Conveyed Property from
OFL to ORFC II, conveying good title thereto free and clear of any Liens, and
the Receivables and Other Conveyed Property shall not be a part of OFL's estate
in the event of the filing of a bankruptcy petition by or against OFL under any
bankruptcy or similar law.
(b) (1) OFL shall transfer to ORFC II the Receivables and the
related Other Conveyed Property as described in paragraph (a) above only upon
the satisfaction of each of the following conditions on or prior to the related
Transfer Date:
(i) OFL shall have delivered to ORFC II, the Owner Trustee and the
Indenture Trustee a duly executed Assignment Agreement (including an
acceptance by ORFC II), which shall include a Schedule of Receivables
listing the Receivables being transferred on such Transfer Date;
(ii) as of such Transfer Date, OFL shall not have been insolvent nor
shall OFL have been rendered insolvent by such sale and assignment nor
shall OFL be aware of any pending insolvency;
(iii) OFL shall have taken any action necessary or advisable to
maintain the first priority perfected ownership interest of ORFC II in the
Receivables and Other Conveyed Property;
5
<PAGE>
(iv) no selection procedures adverse to the interests of ORFC II, the
Issuer or the Noteholders shall have been utilized by OFL or ORFC II in
selecting the Receivables;
(v) OFL shall have provided to ORFC II and JPMD any information
reasonably requested by any of the foregoing with respect to the
Receivables;
(vi) the conditions to the transfer of Receivables to the Trust
pursuant to Section 2.1(b) of the Sale and Servicing Agreement have been
met;
(vii) each of the representations and warranties made by OFL pursuant
to Section 3.1 shall be true and correct as of the related Transfer Date,
and OFL shall have performed all obligations to be performed by it
hereunder on or prior to such Transfer Date;
(viii) OFL shall, at its own expense, on or prior to the Transfer
Date indicate in its computer files that the Receivables identified in the
Assignment Agreement have been sold to ORFC II pursuant to this Agreement
and the related Assignment Agreement;
(ix) on any Transfer Date following a Trust Property Liquidation Date
on which (i) not less than all of the Receivables in the Trust as of such
date are purchased pursuant to Section 9.1(b) of the Sale and Servicing
Agreement and (ii) ORFC II receives amounts on deposit in the Spread
Account pursuant to Section 5.1(b) of the Sale and Servicing Agreement,
until the Transfer Date that occurs on the later to occur of (x) 90 days
since the most recent Trust Property Liquidation Date and (y) 90 days since
the most recent Transfer Date on which the Excess Yield Condition was not
satisfied, but for the required hedging arrangement, if the Excess Yield
Condition is not satisfied with respect to the Receivables to be conveyed
on such Transfer Date, OFL shall have established a hedging arrangement
with respect to such Receivables that is acceptable to JPMD; and
(x) OFL shall have delivered to the Indenture Trustee, the Owner
Trustee and JPMD an Officer's Certificate confirming the satisfaction of
each condition precedent specified in this paragraph (b)(1).
SECTION 2.3. DELIVERY OF RECEIVABLE FILES. OFL shall use its best
efforts to deliver to the Custodian within three Business Days after each
Transfer Date, but in any event OFL shall deliver to the Custodian no later than
ten Business Days after such Transfer Date, the following documents:
6
<PAGE>
(i) The fully executed original of the Receivable (together with the
original of any agreements modifying the Receivable, including without
limitation any extension agreements);
(ii) A certificate of insurance, application form signed by the
Obligor or a signed representation letter from the Obligor named in the
Receivable pursuant to which the Obligor has agreed to obtain an Insurance
Policy, or a documented verbal confirmation by the insurance agent for the
Obligor of a policy number for an Insurance Policy or any other documents
evidencing or relating to any Insurance Policy;
(iii) The original credit application, or a copy thereof, of each
Obligor, on OFL's customary form, or on a form approved by OFL, for such
application; and
(iv) The original certificate of title (when received) and otherwise
such documents, if any, that OFL keeps on file in accordance with its
customary procedures indicating that the Financed Vehicle is owned by the
Obligor and subject to the interest of OFL as first lienholder or secured
party (including any Lien Certificate received by OFL), or if such original
certificate of title has not yet been received, a copy of the application
therefor, showing OFL as secured party, or a letter from the applicable
Dealer agreeing unconditionally to repurchase the related Receivable if the
certificate of title is not received by OFL within 180 days.
It is the intention of OFL and ORFC II that the transfer and assignment
contemplated by this Agreement and the related Assignment Agreements shall
constitute a sale of the Receivables and the Other Conveyed Property from OFL to
ORFC II, conveying good title thereto free and clear of any Liens, and the
Receivables and the Other Conveyed Property shall not be part of OFL's estate in
the event of the filing of a bankruptcy petition by or against OFL under any
bankruptcy or similar law.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 REPRESENTATIONS AND WARRANTIES OF OFL. OFL makes the
following representations and warranties, on which ORFC II relies in purchasing
the Receivables and the Other Conveyed Property and in transferring the
Receivables and the Other Conveyed Property to the Trust under the Sale and
Servicing Agreement. Such representations are made as of the execution and
delivery of this Agreement and as of each Transfer Date, and shall survive the
sale, transfer and assignment of the Receivables and the Other Conveyed Property
hereunder and under the Assignment Agreements and the sale, transfer and
assignment thereof by ORFC II to the Trust under the Sale and Servicing
Agreement. OFL and ORFC II agree that ORFC II will assign to the Trust all of
ORFC II's
7
<PAGE>
rights under this Agreement and that the Trust will thereafter be
entitled to enforce this Agreement against OFL in the Trust's own name.
(a) SCHEDULE OF REPRESENTATIONS. The representations and warranties
set forth on the Schedule of Representations are true and correct.
(b) ORGANIZATION AND GOOD STANDING. OFL has been duly organized and
is validly existing as a corporation in good standing under the laws of the
State of Minnesota, with power and authority to own its properties and to
conduct its business as such properties are currently owned and such business is
currently conducted, and had at all relevant times, and now has, power,
authority and legal right to acquire, own and sell the Receivables and the Other
Conveyed Property transferred to ORFC II.
(c) DUE QUALIFICATION. OFL is duly qualified to do business as a
foreign corporation in good standing, and has obtained all necessary licenses
and approvals, in all jurisdictions in which the ownership or lease of its
property or the conduct of its business requires such qualification.
(d) POWER AND AUTHORITY. OFL has the power and authority to execute
and deliver this Agreement, each Assignment Agreement and its Related Documents
and to carry out its terms and their terms, respectively; OFL has full power and
authority to sell and assign the Receivables and the Other Conveyed Property to
be sold and assigned to and deposited with ORFC II under each Assignment
Agreement and has duly authorized such sale and assignment to ORFC II by all
necessary corporate action; and the execution, delivery and performance of this
Agreement, each Assignment Agreement and OFL's Related Documents have been duly
authorized by OFL by all necessary corporate action.
(e) VALID SALE; BINDING OBLIGATIONS. This Agreement, each Assignment
Agreement and OFL's Related Documents have been duly executed and delivered,
shall effect a valid sale, transfer and assignment of the Receivables and the
Other Conveyed Property, enforceable against OFL and creditors of and purchasers
from OFL; and this Agreement, each Assignment Agreement and OFL's Related
Documents constitute legal, valid and binding obligations of OFL enforceable in
accordance with their respective terms, except as enforceability may be limited
by bankruptcy, insolvency, reorganization or other similar laws affecting the
enforcement of creditors' rights generally and by equitable limitations on the
availability of specific remedies, regardless of whether such enforceability is
considered in a proceeding in equity or at law.
(f) NO VIOLATION. The consummation of the transactions contemplated
by this Agreement, each Assignment Agreement and the Related Documents and the
fulfillment of the terms of this Agreement, each Assignment Agreement and the
Related Documents shall not conflict with, result in any breach of any of the
terms and provisions of or constitute (with or without notice, lapse of time or
both) a default under, the articles of
8
<PAGE>
incorporation or bylaws of OFL, or any
indenture, agreement, mortgage, deed of trust or other instrument to which OFL
is a party or by which it is bound, or result in the creation or imposition of
any Lien upon any of its properties pursuant to the terms of any such indenture,
agreement, mortgage, deed of trust or other instrument, other than this
Agreement, each Assignment Agreement and the Sale and Servicing Agreement, or
violate any law, order, rule or regulation applicable to OFL of any court or of
any federal or state regulatory body, administrative agency or other
governmental instrumentality having jurisdiction over OFL or any of its
properties.
(g) NO PROCEEDINGS. There are no proceedings or investigations
pending or, to OFL's knowledge, threatened against OFL, before any court,
regulatory body, administrative agency or other tribunal or governmental
instrumentality having jurisdiction over OFL or its properties (i) asserting the
invalidity of this Agreement, any Assignment Agreement or any of the Related
Documents, (ii) seeking to prevent the issuance of the Notes or the Certificates
or the consummation of any of the transactions contemplated by this Agreement,
any Assignment Agreement or any of the Related Documents, (iii) seeking any
determination or ruling that might materially and adversely affect the
performance by OFL of its obligations under, or the validity or enforceability
of, this Agreement, any Assignment Agreement or any of the Related Documents or
(iv) seeking to affect adversely the federal income tax or other federal, state
or local tax attributes of, or seeking to impose any excise, franchise, transfer
or similar tax upon, the transfer and acquisition of the Receivables and the
Other Conveyed Property hereunder, under any Assignment Agreement or under the
Sale and Servicing Agreement.
(h) NO TERMINATION EVENTS. No Purchase Termination Event or Servicer
Termination Event shall have occurred and be continuing.
(i) CHIEF EXECUTIVE OFFICE. The chief executive office of OFL is
located at 7825 Washington Avenue South, Suite 400, Minneapolis, MN 55439-2435.
SECTION 3.2 REPRESENTATIONS AND WARRANTIES OF ORFC II. ORFC II makes
the following representations and warranties, on which OFL relies in selling,
assigning, transferring and conveying the Receivables and the Other Conveyed
Property to ORFC II hereunder and under each Assignment Agreement. Such
representations are made as of the execution and delivery of this Agreement and
as of each Transfer Date, and shall survive the sale, transfer and assignment of
the Receivables and the Other Conveyed Property hereunder and under each
Assignment Agreement and the sale, transfer and assignment thereof by ORFC II to
the Trust under the Sale and Servicing Agreement.
(a) ORGANIZATION AND GOOD STANDING. ORFC II has been duly organized
and is validly existing and in good standing as a corporation under the laws of
the State of Delaware, with the power and authority to own its properties and to
conduct its business as such properties are currently owned and such business is
currently conducted, and had at all
9
<PAGE>
relevant times, and has, full power, authority and legal right to acquire and
own the Receivables and the Other Conveyed Property and to transfer the
Receivables and the Other Conveyed Property to the Trust pursuant to the Sale
and Servicing Agreement.
(b) DUE QUALIFICATION. ORFC II is duly qualified to do business as a
foreign corporation in good standing, and has obtained all necessary licenses
and approvals in all jurisdictions where the failure to do so would materially
and adversely affect (i) ORFC II's ability to acquire the Receivables or the
Other Conveyed Property, (ii) the validity or enforceability of the Receivables
and the Other Conveyed Property or (iii) ORFC II's ability to perform its
obligations hereunder, under any Assignment Agreement and under the Related
Documents.
(c) POWER AND AUTHORITY. ORFC II has the power, authority and legal
right to execute and deliver this Agreement, each Assignment Agreement and its
Related Documents and to carry out the terms hereof and thereof and to acquire
the Receivables and the Other Conveyed Property hereunder and under each
Assignment Agreement; and the execution, delivery and performance of this
Agreement, each Assignment Agreement and its Related Documents and all of the
documents required pursuant hereto or thereto have been duly authorized by ORFC
II by all necessary action.
(d) NO CONSENT REQUIRED. ORFC II is not required to obtain the
consent of any other Person, or any consent, license, approval or authorization
or registration or declaration with, any governmental authority, bureau or
agency in connection with the execution, delivery or performance of this
Agreement, each Assignment Agreement and the Related Documents, except for such
as have been obtained, effected or made.
(e) BINDING OBLIGATION. This Agreement, each Assignment Agreement
and each of its Related Documents constitutes a legal, valid and binding
obligation of ORFC II, enforceable against ORFC II in accordance with its terms,
subject, as to enforceability, to applicable bankruptcy, insolvency,
reorganization, conservatorship, receivership, liquidation and other similar
laws and to general equitable principles.
(f) NO VIOLATION. The execution, delivery and performance by ORFC II
of this Agreement and each Assignment Agreement, the consummation of the
transactions contemplated by this Agreement, each Assignment Agreement and the
Related Documents and the fulfillment of the terms of this Agreement, each
Assignment Agreement and the Related Documents do not and will not conflict
with, result in any breach of any of the terms and provisions of or constitute
(with or without notice or lapse of time) a default under the certificate of
incorporation or bylaws of ORFC II, or conflict with or breach any of the terms
or provisions of, or constitute (with or without notice or lapse of time) a
default under, any indenture, agreement, mortgage, deed of trust or other
instrument to which ORFC is a party or by which ORFC II is bound or to which any
of its properties are subject, or result in the creation or imposition of any
Lien upon any of its properties pursuant to the terms of any
10
<PAGE>
such indenture, agreement, mortgage, deed of trust or other instrument (other
than the Sale and Servicing Agreement and the Indenture), or violate any law,
order, rule or regulation, applicable to ORFC II or its properties, of any
federal or state regulatory body or any court, administrative agency, or other
governmental instrumentality having jurisdiction over ORFC II or any of its
properties.
(g) NO PROCEEDINGS. There are no proceedings or investigations
pending, or, to the knowledge of ORFC II, threatened against ORFC II, before any
court, regulatory body, administrative agency, or other tribunal or governmental
instrumentality having jurisdiction over ORFC II or its properties: (i)
asserting the invalidity of this Agreement, any Assignment Agreement or any of
the Related Documents, (ii) seeking to prevent the consummation of any of the
transactions contemplated by this Agreement, any Assignment Agreement or any of
the Related Documents, (iii) seeking any determination or ruling that might
materially and adversely affect the performance by ORFC II of its obligations
under, or the validity or enforceability of, this Agreement, any Assignment
Agreement or any of the Related Documents or (iv) that may adversely affect the
federal or state income tax attributes of, or seeking to impose any excise,
franchise, transfer or similar tax upon, the transfer and acquisition of the
Receivables and the Other Conveyed Property hereunder or under any Assignment
Agreement or the transfer of the Receivables and the Other Conveyed Property to
the Trust pursuant to the Sale and Servicing Agreement.
In the event of any breach of a representation and warranty made by ORFC II
hereunder, OFL covenants and agrees that it will not take any action to pursue
any remedy that it may have hereunder, in law, in equity or otherwise, until a
year and a day have passed since the date on which all investor certificates,
notes or other similar securities issued by the Trust, or a trust or similar
vehicle formed by ORFC II, have been paid in full. OFL and ORFC II agree that
damages will not be an adequate remedy for such breach and that this covenant
may be specifically enforced by ORFC II or by the Owner Trustee on behalf of the
Trust.
ARTICLE IV
COVENANTS OF OFL
SECTION 4.1 PROTECTION OF TITLE OF ORFC II AND THE TRUST.
(a) At or prior to the Closing Date, OFL shall have filed or caused
to be filed a UCC-1 financing statement, executed by OFL as seller or debtor,
naming ORFC II as purchaser or secured party and describing the Receivables and
the Other Conveyed Property, with respect to this Agreement and each Assignment
Agreement, being sold by it to ORFC II as collateral, with the office of the
Secretary of State of the State of Minnesota and in such other locations as ORFC
II shall have required. From time to time thereafter, OFL shall execute and
file such financing statements and cause to be executed and filed such
11
<PAGE>
continuation statements, all in such manner and in such places as may be
required by law fully to preserve, maintain and protect the interest of ORFC II
under this Agreement and each Assignment Agreement and of the Trust under the
Sale and Servicing Agreement in the Receivables and the Other Conveyed Property
and in the proceeds thereof. OFL shall deliver (or cause to be delivered) to
ORFC II, the Owner Trustee, the Indenture Trustee and DFC file-stamped copies
of, or filing receipts for, any document filed as provided above, as soon as
available following such filing. In the event that OFL fails to perform its
obligations under this subsection, ORFC II or the Owner Trustee may do so at the
expense of OFL.
(b) OFL shall not change its name, identity, or corporate structure
in any manner that would, could or might make any financing statement or
continuation statement filed by OFL (or by ORFC II or the Owner Trustee on
behalf of OFL) in accordance with paragraph (a) above seriously misleading
within the meaning of Section 9-402(7) of the UCC, unless it shall have given
ORFC II, the Owner Trustee and JPMD at least 60 days' prior written notice
thereof, and shall promptly file appropriate amendments to all previously filed
financing statements and continuation statements.
(c) OFL shall give ORFC II, JPMD, the Indenture Trustee and the Owner
Trustee at least 60 days' prior written notice of any relocation of its
principal executive office if, as a result of such relocation, the applicable
provisions of the UCC would require the filing of any amendment of any
previously filed financing or continuation statement or of any new financing
statement. OFL shall at all times maintain each office from which it services
Receivables and its principal executive office within the United States of
America.
(d) OFL shall maintain its computer systems so that, from and after
the time of sale under this Agreement and under any Assignment Agreement of the
Receivables to ORFC II, and the conveyance of the Receivables by ORFC II to the
Trust, OFL's master computer records (including archives) that shall refer to a
Receivable indicate clearly that such Receivable has been sold to ORFC II and
has been conveyed by ORFC II to the Trust. Indication of the Trust's ownership
of Receivable shall be deleted from or modified on OFL's computer systems when,
and only when, the Receivable shall become a Purchased Receivable or shall have
been paid in full. OFL shall indicate in its consolidated financial statements
that Receivables have been sold to ORFC II and are not available to the
creditors of OFL.
(e) If at any time OFL shall propose to sell, grant a security
interest in, or otherwise transfer any interest in motor vehicle receivables to
any prospective purchaser, lender or other transferee, OFL shall give to such
prospective purchaser, lender, or other transferee computer tapes, records, or
print-outs (including any restored from archives) that, if they shall refer in
any manner whatsoever to any Receivable, shall indicate clearly that such
Receivable has been sold to ORFC II and is owned by the Trust.
12
<PAGE>
SECTION 4.2 OTHER LIENS OR INTERESTS. Except for the conveyances
under any Assignment Agreement, OFL will not sell, pledge, assign or transfer to
any other Person, or grant, create, incur, assume or suffer to exist any Lien on
the Receivables or the Other Conveyed Property, or any interest therein, and OFL
shall defend the right, title, and interest of ORFC II and the Trust in and to
the Receivables and the Other Conveyed Property against all claims of third
parties claiming through or under OFL.
SECTION 4.3 COSTS AND EXPENSES. OFL shall pay all reasonable costs
and disbursements in connection with the performance of its obligations
hereunder and under each Assignment Agreement and its Related Documents.
SECTION 4.4 INDEMNIFICATION.
(a) OFL shall defend, indemnify and hold harmless ORFC II, the Trust,
the Owner Trustee, the Indenture Trustee, JPMD, the Backup Servicer, the
Noteholders and the Certificateholders from and against any and all costs,
expenses, losses, damages, claims, and liabilities, arising out of or resulting
from any breach of any of OFL's representations and warranties contained herein.
(b) OFL shall defend, indemnify and hold harmless ORFC II, the Trust,
the Owner Trustee, the Indenture Trustee, JPMD, the Backup Servicer, the
Noteholders and the Certificateholders from and against any and all costs,
expenses, losses, damages, claims, and liabilities, arising out of or resulting
from the use, ownership or operation by OFL or any affiliate thereof of a
Financed Vehicle.
(c) OFL shall defend and indemnify ORFC II, the Trust, the Owner
Trustee, the Indenture Trustee, JPMD, the Backup Servicer, the Noteholders and
the Certificateholders against any and all costs, expenses, losses, damages,
claims and liabilities arising out of or resulting from any action taken, or
failed to be taken, by it in respect of any portion of the Trust Property other
than in accordance with this Agreement or the Sale and Servicing Agreement.
(d) OFL agrees to pay, and shall defend, indemnify and hold harmless
ORFC II, the Trust, the Owner Trustee, the Indenture Trustee, JPMD, the Backup
Servicer, the Noteholders and the Certificateholders from and against any taxes
that may at any time be asserted against ORFC II, the Owner Trustee, the
Indenture Trustee, DFC, the Backup Servicer, the Noteholders and the
Certificateholders with respect to the transactions contemplated in this
Agreement or in any Assignment Agreement, including, without limitation, any
sales, gross receipts, general corporation, tangible or intangible personal
property, privilege, or license taxes (but not including any taxes asserted with
respect to, and as of the date of, any sale, transfer and assignment of the
Receivables and the Other Conveyed Property to ORFC II and of the Trust Property
to the Trust or the issuance and original sale of the Notes or the Certificates,
or asserted with respect to ownership of the
13
<PAGE>
Receivables and Other Conveyed Property or the Trust Property which shall be
indemnified by OFL pursuant to clause (e) below, or federal, state or other
income taxes, arising out of distributions on the Notes or the Certificates or
transfer taxes arising in connection with the transfer of the Notes or the
Certificates) and costs and expenses in defending against the same, arising by
reason of the acts to be performed by OFL under this Agreement or under any
Assignment Agreement or imposed against such Persons.
(e) OFL agrees to pay, and to indemnify, defend and hold harmless
ORFC II, the Trust, the Owner Trustee, the Indenture Trustee, JPMD, the Backup
Servicer, the Noteholders and the Certificateholders from, any taxes which may
at any time be asserted against such Persons with respect to, and as of the date
of, the conveyance or ownership of any Receivables or the Other Conveyed
Property hereunder or under each Assignment Agreement and the conveyance or
ownership of the Trust Property under the Sale and Servicing Agreement or the
issuance and original sale of the Notes and the Certificates, including, without
limitation, any sales, gross receipts, personal property, tangible or intangible
personal property, privilege or license taxes (but not including any federal or
other income taxes, including franchise taxes, arising out of the transactions
contemplated hereby or transfer taxes arising in connection with the transfer of
Notes or Certificates) and costs and expenses in defending against the same,
arising by reason of the acts to be performed by OFL under this Agreement or
under any Assignment Agreement or imposed against such Persons.
(f) OFL shall defend, indemnify, and hold harmless ORFC II, the Owner
Trustee, the Indenture Trustee, DFC, the Backup Servicer, the Trust, JPMD, the
Noteholders and the Certificateholders from and against any and all costs,
expenses, losses, claims, damages, and liabilities to the extent that such cost,
expense, loss, claim, damage, or liability arose out of, or was imposed upon
ORFC II, the Trust, the Indenture Trustee, JPMD, the Noteholders and the
Certificateholders through the negligence, willful misfeasance, or bad faith of
OFL in the performance of its duties under this Agreement or under any
Assignment Agreement or by reason of reckless disregard of OFL's obligations and
duties under this Agreement or under any Assignment Agreement.
(g) OFL shall indemnify, defend and hold harmless ORFC II, the Owner
Trustee, the Indenture Trustee, JPMD, the Backup Servicer, the Trust, the
Noteholders and the Certificateholders from and against any loss, liability or
expense incurred by reason of the violation by OFL of federal or state
securities laws in connection with the registration or the sale of the Notes and
the Certificates.
(h) OFL shall indemnify, defend and hold harmless ORFC II, the Owner
Trustee, the Indenture Trustee, JPMD, the Backup Servicer, the Trust, the
Noteholders and the Certificateholders from and against any loss, liability or
expense imposed upon, or incurred by, ORFC II, the Owner Trustee, the Indenture
Trustee, JPMD, the Trust, the
14
<PAGE>
Noteholders or the Certificateholders as a result of the failure of any
Receivable, or the sale of the related Financed Vehicle, to comply with all
requirements of applicable law.
(i) OFL shall defend, indemnify, and hold harmless ORFC II and its
assignees from and against all costs, expenses, losses, claims, damages, and
liabilities arising out of or incurred in connection with the acceptance or
performance of OFL's trusts and duties as Servicer under the Sale and Servicing
Agreement, except to the extent that such cost, expense, loss, claim, damage, or
liability shall be due to the willful misfeasance, bad faith, or negligence
(except for errors in judgment) of ORFC II.
(j) OFL shall indemnify, defend and hold harmless ORFC II, the Owner
Trustee, the Indenture Trustee, JPMD, the Backup Servicer, the Trust, the
Noteholders and the Certificateholders from and against any loss, liability or
expense imposed upon, or incurred by, ORFC II, the Owner Trustee and the
Indenture Trustee, JPMD, the Trust, the Noteholders or the Certificateholders as
a result of OFL's or ORFC II's use of the name "Olympic."
Indemnification under this Section 4.4 shall include reasonable fees
and expenses of counsel and expenses of litigation and shall survive termination
of the Trust. The indemnity obligations hereunder shall be in addition to any
obligation that OFL may otherwise have.
SECTION 4.5 ADVANCES.
(a) As of any Determination Date as of which no Trigger Event has
occurred, and any previous Trigger Event has been Deemed Cured, OFL, as Seller
hereunder, shall become obligated to pay to or upon the order of ORFC II on the
related Deposit Date, an amount equal to the lesser of (i) the aggregate
Collection Shortfall with respect to Receivables for which no Scheduled Payment
was due during such Monthly Period and (ii) the Net Advance Shortfall; PROVIDED,
HOWEVER, that OFL shall not be required to make such payments with respect to a
Receivable extended pursuant to Section 3.2(b) of the Sale and Servicing
Agreement for any Monthly Period during which no Scheduled Payment is due
according to the terms of such extension.
(b) As of any Determination Date as of which a Trigger Event has
occurred, or as of which any previous Trigger Event has not been Deemed Cured,
OFL, as Seller hereunder, shall become obligated to pay to or upon the order of
ORFC II on the related Deposit Date, the following amounts: If there are
Collection Shortfalls with respect to a Receivable, an amount equal to such
Collection Shortfall; PROVIDED, HOWEVER, OFL shall only be required to make such
payments with respect to Receivables for which no Scheduled Payment was due
during such Monthly Period; PROVIDED, FURTHER, that OFL shall not be required to
make such payments with respect to a Receivable extended pursuant to Section
15
<PAGE>
3.2(b) of the Sale and Servicing Agreement for any Monthly Period during which
no Scheduled Payment is due according to the terms of such extension.
ARTICLE V
REPURCHASES
SECTION 5.1 REPURCHASE OF RECEIVABLES UPON BREACH OF WARRANTY OR
COVENANT. Upon the occurrence of a Repurchase Event OFL shall, unless such
breach shall have been cured in all material respects, repurchase such
Receivable from the Trust and, on or before the related Deposit Date, OFL shall
pay the Purchase Amount to the Trust pursuant to Section 4.5 of the Sale and
Servicing Agreement. It is understood and agreed that, except as set forth in
Section 6.1, the obligation of OFL to repurchase any Receivable as to which a
breach has occurred and is continuing shall, if such obligation is fulfilled,
constitute the sole remedy against OFL for such breach available to ORFC II,
Certificateholders, Noteholders, or the Owner Trustee or the Indenture Trustee
on behalf of Certificateholders or Noteholders or DFC. The provisions of this
Section 5.1 are intended to grant the Owner Trustee and the Indenture Trustee a
direct right against OFL to demand performance hereunder, and in connection
therewith, OFL waives any requirement of prior demand against ORFC II with
respect to such repurchase obligation. Any such purchase shall take place in
the manner specified in Section 2.6 or Section 3.7, as applicable, of the Sale
and Servicing Agreement. Notwithstanding any other provision of this Agreement
or the Sale and Servicing Agreement to the contrary, the obligation of OFL under
this Section shall not terminate upon a termination of OFL as Servicer under the
Sale and Servicing Agreement and shall be performed in accordance with the terms
hereof notwithstanding the failure of the Servicer or ORFC II to perform any of
their respective obligations with respect to such Receivable under the Sale and
Servicing Agreement.
In addition to the foregoing and notwithstanding whether the related
Receivable shall have been purchased by OFL, OFL shall indemnify the Owner
Trustee, the Indenture Trustee, JPMD, the Backup Servicer, the Trust, the
Noteholders and the Certificateholders against all costs, expenses, losses,
damages, claims and liabilities, including reasonable fees and expenses of
counsel, which may be asserted against or incurred by any of them as a result of
third party claims arising out of the events or facts giving rise to such
Repurchase Events.
SECTION 5.2 REASSIGNMENT OF PURCHASED RECEIVABLES. Upon deposit in
the Collection Account of the Purchase Amount of any Receivable repurchased by
OFL under Section 5.1, ORFC II and the Owner Trustee shall take such steps as
may be reasonably requested by OFL in order to assign to OFL all of ORFC II's
and the Trust's right, title and interest in and to such Receivable and all
security and documents and all Other Conveyed Property conveyed to ORFC II and
the Trust directly relating thereto, without recourse,
16
<PAGE>
representation or warranty, except as to the absence of liens, charges or
encumbrances created by or arising as a result of actions of ORFC II or the
Owner Trustee. Such assignment shall be a sale and assignment outright, and
not for security. If, following the reassignment of a Purchased Receivable,
in any enforcement suit or legal proceeding, it is held that OFL may not
enforce any such Receivable on the ground that it shall not be a real party in
interest or a holder entitled to enforce the Receivable, ORFC II and the Owner
Trustee shall, at the expense of OFL, take such steps as OFL deems reasonably
necessary to enforce the Receivable, including bringing suit in ORFC II's or
the Owner Trustee's name or the names of the Certificateholders.
SECTION 5.3 REPURCHASE OF INELIGIBLE RECEIVABLES UPON SECURITIZED
OFFERING. Upon the purchase of Ineligible Receivables by ORFC II pursuant to
Section 6.5 of the Sale and Servicing Agreement, OFL shall be obligated to
purchase from ORFC II all such Ineligible Receivables for a purchase price equal
to the fair market value of such Ineligible Receivables.
SECTION 5.4 WAIVERS. No failure or delay on the part of ORFC II, or
the Owner Trustee as assignee of ORFC II, in exercising any power, right or
remedy under this Agreement shall operate as a waiver thereof, nor shall any
single or partial exercise of any such power, right or remedy preclude any other
or future exercise thereof or the exercise of any other power, right or remedy.
ARTICLE VI
MISCELLANEOUS
SECTION 6.1 LIABILITY OF OFL. OFL shall be liable in accordance
herewith only to the extent of the obligations in this Agreement or in any
Assignment Agreement specifically undertaken by OFL and the representations and
warranties of OFL.
SECTION 6.2 [RESERVED].
SECTION 6.3 MERGER OR CONSOLIDATION OF OFL OR ORFC II. Any
corporation or other entity (i) into which OFL or ORFC II may be merged or
consolidated, (ii) resulting from any merger or consolidation to which OFL or
ORFC II is a party or (iii) succeeding to the business of OFL or ORFC II, in the
case of ORFC II, which corporation has a certificate of incorporation containing
provisions relating to limitations on business and other matters substantively
identical to those contained in ORFC II's certificate of incorporation, provided
that in any of the foregoing cases such corporation shall execute an agreement
of assumption to perform every obligation of OFL or ORFC II, as the case may be,
under this Agreement and each Assignment Agreement and, whether or not such
assumption agreement is executed, shall be the successor to OFL or ORFC II, as
the case
17
<PAGE>
may be, hereunder and under each such Assignment Agreement (without
relieving OFL or ORFC II of its responsibilities hereunder, if it survives such
merger or consolidation) without the execution or filing of any document or any
further act by any of the parties to this Agreement or each Assignment
Agreement. Notwithstanding the foregoing, ORFC II shall not merge or
consolidate with any other Person or permit any other Person to become the
successor to ORFC II's business without the prior written consent of JPMD and
the Rating Agencies. OFL or ORFC II shall promptly inform the other party, the
Owner Trustee, the Indenture Trustee, JPMD and the Rating Agencies of such
merger, consolidation or purchase and assumption. Notwithstanding the
foregoing, as a condition to the consummation of the transactions referred to in
clauses (i), (ii) and (iii) above, (x) immediately after giving effect to such
transaction, no representation or warranty made pursuant to Sections 3.1 and 3.2
and this Agreement, or similar representation or warranty made in any Assignment
Agreement, shall have been breached (for purposes hereof, such representations
and warranties shall speak as of the date of the consummation of such
transaction), (y) OFL or ORFC II, as applicable, shall have delivered prompt
written notice of such consolidation, merger or purchase and assumption to the
Owner Trustee, the Indenture Trustee, JPMD, and the Rating Agencies prior to the
consummation of such transaction and shall have delivered to the Owner Trustee,
the Indenture Trustee and DFC an Officer's Certificate and an Opinion of Counsel
each stating that such consolidation, merger or succession and such agreement of
assumption comply with this Section 6.3 and that all conditions precedent, if
any, provided for in this Agreement, or in each Assignment Agreement, relating
to such transaction have been complied with, and (z) OFL or ORFC II, as
applicable, shall have delivered to the Owner Trustee, the Indenture Trustee and
JPMD an Opinion of Counsel, stating that, in the opinion of such counsel, either
(A) all financing statements and continuation statements and amendments thereto
have been executed and filed that are necessary to preserve and protect the
interest of the Owner Trustee in the Trust Property and reciting the details of
the filings or (B) no such action shall be necessary to preserve and protect
such interest.
SECTION 6.4 LIMITATION ON LIABILITY OF OFL AND OTHERS. OFL and any
director, officer, employee or agent may rely in good faith on the advice of
counsel or on any document of any kind prima facie properly executed and
submitted by any Person respecting any matters arising under this Agreement.
OFL shall not be under any obligation to appear in, prosecute or defend any
legal action that is not incidental to its obligations under this Agreement, any
Assignment Agreement or its Related Documents and that in its opinion may
involve it in any expense or liability.
SECTION 6.5 OFL MAY OWN NOTES OR CERTIFICATES. Subject to the
provisions of the Sale and Servicing Agreement, OFL and any Affiliate of OFL may
in its individual or any other capacity become the owner or pledgee of Notes or
Certificates with the same rights as it would have if it were not OFL or an
Affiliate thereof.
18
<PAGE>
SECTION 6.6 AMENDMENT.
(a) This Agreement and any Assignment Agreement may be amended by OFL
and ORFC II, without the consent of the Owner Trustee, the Indenture Trustee or
JPMD (A) to cure any ambiguity or (B) to correct any provisions in this
Agreement or any such Assignment Agreement; PROVIDED, HOWEVER, that such action
shall not, as evidenced by an Opinion of Counsel delivered to the Owner Trustee,
the Indenture Trustee and JPMD adversely affect in any material respect the
interests of any Certificateholder or Noteholder.
(b) This Agreement and any Assignment Agreement may also be amended
from time to time by OFL and ORFC II, with the prior written consent of the
Owner Trustee, the Indenture Trustee, a Certificate Majority, a Note Majority
and JPMD for the purpose of adding any provisions to or changing in any manner
or eliminating any of the provisions of this Agreement or any Assignment
Agreement, or of modifying in any manner the rights of the Certificateholders or
the Noteholders; PROVIDED, HOWEVER, that no such amendment shall (i) increase or
reduce in any manner the amount of, or accelerate or delay the timing of,
collections of payments on Receivables, distributions that shall be required to
be made on any Certificate or Note or the Certificate Rate or the Note Interest
Rate or (ii) reduce the aforesaid percentage required to consent to any such
amendment or any waiver hereunder, without the consent of the Holders of all
Certificates or Notes then outstanding or of the Holders of all Notes then
outstanding.
(c) Prior to the execution of any such amendment or consent, OFL
shall have furnished written notification of the substance of such amendment or
consent to each Rating Agency.
(d) Promptly after the execution of any such amendment or consent,
the Owner Trustee or the Indenture Trustee, as applicable, shall furnish written
notification of the substance of such amendment or consent to JPMD and each
Certificateholder and Noteholder.
(e) It shall not be necessary for the consent of Certificateholders
or Noteholders pursuant to this Section to approve the particular form of any
proposed amendment or consent, but it shall be sufficient if such consent shall
approve the substance thereof. The manner of obtaining such consents and of
evidencing the authorization of the execution thereof by Certificateholders or
Noteholders shall be subject to such reasonable requirements as the Owner
Trustee or the Indenture Trustee, as applicable, may prescribe, including the
establishment of record dates. The consent of any Holder of a Certificate or
Note given pursuant to this Section or pursuant to any other provision of this
Agreement shall be conclusive and binding on such Holder and on all future
Holders of such Certificate or Note and of any Certificate or Note issued upon
the transfer thereof or in exchange thereof or in lieu thereof whether or not
notation of such consent is made upon the Certificate or Note.
19
<PAGE>
SECTION 6.7 NOTICES. All demands, notices and communications to OFL
or ORFC II hereunder shall be in writing, personally delivered, or sent by
telecopier (subsequently confirmed in writing), reputable overnight courier or
mailed by certified mail, return receipt requested, and shall be deemed to have
been given upon receipt (a) in the case of OFL, to Olympic Financial Ltd., 7825
Washington Avenue South, Minneapolis, Minnesota 55439-2435, Attention: John A.
Witham, or such other address as shall be designated by OFL in a written notice
delivered to the other party or to the Owner Trustee or the Indenture Trustee,
as applicable, (b) in case of ORFC II, to Olympic Receivables Finance Corp. II,
7825 Washington Avenue South, Suite 410, Minneapolis, Minnesota 55439-2435,
Attention: John A. Witham, or (c) in the case of JPMD, 902 Market Street,
Wilmington, Delaware 19801-3015, Attention: Asset Finance Group.
SECTION 6.8 MERGER AND INTEGRATION. Except as specifically stated
otherwise herein, this Agreement, each Assignment Agreement and the Related
Documents set forth the entire understanding of the parties relating to the
subject matter hereof, and all prior understandings, written or oral, are
superseded by this Agreement, each Assignment Agreement and the Related
Documents. Neither this Agreement nor any Assignment Agreement may be modified,
amended, waived or supplemented except as provided herein.
SECTION 6.9 SEVERABILITY OF PROVISIONS. If any one or more of the
covenants, provisions or terms of this Agreement or any Assignment Agreement
shall be for any reason whatsoever held invalid, then such covenants, provisions
or terms shall be deemed severable from the remaining covenants, provisions or
terms of this Agreement or any Assignment Agreement and shall in no way affect
the validity or enforceability of the other provisions of this Agreement or any
Assignment Agreement.
SECTION 6.10 INTENTION OF THE PARTIES. The execution and delivery of
this Agreement shall constitute an acknowledgment by OFL and ORFC II that they
intend that the assignments and transfers herein contemplated pursuant to each
Assignment Agreement constitute a sale and assignment outright, and not for
security, of the Receivables and the Other Conveyed Property, conveying good
title thereto free and clear of any Liens, from OFL to ORFC II, and that the
Receivables and the Other Conveyed Property shall not be a part of OFL's estate
in the event of the bankruptcy, reorganization, arrangement, insolvency or
liquidation proceeding, or other proceeding under any federal or state
bankruptcy or similar law, or the occurrence of another similar event, of, or
with respect to, OFL. In the event that such conveyance is determined to be
made as security for a loan made by ORFC II, the Trust, the Certificateholders
or the Noteholders to OFL, the parties intend that OFL shall have granted to
ORFC II a security interest in all of OFL's right, title and interest in and to
the Receivables and the Other Conveyed Property conveyed pursuant to each
Assignment Agreement and that this Agreement shall constitute a security
agreement under applicable law.
20
<PAGE>
SECTION 6.11 GOVERNING LAW. This Agreement shall be construed in
accordance with, the laws of the State of New York without regard to the
principles of conflicts of laws thereof and the obligations, rights and remedies
of the parties under this Agreement shall be determined in accordance with such
laws.
SECTION 6.12 COUNTERPARTS. For the purpose of facilitating the
execution of this Agreement and for other purposes, this Agreement may be
executed simultaneously in any number of counterparts, each of which
counterparts shall be deemed to be an original, and all of which counterparts
shall constitute but one and the same instrument.
SECTION 6.13 CONVEYANCE OF THE RECEIVABLES AND THE OTHER CONVEYED
PROPERTY TO THE TRUST. OFL acknowledges that ORFC II intends, pursuant to the
Sale and Servicing Agreement, to convey the Receivables and the Other Conveyed
Property, together with its rights under this Agreement, to the Trust on the
date hereof. OFL acknowledges and consents to such conveyance and waives any
further notice thereof and covenants and agrees that the representations and
warranties of OFL contained in this Agreement and the rights of ORFC II
hereunder are intended to benefit the Owner Trustee, the Indenture Trustee,
JPMD, the Trust, the Certificateholders and the Noteholders. In furtherance of
the foregoing, OFL covenants and agrees to perform its duties and obligations
hereunder, in accordance with the terms hereof for the benefit of the Owner
Trustee, the Indenture Trustee, JPMD, the Trust, the Certificateholders and the
Noteholders and that, notwithstanding anything to the contrary in this
Agreement, OFL shall be directly liable to the Owner Trustee and the Trust
(notwithstanding any failure by the Servicer, the Backup Servicer or ORFC II to
perform its duties and obligations hereunder or under the Sale and Servicing
Agreement) and that the Owner Trustee may enforce the duties and obligations of
OFL under this Agreement against OFL for the benefit of the Trust, JPMD, the
Certificateholders and the Noteholders.
SECTION 6.14 NONPETITION COVENANT. Neither ORFC II nor OFL shall
petition or otherwise invoke the process of any court or government authority
for the purpose of commencing or sustaining a case against the Trust (or, in the
case of OFL, against ORFC II) under any federal or state bankruptcy, insolvency
or similar law or appointing a receiver, liquidator, assignee, trustee,
custodian, sequestrator or other similar official of the Trust (or ORFC II) or
any substantial part of its property, or ordering the winding up or liquidation
of the affairs of the Trust (or ORFC II).
21
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Receivables Purchase
Agreement and Assignment to be duly executed by their respective officers as of
the day and year first above written.
OLYMPIC RECEIVABLES FINANCE CORP. II,
as Purchaser
By:_________________________________
Name: John A. Witham
Title: Senior Vice President and
Chief Financial Officer
OLYMPIC FINANCIAL LTD., as Seller
By:_________________________________
Name: John A. Witham
Title: Senior Vice President and
Chief Financial Officer
<PAGE>
SCHEDULE A
SCHEDULE OF RECEIVABLES
[Deemed Incorporated from each Assignment Agreement]<PAGE>
<PAGE>
SCHEDULE B
REPRESENTATIONS AND WARRANTIES OF OFL
1. CHARACTERISTICS OF RECEIVABLES. Each Receivable (A) was
originated by a Dealer for the retail sale of a Financed Vehicle in the ordinary
course of such Dealer's business and such Dealer had all necessary licenses and
permits to originate Receivables in the state where such Dealer was located, was
fully and properly executed by the parties thereto, was purchased by OFL from
such Dealer under an existing Dealer Agreement with OFL and was validly assigned
by such Dealer to OFL, (B) contains customary and enforceable provisions such as
to render the rights and remedies of the holder thereof adequate for realization
against the collateral security, and (C) is fully amortizing and provides for
level monthly payments (provided that the payment in the first Monthly Period
and the final Monthly Period of the life of the Receivable may be minimally
different from the level payment) which, if made when due, shall fully amortize
the Amount Financed over the original term.
2. NO FRAUD OR MISREPRESENTATION. Each Receivable was originated
by a Dealer and was sold by the Dealer to OFL without any fraud or
misrepresentation on the part of such Dealer in either case.
3. COMPLIANCE WITH LAW. All requirements of applicable federal,
state and local laws, and regulations thereunder (including, without limitation,
usury laws, the Federal Truth-in-Lending Act, the Equal Credit Opportunity Act,
the Fair Credit Billing Act, the Fair Credit Reporting Act, the Fair Debt
Collection Practices Act, the Federal Trade Commission Act, the Magnuson-Moss
Warranty Act, the Federal Reserve Board's Regulations "B" and "Z", the Soldiers'
and Sailors' Civil Relief Act of 1940, the Minnesota Motor Vehicle Retail
Installment Sales Act, and state adaptations of the National Consumer Act and of
the Uniform Consumer Credit Code and other consumer credit laws and equal credit
opportunity and disclosure laws) in respect of all of the Receivables and each
and every sale of Financed Vehicles, have been complied with in all material
respects, and each Receivable and the sale of the Financed Vehicle evidenced by
each Receivable complied at the time it was originated or made and now complies
in all material respects with all applicable legal requirements.
4. ORIGINATION. Each Receivable is a United States dollar
obligation of an Obligor domiciled in the United States and such Receivable was
originated in the United States.
5. BINDING OBLIGATION. Each Receivable represents the genuine,
legal, valid and binding payment obligation of the Obligor thereon, enforceable
by the holder thereof in accordance with its terms, except (A) as enforceability
may be limited by bankruptcy, insolvency, reorganization or similar laws
affecting the enforcement of creditors' rights generally and by equitable
limitations on the availability of specific remedies, regardless of whether such
enforceability is considered in a proceeding in equity or at law and (B) as such
Receivable may
B-1
<PAGE>
be modified by the application after the related Cutoff Date of
the Soldiers' and Sailors' Civil Relief Act of 1940, as amended; and all parties
to each Receivable had full legal capacity to execute and deliver such
Receivable and all other documents related thereto and to grant the security
interest purported to be granted thereby.
6. NO GOVERNMENT OBLIGOR. No Obligor is the United States of
America or any State or any agency, department, subdivision or instrumentality
thereof.
7. OBLIGOR BANKRUPTCY. At the applicable Cutoff Date, no Obligor
had been identified on the records of OFL as being, and, to the best of ORFC
II's knowledge, no Obligor is the subject of a current bankruptcy proceeding.
8. SCHEDULE OF RECEIVABLES. The information set forth in the
Schedule of Receivables has been produced from the Electronic Ledger and was
true and correct in all material respects as of the close of business on the
applicable Cutoff Date.
9. MARKING RECORDS. By the Closing Date or by each Transfer Date,
as applicable, OFL will have caused the portions of the Electronic Ledger
relating to the Receivables to be clearly and unambiguously marked to show that
the Receivables constitute part of the Trust Property and are owned by the Trust
in accordance with the terms of the Sale and Servicing Agreement.
10. MONTHLY TAPE. The Monthly Tape made available by OFL to ORFC
II, the Backup Servicer and the Indenture Trustee was complete and accurate in
all respects as of the date delivered and includes a description of the same
Receivables that are described in the Schedule of Receivables.
11. ADVERSE SELECTION. No selection procedures adverse to the
Noteholders or the Certificateholders were utilized in selecting the Receivables
from those receivables owned by OFL which met the selection criteria contained
in the Sale and Servicing Agreement.
12. CHATTEL PAPER. The Receivables constitute chattel paper within
the meaning of the UCC as in effect in the States of Minnesota and New York.
13. ONE ORIGINAL. There is only one original executed copy of each
Receivable.
14. RECEIVABLE FILES COMPLETE. The complete Receivable File (other
than item (iv) in Section 2.3 of this Agreement) is in the possession of OFL at
its corporate office. The complete Receivable File for each Receivable will be
in the possession of the Custodian within ten Business Days after the conveyance
of the Receivable from OFL to ORFC II. By such date, there will exist a
Receivable File pertaining to each Receivable and such Receivable File
B-2
<PAGE>
contains (a) a fully executed original of the Receivable, (b) a certificate of
insurance, application form for insurance signed by the Obligor or a signed
representation letter from the Obligor named in the Receivable pursuant to which
the Obligor has agreed to obtain physical damage insurance for the Financed
Vehicle, or copies thereof, or a documented verbal confirmation by an insurance
agent for the Obligor of a policy number for an insurance policy for the
Financed Vehicle, (c) the original Lien Certificate or application therefor or
a letter from the applicable Dealer agreeing unconditionally to repurchase the
related Receivable if the certificate of title is not received by OFL within
180 days, and (d) a credit application signed by the Obligor, or a copy
thereof. Each of such documents which is required to be signed by the Obligor
has been signed by the Obligor in the appropriate spaces. All blanks on any
form have been properly filled in and each form has otherwise been correctly
prepared. The complete file for each Receivable currently is in the possession
of the Custodian.
15. RECEIVABLES IN FORCE. No Receivable has been satisfied,
subordinated or rescinded, and the Financed Vehicle securing each such
Receivable has not been released from the lien of the related Receivable in
whole or in part. No provisions of any Receivable have been waived, altered or
modified in any respect since its origination, except by instruments or
documents identified in the Receivable File. No Receivable has been modified as
a result of application of the Soldiers' and Sailors' Civil Relief Act of 1940,
as amended.
16. LAWFUL ASSIGNMENT. No Receivable was originated in, or is
subject to the laws of, any jurisdiction the laws of which would make unlawful,
void or voidable the sale, transfer and assignment of such Receivable under this
Agreement, under any Assignment Agreement or pursuant to transfers of the Notes
or the Certificates. With respect to such sale, transfer and assignment of such
Receivable under this Agreement or pursuant to transfers of the Notes or the
Certificates, either (1) no consent is required or (2) all required consents
have been obtained.
17. GOOD TITLE. No Receivable has been sold, transferred, assigned
or pledged by OFL to any Person other than ORFC II; immediately prior to the
conveyance of the Receivables to ORFC II pursuant to this Agreement or any
Assignment Agreement, OFL had good and indefeasible title thereto, free and
clear of any Lien, and immediately upon the transfer thereof, ORFC II shall have
good and indefeasible title to and will be the sole owner of each Receivable,
free of any Lien. No Dealer has a participation in, or other right to receive,
proceeds of any Receivable. OFL has not taken any action to convey any right to
any Person that would result in such Person having a right to payments received
under the related Insurance Policies or the related Dealer Agreements or Dealer
Assignments or to payments due under such Receivables.
18. SECURITY INTEREST IN FINANCED VEHICLE. Each Receivable created
or shall create a valid, binding and enforceable first priority security
interest in favor of OFL in the Financed Vehicle. The Lien Certificate and
original certificate of title for each Financed Vehicle
B-3
<PAGE>
show, or if a new or replacement Lien Certificate is being applied for with
respect to such Financed Vehicle, the Lien Certificate will be received within
180 days of the Closing Date or any Transfer Date, as applicable, and will show,
OFL named as the original secured party under each Receivable as the holder of a
first priority security interest in such Financed Vehicle. With respect to each
Receivable for which the Lien Certificate has not yet been returned from the
Registrar of Titles, OFL has received written evidence from the related Dealer
that such Lien Certificate showing OFL as first lienholder has been applied for,
or a letter from the applicable Dealer agreeing unconditionally to repurchase
the related Receivable if the certificate of title is not received by OFL
within 180 days. OFL's security interest has been validly assigned by OFL to
ORFC II pursuant to this Agreement or any Assignment Agreement, as applicable.
Immediately after the sale, transfer and assignment thereof by ORFC II to the
Trust, each Receivable will be secured by an enforceable and perfected first
priority security interest in the Financed Vehicle in favor of the Trust as
secured party, which security interest is prior to all other Liens upon and
security interests in such Financed Vehicle which now exist or may hereafter
arise or be created (except, as to priority, for any lien for taxes, labor or
materials affecting a Financed Vehicle). As of each Cutoff Date there were no
Liens or claims for taxes, work, labor or materials affecting a Financed
Vehicle which are or may be Liens prior or equal to the lien of the related
Receivable.
19. ALL FILINGS MADE. All filings (including, without limitation,
UCC filings) required to be made by any Person and actions required to be taken
or performed by any Person in any jurisdiction to give the Trust a first
priority perfected lien on, or ownership interest in, the Receivables and the
Other Conveyed Property have been made, taken or performed.
20. NO IMPAIRMENT. OFL has not done anything to convey any right to
any Person that would result in such Person having a right to payments due under
a Receivable or otherwise to impair the rights of ORFC II, the Trust, the
Indenture Trustee, JPMD, the Noteholders and the Certificateholders in any
Receivable or the proceeds thereof.
21. RECEIVABLE NOT ASSUMABLE. No Receivable is assumable by another
Person in a manner which would release the Obligor thereof from such Obligor's
obligations to OFL with respect to such Receivable.
22. NO DEFENSES. No Receivable is subject to any right of
rescission, setoff, counterclaim or defense and no such right has been asserted
or threatened with respect to any Receivable.
23. NO DEFAULT. There has been no default, breach, violation or
event permitting acceleration under the terms of any Receivable (other than
payment delinquencies of not more than 30 days), and no condition exists or
event has occurred and is continuing that with notice, the lapse of time or both
would constitute a default, breach, violation or event permitting acceleration
under the terms of any Receivable, and there has been no waiver of any of the
B-4
<PAGE>
foregoing. As of any Cutoff Date or any Transfer Date, as applicable, no
Financed Vehicle had been repossessed.
24. INSURANCE. As of the date hereof or as of the date of any
Assignment Agreement, as applicable, each Financed Vehicle is covered by a
comprehensive and collision insurance policy (i) in an amount at least equal to
the lesser of (a) its maximum insurable value or (b) the principal amount due
from the Obligor under the relate Receivable, (ii) naming OFL as loss payee and
(iii) insuring against loss and damage due to fire, theft, transportation,
collision and other risks generally covered by comprehensive and collision
coverage. Each Receivable requires the Obligor to maintain physical loss and
damage insurance, naming OFL and its successors and assigns as additional
insured parties, and each Receivable permits the holder thereof to obtain
physical loss and damage insurance at the expense of the Obligor if the Obligor
fails to do so. No Financed Vehicle was or had previously been insured under a
policy of Force-Placed Insurance on the related Cutoff Date.
25. PAST DUE. As of the related Cutoff Date, no Receivable was more
than 30 days past due and no funds have been advanced by ORFC II, the Servicer,
any Dealer, or anyone acting on behalf of any of them in order to cause any
Receivable to qualify under this representation.
26. REMAINING PRINCIPAL BALANCE. As of the related Cutoff Date,
each Receivable had a remaining principal balance equal to or greater than
$500.00 and the Principal Balance of each Receivable set forth in the Schedule
of Receivables is true and accurate in all material respects.
27. MATURITY. Each Receivable had an original maturity of at least
three months.
28. CERTAIN CHARACTERISTICS. (A) No Receivable has an initial
payment date more than three months subsequent to the related Cutoff Date; (B)
No Receivable has a final scheduled payment date on or before the related
Transfer Date; (C) The Principal Balance of each Receivable set forth in
Schedule of Receivables is true and accurate in all material respects as of the
related Cutoff Date; and (D) after giving effect to the conveyance of
Receivables on each Transfer Date, (i) the aggregate of the Principal Balances
of Receivables with original maturities ranging from 72 to 84 months shall not
exceed 7.5% of the aggregate of the Principal Balances of all Receivables on
such Transfer Date, and (ii) the aggregate of the Principal Balances of
Receivables attributable to loans originated under OFL's "Classic" program shall
not exceed 40% of the aggregate of the Principal Balances of all Receivables on
such Transfer Date.
29. PAYMENTS TO LOCKBOX BANK. The Obligor with respect to each
Receivable, as of the related Transfer Date, is required to make all Scheduled
Payments to the Lockbox Bank.
B-5
<PAGE>
EXECUTION COPY
AMENDMENT
Dated as of June 12, 1996
to
RECEIVABLES PURCHASE AGREEMENT AND ASSIGNMENT
Dated as of December 28, 1995
between
OLYMPIC RECEIVABLES FINANCE CORP. II
Purchaser
and
OLYMPIC FINANCIAL LTD.
Seller
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I
DEFINITIONS
ARTICLE II
AMENDMENT
SECTION 2.1. AMENDMENT TO SECTION 6.7 OF THE RECEIVABLES PURCHASE
AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 2.2. AMENDMENT TO SCHEDULE B OF THE RECEIVABLES PURCHASE
AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE III
MISCELLANEOUS
SECTION 3.1. COUNTERPARTS. . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 3.2. GOVERNING LAW; ENTIRE AGREEMENT . . . . . . . . . . . . . 2
SECTION 3.3. HEADINGS. . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 3.4. RECEIVABLES PURCHASE AGREEMENT IN FULL FORCE AND EFFECT
AS AMENDED . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
-i-
<PAGE>
AMENDMENT dated as of June 12, 1996 (the "AMENDMENT") to RECEIVABLES
PURCHASE AGREEMENT AND ASSIGNMENT dated as of December 28, 1995 (the
"RECEIVABLES PURCHASE AGREEMENT"), between Olympic Receivables Finance Corp. II,
a Delaware corporation, as Purchaser (the "PURCHASER") and Olympic Financial
Ltd., a Minnesota corporation, as Seller (the "SELLER").
WHEREAS, the Purchaser and the Seller have entered into the Receivables
Purchase Agreement;
WHEREAS, pursuant to Section 6.6(b) of the Receivables Purchase Agreement,
the Purchaser and the Seller desire to amend the Receivables Purchase Agreement
in certain respects as provided below;
WHEREAS, each of the Owner Trustee, the Indenture Trustee, a Certificate
Majority, a Note Majority and JPMD has consented to this Amendment as required
by Section 6.6(b) of the Receivables Purchase Agreement;
WHEREAS, it is the intent of the parties that this Amendment be effective
as of the date set forth above (the "EFFECTIVENESS DATE");
NOW, THEREFORE, the parties to this Amendment hereby agree as follows:
ARTICLE I
DEFINITIONS
Unless otherwise defined herein or the context otherwise requires, defined
terms used herein shall have the meanings ascribed thereto in the Receivables
Purchase Agreement.
ARTICLE II
AMENDMENT
SECTION 2.1. AMENDMENT TO SECTION 6.7 OF THE RECEIVABLES PURCHASE
AGREEMENT. Section 6.7 of the Receivables Purchase Agreement is hereby amended
by deleting the words "902 Market Street, Wilmington, Delaware 19801" and
substituting therefor "500 Stanton Christiana Road, Newark, Delaware 19713-
2107."
SECTION 2.2. AMENDMENT TO SCHEDULE B OF THE RECEIVABLES PURCHASE
AGREEMENT. Clause (D)(i) of Paragraph 28 of Schedule B to the Receivables
Purchase Agreement is hereby amended by deleting the number "72" and
substituting therefor "73."
<PAGE>
ARTICLE III
MISCELLANEOUS
SECTION 3.1. COUNTERPARTS. This Amendment may be executed by the parties
hereto in several counterparts, each of which shall be deemed to be an original
and all of which shall constitute together but one and the same agreement. This
Amendment shall become effective when the Seller shall have received (a)
counterparts hereof executed on behalf of the Purchaser and the Seller, (b) the
consents of the Owner Trustee, the Indenture Trustee, JPMD, as sole
Certificateholder, and as Administrative Agent for Delaware Funding Corporation,
the sole Noteholder, and JPMD, in its individual capacity, to the terms of this
Amendment and (c) evidence of written notice to S&P and Moody's of this
Amendment.
SECTION 3.2. GOVERNING LAW; ENTIRE AGREEMENT. THIS AMENDMENT SHALL BE
DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE
STATE OF NEW YORK. This Amendment and the Receivables Purchase Agreement (and
all exhibits, annexes and schedules thereto) constitute the entire understanding
among the parties hereto with respect to the subject matter hereof and supersede
any prior agreements, written or oral, with respect thereto.
SECTION 3.3. HEADINGS. The various headings of this Amendment are
inserted for convenience only and shall not affect the meaning or interpretation
of this Amendment or any provisions hereof or thereof.
SECTION 3.4. RECEIVABLES PURCHASE AGREEMENT IN FULL FORCE AND EFFECT AS
AMENDED. Except as specifically stated herein, all of the terms and conditions
of the Receivables Purchase Agreement shall remain in full force and effect.
All references to the Receivables Purchase Agreement in any other document or
instrument shall be deemed to mean the Receivables Purchase Agreement, as
amended by this Amendment. This Amendment shall not constitute a novation of
the Receivables Purchase Agreement, but shall constitute an amendment thereto.
The parties hereto agree to be bound by the terms and obligations of the
Receivables Purchase Agreement, as amended by this Amendment, as though the
terms and obligations of the Receivables Purchase Agreement were set forth
herein.
-2-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their authorized officers, all as of the date and
year first above written.
PURCHASER:
OLYMPIC RECEIVABLES FINANCE CORP. II
By: __________________________________
Name:
Title:
SELLER:
OLYMPIC FINANCIAL LTD.,
By: __________________________________
Name:
Title:
AGREED AND CONSENTED:
OWNER TRUSTEE:
WILMINGTON TRUST COMPANY, not in its individual
capacity but solely as Owner Trustee under the Trust
Agreement
By: __________________________________
Name:
Title:
-3-
<PAGE>
INDENTURE TRUSTEE:
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, not in
its individual capacity but as Indenture Trustee
By: __________________________________
Name:
Title:
MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as sole
Certificateholder, and as Administrative Agent for
Delaware Funding Corporation, as sole Noteholder
By: __________________________________
Name:
Title:
MORGAN GUARANTY TRUST COMPANY OF NEW YORK, in its
individual capacity
By: __________________________________
Name:
Title:
-4-
<PAGE>
EXECUTION COPY
AMENDMENT NO. 2
Dated as of September 30, 1996
to
RECEIVABLES PURCHASE AGREEMENT AND ASSIGNMENT
Dated as of December 28, 1995
between
OLYMPIC RECEIVABLES FINANCE CORP. II
Purchaser
and
OLYMPIC FINANCIAL LTD.
Seller
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I
DEFINITIONS
ARTICLE II
AMENDMENT
SECTION 2.1. Amendment to Section 2.2 of the Receivables Purchase
Agreement. . . . . . . . . . . . . . . . . . 1
ARTICLE III
MISCELLANEOUS
SECTION 3.1. Counterparts. . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 3.2. Governing Law; Entire Agreement . . . . . . . . . . . . . 2
SECTION 3.3. Headings. . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 3.4. Receivables Purchase Agreement in Full Force and Effect
as Amended . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
-i-
<PAGE>
AMENDMENT NO. 2 dated as of September 30, 1996 (the "AMENDMENT") to
RECEIVABLES PURCHASE AGREEMENT AND ASSIGNMENT dated as of December 28, 1995 and
amended as of June 12, 1996 (as amended, the "RECEIVABLES PURCHASE AGREEMENT"),
between Olympic Receivables Finance Corp. II, a Delaware corporation, as
Purchaser (the "PURCHASER") and Olympic Financial Ltd., a Minnesota corporation,
as Seller (the "SELLER").
WHEREAS, the Purchaser and the Seller have entered into the Receivables
Purchase Agreement;
WHEREAS, pursuant to Section 6.6(b) of the Receivables Purchase Agreement,
the Purchaser and the Seller desire to amend the Receivables Purchase Agreement
in certain respects as provided below;
WHEREAS, each of the Owner Trustee, the Indenture Trustee, a Certificate
Majority, a Note Majority and JPMD has consented to this Amendment as required
by Section 6.6(b) of the Receivables Purchase Agreement;
WHEREAS, it is the intent of the parties that this Amendment be effective
as of the date set forth above (the "EFFECTIVENESS DATE");
NOW, THEREFORE, the parties to this Amendment hereby agree as follows:
ARTICLE I
DEFINITIONS
Unless otherwise defined herein or the context otherwise requires, defined
terms used herein shall have the meanings ascribed thereto in the Receivables
Purchase Agreement.
ARTICLE II
AMENDMENT
SECTION 2.1. AMENDMENT TO SECTION 2.2 OF THE RECEIVABLES PURCHASE
AGREEMENT.
(a) Section 2.2(b)(1)(ix) of the Receivables Purchase Agreement is hereby
amended to read in its entirety as follows:
(ix) on any Transfer Date, OFL shall have established, in the name of
the Trustee for the benefit of the Noteholders and the Certificateholders,
an Eligible
<PAGE>
Interest Rate Cap Agreement in a notional amount equal to or
greater than the sum of the Note Balance PLUS the Certificate Balance on
such date (after taking into account the transfer of Receivables to the
Trust on such date);
(b) Section 2.2(b)(1) of the Receivables Purchase Agreement is hereby
amended by adding the following subsection (x) immediately following Section
2.2(b)(1)(ix):
(x) OFL shall have paid to the Purchaser for deposit into the Spread
Account an amount at least equal to 1.0% of the aggregate of the Principal
Balances of the Receivables sold to the Purchaser on such Transfer Date;
and
(c) Section 2.2(b)(1) of the Receivables Purchase Agreement is hereby
further amended by renumbering Section 2.2(b)(1)(x) as Section 2.2(b)(1)(xi).
ARTICLE III
MISCELLANEOUS
SECTION 3.1. COUNTERPARTS. This Amendment may be executed by the parties
hereto in several counterparts, each of which shall be deemed to be an original
and all of which shall constitute together but one and the same agreement. This
Amendment shall become effective when the Seller shall have received (a)
counterparts hereof executed on behalf of the Purchaser and the Seller, (b) the
consents of the Owner Trustee, the Indenture Trustee, JPMD, as sole
Certificateholder, and as Administrative Agent for Delaware Funding Corporation,
the sole Noteholder, to the terms of this Amendment and (c) evidence of written
notice to Standard & Poor's and Moody's of this Amendment.
SECTION 3.2. GOVERNING LAW; ENTIRE AGREEMENT. THIS AMENDMENT SHALL BE
DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE
STATE OF NEW YORK. This Amendment and the Receivables Purchase Agreement (and
all exhibits, annexes and schedules thereto) constitute the entire understanding
among the parties hereto with respect to the subject matter hereof and supersede
any prior agreements, written or oral, with respect thereto.
SECTION 3.3. HEADINGS. The various headings of this Amendment are
inserted for convenience only and shall not affect the meaning or interpretation
of this Amendment or any provisions hereof or thereof.
SECTION 3.4. RECEIVABLES PURCHASE AGREEMENT IN FULL FORCE AND EFFECT AS
AMENDED. Except as specifically stated herein, all of the terms and conditions
of the Receivables Purchase Agreement shall remain in full force and effect.
All references to the Receivables Purchase Agreement in any other document or
instrument shall be deemed to
-2-
<PAGE>
mean the Receivables Purchase Agreement, as amended by this Amendment. This
Amendment shall not constitute a novation of the Receivables Purchase
Agreement, but shall constitute an amendment thereto. The parties hereto
agree to be bound by the terms and obligations of the Receivables Purchase
Agreement, as amended by this Amendment, as though the terms and obligations
of the Receivables Purchase Agreement were set forth herein.
-3-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their authorized officers, all as of the date
and year first above written.
PURCHASER:
OLYMPIC RECEIVABLES FINANCE CORP. II
By: /s/ John Witham
----------------------------------
Name: John Witham
Title: EVP/CFO
SELLER:
OLYMPIC FINANCIAL LTD.,
By: /s/ Mike Sherman
----------------------------------
Name: Mike Sherman
Title: VP/Treasurer
AGREED AND CONSENTED:
OWNER TRUSTEE:
WILMINGTON TRUST COMPANY, not in its individual
capacity but solely as Owner Trustee under the Trust
Agreement
By: /s/ Denise M. Geran
----------------------------------
Name: Denise M. Geran
Title: Financial Services Officer
-4-
<PAGE>
INDENTURE TRUSTEE:
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, not in
its individual capacity but as Indenture Trustee
By: /s/ illegible
----------------------------------
Name:
Title:
MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as sole
Certificateholder, and as Administrative Agent for
Delaware Funding Corporation, as sole Noteholder
By: /s/ illegible
----------------------------------
Name:
Title:
-5-
<PAGE>
EXECUTION COPY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AMENDMENT NO. 3
Dated as of January 17, 1997
to
RECEIVABLES PURCHASE AGREEMENT AND ASSIGNMENT
Dated as of December 28, 1995
between
OLYMPIC RECEIVABLES FINANCE CORP. II
Purchaser
and
0LYMPIC FINANCIAL LTD.
Seller
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS
ARTICLE II
AMENDMENT
SECTION 2.1. Amendment to Section 2.2 of the Receivables Purchase
Agreement . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 2.2. Amendment to Schedule B to Receivables Purchase
Agreement . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE III
MISCELLANEOUS
SECTION 3.1. Counterparts . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 3.2. Governing Law; Entire Agreement. . . . . . . . . . . . . . 2
SECTION 3.3. Headings . . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 3.4. Receivables Purchase Agreement in Full Force and Effect as
Amended . . . . . . . . . . . . . . . . . . . . . . . . 3
-i-
<PAGE>
AMENDMENT NO. 3. dated as of January 17, 1997 (the "AMENDMENT") to
RECEIVABLES PURCHASE AGREEMENT AND ASSIGNMENT dated as of December 28, 1995 and
amended as of June 12, 1996 and September 30, 1996 (as amended, the "RECEIVABLES
PURCHASE AGREEMENT"), between Olympic Receivables Finance Corp. II, a Delaware
corporation, as Purchaser (the "PURCHASER") and Olympic Financial LTD., a
Minnesota corporation, as Seller (the "SELLER").
WHEREAS, the Purchaser and the Seller have entered into the Receivables
Purchase Agreement;
WHEREAS, pursuant to Section 6.6(b) of the Receivables Purchase Agreement,
the Purchaser and the Seller desire to amend the Receivables Purchase Agreement
in certain respects as provided below;
WHEREAS, each of the Owner Trustee, the Indenture Trustee, a Certificate
Majority, a Note Majority and JPMD has consented to this Amendment as required
by Section 6.6(b) of the Receivables Purchase Agreement;
WHEREAS, it is the intent of the parties that this Amendment be effective
as of the date set forth above (the "EFFECTIVENESS DATE");
NOW, THEREFORE, the parties to this Amendment hereby agree as follows:
ARTICLE I
DEFINITIONS
Unless otherwise defined herein or the context otherwise requires, defined
terms used herein shall have the meanings ascribed thereto in the Receivables
Purchase Agreement.
ARTICLE II
AMENDMENT
SECTION 2.1. AMENDMENT TO SECTION 2.2 OF THE RECEIVABLES PURCHASE
AGREEMENT
(a) Section 2.2(b)(1)(x) of the Receivables Purchase Agreement is hereby
amended by deleting the reference to "1.0%" and substituting therefor "4.0%".
(b) Section 2.2(b)(1) of the Receivables Purchase Agreement is hereby
amended by adding the following subsection (xi) immediately following Section
2.2(b)(1)(x):
<PAGE>
(xi) after giving effect to the conveyance of Receivables on such
Transfer Date, the aggregate of the Principal Balances of Receivables
attributable to loans classified as Financed Repossessions shall not exceed
3.0% of the aggregate of the Principal Balances of all Receivables on such
Transfer Date; and
(c) Section 2.2(b)(1) of the Receivables Purchase Agreement is hereby
further amended by renumbering Section 2.2(b)(1)(xi) as Section 2.2(b)(1)(xii).
SECTION 2.2. AMENDMENT TO SCHEDULE B TO RECEIVABLES PURCHASE AGREEMENT.
(a) Clause 28(D)(i) of Schedule B is hereby amended by deleting the word
"and" at the end of such clause.
(b) Clause 28(D)(ii) of Schedule B is hereby amended by deleting the
reference to "40%" and substituting therefor "55%".
(c) Clause 28(D) is hereby amended by adding the following immediately
following clause (ii) thereof:
"; and (iii) the aggregate of the Principal Balances of Receivables
attributable to loans classified as Financed Repossessions shall not
exceed 3.0% of the aggregate of the Principal Balances of all
Receivables on such Transfer Date"
ARTICLE III
MISCELLANEOUS
SECTION 3.1. COUNTERPARTS. This Amendment may be executed by the parties
hereto in several counterparts, each of which shall be deemed to be an original
and all of which shall constitute together but one and the same agreement. This
Amendment shall become effective when the Seller shall have received (a)
counterparts hereof executed on behalf of the Purchaser and the Seller, (b) the
consents of the Owner Trustee, the Indenture Trustee, JPMD, as sole
Certificateholder, and as Administrative Agent for Delaware Funding Corporation,
the sole Noteholder, to the terms of this Amendment and (c) evidence of written
notice to Standard & Poor's and Moody's of this Amendment.
SECTION 3.2. GOVERNING LAW; ENTIRE AGREEMENT. THIS AMENDMENT SHALL BE
DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE
STATE OF NEW YORK. This Amendment and the Receivables Purchase Agreement (and
all exhibits, annexes and schedules thereto) constitute the entire understanding
among the parties hereto with respect to the subject matter hereof and supersede
any prior agreements, written or oral, with respect thereto.
-2-
<PAGE>
SECTION 3.3. HEADINGS. The various headings of this Amendment are
inserted for convenience only and shall not affect the meaning or interpretation
of this Amendment or any provisions hereof or thereof.
SECTION 3.4. RECEIVABLES PURCHASE AGREEMENT IN FULL FORCE AND EFFECT AS
AMENDED. Except as specifically stated herein, all of the terms and conditions
of the Receivables Purchase Agreement shall remain in full force and effect.
All references to the Receivables Purchase Agreement in any other document or
instrument shall be deemed to mean the Receivables Purchase Agreement, as
amended by this Amendment. This Amendment shall not constitute a novation of
the Receivables Purchase Agreement, but shall constitute an amendment thereto.
The parties hereto agree to be bound by the terms and obligations of the
Receivables Purchase Agreement, as amended by this Amendment, as though the
terms and obligations of the Receivables Purchase Agreement were set forth
herein.
-3-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their authorized officers, all as of the date and
year first above written.
PURCHASER:
OLYMPIC RECEIVABLES FINANCE CORP. II
By:__________________________________
Name:
Title:
SELLER:
OLYMPIC FINANCIAL LTD.,
By:__________________________________
Name:
Title:
AGREED AND CONSENTED:
OWNER TRUSTEE:
WILMINGTON TRUST COMPANY, not in its
individual capacity but solely as Owner
Trustee under the Trust Agreement
By:__________________________________
Name:
Title:
-4-
<PAGE>
INDENTURE TRUSTEE:
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, not in its individual capacity
but as Indenture Trustee
By:__________________________________
Name:
Title:
MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as
sole Certificateholder, and as Administrative
Agent for Delaware Funding Corporation, as
sole Noteholder
By:__________________________________
Name:
Title:
-5-
<PAGE>
EXECUTION COPY
SALE AND SERVICING AGREEMENT
Dated as of December 28, 1995
among
OLYMPIC AUTOMOBILE RECEIVABLES WAREHOUSE TRUST
Issuer
OLYMPIC RECEIVABLES FINANCE CORP. II
Seller
OLYMPIC FINANCIAL LTD.
In its individual capacity and as Servicer
and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
Backup Servicer
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I
DEFINITIONS
Section 1.1. Definitions. . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.2. Usage of Terms . . . . . . . . . . . . . . . . . . . . . 22
Section 1.3. Calculations . . . . . . . . . . . . . . . . . . . . . . 22
Section 1.4. Section References . . . . . . . . . . . . . . . . . . . 22
Section 1.5. No Recourse. . . . . . . . . . . . . . . . . . . . . . . 23
Section 1.6. Condition to Effectiveness of Agreements . . . . . . . . 23
ARTICLE II
CONVEYANCE OF RECEIVABLES
Section 2.1. Conveyance of Receivables. . . . . . . . . . . . . . . . 23
Section 2.2. Custody of Receivable Files. . . . . . . . . . . . . . . 28
Section 2.3. Conditions to Acceptance by Owner Trustee. . . . . . . . 29
Section 2.4. Deemed Acceptance by Owner Trustee and Indenture
Trustee. . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 2.5. Representations and Warranties of Seller . . . . . . . . 30
Section 2.6. Repurchase of Receivables Upon Breach of Warranty. . . . 34
Section 2.7. Nonpetition Covenant . . . . . . . . . . . . . . . . . . 35
Section 2.8. Collecting Lien Certificates Not Delivered on the
Closing Date or Transfer Date. . . . . . . . . . . . . . 35
Section 2.9. Trust's Assignment of Administrative Receivables and
Warranty Receivables . . . . . . . . . . . . . . . . . . 35
ARTICLE III
ADMINISTRATION AND SERVICING OF RECEIVABLES
Section 3.1. Duties of the Servicer . . . . . . . . . . . . . . . . . 36
Section 3.2. Collection of Receivable Payments; Modifications of
Receivables; Lockbox Agreements. . . . . . . . . . . . . 37
Section 3.3. Realization Upon Receivables . . . . . . . . . . . . . . 40
Section 3.4. Insurance. . . . . . . . . . . . . . . . . . . . . . . . 41
Section 3.5. Maintenance of Security Interests in Vehicles. . . . . . 42
Section 3.6. Covenants, Representations, and Warranties of Servicer . 43
Section 3.7. Purchase of Receivables Upon Breach of Covenant. . . . . 45
Section 3.8. Total Servicing Fee; Payment of Certain Expenses by
Servicer . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 3.9. Servicer's Certificate . . . . . . . . . . . . . . . . . 46
-i-
<PAGE>
Section 3.10. Annual Statement as to Compliance; Notice of Servicer
Termination Event. . . . . . . . . . . . . . . . . . . . 47
Section 3.11. Annual Independent Accountants' Report . . . . . . . . . 48
Section 3.12. Access to Certain Documentation and Information
Regarding Receivables. . . . . . . . . . . . . . . . . . 48
Section 3.13. Monthly Tape . . . . . . . . . . . . . . . . . . . . . . 49
Section 3.14. Retention of Servicer. . . . . . . . . . . . . . . . . . 50
Section 3.15. Fidelity Bond. . . . . . . . . . . . . . . . . . . . . . 50
Section 3.16. Duties of the Servicer under the Indenture . . . . . . . 50
Section 3.17. Daily Report . . . . . . . . . . . . . . . . . . . . . . 51
Section 3.18. Certain Duties of the Servicer under the Trust
Agreement. . . . . . . . . . . . . . . . . . . . . . . . 51
ARTICLE IV
DISTRIBUTIONS; STATEMENTS TO
CERTIFICATEHOLDERS AND NOTEHOLDERS
Section 4.1. Trust Accounts . . . . . . . . . . . . . . . . . . . . . 52
Section 4.2. Collections. . . . . . . . . . . . . . . . . . . . . . . 53
Section 4.3. Application of Collections . . . . . . . . . . . . . . . 54
Section 4.4. Monthly Advances . . . . . . . . . . . . . . . . . . . . 55
Section 4.5. Additional Deposits. . . . . . . . . . . . . . . . . . . 56
Section 4.6. Distributions. . . . . . . . . . . . . . . . . . . . . . 56
Section 4.7. Distributions on Trust Property Liquidation. . . . . . . 58
Section 4.8. Net Deposits . . . . . . . . . . . . . . . . . . . . . . 60
Section 4.9. Statements to Certificateholders and Noteholders . . . . 60
Section 4.10. Indenture Trustee as Agent . . . . . . . . . . . . . . . 62
Section 4.11. Eligible Accounts. . . . . . . . . . . . . . . . . . . . 62
ARTICLE V
THE SPREAD ACCOUNT
Section 5.1. Withdrawals from Spread Account. . . . . . . . . . . . . 62
ARTICLE VI
THE SELLER
Section 6.1. Liability of Seller. . . . . . . . . . . . . . . . . . . 62
Section 6.2. Merger or Consolidation of, or Assumption of the
Obligations of, Seller; Amendment of Certificate of
Incorporation. . . . . . . . . . . . . . . . . . . . . . 63
Section 6.3. Limitation on Liability of Seller and Others . . . . . . 63
Section 6.4. Seller May Own Certificates or Notes . . . . . . . . . . 64
Section 6.5. Limited Recourse Upon Securitized Offering . . . . . . . 64
-ii-
<PAGE>
ARTICLE VII
THE SERVICER
Section 7.1. Liability of Servicer; Indemnities . . . . . . . . . . . 64
Section 7.2. Merger or Consolidation of, or Assumption of the
Obligations of, the Servicer or Backup Servicer. . . . . 66
Section 7.3. Limitation on Liability of Servicer, Backup Servicer
and Others . . . . . . . . . . . . . . . . . . . . . . . 67
Section 7.4. Delegation of Duties . . . . . . . . . . . . . . . . . . 67
Section 7.5. Servicer and Backup Servicer Not to Resign . . . . . . . 68
ARTICLE VIII
SERVICER TERMINATION EVENTS
Section 8.1. Servicer Termination Event . . . . . . . . . . . . . . . 68
Section 8.2. Consequences of a Servicer Termination Event . . . . . . 69
Section 8.3. Appointment of Successor . . . . . . . . . . . . . . . . 70
Section 8.4. Notification to Certificateholders and Noteholders . . . 71
Section 8.5. Waiver of Past Defaults. . . . . . . . . . . . . . . . . 71
ARTICLE IX
TERMINATION
Section 9.1. Optional Purchase of Receivables; Liquidation of Trust
Estate . . . . . . . . . . . . . . . . . . . . . . . . . 72
ARTICLE X
MISCELLANEOUS PROVISIONS
Section 10.1. Amendment. . . . . . . . . . . . . . . . . . . . . . . . 74
Section 10.2. Protection of Title to Trust Property. . . . . . . . . . 76
Section 10.3. Governing Law. . . . . . . . . . . . . . . . . . . . . . 78
Section 10.4. Severability of Provisions . . . . . . . . . . . . . . . 78
Section 10.5. Assignment . . . . . . . . . . . . . . . . . . . . . . . 78
Section 10.6. Third-Party Beneficiaries. . . . . . . . . . . . . . . . 78
Section 10.7. [RESERVED] . . . . . . . . . . . . . . . . . . . . . . . 78
Section 10.8. Counterparts . . . . . . . . . . . . . . . . . . . . . . 78
Section 10.9. Intention of Parties . . . . . . . . . . . . . . . . . . 78
Section 10.10. Notices. . . . . . . . . . . . . . . . . . . . . . . . . 79
Section 10.11. Limitation of Liability. . . . . . . . . . . . . . . . . 79
-iii-
<PAGE>
SCHEDULE A SCHEDULE OF RECEIVABLES
SCHEDULE B REPRESENTATIONS AND WARRANTIES OF SELLER AND OFL
SCHEDULE C SERVICING POLICIES AND PROCEDURES
EXHIBIT B FORM OF CUSTODIAN AGREEMENT
EXHIBIT D FORM OF RECEIVABLES PURCHASE AGREEMENT
EXHIBIT E FORM OF SERVICER'S CERTIFICATE
EXHIBIT F FORM OF TRANSFER AGREEMENT
-iv-
<PAGE>
THIS SALE AND SERVICING AGREEMENT, dated as of December 28, 1995, is
made among Olympic Automobile Receivables Warehouse Trust (the "Issuer"),
Olympic Receivables Finance Corp. II, a Delaware corporation, as Seller (the
"Seller"), Olympic Financial Ltd., a Minnesota corporation, in its individual
capacity and as Servicer (in its individual capacity, "OFL"; in its capacity
as Servicer, the "Servicer") and Norwest Bank Minnesota, National
Association, a national banking association, as Backup Servicer (the "Backup
Servicer").
In consideration of the mutual agreements herein contained, and of other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1. DEFINITIONS. All terms defined in the Indenture or the
Trust Agreement (each as defined below) shall have the same meaning in this
Agreement. Whenever capitalized and used in this Agreement, the following
words and phrases, unless the context otherwise requires, shall have the
following meanings:
ACCOUNTANTS' REPORT: The report of a firm of nationally recognized
independent accountants described in Section 3.11.
ACCOUNTING DATE: With respect to a Distribution Date or a Determination
Date, the last day of the Monthly Period immediately preceding such
Distribution Date or Determination Date.
ADMINISTRATIVE RECEIVABLE: With respect to any Monthly Period, a
Receivable which the Servicer is required to purchase pursuant to Section 3.7
or which the Servicer has elected to purchase pursuant to Section 3.4(c).
ADMINISTRATOR: The meaning assigned to such term in the Trust Agreement.
AFFILIATE: With respect to any Person, any other Person directly or
indirectly controlling, controlled by, or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person, means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
<PAGE>
AGGREGATE MONTHLY ADVANCE AMOUNT: As of any Determination Date, the
excess, if any, of (x) the amount of interest accrued on the Receivables (for
the number of calendar days in the related Monthly Period) (calculated
according to the method specified in the related retail installment sale
contract or promissory note at the APR on the Principal Balance of such
Receivable as of the second Accounting Date preceding such Determination
Date) over (y) the amounts deposited into the Collection Account during the
related Monthly Period in respect of the Receivables and allocable to
interest (determined in accordance with Section 4.3).
AGGREGATE PRINCIPAL BALANCE: With respect to any Determination Date,
the sum of the Principal Balances (computed as of the related Accounting
Date) for all Receivables (other than (i) any Receivable that became a
Liquidated Receivable during the related Monthly Period and (ii) any
Receivable that became a Purchased Receivable as of the related Accounting
Date).
AGREEMENT OR "THIS AGREEMENT": This Sale and Servicing Agreement, all
amendments and supplements thereto and all exhibits and schedules to any of
the foregoing.
AMOUNT FINANCED: With respect to a Receivable or an Auto Receivable,
the aggregate amount advanced under such Receivable or Auto Receivable, as
applicable, toward the purchase price of the Financed Vehicle and related
costs, including amounts advanced in respect of accessories, insurance
premiums, service and warranty contracts, other items customarily financed as
part of retail automobile installment sale contracts or promissory notes, and
related costs. The term "Amount Financed" shall not include any Insurance
Add-On Amounts.
ANNUAL PERCENTAGE RATE OR APR: With respect to a Receivable, the rate
per annum of finance charges stated in such Receivable as the "annual
percentage rate" (within the meaning of the Federal Truth-in-Lending Act).
If after the Closing Date or the applicable Transfer Date, the rate per annum
with respect to a Receivable as of the Closing Date or the applicable
Transfer Date is reduced as a result of (i) an insolvency proceeding
involving the Obligor or (ii) pursuant to the Soldiers' and Sailors' Civil
Relief Act of 1940, Annual Percentage Rate or APR shall refer to such reduced
rate.
ASSIGNMENT AGREEMENT: The assignment agreement between OFL and the
Seller pursuant to which OFL sells and assigns Receivables and related Other
Conveyed Property to the Seller, the form of which is attached to the
Purchase Agreement as Exhibit A.
AUTO RECEIVABLES: Any consumer installment sale contracts or promissory
notes (and related security agreements) secured by new and used automobiles
and light trucks (and all accessories thereto) purchased or otherwise
acquired by OFL or any Affiliate of OFL from Dealers.
-2-
<PAGE>
AVAILABLE FUNDS: With respect to any Determination Date, the sum of (i)
the Collected Funds for such Determination Date, (ii) all Purchase Amounts to
be deposited in the Collection Account on the related Deposit Date, (iii) all
Monthly Advances to be made by the Seller or the Servicer on the related
Deposit Date, and (iv) all net income from investments of funds in the Trust
Accounts and the Certificate Distribution Account during the related Monthly
Period.
AVERAGE NET EXCESS SPREAD PERCENTAGE: (i) As of (x) the first
Determination Date or (y) the second Determination Date immediately following
a Trust Property Liquidation Date, or if no Trust Property Liquidation Date
has occurred, the Closing Date, in the case of the first such Determination
Date, the Net Excess Spread Percentage as of the Accounting Date for the
related Monthly Period and in the case of the second such Determination Date,
the average of the Net Excess Spread Percentages for the two preceding
Monthly Periods, calculated as of the Accounting Date of each such Monthly
Period; and (ii) as of any subsequent Determination Date, the average of the
Net Excess Spread Percentages for the three preceding Monthly Periods,
calculated as of the Accounting Date of each such Monthly Period.
AVERAGE SERVICING PORTFOLIO: As of any date, the average of the
Servicing Portfolio for the seven preceding Monthly Periods, calculated in
each case as of the Accounting Date with respect to each Monthly Period.
BACKUP SERVICER: Norwest Bank Minnesota, National Association, or its
successor in interest pursuant to Section 8.2, or such Person as shall have
been appointed as Backup Servicer or successor Servicer pursuant to Section
8.3.
BASIC SERVICING FEE: With respect to any Monthly Period, the fee
payable to the Servicer for services rendered during such Monthly Period,
which shall be equal to one-twelfth of the Basic Servicing Fee Rate
multiplied by the Aggregate Principal Balance as of the Determination Date
falling in such Monthly Period.
BASIC SERVICING FEE RATE: 1.00% per annum, payable monthly at
one-twelfth of the annual rate.
BUSINESS DAY: Any day other than a Saturday, Sunday, legal holiday or
other day on which commercial banking institutions in Minneapolis, Minnesota,
New York, New York, Wilmington, Delaware or any other location of any
successor Servicer, successor Owner Trustee or successor Indenture Trustee
are authorized or obligated by law, executive order or governmental decree to
be closed.
CERTIFICATE BALANCE: The meaning assigned to such term in the Trust
Agreement.
-3-
<PAGE>
CERTIFICATE DISTRIBUTION ACCOUNT: The meaning assigned to such term in
the Trust Agreement.
CERTIFICATE MAJORITY: The meaning assigned to such term in the Trust
Agreement.
CERTIFICATE PURCHASE AGREEMENT: The meaning assigned to such term in
the Trust Agreement
CERTIFICATE PURCHASE TERMINATION EVENT: Any event or occurrence
designated as such in the Certificate Purchase Agreement.
CERTIFICATE RATE: The meaning assigned to such term in the Certificate
Purchase Agreement.
CERTIFICATEHOLDERS' DISTRIBUTABLE AMOUNT: With respect to any
Distribution Date, the sum of the Certificateholders' Interest Distributable
Amount and the Certificateholders' Principal Distributable Amount.
CERTIFICATEHOLDERS' INTEREST CARRYOVER SHORTFALL: With respect to any
Distribution Date, the excess of the Certificateholders' Interest
Distributable Amount for the preceding Distribution Date over the amount in
respect of interest on the Certificates that was actually deposited in the
Certificate Distribution Account on such preceding Distribution Date, plus
interest on such excess, to the extent permitted by law, at the Certificate
Rate from such preceding Distribution Date to but excluding the current
Distribution Date.
CERTIFICATEHOLDERS' INTEREST DISTRIBUTABLE AMOUNT: With respect to any
Distribution Date, the sum of the Certificateholders' Monthly Interest
Distributable Amount for such Distribution Date and the Certificateholders'
Interest Carryover Shortfall for such Distribution Date.
CERTIFICATEHOLDERS' MONTHLY INTEREST DISTRIBUTABLE AMOUNT: With respect
to any Distribution Date, for the related Interest Accrual Period, the sum of
(i) the sum of the interest accrued on each day during such Interest Accrual
Period on the Certificates at the Certificate Rate on the Certificate Balance
as of the close of business on the immediately preceding day and (ii) the
Interest Arrearage.
CERTIFICATEHOLDERS' MONTHLY PRINCIPAL DISTRIBUTABLE AMOUNT: With
respect to any Distribution Date, the Certificateholders' Percentage of the
Principal Distribution Amount plus, with respect to the Distribution Date on
which the outstanding principal balance of the Notes is reduced to zero, the
remainder of the Principal Distribution Amount on such Distribution Date.
-4-
<PAGE>
CERTIFICATEHOLDERS' PERCENTAGE: With respect to any Determination Date
relating to a Distribution Date, 100% minus the Noteholders' Percentage as of
such Determination Date.
CERTIFICATEHOLDERS' PRINCIPAL CARRYOVER SHORTFALL: As of the close of
any Distribution Date, the excess of the sum of the Certificateholders'
Principal Distributable Amount over the amount in respect of principal that
was actually deposited in the Certificate Distribution Account on such
Distribution Date.
CERTIFICATEHOLDERS' PRINCIPAL DISTRIBUTABLE AMOUNT: With respect to any
Distribution Date (other than the Final Scheduled Distribution Date), the sum
of the Certificateholders' Monthly Principal Distributable Amount for such
Distribution Date and any Certificateholders' Principal Carryover Shortfall
as of the close of the preceding Distribution Date; PROVIDED, HOWEVER, that
the Certificateholders' Principal Distributable Amount shall not exceed the
Certificate Balance. The "Certificateholders' Principal Distributable Amount"
on the Final Scheduled Distribution Date will equal the Certificate Balance
as of the Final Scheduled Distribution Date.
CERTIFICATES: The meaning assigned to such term in the Trust Agreement.
CLOSING DATE: December 28, 1995.
COLLATERAL INSURANCE: The meaning set forth in Section 3.4(a).
COLLECTED FUNDS: With respect to any Determination Date, the amount of
funds in the Collection Account representing collections on the Receivables
during the related Monthly Period, including all Liquidation Proceeds
collected during the related Monthly Period (but excluding any Monthly
Advances and any Purchase Amounts).
COLLECTION ACCOUNT: The account designated as the Collection Account
in, and which is established and maintained pursuant to, Section 4.1(a).
COLLECTION RECORDS: All manually prepared or computer generated records
relating to collection efforts or payment histories with respect to the
Receivables.
COLLECTION SHORTFALL: As of any Determination Date, with respect to a
Receivable, if the amounts deposited into the Collection Account during a
Monthly Period in respect of such Receivable and allocable to interest
(determined in accordance with Section 4.3) is less than the interest accrued
on such Receivable (for the number of calendar days in such Monthly Period)
(calculated according to the method specified in the related retail
installment sale contract or promissory note at the APR on the Principal
Balance of such Receivable as of the Accounting Date for the immediately
preceding Monthly Period), the amount of such shortfall.
-5-
<PAGE>
COMMERCIAL PAPER NOTES: The commercial paper notes issued from time to
time by DFC and related to the Notes.
CORPORATE TRUST OFFICE: With respect to the Owner Trustee, the
principal office of the Owner Trustee at which at any particular time its
corporate trust business shall be administered, which office at the Closing
Date is located at Rodney Square North, 1100 North Market Street, Wilmington,
Delaware 19890-0001, Attention: Corporate Trust Administration; the telecopy
number for the Corporate Trust Office of the Owner Trustee on the date of the
execution of this Agreement is (302) 651-8882; with respect to the Indenture
Trustee, the principal office of the Indenture Trustee at which at any
particular time its corporate trust business shall be administered, which
office is located at Sixth Street and Marquette Avenue, Minneapolis,
Minnesota 55479-0069, Attention: Corporate Trust Department; the telecopy
number for the Corporate Trust Office of the Indenture Trustee on the date of
execution of this Agreement is (612) 667-9825.
CRAM DOWN LOSS: With respect to a Receivable or an Auto Receivable, as
applicable, if a court of appropriate jurisdiction in an insolvency
proceeding shall have issued an order reducing the amount owed on a
Receivable or an Auto Receivable or otherwise modifying or restructuring the
Scheduled Payments to be made on a Receivable or an Auto Receivable, an
amount equal to the excess of the principal balance of such Receivable or
Auto Receivable, as applicable, immediately prior to such order over the
principal balance of such Receivable or Auto Receivable, as applicable, as so
reduced or the net present value (using as the discount rate the higher of
the contract rate or the rate of interest, if any, specified by the court in
such order) of the scheduled payments as so modified or restructured. A Cram
Down Loss will be deemed to have occurred on the date of issuance of such
order.
CUSTODIAN: OFL and any other Person named from time to time as
custodian in any Custodian Agreement acting as agent for the Trust, which
Person must be acceptable to JPMD.
CUSTODIAN AGREEMENT: Any Custodian Agreement from time to time in
effect between the Custodian named therein and the Trust, substantially in
the form of Exhibit B hereto, as the same may be amended, supplemented or
otherwise modified from time to time in accordance with the terms thereof,
which Custodian Agreement and any amendments, supplements or modifications
thereto shall be acceptable to JPMD.
CUTOFF DATE: With respect to any Receivables, the date specified in the
related Transfer Agreement, which may in no event be later than the related
Transfer Date.
DEALER: A seller of new or used automobiles or light trucks that
originated one or more of the Receivables and sold the respective Receivable,
directly or indirectly, to OFL under an agreement between such seller and OFL.
-6-
<PAGE>
DEALER AGREEMENT: An agreement between OFL and a Dealer relating to the
sale of Auto Receivables to OFL and all documents and instruments relating
thereto.
DEALER ASSIGNMENT: With respect to an Auto Receivable, the executed
assignment executed by a Dealer conveying such Receivable to OFL.
DEEMED CURED: (i) As of any Determination Date following the occurrence
of a Trigger Event, no Trigger Event has occurred and is continuing as of
such Determination Date or as of any of the 3 consecutively preceding Monthly
Periods during which there were Receivables in the Trust; and (ii) the
occurrence of a Trust Property Liquidation Date on which not less than all of
the Receivables in the Trust as of such date are purchased pursuant to
Section 9.1(b) hereof.
DEFICIENCY CLAIM AMOUNT: The meaning set forth in Section 5.1.
DELINQUENCY RATIO: As of any Determination Date, a fraction, expressed
as a percentage, the numerator of which equals the aggregate of the Principal
Balances of all Auto Receivables that are Delinquent Receivables and the
denominator of which equals the Servicing Portfolio as of such Determination
Date.
DELINQUENT RECEIVABLE: With respect to any Determination Date, any
Receivable or Auto Receivable, as applicable, as to which all or a portion of
a Scheduled Payment is more than 31 days delinquent as of the related
Accounting Date.
DEPOSIT DATE: With respect to any Monthly Period, the Business Day
immediately preceding the related Distribution Date.
DETERMINATION DATE: With respect to any Monthly Period, the fifth
Business Day immediately preceding the related Distribution Date.
DFC: Delaware Funding Corporation, a Delaware corporation.
DFC ASSET PURCHASE AGREEMENT: The meaning assigned to such term in the
Note Purchase Agreement.
DISTRIBUTION AMOUNT: With respect to a Distribution Date, the sum of
(i) the Available Funds for such Distribution Date, and (ii) the Deficiency
Claim Amount, if any, received by the Indenture Trustee with respect to such
Distribution Date.
DISTRIBUTION DATE: The 15th day of each calendar month, or if such 15th
day is not a Business Day, the next succeeding Business Day, commencing
February 15, 1996 to and including the Final Scheduled Distribution Date.
-7-
<PAGE>
ELECTRONIC LEDGER: The electronic master record of the retail
installment sales contracts or installment loans of OFL.
ELIGIBLE ACCOUNT: A segregated direct deposit account maintained with a
depository institution or trust company organized under the laws of the
United States of America, or any of the States thereof, or the District of
Columbia, having a certificate of deposit, short term deposit or commercial
paper rating of at least "A-1+" by Standard & Poor's and "P-1" by Moody's.
ELIGIBLE INVESTMENTS: Any one or more of the following types of
investments:
(a) (i) direct interest-bearing obligations of, and
interest-bearing obligations guaranteed as to timely payment of
principal and interest by, the United States or any agency or
instrumentality of the United States, the obligations of which are
backed by the full faith and credit of the United States; and (ii)
direct interest-bearing obligations of, and interest-bearing obligations
guaranteed as to timely payment of principal and interest by, the
Federal National Mortgage Association or the Federal Home Loan Mortgage
Corporation, but only if, at the time of investment, such obligations
are assigned the highest credit rating by each Rating Agency;
(b) demand or time deposits in, certificates of deposit of, or
bankers' acceptances issued by any depository institution or trust
company organized under the laws of the United States or any State and
subject to supervision and examination by federal and/or State banking
authorities (including, if applicable, the Indenture Trustee, the Owner
Trustee or any agent of either of them acting in their respective
commercial capacities); provided that the short-term unsecured debt
obligations of such depository institution or trust company at the time
of such investment, or contractual commitment providing for such
investment, are assigned the highest credit rating by each Rating Agency;
(c) repurchase obligations pursuant to a written agreement (i) with
respect to any obligation described in clause (a) above, where the
Indenture Trustee has taken actual or constructive delivery of such
obligation in accordance with Section 4.1, and (ii) entered into with
the corporate trust department of a depository institution or trust
company organized under the laws of the United States or any State
thereof, the deposits of which are insured by the Federal Deposit
Insurance Corporation and the short-term unsecured debt obligations of
which are rated "A-1+" by Standard & Poor's and "P-1" by Moody's
(including, if applicable, the Indenture Trustee, the Owner Trustee or
any agent of either of them acting in their respective commercial
capacities);
-8-
<PAGE>
(d) securities bearing interest or sold at a discount issued by
any corporation incorporated under the laws of the United States or any
State whose long-term unsecured debt obligations are assigned the
highest credit rating by each Rating Agency at the time of such
investment or contractual commitment providing for such investment;
PROVIDED, HOWEVER, that securities issued by any particular corporation
will not be Eligible Investments to the extent that an investment
therein will cause the then outstanding principal amount of securities
issued by such corporation and held in the Trust Accounts to exceed 10%
of the Eligible Investments held in the Trust Accounts (with Eligible
Investments held in the Trust Accounts valued at par);
(e) commercial paper that (i) is payable in United States dollars
and (ii) is rated in the highest credit rating category by each Rating
Agency;
(f) units of money market funds rated in the highest credit rating
category by each Rating Agency; provided that all Eligible Investments
shall be held in the name of the Indenture Trustee; or
(g) any other demand or time deposit, obligation, security or
investment as may be acceptable to JPMD and that satisfies the Rating
Agency Condition;
Eligible Investments may be purchased by or through the Indenture Trustee or
any of its Affiliates.
ELIGIBLE SERVICER: OFL, the Backup Servicer or another Person which at
the time of its appointment as Servicer (i) is servicing a portfolio of motor
vehicle retail installment sales contracts and/or motor vehicle installment
loans, (ii) is legally qualified and has the capacity to service the
Receivables, (iii) has demonstrated the ability professionally and
competently to service a portfolio of motor vehicle retail installment sales
contracts and/or motor vehicle installment loans similar to the Receivables
with reasonable skill and care, and (iv) is qualified and entitled to use,
pursuant to a license or other written agreement, and agrees to maintain the
confidentiality of, the software which the Servicer uses in connection with
performing its duties and responsibilities under this Agreement or otherwise
has available software which is adequate to perform its duties and
responsibilities under this Agreement.
EXCESS YIELD CONDITION: As of any date, the Excess Yield Percentage is
greater than 3.0%.
EXCESS YIELD PERCENTAGE: As of any date, (i) the weighted average APR
of the Receivables, minus (ii) the sum of (x) the H.15 (519) 30-day
Commercial Paper Rate as of the immediately preceding Business Day plus (y)
1.50%.
-9-
<PAGE>
FACILITY BALANCE: As of any date, the sum of (i) the aggregate
Outstanding Amount of the Notes, plus (ii) the Certificate Balance (excluding
the General Partner Certificates).
FACILITY LIMIT: $219,800,000.00.
FINAL SCHEDULED DISTRIBUTION DATE: With respect to the Notes and the
Certificates, the earlier of (i) the Distribution Date that is 85 months from
the Purchase Termination Date and (ii) the date on which the Notes or the
Certificates are fully redeemed in accordance with the Indenture or the Trust
Agreement, as the case may be (or, if such day is not a Business Day, the
next succeeding Business Day).
FINANCED VEHICLE: A new or used automobile or light truck, together
with all accessories thereto, securing or purporting to secure an Obligor's
indebtedness under a Receivable or an Auto Receivable, as applicable.
FORCE-PLACED INSURANCE: The meaning set forth in Section 3.4(b).
FUNDING PERIOD: The period from and including the Closing Date to but
excluding the Purchase Termination Date.
GENERAL PARTNER CERTIFICATES: The meaning assigned to such term in the
Trust Agreement.
GENERAL PARTNER: Seller in its capacity as general partner of the
Trust, and any successors thereto as permitted by the Trust Agreement.
INDENTURE: The Indenture, dated as of December 28, 1995, between the
Trust and the Indenture Trustee, as the same may be amended and supplemented
from time to time.
INDENTURE COLLATERAL: The meaning assigned to such term in the
Indenture.
INDENTURE TRUSTEE: The Person acting as Trustee under the Indenture,
its successors in interest and any successor Trustee under the Indenture.
INDEPENDENT ACCOUNTANTS: The meaning set forth in Section 3.11(a).
INDEPENDENT CERTIFICATE: The meaning assigned to such term in the
Indenture.
INELIGIBLE RECEIVABLES: With respect to a Securitized Offering, any
Receivables that do not meet the eligibility criteria as of the cutoff date
for such Securitized Offering.
INSOLVENCY EVENT: With respect to a specified Person, (a) the
commencement of an involuntary case against such Person under the federal
bankruptcy laws, as now or
-10-
<PAGE>
hereinafter in effect, or another present or future federal or state
bankruptcy, insolvency or similar law, and such case is not dismissed within
60 days; or (b) the filing of a decree or entry of an order for relief by a
court having jurisdiction in the premises in respect of such Person or any
substantial part of its property in an involuntary case under any applicable
Federal or state bankruptcy, insolvency or other similar law now or hereafter
in effect, or appointing a receiver, liquidator, assignee, custodian,
trustee, sequestrator or similar official for such Person or for any
substantial part of its property, or ordering the winding-up or liquidation
of such Person's affairs; or (c) the commencement by such Person of a
voluntary case under any applicable Federal or state bankruptcy, insolvency
or other similar law now or hereafter in effect, or the consent by such
Person to the entry of an order for relief in an involuntary case under any
such law, or the consent by such Person to the appointment of or taking
possession by a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official for such Person or for any substantial part
of its property, or the making by such Person of any general assignment for
the benefit of creditors, or the failure by such Person generally to pay its
debts as such debts become due, or the taking of action by such Person in
furtherance of any of the foregoing.
INSOLVENCY PROCEEDS: The meaning set forth in Section 9.1(c).
INSURANCE ADD-ON AMOUNT: The premium charged to the Obligor in the
event that the Servicer obtains Force-Placed Insurance pursuant to Section
3.4.
INSURANCE POLICY: With respect to a Receivable, any insurance policy
benefiting the holder of the Receivable providing loss or physical damage,
credit life, credit disability, theft, mechanical breakdown or similar
coverage with respect to the Financed Vehicle or the Obligor.
INTEREST ACCRUAL PERIOD: The meaning set forth in the Note Purchase
Agreement or the Certificate Purchase Agreement, as applicable
INTEREST ARREARAGE: The meaning assigned to such term in the
Certificate Purchase Agreement.
INVESTOR GROUP: The group of investors committed to purchasing Investor
Certificates under the Certificate Purchase Agreement.
ISSUER: The meaning assigned to such term in the Indenture.
ISSUER ORDER: The meaning assigned to such term in the Indenture.
JPMD: J.P. Morgan Delaware, in its capacity as Administrative Agent for
DFC and the purchasers under the DFC Asset Purchase Agreement and as agent
for the banks under the Program Facility, or as agent for the Investor Group.
-11-
<PAGE>
LIEN: Any security interest, lien, charge, pledge, preference, equity
or encumbrance of any kind, including tax liens, mechanics' liens and any
liens that attach by operation of law.
LIEN CERTIFICATE: With respect to a Financed Vehicle, an original
certificate of title, certificate of lien or other notification issued by the
Registrar of Titles of the applicable state to a secured party which
indicates that the lien of the secured party on the Financed Vehicle is
recorded on the original certificate of title. In any jurisdiction in which
the original certificate of title is required to be given to the Obligor, the
term "Lien Certificate" shall mean only a certificate or notification issued
to a secured party.
LIQUIDATED RECEIVABLE: With respect to any 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
delinquent.
LIQUIDATION PROCEEDS: With respect to a Liquidated Receivable, all
amounts realized with respect to such Receivable net of (i) reasonable
expenses incurred by the Servicer in connection with the collection of such
Receivable and the repossession and disposition of the Financed Vehicle and
(ii) amounts that are required to be refunded to the Obligor on such
Receivable; PROVIDED, HOWEVER, that the Liquidation Proceeds with respect to
any Receivable shall in no event be less than zero.
LOCKBOX ACCOUNT: The segregated account maintained on behalf of the
Trust by the Lockbox Bank in accordance with Section 3.2(d).
LOCKBOX AGREEMENT: The Agency Agreement, dated as of November 13, 1992
by and among Harris Trust and Savings Bank, OFL, Shawmut Bank, N.A., as
Trustee, Saturn Financial Services, Inc. and the Program Parties (as defined
therein), taken together with the Retail Lockbox Agreement, dated as of
November 13, 1992, among such parties, and the Counterpart to Agency
Agreement and Retail Lockbox Agreement, dated as of December 28, 1995, among
Harris Trust and Savings Bank, OFL, the Trust and the Indenture Trustee, as
such agreements may be amended from time to time, unless the Indenture
Trustee hereunder shall cease to be a Program Party thereunder, or such
agreement shall be terminated in accordance with its terms, in which event
"Lockbox Agreement" shall mean such other agreement, in form and substance
acceptable to JPMD, among the Servicer, the Trust, the Indenture Trustee and
the Lockbox Bank.
LOCKBOX BANK: Harris Trust and Savings Bank or a depository institution
named by the Servicer and acceptable to JPMD.
-12-
<PAGE>
MATERIAL ADVERSE EFFECT: With respect to any event or circumstance, means
a material adverse effect on:
(i) the ability of OFL, the Seller or the Servicer to perform in all
material respects its obligations under this Agreement or any other Related
Document;
(ii) the validity or enforceability of this Agreement, any other
Related Document or the Receivables or the collectibility of the
Receivables; or
(iii) the status, existence, perfection, priority or
enforceability of the Trust's interest in the Receivables.
MAXIMUM PRINCIPAL BALANCE: With respect to the Notes, $200,000,000
(excluding capitalized interest thereon).
MONTHLY ADVANCE: The amount that the Servicer or the Seller, as the
case may be, is required to advance on any Receivables pursuant to Section
4.4(a) or (b).
MONTHLY INTEREST COLLECTION SHORTFALL: As of any Determination Date,
the excess, if any, of (x) the amount necessary to make the payments required
by Sections 4.6(i), (ii), (iii), (iv) and (vi) hereof over (y) the sum of (i)
the Collected Funds for such Determination Date, to the extent allocable to
interest on the related Receivables, (ii) all Purchase Amounts to be
deposited in the Collection Account on the related Deposit Date, to the
extent allocable to interest on the related Receivables, and (iii) all net
income from investments of funds in the Trust Accounts and the Certificate
Distribution Account during the related Monthly Period.
MONTHLY PERIOD: With respect to a Distribution Date or a Determination
Date, the calendar month preceding the month in which such Distribution Date
or Determination Date occurs (or, in the case of the first Distribution Date
or Determination Date, the portion of the calendar month preceding the month
in which such Distribution Date or Determination Date occurs, from and
including the initial Transfer Date to and including the last day of such
calendar month) (such calendar month (or portion thereof) being referred to
as the "related" Monthly Period with respect to such Distribution Date or
Determination Date). With respect to an Accounting Date, the calendar month
in which such Accounting Date occurs is referred to herein as the "related"
Monthly Period to such Accounting Date.
MONTHLY RECORDS: All records and data maintained by the Servicer with
respect to the Receivables, including the following with respect to each
Receivable: the account number; the identity of the originating Dealer;
Obligor name; Obligor address; Obligor home phone number; Obligor business
phone number; original Principal Balance; original
-13-
<PAGE>
term; Annual Percentage Rate; current Principal Balance; current remaining
term; origination date; first payment date; final scheduled payment date;
next payment due date; date of most recent payment; new/used classification;
collateral description; days currently delinquent; number of contract
extensions (months) to date; amount, if any, of Force-Placed Insurance
payable monthly; amount of the Scheduled Payment; current Insurance Policy
expiration date; and past due late charges, if any.
MOODY'S: Moody's Investors Service, Inc., or any successor thereto.
NET ADVANCE AMOUNT: As of any Determination Date, an amount equal to
the lesser of (i) the Aggregate Monthly Advance Amount and (ii) the Monthly
Interest Collection Shortfall.
NET ADVANCE SHORTFALL: The meaning set forth in Section 4.4(a)(ii).
NET EXCESS SPREAD PERCENTAGE: As of any Determination Date, (i) the
weighted average APR of the Receivables (taking into account any hedging
arrangements maintained pursuant to Section 2.1(b)(xiv) as of the related
Accounting Date, minus (ii) the weighted average of the Note Interest Rate
and the Certificate Rate for the immediately preceding Interest Accrual
Period, minus (iii) 1.00%, minus (iv) the Net Loss Rate for such
Determination Date.
NET LOSS RATE: As of any Determination Date, a fraction expressed as a
percentage, the numerator of which is equal to (i) the sum of (a) the
aggregate of the Principal Balances as of the related Accounting Date of all
Receivables that became Liquidated Receivables during the related Monthly
Period and (b) the amount of any Cram Down Losses less (ii) the Liquidation
Proceeds received by the Trust during the related Monthly Period, and the
denominator of which is equal to the average of the Aggregate Principal
Balance as of the related Accounting Date and the Aggregate Principal Balance
as of the next preceding Accounting Date.
NET PORTFOLIO LOSSES: With respect to any Monthly Period, the aggregate
amount of gross charge-offs of Auto Receivables serviced by OFL or any of its
Affiliates during such Monthly Period net of all recoveries with respect to
any such Auto Receivables (including post-disposition amounts received on
previously charged-off Auto Receivables), calculated in a manner consistent
with the calculation of net losses in OFL's Annual Report on Form 10-K for
the year ended December 31, 1994.
NON-CALLABLE NOTES: The meaning assigned to such term in the Indenture.
NOTE DISTRIBUTION ACCOUNT: The account designated as such, established
and maintained pursuant to Section 4.1(b).
-14-
<PAGE>
NOTE INTEREST ARREARAGE: The meaning assigned to such term in the Note
Purchase Agreement.
NOTE INTEREST RATE: The meaning assigned to such term in the Note
Purchase Agreement.
NOTE MAJORITY: Holders of Notes representing a majority of the
Outstanding principal balance of Notes or if no Notes are Outstanding but the
Purchase Termination Date has not occurred, holders of commitments to
purchase a majority of the Maximum Principal Balance of Notes; PROVIDED,
HOWEVER, any Notes held by OFL or any affiliate thereof shall be excluded
when calculating a Note Majority.
NOTE PURCHASE AGREEMENT: The Note Purchase Agreement, dated as of
December 28, 1995, among the Trust, OFL, the owners named therein and J.P.
Morgan Delaware, as agent for those owners, as the same may be amended and
supplemented from time to time.
NOTE PURCHASE TERMINATION EVENT: Any event or occurrence designated as
such in the Note Purchase Agreement.
NOTEHOLDERS' DISTRIBUTABLE AMOUNT: With respect to any Distribution
Date, the sum of the Noteholders' Interest Distributable Amount and the
Noteholders' Principal Distributable Amount.
NOTEHOLDERS' INTEREST CARRYOVER SHORTFALL: With respect to any
Distribution Date, the excess of the Noteholders' Interest Distributable
Amount for the preceding Distribution Date over the amount in respect of
interest on the Notes that was actually deposited in the Note Distribution
Account on such preceding Distribution Date, plus interest on the amount of
interest due but not paid to Noteholders on the preceding Distribution Date,
to the extent permitted by law, at the Note Interest Rate from such preceding
Distribution Date to but excluding the current Distribution Date.
NOTEHOLDERS' INTEREST DISTRIBUTABLE AMOUNT: With respect to any
Distribution Date, the sum of the Noteholders' Monthly Interest Distributable
Amount for such Distribution Date and the Noteholders' Interest Carryover
Shortfall for such Distribution Date.
NOTEHOLDERS' MONTHLY INTEREST DISTRIBUTABLE AMOUNT: With respect to any
Distribution Date, for the related Interest Accrual Period, the sum of (i)
the sum of the interest accrued on each day during such Interest Accrual
Period on the Notes at the Note Interest Rate on the outstanding principal
balance of the Notes as of the close of business on the immediately preceding
day and (ii) the Note Interest Arrearage.
-15-
<PAGE>
NOTEHOLDERS' PERCENTAGE: (i) with respect to any Determination Date
relating to a Distribution Date prior to the Distribution Date on which the
principal balance of the Notes is reduced to zero, 100%, (ii) with respect
to the Determination Date relating to the Distribution Date on which the
principal balance of the Notes is reduced to zero, 100% with respect to that
portion of the Principal Distribution Amount equal to the unpaid principal
balance of the Notes, and with respect to the remaining portion of the
Principal Distribution Amount, zero, and (iii) with respect to any
Determination Date relating to a Distribution Date thereafter (if any), zero.
NOTEHOLDERS' PRINCIPAL DISTRIBUTABLE AMOUNT: With respect to any
Distribution Date (other than the Final Scheduled Distribution Date with
respect to the Notes), the Noteholders' Percentage of the Principal
Distribution Amount for such Distribution Date. The Noteholders' Principal
Distributable Amount on the Final Scheduled Distribution Date will equal the
sum of (i) the Noteholders' Percentage of the Principal Distribution Amount
for such Distribution Date, and (ii) the excess of the outstanding principal
balance of the Notes, if any, over the amounts in clause (i). In no event
may the Noteholders' Principal Distributable Amount for any Distribution Date
exceed the outstanding principal balance of the Notes immediately prior to
such Distribution Date.
NOTES: The meaning assigned to such term in the Indenture.
OBLIGOR: 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 or an Auto Receivable, as applicable.
OFFICER'S CERTIFICATE: The meaning assigned to such term in the Indenture.
OFL: Olympic Financial Ltd., a Minnesota corporation.
OPINION OF COUNSEL: A written opinion of counsel acceptable in form and
substance and from counsel acceptable to the Owner Trustee and, if such opinion
or a copy thereof is required to be delivered to the Indenture Trustee or JPMD,
to the Indenture Trustee or JPMD, as applicable.
OTHER CONVEYED PROPERTY: The meaning assigned to such term in the Purchase
Agreement.
OUTSTANDING: The meaning assigned to such term in the Indenture.
OUTSTANDING AMOUNT: The meaning assigned to such term in the Indenture.
OUTSTANDING MONTHLY ADVANCES: With respect to a Receivable and a
Determination Date, the sum of all Monthly Advances made on any Determination
Date pursuant to
-16-
<PAGE>
Section 4.4(b) prior to such Determination Date relating to that Receivable
which have not been reimbursed pursuant to Section 4.6(i) or Section 4.8.
OWNER TRUSTEE: Wilmington Trust Company, acting not individually but
solely as trustee, or its successor in interest, and any successor Owner Trustee
appointed as provided in the Trust Agreement.
PAYING AGENT: The meaning assigned to such term in the Indenture.
PERSON: Any legal person, including any individual, corporation,
partnership, joint venture, estate, association, joint stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof, or any other entity.
PORTFOLIO LOSS RATIO: As of any Determination Date, a fraction, expressed
as a percentage, the numerator of which equals the product of 2.0 times the Net
Portfolio Losses for the six preceding Monthly Periods and the denominator of
which equals the Average Servicing Portfolio as of such Determination Date.
PRINCIPAL BALANCE: With respect to any Receivable, as of any date, the
Amount Financed minus (i) that portion of all amounts received on or prior to
such date and allocable to principal in accordance with the terms of the
Receivable, and (ii) any Cram Down Loss in respect of such Receivable.
PRINCIPAL DISTRIBUTION AMOUNT: With respect to any Distribution Date, the
amount equal to the sum of the following amounts with respect to the related
Monthly Period, in each case computed with respect to each Receivable in
accordance with the method specified in the related retail installment sale
contract or promissory note: (i) that portion of all collections on Receivables
(other than Liquidated Receivables and Purchased Receivables) allocable to
principal, including all full and partial principal prepayments, (ii) the
Principal Balance (as of the related Accounting Date) of all Receivables that
became Liquidated Receivables during the related Monthly Period (other than
Purchased Receivables), (iii) the Principal Balance of all Receivables that
became Purchased Receivables as of the related Accounting Date, and (iv) the
aggregate amount of Cram Down Losses that shall have occurred during the related
Monthly Period.
PRINCIPAL FUNDING ACCOUNT: The account designated as the Principal Funding
Account in, and which is established and maintained pursuant to, Section 4.1(d).
PRINCIPAL FUNDING EXCESS AMOUNT: The meaning specified in Section 4.2(b).
PROGRAM FACILITY: The meaning assigned to such term in the Note Purchase
Agreement.
-17-
<PAGE>
PURCHASE AGREEMENT: (i) The Receivables Purchase Agreement and
Assignment, dated as of December 28, 1995, between OFL and the Seller and
(ii) one or more Assignment Agreements pursuant thereto, pursuant to which,
together, OFL transfers the Receivables and Other Conveyed Property to the
Seller.
PURCHASE AMOUNT: With respect to a Receivable, the Principal Balance
and all accrued and unpaid interest on the Receivable (without regard to any
Monthly Advances that may have been made with respect to the Receivable) as
of the Accounting Date on which the obligation to purchase such Receivable
arises.
PURCHASE PRICE: With respect to any Receivables, Other Conveyed Property
and other property conveyed to the Trust by the Seller on any Transfer Date, an
amount equal to the sum of the Principal Balances of all such Receivables
conveyed as of the applicable Cutoff Date.
PURCHASED RECEIVABLE: As of any Accounting Date, any Receivable (including
any Liquidated Receivable) that became a Warranty Receivable or Administrative
Receivable as of such Accounting Date (or which OFL or the Servicer has elected
to purchase as of an earlier Accounting Date, as permitted by Section 2.6 or
3.7), and as to which the Purchase Amount has been deposited in the Collection
Account by the Seller, OFL or the Servicer, as applicable, on or before the
related Deposit Date.
PURCHASE TERMINATION DATE: The meaning set forth in Section 2.1(c)(1).
PURCHASE TERMINATION EVENT: The meaning set forth in Section 2.1(c)(2).
RATING AGENCY: Each of Moody's and Standard & Poor's, so long as such
Persons maintain a rating on the Commercial Paper Notes; and if either Moody's
or Standard & Poor's no longer maintains a rating on the Commercial Paper Notes
, such other nationally recognized statistical rating organization selected by
JPMD.
RATING AGENCY CONDITION: With respect to any action, that each Rating
Agency shall have been given 10 days' prior notice thereof and that each of the
Rating Agencies shall have notified JPMD in writing that such action will not
result in a reduction or withdrawal of the then current rating of the Commercial
Paper Notes.
RECAPITALIZATION: A recapitalization of the Trust in which (a) the Trust
issues Non-Callable Notes under the Indenture, the proceeds of which are used to
redeem, in full or in part, the Notes Outstanding prior to that recapitalization
and (b) the Seller waives its rights under Section 9.1(b)(ii) to purchase the
Trust Property.
RECEIVABLE: An Auto Receivable that is included in the Schedule of
Receivables, and all rights and obligations under such a contract, but not
including (i) any Liquidated
-18-
<PAGE>
Receivable (other than for purposes of calculating Certificateholders'
Distributable Amounts and Noteholders' Distributable Amounts hereunder and
for the purpose of determining the obligations pursuant to Section 2.6 and
3.7 to purchase Receivables), or (ii) any Purchased Receivable on or after
the Accounting Date immediately preceding the Deposit Date on which payment
of the Purchase Amount is made in connection therewith pursuant to Section
4.5.
RECEIVABLE FILE: The documents, electronic entries, instruments and
writings listed in Section 2.2(a) pertaining to a particular Receivable.
REGISTRAR OF TITLES: With respect to any state, the governmental agency or
body responsible for the registration of, and the issuance of certificates of
title relating to, motor vehicles and liens thereon.
RELATED DOCUMENTS: The Trust Agreement, the Indenture, the Certificates,
the Notes, the Purchase Agreement, each Transfer Agreement, the Custodian
Agreement, the Lockbox Agreement, the Certificate Purchase Agreement and the
Note Purchase Agreement. The Related Documents executed by any party are
referred to herein as "such party's Related Documents," "its Related Documents"
or by a similar expression.
RESPONSIBLE OFFICER: When used with respect to the Owner Trustee, any
officer of the Owner Trustee assigned by the Owner Trustee to administer its
corporate trust affairs relating to the Trust. When used with respect to any
other Person that is not an individual, the President, any Vice-President or
Assistant Vice-President or the Controller of such Person, or any other officer
or employee having similar functions.
SCHEDULED PAYMENT: With respect to any Monthly Period for any Receivable
or Auto Receivable, as applicable, the amount set forth in such Receivable or
Auto Receivable, as applicable, as required to be paid by the Obligor in such
Monthly Period. If after the Closing Date or the related Cutoff Date, the
Obligor's obligation under a Receivable or Auto Receivable with respect to a
Monthly Period has been modified so as to differ from the amount specified in
such Receivable or Auto Receivable, as applicable, as a result of (i) the order
of a court in an insolvency proceeding involving the Obligor, (ii) pursuant to
the Soldiers' and Sailors' Civil Relief Act of 1940 or (iii) modifications or
extensions of the Receivable permitted by Section 3.2(b), the Scheduled Payment
with respect to such Monthly Period shall refer to the Obligor's payment
obligation with respect to such Monthly Period as so modified.
SCHEDULE OF RECEIVABLES: The schedule of all automobile retail installment
loan contracts and promissory notes sold and transferred pursuant to each
Transfer Agreement which is attached hereto as Schedule A, as such Schedule
shall be supplemented from time to time (i) by each Schedule of Receivables with
respect to each Transfer Agreement, which Schedules of Receivables shall be
deemed incorporated and made a part of Schedule A
-19-
<PAGE>
hereto and (ii) by the Servicer from time to time to reflect removal from the
Trust of (a) Purchased Receivables and (b) Receivables purchased from the
Trust pursuant to Section 9.1, such comprehensive schedule to be maintained
by the Indenture Trustee. With respect to a Transfer Agreement, "Schedule of
Receivables" shall mean the Schedule attached to such Transfer Agreement as
Exhibit A thereto.
SCHEDULE OF REPRESENTATIONS: The Schedule of Representations and
Warranties attached hereto as Schedule B.
SECURED OBLIGATIONS: The meaning assigned to such term in the Indenture.
SECURITIZED OFFERING: An offering of certificates and notes of this Trust,
the proceeds of which are used to redeem, in full, the Certificates issued under
the Trust Agreement (excluding the General Partner Certificates) and the Notes
issued under the Indenture.
SELLER: Olympic Receivables Finance Corp. II, a Delaware corporation, or
its successor in interest pursuant to Section 6.2.
SERVICER: Olympic Financial Ltd., its successor in interest pursuant to
Section 8.2 or, after any termination of the Servicer upon a Servicer
Termination Event, the Backup Servicer or any other successor Servicer.
SERVICER FEE THRESHOLD: The meaning specified in Section 4.6(ii).
SERVICER TERMINATION EVENT: An event described in Section 8.1.
SERVICER'S CERTIFICATE: With respect to each Determination Date, a
certificate, completed by and executed on behalf of the Servicer, in accordance
with Section 3.9, substantially in the form attached hereto as Exhibit E.
SERVICING PORTFOLIO: As of any date, the aggregate principal balance of
all Auto Receivables (whether or not thereafter sold or disposed of) which are
serviced by OFL or any of its Affiliates at such time, calculated in a manner
consistent with the calculation of the components of Average Servicing Portfolio
in OFL's most recent Annual Report on Form 10-K to the extent such calculation
is consistent with the calculation of the components of Average Servicing
Portfolio in OFL's Annual Report on Form 10-K for the year ended December 31,
1994, as amended.
SPREAD ACCOUNT: The account designated as the Spread Account in, and which
is established and maintained pursuant to, Section 4.1(c).
-20-
<PAGE>
STANDARD & POOR'S: Standard & Poor's Ratings Services, a division of
McGraw-Hill, Inc., or any successor thereto.
SUBCOLLECTION ACCOUNT: The account designated as the Subcollection Account
in, and which is established and maintained pursuant to Section 4.2(a).
SUPPLEMENTAL SERVICING FEE: With respect to any Monthly Period, all
administrative fees, expenses and charges paid by or on behalf of Obligors,
including late fees, collected on the Receivables during such Monthly Period.
TOTAL SERVICING FEE: The sum of the Basic Servicing Fee and the
Supplemental Servicing Fee.
TRANSFER AGREEMENT: With respect to any Receivables, the transfer
agreement between the Seller and the Trust pursuant to which the Seller sells
and assigns Receivables, Other Conveyed Property and other property to the
Trust, the form of which is attached hereto as Exhibit F.
TRANSFER DATE: Any date during the Funding Period on which Receivables are
transferred to the Trust pursuant to Section 2.1.
TRIGGER EVENT: As of any Determination Date, if the Net Excess Spread
Percentage shall be less than 3%.
TRUST: Olympic Automobile Receivables Warehouse Trust.
TRUST ACCOUNTS: The meaning specified in 4.1(e).
TRUST AGREEMENT: The Trust Agreement, dated as of December 28, 1995,
between the Seller and the Owner Trustee, as the same may be amended and
supplemented from time to time.
TRUST ESTATE: The meaning assigned to such term in the Indenture.
TRUST PROPERTY: The meaning specified in the Trust Agreement.
TRUST PROPERTY LIQUIDATION DATE: The date specified in the notice issued
pursuant to Section 9.1(b) as the date on which proceeds from a sale of the
Trust Property will be distributed to Noteholders and Certificateholders.
UCC: The Uniform Commercial Code as in effect in the relevant
jurisdiction.
-21-
<PAGE>
WAREHOUSING LOSS RATIO: With respect to any Determination Date, a
fraction, expressed as a percentage, calculated as of the related Accounting
Date, the numerator of which is equal to the excess of (A) the sum of (i) the
aggregate of the Principal Balances of Receivables conveyed to the Trust
since the immediately preceding Trust Property Liquidation Date, or, if no
Trust Property Liquidation Date has occurred, since the Closing Date (plus
accrued and unpaid interest to the end of the relevant Monthly Period, at the
applicable APR) of all Receivables that became Liquidated Receivables since
the immediately preceding Trust Property Liquidation Date, or, if no Trust
Property Liquidation Date has occurred, since the Closing Date, plus (ii) the
aggregate of the Principal Balances of all Receivables that became Purchased
Receivables since the immediately preceding Trust Property Liquidation Date,
or, if no Trust Property Liquidation Date has occurred, since the Closing
Date and that were delinquent with respect to all or a portion of a Scheduled
Payment more than 31 days as of the related Accounting Date, plus (iii) the
aggregate of all Cram Down Losses that occurred since the immediately
preceding Trust Property Liquidation Date, or, if no Trust Property
Liquidation Date has occurred, since the Closing Date, over (B) the
Liquidation Proceeds received by the Trust since the immediately preceding
Trust Property Liquidation Date, or, if no Trust Property Liquidation Date
has occurred, since the Closing Date and the denominator of which is equal to
the Aggregate Principal Balance as of the related Accounting Date.
WARRANTY RECEIVABLE: With respect to any Monthly Period, a Receivable
which OFL has become obligated to repurchase pursuant to Section 2.6.
Section 1.2. USAGE OF TERMS. With respect to all terms used in this
Agreement, the singular includes the plural and the plural the singular;
words importing any gender include the other gender; references to "writing"
include printing, typing, lithography, and other means of reproducing words
in a visible form; references to agreements and other contractual instruments
include all subsequent amendments thereto or changes therein entered into in
accordance with their respective terms and not prohibited by this Agreement;
references to Persons include their permitted successors and assigns; and the
terms "include" or "including" mean "include without limitation" or
"including without limitation."
Section 1.3. CALCULATIONS. (a) All calculations of the amount of
interest accrued on the Certificates and the Notes shall be made on the basis
of the actual number of days elapsed in either a 360-day or a 365-day year,
as specified in the Note Purchase Agreement or Certificate Purchase
Agreement, as the case may be; and (b) all calculations of the amount of the
Basic Servicing Fee shall be made on the basis of a 360-day year consisting
of twelve 30-day months. All references to the Principal Balance of a
Receivable as of an Accounting Date shall refer to the close of business on
such day.
-22-
<PAGE>
Section 1.4. SECTION REFERENCES. All references to Articles, Sections,
paragraphs, subsections, exhibits and schedules shall be to such portions of
this Agreement unless otherwise specified.
Section 1.5. NO RECOURSE. Subject to the provisions of Section 6.5
with respect to the Seller, no recourse may be taken, directly or indirectly,
under this Agreement or any certificate or other writing delivered in
connection herewith or therewith, against any stockholder, officer, or
director, as such, of the Seller, OFL, the Servicer, the Indenture Trustee,
the Backup Servicer or the Owner Trustee or of any predecessor or successor
of the Seller, OFL, the Servicer, the Indenture Trustee, the Backup Servicer
or the Owner Trustee.
Section 1.6. CONDITION TO EFFECTIVENESS OF AGREEMENTS. This Agreement
and the Related Documents shall not be effective until such time as this
Agreement, the Related Documents and any and all certificates, opinions and
other documents required hereby and thereby have been executed and delivered
to the satisfaction of JPMD, in its sole discretion.
ARTICLE II
CONVEYANCE OF RECEIVABLES
Section 2.1. CONVEYANCE OF RECEIVABLES. (a) Subject to the terms and
conditions of this Agreement, including the conditions set forth in paragraph
(b) below, the Seller, pursuant to the mutually agreed upon terms contained
herein and pursuant to one or more Transfer Agreements, shall sell, transfer,
assign, and otherwise convey to the Trust, without recourse (but without
limitation of its obligations in this Agreement), all of the right, title and
interest of the Seller, whether then existing or thereafter acquired, in and
to the Receivables and the Other Conveyed Property, an assignment of the
rights of the Seller under the Purchase Agreement, all funds on deposit from
time to time in the Trust Accounts and all investments therein and proceeds
thereof, and all proceeds of the foregoing. It is the intention of the
Seller that the transfer and assignment contemplated by this Agreement and
each Transfer Agreement shall constitute a sale of the Receivables and other
Trust Property from the Seller to the Trust and the beneficial interest in
and title to the Receivables and the other Trust Property shall not be part
of the Seller's estate in the event of the filing of a bankruptcy petition by
or against the Seller under any bankruptcy law. In the event that,
notwithstanding the intent of the Seller, the transfer and assignment
contemplated hereby and each Transfer Agreement is held not to be a sale,
this Agreement and each Transfer Agreement shall constitute a grant of a
security interest to the Trust in the property referred to in this Section
2.1 or transferred to the Trust pursuant to the related Transfer Agreement.
(b) (1) The Seller shall transfer to the Trust the Receivables and the
other property and rights related thereto described in paragraph (a) above only
upon the satisfaction of each of the following conditions on or prior to the
related Transfer Date:
-23-
<PAGE>
(i) the Funding Period shall not have terminated;
(ii) the Seller shall have provided the Owner Trustee, the Indenture
Trustee and the Rating Agencies with any information reasonably requested
by any of the foregoing with respect to the Receivables;
(iii) the Seller shall have delivered to the Owner Trustee and the
Indenture Trustee a duly executed Transfer Agreement, which shall include a
Schedule of Receivables listing the Receivables being transferred on such
Transfer Date;
(iv) OFL shall have delivered to the Seller, the Owner Trustee and
the Indenture Trustee a duly executed Assignment Agreement, which shall
include a Schedule of Receivables listing the Receivables being transferred
on such Transfer Date;
(v) the Seller shall, to the extent required by Section 4.1, have
deposited in the Collection Account collections in respect of the
Receivables;
(vi) the Seller shall have taken any action necessary or advisable to
maintain the first perfected ownership interest of the Trust in the Trust
Property and the first perfected security interest of the Indenture Trustee
in the Indenture Collateral;
(vii) the aggregate Principal Balances of Receivables in the Trust,
including the Receivables to be conveyed to the Trust on each Transfer
Date, that were owed by any single Obligor or its Affiliates shall not
exceed $250,000;
(viii) after giving effect to the conveyance of Receivables on such
Transfer Date, the aggregate of the Principal Balances of Receivables with
original maturities ranging from 72 to 84 months shall not exceed 7.5% of
the aggregate of the Principal Balances of all Receivables on such Transfer
Date;
(ix) each of the representations and warranties made by the Seller
pursuant to Section 2.5 shall be true and correct as of the related
Transfer Date, and the Seller shall have performed all obligations to be
performed by it hereunder on or prior to such Transfer Date;
(x) the Seller shall, at its own expense, on or prior to the Transfer
Date indicate in its computer files that the Receivables identified in the
Transfer Agreement have been sold to the Trust pursuant to this Agreement
and the related Transfer Agreement;
-24-
<PAGE>
(xi) no event has occurred and is continuing, or would result from
the conveyance on such Transfer Date, that constitutes a Purchase
Termination Event or Servicer Termination Event;
(xii) after giving effect to the conveyance of Receivables on such
Transfer Date, the Facility Balance shall not exceed the Facility Limit;
(xiii) the Seller shall have provided the Indenture Trustee, the
Owner Trustee and JPMD a statement listing (A) the aggregate of the
Principal Balances of such Receivables so transferred, (B) the related
Purchase Price, (C) the Facility Balance after giving effect to the
transfers on such date and (D) any other information reasonably requested
by any of the foregoing with respect to such Receivables;
(xiv) on any Transfer Date following a Trust Property Liquidation
Date on which (i) not less than all of the Receivables in the Trust as of
such date are purchased pursuant to Section 9.1(b) hereof and (ii) the
Seller receives amounts on deposit in the Spread Account pursuant to
Section 5.1(b) hereof, until the Transfer Date on the later of (x) the date
that is 90 days from the most recent Trust Property Liquidation Date and
(y) the date that is 90 days from the most recent Transfer Date on which
the Excess Yield Condition was not satisfied, but for the required hedging
arrangement, if the Excess Yield Condition is not satisfied with respect to
the Receivables to be conveyed on such Transfer Date, OFL shall have
established a hedging arrangement with respect to such Receivables that is
acceptable to JPMD;
(xv) after giving effect to the conveyance of Receivables on such
Transfer Date, the aggregate of the Principal Balances of Receivables
attributable to loans originated under OFL's "Classic" program shall not
exceed 40% of the aggregate of the Principal Balances of all Receivables on
such Transfer Date;
(xvi) the condition to effectiveness set forth in Section 1.6 shall
have been satisfied; and
(xvii) the Seller shall have delivered to the Owner Trustee and the
Indenture Trustee an Officer's Certificate confirming the satisfaction of
each condition precedent specified in this paragraph (b)(1).
(2) On each such Transfer Date, if all the conditions specified in
paragraph (b)(1) above have been satisfied, the Trust shall accept the transfer
of such Receivables and shall pay or cause to be paid to the Seller an amount
equal to the Purchase Price. The Purchase Price shall be paid FIRST, from
amounts, if any, on deposit in the Principal Funding Account, and SECOND, from
amounts, if any, received by the Trust in connection
-25-
<PAGE>
with the issuance and sale of Notes or Certificates (or additional principal
amounts thereof), as applicable.
(c) (1) PURCHASE TERMINATION DATE. The Trust's commitment to purchase
Receivables and other property hereunder and under any Transfer Agreement shall
terminate upon the earliest to occur of the following (the "Purchase Termination
Date"):
(i) The date that is 364 days from the Closing Date; PROVIDED,
HOWEVER, the parties to this Agreement (with the consent of JPMD) may
mutually agree in writing to the extension of such date to a date no later
than 364 days following the date of such extension;
(ii) A date upon which a Purchase Termination Event has occurred and
is continuing and (A) JPMD declares a Purchase Termination Date in a notice
in accordance with the terms of subsection 2 below, or (B) such date
becomes a Purchase Termination Date automatically in accordance with the
terms of subsection 2 below;
(iii) The initial cutoff date with respect to a Securitized Offering,
as specified in the preliminary offering document with respect to the
securities to be issued in connection with such Securitized Offering;
(iv) A date on which a Note Purchase Termination Event has occurred
and is continuing; or
(v) A date on which a Certificate Purchase Termination Event has
occurred and is continuing.
(2) PURCHASE TERMINATION EVENTS. If any of the following events
(each, a "Purchase Termination Event") shall have occurred and be continuing,
then (a) in the case of a Purchase Termination Event other than a Purchase
Termination Event described in subsection (ii) below, JPMD shall, at the request
of, or may with the consent of, a Note Majority, by notice (which notice shall
be in writing) to the Seller, the Indenture Trustee and the Owner Trustee
declare the Purchase Termination Date to have occurred, and (b) in the case of a
Purchase Termination Event described in subsection (ii) below, the Purchase
Termination Date shall occur automatically:
(i) Any event or occurrence that constitutes a Servicer Termination
Event pursuant to Section 8.1 (other than an event described in Section
8.1(d));
(ii) Any event or occurrence that constitutes a Servicer Termination
Event pursuant to Section 8.1(d);
-26-
<PAGE>
(iii) There shall exist any event or occurrence that has a Material
Adverse Effect;
(iv) The Seller, for any reason, shall fail to grant to the Trust and
to maintain in favor of the Trust a valid and perfected ownership interest
(or, if not an ownership interest, a valid and perfected first priority
security interest) in any material portion of the Receivables and other
Trust Property;
(v) The Internal Revenue Service shall file notice of a lien pursuant
to Section 6323 of the Internal Revenue Code with regard to any of the
assets of the Seller or OFL, or the Pension Benefit Guaranty Corporation
shall file notice of a lien pursuant to Section 4068 of the Employee
Retirement Income Security Act of 1974 with regard to any of the assets of
the Seller or OFL, and in either such case such lien shall secure a
liability in excess of $1,000,000 and shall not have been released within
40 days;
(vi) A default shall have occurred and be continuing (x) under any
instrument or agreement evidencing, securing or providing for the issuance
of indebtedness for borrowed money in excess of $10,000,000 of, or
guaranteed by, OFL, the Seller or the Servicer which default (A) is a
default in payment of any principal or interest on such indebtedness when
due or within any applicable grace period, or (B) such default shall have
resulted in acceleration of the maturity of such indebtedness; or (y) under
any agreement providing for the sales of Receivables by OFL, the Seller or
the Servicer with an aggregate purchase price outstanding over $10,000,000,
resulting in the early amortization of the purchasers' or investors'
interest in such Receivables, or the replacement of the Servicer as
servicer thereunder; unless, in the case of each of CLAUSES (X) and (Y)
above, (1) OFL, the Seller or the Servicer, as the case may be, is
contesting in good faith, by appropriate proceedings, that such
indebtedness is due and payable or that such acceleration or early
amortization is rightful, and (2) no final judgment adverse to OFL, the
Seller or the Servicer, as the case may be, shall have been entered on such
proceedings;
(vii) (A) Any litigation (including, without limitation, derivative
actions), arbitration proceedings or governmental proceedings not disclosed
in writing by OFL, the Seller or the Servicer, as the case may be, prior to
the date of execution and delivery of this Agreement is pending against
OFL, the Seller or the Servicer, as the case may be, or any Affiliate
thereof, which, in the reasonable opinion of JPMD, if adversely determined,
would have a Material Adverse Effect, or (B) any material development not
so disclosed has occurred in any litigation (including, without limitation,
derivative actions), arbitration proceedings or governmental proceedings so
disclosed, which, in the reasonable opinion of JPMD, would have a
reasonable probability of causing a Material Adverse Effect; or
-27-
<PAGE>
(viii) OFL (if it is the Servicer) shall make any material adverse
change in the Servicing Policy and Procedures without the prior written
consent of JPMD (which consent shall not be unreasonably withheld); or
(ix) On any Determination Date after the first Transfer Date but
prior to the Purchase Termination Date, (A) the Delinquency Ratio shall
exceed 2.5%; (B) the Portfolio Loss Ratio shall exceed 2.0%; (C) the
Warehousing Loss Ratio shall exceed 1.0%; or (D) the Average Net Excess
Spread Percentage shall be less than 1.5%.
Section 2.2. CUSTODY OF RECEIVABLE FILES. (a) In connection with the
sale, transfer and assignment of the Receivables and the other Trust Property
to the Trust pursuant to this Agreement and each Transfer Agreement, and
simultaneously with the execution and delivery of this Agreement, the Trust
shall enter into the Custodian Agreement with the Custodian, dated as of the
Closing Date, pursuant to which the Owner Trustee, on behalf of the Trust,
shall revocably appoint the Custodian, and the Custodian shall accept such
appointment, to act as the agent of the Trust as Custodian of the documents
set forth below. Pursuant to the terms of the Purchase Agreement, OFL has
agreed to use its best efforts to deliver to the Custodian as agent of the
Trust within three Business Days after each Transfer Date, but in any event
OFL shall deliver to the Custodian no later than ten Business Days after such
Transfer Date, the following documents:
(i) The fully executed original of the Receivable (together with any
agreements modifying the Receivable, including without limitation any
extension agreements);
(ii) A certificate of insurance, application form signed by the
Obligor or a signed representation letter from the Obligor named in the
Receivable pursuant to which the Obligor has agreed to obtain an Insurance
Policy, or a documented verbal confirmation by the insurance agent for the
Obligor of a policy number for an Insurance Policy or any other documents
evidencing or related to any Insurance Policy, or copies thereof;
(iii) The original credit application, or a copy thereof, of each
Obligor, fully executed by each such Obligor on OFL's customary form, or on
a form approved by OFL, for such application; and
(iv) The original certificate of title (when received) and otherwise
such documents, if any, that OFL keeps on file in accordance with its
customary procedures indicating that the Financed Vehicle is owned by the
Obligor and subject to the interest of OFL as first lienholder or secured
party (including any Lien Certificate received by OFL), or, if such
original certificate of title has not yet been received, a copy of the
application therefor, showing OFL as secured party or a
-28-
<PAGE>
letter from the applicable Dealer agreeing unconditionally to repurchase
the related Receivable if the certificate of title is not received by OFL
within 180 days.
In connection with the grant of the security interest in the Trust Estate
to the Indenture Trustee in respect of the Secured Obligations pursuant to the
Indenture, the Trust agrees that from and after the Closing Date through the
date of release of such security interest pursuant to the terms of the
Indenture, the Custodian shall not be acting as agent of the Trust, but rather
shall be acting as agent of the Indenture Trustee in respect of the Secured
Obligations.
The Indenture Trustee may act as the Custodian, in which case the Indenture
Trustee shall be deemed to have assumed the obligations of the Custodian
specified in the Custodian Agreement, and the terms of Exhibit B shall be deemed
incorporated by reference herein.
(b) Upon payment in full on any Receivable, the Servicer will notify the
Custodian by certification of an officer of the Servicer (which certification
shall include a statement to the effect that all amounts received in connection
with such payments which are required to be deposited in the Collection Account
pursuant to Section 3.1 have been so deposited) and shall request delivery of
the Receivable and Receivable File to the Servicer. From time to time as
appropriate for servicing and enforcing any Receivable, the Custodian shall,
upon written request of an officer of the Servicer and delivery to the Custodian
of a receipt signed by such officer, cause the original Receivable and the
related Receivable File to be released to the Servicer. The Servicer's receipt
of a Receivable and/or Receivable File shall obligate the Servicer to return the
original Receivable and the related Receivable File to the Custodian when its
need by the Servicer has ceased unless the Receivable shall be repurchased as
described in Section 2.6 or 3.7.
Section 2.3. CONDITIONS TO ACCEPTANCE BY OWNER TRUSTEE. As conditions to
the Owner Trustee's execution and delivery of the Notes on behalf of the Trust
and execution, authentication and delivery of the Certificates on behalf of the
Trust on the Closing Date, the Owner Trustee shall have received the following
on or before the Closing Date:
(a) Copies of resolutions of the Board of Directors of the Seller
approving the execution, delivery and performance of this Agreement, the
Related Documents and the transactions contemplated hereby and thereby,
certified by a Secretary or an Assistant Secretary of the Seller;
(b) Copies of resolutions of the Board of Directors of OFL approving
the execution, delivery and performance of this Agreement, the Related
Documents and the transactions contemplated hereby and thereby, certified
by a Secretary or an Assistant Secretary of OFL; and
-29-
<PAGE>
(c) Evidence that all filings (including, without limitation, UCC
filings) required to be made by any Person and actions required to be taken
or performed by any Person in any jurisdiction to give the Owner Trustee a
first priority perfected lien on, or ownership interest in, the Receivables
and the other Trust Property have been made, taken or performed.
Section 2.4. DEEMED ACCEPTANCE BY OWNER TRUSTEE AND INDENTURE TRUSTEE. By
its execution or acceptance, as the case may be, of this Agreement, each of the
Owner Trustee and the Indenture Trustee, on each Transfer Date, subject to the
satisfaction of the conditions to conveyance set forth in Section 2.1(b), shall
be deemed to have accepted the conveyance of the Receivables and other property
conveyed to the Trust under the related Transfer Agreement and assigned to the
Indenture Trustee pursuant to the Indenture without any further act on their
behalf.
Section 2.5. REPRESENTATIONS AND WARRANTIES OF SELLER. By its execution
of this Agreement and each Transfer Agreement, the Seller makes the following
representations and warranties on which the Trust relies in accepting the
Receivables and the other Trust Property in trust and on which the Owner Trustee
relies in issuing, on behalf of the Trust, the Certificates and Notes. Unless
otherwise specified, such representations and warranties speak as of the Closing
Date or Transfer Date, as appropriate, but shall survive the sale, transfer, and
assignment of the Receivables to the Trust.
(a) SCHEDULE OF REPRESENTATIONS. The representations and warranties
set forth on the Schedule of Representations are true and correct.
(b) ORGANIZATION AND GOOD STANDING. The Seller has been duly
organized and is validly existing as a corporation in good standing under
the laws of the State of Delaware, with power and authority to own its
properties and to conduct its business as such properties are currently
owned and such business is currently conducted, and had at all relevant
times, and now has, power, authority and legal right to acquire, own and
sell the Receivables and the other property transferred to the Trust.
(c) DUE QUALIFICATION. The Seller is duly qualified to do business
as a foreign corporation in good standing, and has obtained all necessary
licenses and approvals, in all jurisdictions in which the ownership or
lease of its property or the conduct of its business requires such
qualification.
(d) POWER AND AUTHORITY. The Seller has the power and authority to
execute and deliver this Agreement and its Related Documents and to carry
out its terms and their terms, respectively; the Seller has full power and
authority to sell and assign the Trust Property to be sold and assigned to
and deposited with the Trust by it and has duly authorized such sale and
assignment to the Trust by all
-30-
<PAGE>
necessary corporate action; and the execution, delivery and performance of
this Agreement and the Seller's Related Documents have been duly authorized
by the Seller by all necessary corporate action.
(e) VALID SALE; BINDING OBLIGATIONS. This Agreement and each
Transfer Agreement effects a valid sale, transfer and assignment of the
Receivables and the other Trust Property, enforceable against the Seller
and creditors of and purchasers from the Seller; and this Agreement and
each Transfer Agreement and the Seller's Related Documents, when duly
executed and delivered, shall constitute legal, valid and binding
obligations of the Seller enforceable in accordance with their respective
terms, except as enforceability may be limited by bankruptcy, insolvency,
reorganization or other similar laws affecting the enforcement of
creditors' rights generally and by equitable limitations on the
availability of specific remedies, regardless of whether such
enforceability is considered in a proceeding in equity or at law.
(f) NO VIOLATION. The consummation of the transactions contemplated
by this Agreement and each Transfer Agreement and the Related Documents and
the fulfillment of the terms of this Agreement and each Transfer Agreement
and the Related Documents shall not conflict with, result in any breach of
any of the terms and provisions of or constitute (with or without notice,
lapse of time or both) a default under the certificate of incorporation or
by-laws of the Seller, or any indenture, agreement, mortgage, deed of trust
or other instrument to which the Seller is a party or by which it is bound,
or result in the creation or imposition of any Lien upon any of its
properties pursuant to the terms of any such indenture, agreement,
mortgage, deed of trust or other instrument, other than this Agreement, or
violate any law, order, rule or regulation applicable to the Seller of any
court or of any federal or state regulatory body, administrative agency or
other governmental instrumentality having jurisdiction over the Seller or
any of its properties. Notwithstanding the foregoing, it is understood
that no representation or warranty is expressed herein with respect to the
legality of the use of word "Olympic" by the Seller or its Affiliates.
(g) NO PROCEEDINGS. There are no proceedings or investigations
pending or, to the Seller's knowledge, threatened against the Seller or
OFL, before any court, regulatory body, administrative agency or other
tribunal or governmental instrumentality having jurisdiction over the
Seller or its properties (A) asserting the invalidity of this Agreement,
any Transfer Agreement or any of the Related Documents, (B) seeking to
prevent the issuance of the Certificates or the Notes or the consummation
of any of the transactions contemplated by this Agreement, any Transfer
Agreement or any of the Related Documents, (C) seeking any determination or
ruling that might materially and adversely affect the performance by the
Seller of its obligations under, or the validity or enforceability of, this
-31-
<PAGE>
Agreement, any Transfer Agreement or any of the Related Documents, or (D)
seeking to adversely affect the federal income tax or other federal, state
or local tax attributes of the Certificates or the Notes.
(h) NO TERMINATION EVENTS. To the Seller's knowledge, no Purchase
Termination Event or Servicer Termination Event shall have occurred and be
continuing.
(i) CHIEF EXECUTIVE OFFICE. The chief executive office of the Seller
is at 7825 Washington Avenue South, Suite 900, Minneapolis, MN 55439-2435.
(j) SEPARATE CORPORATE EXISTENCE. The Seller shall:
(1) Maintain in full effect its existence, rights and franchises
as a corporation under the laws of the state of its incorporation and
will obtain and preserve its qualification to do business in each
jurisdiction in which such qualification is or shall be necessary to
protect the validity and enforceability of this Agreement and its
Related Documents and each other instrument or agreement necessary or
appropriate to proper administration hereof and permit and effectuate
the transactions contemplated hereby.
(2) Maintain its own deposit account or accounts, separate from
those of any Affiliate of the Seller, with commercial banking
institutions. The funds of the Seller will not be diverted to any
other Person or for other than the corporate use of the Seller
(including the payment of duly declared dividends to the Seller's
stockholders), and, except as may be expressly permitted by this
Agreement or the Related Documents, the funds of the Seller shall not
be commingled with those of any Affiliate of the Seller.
(3) Ensure that, to the extent that it shares the same officers
or other employees as any of its stockholders or Affiliates, the
salaries of and the expenses related to providing benefits to such
officers and other employees shall be fairly allocated among such
entities, and each such entity shall bear its fair share of the salary
and benefit costs associated with all such common officers and
employees.
(4) Ensure that, to the extent that it jointly contracts with
any of its stockholders or Affiliates to do business with vendors or
service providers or to share overhead expenses, the costs incurred in
so doing shall be allocated fairly among such entities, and each such
entity shall bear its fair share of such costs. To the extent that
the Seller contracts or does business with vendors or service
providers where the goods and services provided are partially for the
benefit of any other Person, the costs incurred in so doing
-32-
<PAGE>
shall be fairly allocated to or among such entities for whose benefit
the goods and services are provided, and each such entity shall bear
its fair share of such costs. All material transactions between the
Seller and any of its Affiliates shall be only on an arm's-length
basis and shall receive the approval of the Seller's Board of
Directors including at least one Independent Director (as defined
below).
(5) Maintain a principal executive and administrative office
through which its business is conducted separate from those of its
stockholders and Affiliates. To the extent that the Seller and any of
its stockholders or Affiliates have offices in contiguous space, there
shall be fair and appropriate allocation of overhead costs among them,
and each such entity shall bear its fair share of such expenses.
(6) Conduct its affairs strictly in accordance with its
Certificate of Incorporation and observe all necessary, appropriate
and customary corporate formalities, including, but not limited to,
holding all regular and special stockholders' and directors' meetings
appropriate to authorize all corporate action, keeping separate and
accurate minutes of such meetings, passing all resolutions or consents
necessary to authorize actions taken or to be taken, and maintaining
accurate and separate books, records and accounts, including, but not
limited to, payroll and intercompany transaction accounts. Regular
stockholders' and directors' meetings shall be held at least annually.
(7) Ensure that its Board of Directors shall be elected
independently from the Boards of Directors of its Affiliates and shall
at all times after January 15, 1995 include at least one Independent
Director (for purposes hereof, "INDEPENDENT DIRECTOR" shall mean any
member of the Board of Directors of the Seller that is not and has not
at any time been (x) a director, officer, employee or shareholder of
any Affiliate of the Seller or (y) a member of the immediate family of
any of the foregoing).
(8) Ensure that decisions with respect to its business and daily
operations shall be independently made by the Seller (although the
officer making any particular decision may also be an officer or
director of an Affiliate of the Seller) and shall not be dictated by
an Affiliate of the Seller.
(9) Act solely in its own corporate name and through its own
authorized officers and agents, and no Affiliate of the Seller shall
be appointed to act as agent of the Seller, except as expressly
contemplated by this Agreement or the Related Documents;
-33-
<PAGE>
(10) Ensure that no Affiliate of the Seller shall advance funds
to the Seller, other than capital contributions made to enable the
Seller to pay the purchase price of Receivables or to otherwise
conduct its business as contemplated by this Agreement and the Related
Documents, and no Affiliate of the Seller will otherwise supply funds
to, or guaranty debts of, the Seller.
(11) Not enter into any guaranty, or otherwise become liable,
with respect to any obligation of any Affiliate of the Seller other
than as expressly contemplated by this Agreement or the Related
Documents.
(12) Ensure that any financial reports required of the Seller
shall comply with generally accepted accounting principles and shall
be issued separately from, but may be consolidated with, any reports
prepared for any of its Affiliates.
(13) Maintain capitalization adequate for the conduct of its
business.
Section 2.6. REPURCHASE OF RECEIVABLES UPON BREACH OF WARRANTY.
Concurrently with the execution and delivery of this Agreement and each
Transfer Agreement, respectively, OFL and the Seller have entered into the
Purchase Agreement and an Assignment Agreement, the rights of the Seller
under which have been assigned by the Seller to the Trust. Under the
Purchase Agreement and each Assignment Agreement OFL has made the same
representations and warranties to the Seller with respect to the Receivables
as those made by Seller pursuant to the Schedule of Representations, upon
which the Owner Trustee has relied in accepting the Trust Property in trust
and executing the Certificates and Notes and upon which the Indenture Trustee
has relied in authenticating the Notes. Upon discovery by any of OFL, the
Seller, the Servicer, the Indenture Trustee or the Owner Trustee of a breach
of any of the representations and warranties contained in Section 2.5 that
materially and adversely affects the interests of the Noteholders, the
Certificateholders or the Trust in any Receivable (including any Liquidated
Receivable), the party discovering such breach shall give prompt written
notice to the others; PROVIDED, HOWEVER, that the failure to give any such
notice shall not affect any obligation of OFL or the Seller. As of the
second Accounting Date (or, at OFL's election, the first Accounting Date)
following its discovery or its receipt of notice of any breach of the
representations and warranties set forth on the Schedule of Representations
that materially and adversely affects the interests of the Noteholders, the
Certificateholders or the Trust in any Receivable (including any Liquidated
Receivable) OFL shall, unless such breach shall have been cured in all
material respects, purchase such Receivable from the Trust and, on or before
the related Deposit Date, OFL shall pay the Purchase Amount to the Owner
Trustee pursuant to Section 4.5. The obligations of the Seller with respect
to any such breach of representations and warranties shall be limited to
taking any and all actions necessary to enable the Owner Trustee to enforce
directly the obligations of OFL
-34-
<PAGE>
under the Purchase Agreement and any Assignment Agreement, as applicable. It
is understood and agreed that, except as set forth in this Section 2.6, the
obligation of OFL to repurchase any Receivable as to which a breach has
occurred and is continuing shall, if such obligation is fulfilled, constitute
the sole remedy against OFL or the Seller for such breach available to the
Indenture Trustee on behalf of the Noteholders or the Owner Trustee on behalf
of Certificateholders.
In addition to the foregoing and notwithstanding whether the related
Receivable shall have been purchased by the Seller or OFL, OFL shall indemnify
the Owner Trustee, the Indenture Trustee, the Backup Servicer, the Trust, the
Noteholders and the Certificateholders against all reasonable costs, expenses,
losses, damages, claims and liabilities, including reasonable fees and expenses
of counsel, which may be asserted against or incurred by any of them as a result
of third party claims arising out of the events or facts giving rise to such
breach.
Section 2.7. NONPETITION COVENANT. Until the date that is one year and
one day following the termination of the Trust pursuant to the terms of the
Trust Agreement, none of the Seller, the Servicer, the Owner Trustee (in its
individual capacity or on behalf of the Trust), the Backup Servicer nor OFL
shall petition or otherwise invoke the process of any court or government
authority for the purpose of commencing or sustaining a case against the Trust
or the General Partner under any federal or state bankruptcy, insolvency or
similar law or appointing a receiver, liquidator, assignee, trustee, custodian,
sequestrator or other similar official of the Trust or any substantial part of
its property, or ordering the winding up or liquidation of the affairs of the
Trust.
Section 2.8. COLLECTING LIEN CERTIFICATES NOT DELIVERED ON THE CLOSING
DATE OR TRANSFER DATE. In the case of any Receivable in respect of which
written evidence from the Dealer selling the related Financed Vehicle that the
Lien Certificate for such Financed Vehicle showing OFL as first lienholder has
been applied for from the Registrar of Titles was delivered to the Custodian on
the Closing Date or Transfer Date, as appropriate, in lieu of a Lien
Certificate, the Servicer shall use its best efforts to collect such Lien
Certificate from the Registrar of Titles as promptly as practicable. If such
Lien Certificate showing OFL as first lienholder is not received by the
Custodian within 180 days after the Closing Date or Transfer Date, as
appropriate, then the representation and warranty in paragraph 5 of the Schedule
of Representations in respect of such Receivable shall be deemed to have been
incorrect in a manner that materially and adversely affects the
Certificateholders, the Noteholders and the Trust.
Section 2.9. TRUST'S ASSIGNMENT OF ADMINISTRATIVE RECEIVABLES AND WARRANTY
RECEIVABLES. With respect to all Administrative Receivables and all Warranty
Receivables purchased by the Servicer, the Seller or OFL, the Owner Trustee and
the Indenture Trustee shall take any and all actions reasonably requested by the
Seller, OFL or Servicer, at the expense of the requesting party, to assign,
without recourse, representation or warranty, to
-35-
<PAGE>
the Seller, OFL or the Servicer, as applicable, all of the Indenture
Trustee's and the Trust's right, title and interest in and to such purchased
Receivable, all monies due thereon, the security interests in the related
Financed Vehicles, proceeds from any Insurance Policies, proceeds from
recourse against Dealers on such Receivables and the interests of the Trust
in certain rebates of premiums and other amounts relating to the Insurance
Policies and any documents relating thereto, such assignment being an
assignment outright and not for security; and the Seller, OFL or the
Servicer, as applicable, shall thereupon own such Receivable, and all such
security and documents, free of any further obligation to the Owner Trustee,
the Trust, the Indenture Trustee, the Certificateholders or the Noteholders
with respect thereto.
ARTICLE III
ADMINISTRATION AND SERVICING OF RECEIVABLES
Section 3.1. DUTIES OF THE SERVICER. The Servicer is hereby authorized
to act as agent for the Trust and in such capacity shall manage, service,
administer and make collections on the Receivables, and perform the other
actions required by the Servicer under this Agreement. The Servicer agrees
that its servicing of the Receivables shall be carried out in accordance with
customary and usual procedures of institutions which service motor vehicle
retail installment sales contracts and, to the extent more exacting, the
degree of skill and attention that the Servicer exercises from time to time
with respect to all comparable motor vehicle receivables that it services for
itself or others. In performing such duties, so long as OFL is the Servicer,
it shall comply with the policies and procedures attached hereto as Schedule
C. The Servicer's duties shall include, without limitation, collection and
posting of all payments, responding to inquiries of Obligors on the
Receivables, investigating delinquencies, sending payment coupons to
Obligors, reporting any required tax information to Obligors, policing the
collateral, complying with the terms of the Lockbox Agreement, accounting for
collections and furnishing monthly and annual statements to the Owner
Trustee, the Indenture Trustee and JPMD with respect to distributions,
monitoring the status of Insurance Policies with respect to the Financed
Vehicles and performing the other duties specified herein. The Servicer
shall also administer and enforce all rights and responsibilities of the
holder of the Receivables provided for in the Dealer Agreements (and shall
maintain possession of the Dealer Agreements, to the extent it is necessary
to do so), the Dealer Assignments and the Insurance Policies, to the extent
that such Dealer Agreements, Dealer Assignments and Insurance Policies relate
to the Receivables, the Financed Vehicles or the Obligors. To the extent
consistent with the standards, policies and procedures otherwise required
hereby, the Servicer shall follow its customary standards, policies, and
procedures and shall have full power and authority, acting alone, to do any
and all things in connection with such managing, servicing, administration
and collection that it may deem necessary or desirable. Without limiting the
generality of the foregoing, the Servicer is hereby authorized and empowered
by the Owner Trustee and the Indenture Trustee to execute and deliver, on
-36-
<PAGE>
behalf of the Certificateholders and the Trust or any of them, any and all
instruments of satisfaction or cancellation, or of partial or full release or
discharge, and all other comparable instruments, with respect to the
Receivables and with respect to the Financed Vehicles; PROVIDED, HOWEVER,
that notwithstanding the foregoing, the Servicer shall not, except pursuant
to an order from a court of competent jurisdiction, release an Obligor from
payment of any unpaid amount under any Receivable or waive the right to
collect the unpaid balance of any Receivable from the Obligor, except that
the Servicer may forego collection efforts if the amount subject to
collection is DE MINIMIS and if it would forego collection in accordance with
its customary procedures. The Servicer is hereby authorized to commence, in
its own name or in the name of the Trust (provided the Servicer has obtained
the Owner Trustee's consent, which consent shall not be unreasonably
withheld), a legal proceeding to enforce a Receivable pursuant to Section 3.3
or to commence or participate in any other legal proceeding (including,
without limitation, a bankruptcy proceeding) relating to or involving a
Receivable, an Obligor or a Financed Vehicle. If the Servicer commences or
participates in such a legal proceeding in its own name, the Trust shall
thereupon be deemed to have automatically assigned such Receivable to the
Servicer solely for purposes of commencing or participating in any such
proceeding as a party or claimant, and the Servicer is authorized and
empowered by the Owner Trustee to execute and deliver in the Servicer's name
any notices, demands, claims, complaints, responses, affidavits or other
documents or instruments in connection with any such proceeding. The Owner
Trustee shall furnish the Servicer with any powers of attorney and other
documents which the Servicer may reasonably request and which the Servicer
deems necessary or appropriate and take any other steps which the Servicer
may deem necessary or appropriate to enable the Servicer to carry out its
servicing and administrative duties under this Agreement.
Section 3.2. COLLECTION OF RECEIVABLE PAYMENTS; MODIFICATIONS OF
RECEIVABLES; LOCKBOX AGREEMENTS. (a) Consistent with the standards,
policies and procedures required by this Agreement, the Servicer shall make
reasonable efforts to collect all payments called for under the terms and
provisions of the Receivables as and when the same shall become due, and
shall follow such collection procedures as it follows with respect to all
comparable automobile receivables that it services for itself or others and
otherwise act with respect to the Receivables, the Dealer Agreements, the
Dealer Assignments, the Insurance Policies and the other Trust Property in
such manner as will, in the reasonable judgment of the Servicer, maximize the
amount to be received by the Trust with respect thereto. The Servicer is
authorized in its discretion to waive any prepayment charge, late payment
charge or any other similar fees that may be collected in the ordinary course
of servicing any Receivable.
(b) The Servicer may at any time agree to a modification or amendment
of a Receivable in order to (i) change the Obligor's regular due date to a
date within the Monthly Period in which such due date occurs or (ii)
re-amortize the scheduled payments on the Receivable following a partial
prepayment of principal.
-37-
<PAGE>
(c) The Servicer may grant payment extensions on, or other
modifications or amendments to, a Receivable (in addition to those
modifications permitted by Section 3.2(b)) in accordance with its customary
procedures if the Servicer believes in good faith that such extension,
modification or amendment is necessary to avoid a default on such Receivable,
will maximize the amount to be received by the Trust with respect to such
Receivable, and is otherwise in the best interests of the Trust; PROVIDED,
HOWEVER, that:
(i) The aggregate period of all extensions on a Receivable shall not
exceed three months;
(ii) In no event may a Receivable be extended beyond the Monthly
Period immediately preceding the Final Scheduled Distribution Date;
(iii) The aggregate Principal Balances of the Receivables which have
been extended during any calendar quarter (computed as of the Accounting
Date immediately prior to the first day of such calendar quarter) shall not
exceed 1.5% of the average of the Aggregate Principal Balances as of the
Accounting Date immediately prior to the first day of such Calendar Quarter
and the three immediately succeeding Accounting Dates; and
(iv) No such extension, modification or amendment shall be granted
more than 90 days after the Closing Date or the related Transfer Date if
such action would have the effect of causing such Receivable to be deemed
to have been exchanged for another Receivable within the meaning of Section
1001 of the Internal Revenue Code of 1986, as amended, or any proposed,
temporary or final Treasury Regulations issued thereunder.
(d) The Servicer shall use its best efforts to cause Obligors to make
all payments on the Receivables, whether by check or by direct debit of the
Obligor's bank account, to be made directly to one or more Lockbox Banks,
acting as agent for the Trust pursuant to a Lockbox Agreement. Amounts
received by a Lockbox Bank in respect of the Receivables may initially be
deposited into a demand deposit account maintained by the Lockbox Bank as
agent for the Trust and for other owners of automobile receivables serviced
by the Servicer. The Servicer shall use its best efforts to cause any
Lockbox Bank to deposit all payments on the Receivables in the Lockbox
Account no later than the Business Day after receipt, and to cause all
amounts credited to the Lockbox Account on account of such payments to be
transferred to the Collection Account no later than the second Business Day
after receipt of such payments. The Lockbox Account shall be a demand
deposit account held by the Lockbox Bank, or an Eligible Account satisfying
clause (i) of the definition thereof.
Prior to the Closing Date and any Transfer Date the Servicer shall have
notified each Obligor that makes its payments on the Receivables by check to
make such payments
-38-
<PAGE>
thereafter directly to the Lockbox Bank (except in the case of Obligors that
have already been making such payments to the Lockbox Bank), and shall have
provided each such Obligor with a supply of mailing address labels in order
to enable such Obligors to make such payments directly to the Lockbox Bank
for deposit into the Lockbox Account, and the Servicer will continue, not
less often than every three months, to so notify those Obligors who have
failed to make payments to the Lockbox Bank. If and to the extent requested
by JPMD, the Servicer shall request each Obligor that makes payment on the
Receivables by direct debit of such Obligor's bank account, to execute a new
authorization for automatic payment which in the judgment of JPMD is
sufficient to authorize direct debit by the Lockbox Bank on behalf of the
Trust. If at any time the Lockbox Bank is unable to directly debit an
Obligor's bank account that makes payment on the Receivables by direct debit
and if such inability is not cured within 15 days or cannot be cured by
execution by the Obligor of a new authorization for automatic payment, the
Servicer shall notify such Obligor that it cannot make payment by direct
debit and must thereafter make payment by check.
Notwithstanding any Lockbox Agreement, or any of the provisions of this
Agreement relating to the Lockbox Agreement, the Servicer shall remain
obligated and liable to the Owner Trustee, Indenture Trustee,
Certificateholders and Noteholders for servicing and administering the
Receivables and the other Trust Property in accordance with the provisions of
this Agreement without diminution of such obligation or liability by virtue
thereof.
In the event the Servicer shall for any reason no longer be acting as
such, the successor Servicer shall thereupon assume all of the rights and
obligations of the outgoing Servicer under the Lockbox Agreement. In such
event, the successor Servicer shall be deemed to have assumed all of the
outgoing Servicer's interest therein and to have replaced the outgoing
Servicer as a party to each such Lockbox Agreement to the same extent as if
such Lockbox Agreement had been assigned to the successor Servicer, except
that the outgoing Servicer shall not thereby be relieved of any liability or
obligations on the part of the outgoing Servicer to the Lockbox Bank under
such Lockbox Agreement. The outgoing Servicer shall, upon request of the
Owner Trustee but at the expense of the outgoing Servicer, deliver to the
successor Servicer all documents and records relating to each such Agreement
and an accounting of amounts collected and held by the Lockbox Bank and
otherwise use its best efforts to effect the orderly and efficient transfer
of any Lockbox Agreement to the successor Servicer. In the event that JPMD
elects to change the identity of the Lockbox Bank, the outgoing Servicer, at
its expense, shall cause the Lockbox Bank to deliver, at the direction of
JPMD to the Owner Trustee or a successor Lockbox Bank, all documents and
records relating to the Receivables and all amounts held (or thereafter
received) by the Lockbox Bank (together with an accounting of such amounts)
and shall otherwise use its best efforts to effect the orderly and efficient
transfer of the lockbox arrangements and the Servicer shall notify the
Obligors to make payments to the Lockbox established by the successor.
-39-
<PAGE>
(e) The Servicer shall remit all payments by or on behalf of the
Obligors received directly by the Servicer to the Subcollection Account or to
the Lockbox Bank for deposit into the Collection Account without deposit into
any intervening account as soon as practicable, but in no event later than
the Business Day after receipt thereof.
Section 3.3. REALIZATION UPON RECEIVABLES. (a) Consistent with the
standards, policies and procedures required by this Agreement, the Servicer
shall use its best efforts to repossess (or otherwise comparably convert the
ownership of) and liquidate any Financed Vehicle securing a Receivable with
respect to which the Servicer has determined that payments thereunder are not
likely to be resumed, as soon as is practicable after default on such
Receivable but in no event later than the date on which all or any portion of
a Scheduled Payment has become 91 days delinquent. The Servicer is
authorized to follow such customary practices and procedures as it shall deem
necessary or advisable, consistent with the standard of care required by
Section 3.1, which practices and procedures may include reasonable efforts to
realize upon any recourse to Dealers, the sale of the related Financed
Vehicle at public or private sale, the submission of claims under an
Insurance Policy and other actions by the Servicer in order to realize upon
such a Receivable. The foregoing is subject to the provision that, in any
case in which the Financed Vehicle shall have suffered damage, the Servicer
shall not expend funds in connection with any repair or towards the
repossession of such Financed Vehicle unless it shall determine in its
discretion that such repair and/or repossession shall increase the proceeds
of liquidation of the related Receivable by an amount greater than the amount
of such expenses. All amounts received upon liquidation of a Financed
Vehicle shall be remitted directly by the Servicer to the Subcollection
Account without deposit into any intervening account as soon as practicable,
but in no event later than the Business Day after receipt thereof. The
Servicer shall be entitled to recover all reasonable expenses incurred by it
in the course of repossessing and liquidating a Financed Vehicle into cash
proceeds, but only out of the cash proceeds of such Financed Vehicle, any
deficiency obtained from the Obligor or any amounts received from the related
Dealer, which amounts may be retained by the Servicer (and shall not be
required to be deposited as provided in Section 3.2(e)) to the extent of such
expenses. The Servicer shall pay on behalf of the Trust any personal
property taxes assessed on repossessed Financed Vehicles; the Servicer shall
be entitled to reimbursement of any such tax from Liquidation Proceeds with
respect to such Receivable.
(b) If the Servicer elects to commence a legal proceeding to enforce a
Dealer Agreement or Dealer Assignment, the act of commencement shall be
deemed to be an automatic assignment from the Trust and the Indenture Trustee
to the Servicer of the rights under such Dealer Agreement and Dealer
Assignment for purposes of collection only. If, however, in any enforcement
suit or legal proceeding, it is held that the Servicer may not enforce a
Dealer Agreement or Dealer Assignment on the grounds that it is not a real
party in interest or a Person entitled to enforce the Dealer Agreement or
Dealer Assignment, the Owner Trustee, at the Servicer's expense, or the
Seller, at the Seller's expense, shall take such steps as the Servicer deems
necessary to enforce the Dealer
-40-
<PAGE>
Agreement or Dealer Assignment, including bringing suit in its name or the
name of the Seller or of the Owner Trustee for the benefit of the
Certificateholders and the Indenture Trustee in respect of the Secured
Obligations. All amounts recovered shall be remitted directly by the
Servicer as provided in Section 3.2(e).
Section 3.4. INSURANCE. (a) The Servicer shall require that each
Financed Vehicle be insured by the Insurance Policies referred to in
Paragraph 24 of the Schedule of Representations (the "Collateral Insurance")
and shall monitor the status of such physical loss and damage insurance
coverage thereafter, in accordance with its customary servicing procedures.
Each Receivable requires the Obligor to maintain such physical loss and
damage insurance, naming OFL and its successors and assigns as additional
insureds, and permits the holder of such Receivable to obtain physical loss
and damage insurance at the expense of the Obligor if the Obligor fails to
maintain such insurance. If the Servicer shall determine that an Obligor has
failed to obtain or maintain a physical loss and damage Insurance Policy
covering the related Financed Vehicle which satisfies the conditions set
forth in clause (i)(a) of such Paragraph 24 (including, without limitation,
during the repossession of such Financed Vehicle) the Servicer shall enforce
the rights of the holder of the Receivable under the Receivable to require
the Obligor to obtain such physical loss and damage insurance.
(b) The Servicer may, if an Obligor fails to obtain or maintain a
physical loss and damage Insurance Policy, obtain insurance with respect to
the related Financed Vehicle and advance on behalf of such Obligor, as
required under the terms of the insurance policy, the premiums for such
insurance (such insurance being referred to herein as "Force-Placed
Insurance"). All policies of Force-Placed Insurance shall be endorsed with
clauses providing for loss payable to the Owner Trustee. Any cost incurred
by the Servicer in maintaining such Force-Placed Insurance shall only be
recoverable out of premiums paid by the Obligors or Liquidation Proceeds with
respect to the Receivable, as provided in Section 3.4(c).
(c) In connection with any Force-Placed Insurance obtained hereunder,
the Servicer may, in the manner and to the extent permitted by applicable
law, require the Obligors to repay the entire premium to the Servicer. In no
event shall the Servicer include the amount of the premium in the Amount
Financed under the Receivable. For all purposes of this Agreement, the
Insurance Add-On Amount with respect to any Receivable having Force-Placed
Insurance will be treated as a separate obligation of the Obligor and will
not be added to the Principal Balance of such Receivable, and amounts
allocable thereto will not be available for distribution on the Notes or the
Certificates. The Servicer shall retain and separately administer the right
to receive payments from Obligors with respect to Insurance Add-On Amounts or
rebates of Forced-Placed Insurance premiums. If an Obligor makes a payment
with respect to a Receivable having Force-Placed Insurance, but the Servicer
is unable to determine whether the payment is allocable to the Receivable or
to the Insurance Add-On Amount, the payment shall be applied first to any
unpaid
-41-
<PAGE>
Scheduled Payments and then to the Insurance Add-On Amount. Liquidation
Proceeds on any Receivable will be used first to pay the Principal Balance
and accrued interest on such Receivable and then to pay the related Insurance
Add-On Amount. If an Obligor under a Receivable with respect to which the
Servicer has placed Force-Placed Insurance fails to make scheduled payments
of such Insurance Add-On Amount as due, and the Servicer has determined that
eventual payment of the Insurance Add-On Amount is unlikely, the Servicer
may, but shall not be required to, purchase such Receivable from the Trust
for the Purchase Amount on any subsequent Deposit Date. Any such Receivable,
and any Receivable with respect to which the Servicer has placed Force-Placed
Insurance which has been paid in full (excluding any Insurance Add-On
Amounts) will be assigned to the Servicer.
(d) The Servicer may sue to enforce or collect upon the Insurance
Policies, in its own name, if possible, or as agent of the Trust. If the
Servicer elects to commence a legal proceeding to enforce an Insurance
Policy, the act of commencement shall be deemed to be an automatic assignment
of the rights of the Trust under such Insurance Policy to the Servicer for
purposes of collection only. If, however, in any enforcement suit or legal
proceeding it is held that the Servicer may not enforce an Insurance Policy
on the grounds that it is not a real party in interest or a holder entitled
to enforce the Insurance Policy, the Owner Trustee, on behalf of the Trust,
at the Servicer's expense, or the Seller, at the Seller's expense, shall take
such steps as the Servicer deems necessary to enforce such Insurance Policy,
including bringing suit in its name or the name of the Owner Trustee for the
benefit of the Certificateholders and the Indenture Trustee in respect of the
Secured Obligations.
(e) Subject to the fourth sentence of this subsection (e), the Servicer
shall maintain a vendor's single interest or other collateral protection
insurance policy with respect to all Financed Vehicles which policy shall by
its terms insure against physical damage in the event any Obligor fails to
maintain physical loss and damage insurance with respect to the related
Financed Vehicle. Costs incurred by the Servicer in maintaining such
insurance shall be paid by the Servicer. The Servicer will cause itself to
be named as named insured and the Owner Trustee to be named a loss payee
under all such policies. The Servicer may, with the consent of JPMD, elect
not to maintain such insurance policy but in such event will be obligated to
indemnify the Trust against any losses arising from an Obligor's failure to
maintain physical loss and damage insurance with respect to the related
Financed Vehicle.
Section 3.5. MAINTENANCE OF SECURITY INTERESTS IN VEHICLES. (a)
Consistent with the policies and procedures required by this Agreement, the
Servicer shall take such steps as are necessary to maintain perfection of the
security interest created by each Receivable in the related Financed Vehicle
on behalf of the Trust, including but not limited to obtaining the execution
by the Obligors and the recording, registering, filing, re-recording,
re-filing, and re-registering of all security agreements, financing
statements and continuation statements as
-42-
<PAGE>
are necessary to maintain the security interest granted by the Obligors under
the respective Receivables. The Owner Trustee hereby authorizes the
Servicer, and the Servicer agrees, to take any and all steps necessary to
re-perfect such security interest on behalf of the Trust as necessary because
of the relocation of a Financed Vehicle or for any other reason. In the
event that the assignment of a Receivable to the Owner Trustee on behalf of
the Trust is insufficient, without a notation on the related Financed
Vehicle's certificate of title, or without fulfilling any additional
administrative requirements under the laws of the state in which the Financed
Vehicle is located, to perfect a security interest in the related Financed
Vehicle in favor of the Trust, the Servicer hereby agrees that the Servicer's
designation as the secured party on the certificate of title is in its
capacity as agent of the Trust.
(b) Upon the occurrence of a Servicer Termination Event, the Owner
Trustee and the Servicer shall take or cause to be taken such action as may,
in the opinion of counsel to the Owner Trustee, be necessary to perfect or
re-perfect the security interests in the Financed Vehicles securing the
Receivables in the name of the Trust by amending the title documents of such
Financed Vehicles or by such other reasonable means as may, in the opinion of
counsel to the Owner Trustee, be necessary or prudent. OFL hereby agrees to
pay all expenses related to such perfection or re-perfection and to take all
action necessary therefor.
Section 3.6. COVENANTS, REPRESENTATIONS, AND WARRANTIES OF SERVICER.
By its execution and delivery of this Agreement, the Servicer makes the
following representations, warranties and covenants on which the Owner
Trustee relies in accepting the Receivables in trust and issuing the
Certificates and the Notes on behalf of the Trust and on which the Indenture
Trustee relies in authenticating the Notes.
(a) The Servicer covenants as follows:
(i) LIENS IN FORCE. The Financed Vehicle securing each Receivable
shall not be released in whole or in part from the security interest
granted by the Receivable, except upon payment in full of the Receivable or
as otherwise contemplated herein;
(ii) NO IMPAIRMENT. The Servicer shall do nothing to impair the
rights of the Trust, the Certificateholders or the Noteholders in the
Receivables, the Dealer Agreements, the Dealer Assignments, the Insurance
Policies or the other Trust Property; and
(iii) NO AMENDMENTS. The Servicer shall not extend or otherwise
amend the terms of any Receivable, except in accordance with Section 3.2.
(b) The Servicer represents, warrants and covenants as of the Closing Date
as to itself:
-43-
<PAGE>
(i) ORGANIZATION AND GOOD STANDING. The Servicer has been duly
organized and is validly existing and in good standing under the laws of
its jurisdiction of organization, with power, authority and legal right to
own its properties and to conduct its business as such properties are
currently owned and such business is currently conducted, and had at all
relevant times, and now has, power, authority and legal right to enter into
and perform its obligations under this Agreement;
(ii) DUE QUALIFICATION. The Servicer is duly qualified to do
business as a foreign corporation in good standing, and has obtained all
necessary licenses and approvals, in all jurisdictions in which the
ownership or lease of property or the conduct of its business (including
the servicing of the Receivables as required by this Agreement) requires or
shall require such qualification;
(iii) POWER AND AUTHORITY. The Servicer has the power and authority
to execute and deliver this Agreement and its Related Documents and to
carry out its terms and their terms, respectively, and the execution,
delivery and performance of this Agreement and the Servicer's Related
Documents have been duly authorized by the Servicer by all necessary
corporate action;
(iv) BINDING OBLIGATION. This Agreement and the Servicer's Related
Documents shall constitute legal, valid and binding obligations of the
Servicer enforceable in accordance with their respective terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization, or
other similar laws affecting the enforcement of creditors' rights generally
and by equitable limitations on the availability of specific remedies,
regardless of whether such enforceability is considered in a proceeding in
equity or at law;
(v) NO VIOLATION. The consummation of the transactions contemplated
by this Agreement and the Servicer's Related Documents, and the fulfillment
of the terms of this Agreement and the Servicer's Related Documents, shall
not conflict with, result in any breach of any of the terms and provisions
of, or constitute (with or without notice or lapse of time) a default
under, the articles of incorporation or bylaws of the Servicer, or any
indenture, agreement, mortgage, deed of trust or other instrument to which
the Servicer is a party or by which it is bound, or result in the creation
or imposition of any Lien upon any of its properties pursuant to the terms
of any such indenture, agreement, mortgage, deed of trust or other
instrument, other than this Agreement, or violate any law, order, rule or
regulation applicable to the Servicer of any court or of any federal or
state regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Servicer or any of its
properties. Notwithstanding the foregoing, it is understood that no
representation or warranty is expressed herein with respect to the legality
of the use of the word "Olympic" by the Servicer;
-44-
<PAGE>
(vi) NO PROCEEDINGS. There are no proceedings or investigations
pending or, to the Servicer's knowledge, threatened against the Servicer,
before any court, regulatory body, administrative agency or other tribunal
or governmental instrumentality having jurisdiction over the Servicer or
its properties (A) asserting the invalidity of this Agreement or any of the
Related Documents, (B) seeking to prevent the issuance of the Certificates
or the Notes or the consummation of any of the transactions contemplated by
this Agreement or any of the Related Documents, or (C) seeking any
determination or ruling that might materially and adversely affect the
performance by the Servicer of its obligations under, or the validity or
enforceability of, this Agreement or any of the Related Documents or (D)
seeking to adversely affect the federal income tax or other federal, state
or local tax attributes of the Certificates or the Notes;
(vii) NO CONSENTS. The Servicer is not required to obtain the
consent of any other party or any consent, license, approval or
authorization, or registration or declaration with, any governmental
authority, bureau or agency in connection with the execution, delivery,
performance, validity or enforceability of this Agreement;
(viii) COLLATERAL INSURANCE. The Collateral Insurance is in full
force and effect.
Section 3.7. PURCHASE OF RECEIVABLES UPON BREACH OF COVENANT. Upon
discovery by any of the Servicer, the Owner Trustee or the Indenture Trustee
of a breach of any of the covenants set forth in Sections 3.5(a) or 3.6(a),
the party discovering such breach shall give prompt written notice to the
others; PROVIDED, HOWEVER, that the failure to give any such notice shall not
affect any obligation of the Servicer. As of the second Accounting Date
following its discovery or receipt of notice of any breach of any covenant
set forth in Sections 3.5(a) or 3.6(a) which materially and adversely affects
the interests of the Certificateholders, the Noteholders or the Trust in any
Receivable (including any Liquidated Receivable) (or, at the Servicer's
election, the first Accounting Date so following), the Servicer shall, unless
it shall have cured such breach in all material respects, purchase from the
Trust the Receivable affected by such breach and, on the related Deposit
Date, the Servicer shall pay the related Purchase Amount. It is understood
and agreed that the obligation of the Servicer to purchase any Receivable
(including any Liquidated Receivable) with respect to which such a breach has
occurred and is continuing shall, if such obligation is fulfilled, constitute
the sole remedy against the Servicer for such breach available to the
Certificateholders, the Noteholders, the Owner Trustee on behalf of
Certificateholders or the Indenture Trustee on behalf of Noteholders;
PROVIDED, HOWEVER, that the Servicer shall indemnify the Owner Trustee, the
Backup Servicer, the Trust, the Indenture Trustee, the Noteholders and the
Certificateholders against all costs, expenses, losses, damages, claims and
liabilities, including reasonable fees and expenses of counsel, which may be
asserted against or incurred by any of them as a result of third party claims
arising out of the events or facts giving rise to such breach.
-45-
<PAGE>
Section 3.8. TOTAL SERVICING FEE; PAYMENT OF CERTAIN EXPENSES BY
SERVICER. On each Distribution Date, the Servicer shall be entitled to
receive out of the Collection Account the Basic Servicing Fee and any
Supplemental Servicing Fee for the related Monthly Period pursuant to Section
4.6. The Servicer shall be required to pay all expenses incurred by it in
connection with its activities under this Agreement (including taxes imposed
on the Servicer), expenses incurred in connection with distributions and
reports to Certificateholders and Noteholders and all other fees and expenses
of the Trust, including taxes levied or assessed against the Trust, and
claims against the Trust in respect of indemnification, unless such fees,
expenses or claims in respect of indemnification are expressly stated to be
for the account of OFL or not to be for the account of the Servicer. The
Servicer shall be liable for the fees and expenses of the Owner Trustee, the
Administrator, the Indenture Trustee, the Custodian, the Backup Servicer, the
Lockbox Bank (and any fees under the Lockbox Agreement) and the Independent
Accountants. Notwithstanding the foregoing, if the Servicer shall not be
OFL, a successor to OFL as Servicer permitted by Section 7.2 or an Affiliate
of any of the foregoing, such Servicer shall not be liable for taxes levied
or assessed against the Trust or claims against the Trust in respect of
indemnification.
Section 3.9. SERVICER'S CERTIFICATE. (a) No later than 10:00 a.m. New
York City time on each Determination Date, the Servicer shall deliver to the
Owner Trustee, the Indenture Trustee, the Backup Servicer, JPMD and each
Rating Agency a Servicer's Certificate executed by a Responsible Officer of
the Servicer containing, among other things, (i) all information necessary to
enable the Indenture Trustee to make the distributions required by Section
4.6 and to determine the amount to which the Servicer is entitled to be
reimbursed or has been reimbursed during the related Monthly Period for
Monthly Advances pursuant to Section 4.4(d), (ii) all information necessary
to enable the Indenture Trustee to send the statements to Noteholders,
Certificateholders and JPMD required by Section 4.9, (iii) a listing of all
Warranty Receivables and Administrative Receivables purchased as of the
related Deposit Date, identifying the Receivables so purchased and (iv) all
information necessary to enable the Indenture Trustee to reconcile all
deposits to, and withdrawals from, the Collection Account for the related
Monthly Period and Distribution Date, including the accounting required by
Section 4.8. Receivables purchased by the Servicer or by the Seller or OFL
on the related Deposit Date and each Receivable which became a Liquidated
Receivable or which was paid in full during the related Monthly Period shall
be identified by account number (as set forth in the Schedule of
Receivables). A copy of such certificate may be obtained by any
Certificateholder or Noteholder (or by a Certificate Owner or Note Owner,
upon certification that such Person is a Certificate Owner or Note Owner and
payment of any expenses associated with the distribution thereof) by a
request in writing to the Indenture Trustee addressed to the Corporate Trust
Office. In addition to the information set forth in the preceding sentence,
the Servicer's Certificate delivered to the Indenture Trustee and JPMD on the
Determination Date shall also contain the following information: (a) the
Delinquency Ratio, Portfolio Loss Ratio, Warehousing Loss Ratio and Average
Net Excess Spread
-46-
<PAGE>
Percentage for such Determination Date; (b) whether any Trigger Event has
occurred as of such Determination Date; (c) whether any Trigger Event that
may have occurred as of a prior Determination Date is Deemed Cured as of such
Determination Date; (d) whether to the knowledge of the Servicer a Purchase
Termination Event or Servicer Termination Event has occurred; and (e) such
other information as JPMD requests from time to time.
(b) No later than 10:00 a.m. New York City time on the date that is
five Business Days prior to a Trust Property Liquidation Date, the Servicer
shall deliver to the Owner Trustee, the Indenture Trustee, the Backup
Servicer, JPMD and each Rating Agency, a Servicer's Certificate executed by a
Responsible Officer of the Servicer containing, among other things, (i) all
information necessary for the distributions in Section 4.7, (ii) a listing of
all purchasers of Receivables identifying the Receivables being purchased by
each purchaser, (iii) for Receivables being purchased by the Seller
specifying the specific source of funds for payment of the Seller's portion
of the purchase price, (iv) the aggregate purchase price, and (v) whether the
purchase of Trust Property will be in connection with a final liquidation and
termination of the Trust.
Section 3.10. ANNUAL STATEMENT AS TO COMPLIANCE; NOTICE OF SERVICER
TERMINATION EVENT. (a) The Servicer shall deliver to the Owner Trustee, the
Indenture Trustee, the Backup Servicer, JPMD and each Rating Agency, on or
before March 31 (or 90 days after the end of the Servicer's fiscal year, if
other than December 31) of each year, beginning on March 31, 1997, an
officer's certificate signed by any Responsible Officer of the Servicer,
dated as of December 31 (or other applicable date) of the immediately
preceding year, stating that (i) a review of the activities of the Servicer
during the preceding 12-month period (or such other period as shall have
elapsed from the Closing Date to the date of the first such certificate) and
of its performance under this Agreement has been made under such officer's
supervision, and (ii) to such officer's knowledge, based on such review, the
Servicer has fulfilled all its obligations under this Agreement throughout
such period, or, if there has been a default in the fulfillment of any such
obligation, specifying each such default known to such officer and the nature
and status thereof.
(b) The Servicer shall deliver to the Owner Trustee, the Indenture
Trustee, the Backup Servicer, JPMD and each Rating Agency, promptly after
having obtained knowledge thereof, but in no event later than 2 Business Days
thereafter, written notice in an officer's certificate of any event which
with the giving of notice or lapse of time, or both, would become a Servicer
Termination Event under Section 8.1(a). The Seller or the Servicer shall
deliver to the Owner Trustee, the Indenture Trustee, the Backup Servicer,
JPMD, the Servicer or the Seller (as applicable) and each Rating Agency
promptly after having obtained knowledge thereof, but in no event later than
2 Business Days thereafter, written notice in an officer's certificate of any
event which with the giving of notice or lapse of time, or both, would become
a Servicer Termination Event under any other clause of Section 8.1.
-47-
<PAGE>
Section 3.11. ANNUAL INDEPENDENT ACCOUNTANTS' REPORT. (a) The
Servicer shall cause a firm of nationally recognized independent certified
public accountants (the "Independent Accountants"), who may also render other
services to the Servicer or to the Seller, to deliver to the Owner Trustee,
the Indenture Trustee, the Backup Servicer, JPMD and each Rating Agency, on
or before March 31 (or 90 days after the end of the Servicer's fiscal year,
if other than December 31) of each year, beginning on March 31, 1997, with
respect to the twelve months ended the immediately preceding December 31 (or
other applicable date) (or such other period as shall have elapsed from the
Closing Date to the date of such certificate), a statement (the "Accountant's
Report") addressed to the Board of Directors of the Servicer, to the Owner
Trustee, the Indenture Trustee, the Backup Servicer and to JPMD to the effect
that such firm has audited the financial statements of the Servicer and
issued its report thereon and that such audit was made in accordance with
generally accepted auditing standards, and accordingly included such tests of
the accounting records and such other auditing procedures as such firm
considered necessary in the circumstances including procedures as determined
by the Independent Accountants related to (1) the documents and records
concerning the servicing of automobile installment sales contracts under
pooling and servicing agreements and sale and servicing agreements
substantially similar one to another (such statement to have attached thereto
a schedule setting forth the pooling and servicing agreements and sale and
servicing agreements covered thereby, including this Agreement); and (2) the
delinquency and loss statistics relating to the Servicer's portfolio of
automobile installment sales contracts; and except as described in the
statement, disclosed no exceptions or errors in the records relating to
automobile and light truck loans serviced for others that, in the firm's
opinion, generally accepted auditing standards requires such firm to report.
The Accountants' Report shall further state that (1) a review in accordance
with agreed upon procedures was made of three randomly selected Servicer's
Certificates for each Trust and (2) except as disclosed in the Report, no
exceptions or errors in the Servicer's Certificates so examined were found.
(b) The Accountants' Report shall also indicate that the firm is
independent of the Seller and the Servicer within the meaning of the Code of
Professional Ethics of the American Institute of Certified Public Accountants.
(c) A copy of the Accountants' Report may be obtained by any
Certificateholder or Noteholder by a request in writing to the Indenture
Trustee addressed to the Corporate Trust Office.
Section 3.12. ACCESS TO CERTAIN DOCUMENTATION AND INFORMATION REGARDING
RECEIVABLES. The Servicer shall provide to representatives of the Owner
Trustee, Indenture Trustee, the Backup Servicer and JPMD reasonable access to
the documentation regarding the Receivables. The Servicer shall provide such
access to any Certificateholder or Noteholder only after the occurrence of a
Certificate Purchase Termination Event or a Note Purchase Termination Event,
as the case may be, or in such cases where the Servicer is required by
applicable statutes or regulations (whether applicable to the Servicer or to
-48-
<PAGE>
such Certificateholder or Noteholder) to permit such Certificateholder or
Noteholder to review such documentation. In each case, such access shall be
afforded without charge but only upon reasonable request and during normal
business hours. Nothing in this Section shall derogate from the obligation
of the Servicer to observe any applicable law prohibiting disclosure of
information regarding the Obligors, and the failure of the Servicer to
provide access as provided in this Section as a result of such obligation
shall not constitute a breach of this Section. Any Certificateholder or
Noteholder, by its acceptance of a Certificate or Note (or by acquisition of
its beneficial interest therein), as applicable, shall be deemed to have
agreed to keep confidential and not to use for its own benefit any
information obtained by it pursuant to this Section, except as may be
required by applicable law or requested or required in court proceedings or
by regulatory authority.
Section 3.13. MONTHLY TAPE. On or before the third Business Day, but in
no event later than the fifth calendar day, of each month, the Servicer will
deliver to the Indenture Trustee and the Backup Servicer a computer tape and a
diskette (or any other electronic transmission acceptable to the Indenture
Trustee and the Backup Servicer) in a format acceptable to the Indenture Trustee
and the Backup Servicer containing the information with respect to the
Receivables as of the preceding Accounting Date necessary for preparation of the
Servicer's Certificate relating to the immediately succeeding Determination Date
and necessary to determine the application of collections as provided in Section
4.3. The Backup Servicer shall use such tape or diskette (or other electronic
transmission acceptable to the Indenture Trustee and the Backup Servicer) to
verify the Servicer's Certificate delivered by the Servicer, and the Backup
Servicer shall certify to JPMD that it has verified the Servicer's Certificate
in accordance with this Section 3.13 and shall notify the Servicer and JPMD of
any discrepancies, in each case, on or before the second Business Day following
the Determination Date. In the event that the Backup Servicer reports any
discrepancies, the Servicer and the Backup Servicer shall attempt to reconcile
such discrepancies prior to the fourth Business Day prior to the related
Distribution Date, but in the absence of a reconciliation, the Servicer's
Certificate shall control for the purpose of calculations and distributions with
respect to the related Distribution Date. In the event that the Backup Servicer
and the Servicer are unable to reconcile discrepancies with respect to a
Servicer's Certificate by the related Distribution Date, the Servicer shall
cause the Independent Accountants, at the Servicer's expense, to audit the
Servicer's Certificate and, prior to the third Business Day, but in no event
later than the fifth calendar day, of the following month, reconcile the
discrepancies. The effect, if any, of such reconciliation shall be reflected in
the Servicer's Certificate for such next succeeding Determination Date. In
addition, the Servicer shall, if so requested by the Backup Servicer deliver to
the Backup Servicer its Collection Records and its Monthly Records within one
Business Day of demand therefor and a computer tape containing as of the close
of business on the date of demand all of the data maintained by the Servicer in
computer format in connection with servicing the Receivables. Other than the
duties specifically set forth in this Agreement, the Backup Servicer shall have
no obligations hereunder, including, without limitation, to supervise, verify,
monitor or administer the
-49-
<PAGE>
performance of the Servicer. The Backup Servicer shall have no liability for
any actions taken or omitted by the Servicer. The duties and obligations of
the Backup Servicer shall be determined solely by the express provisions of
this Agreement, and no implied covenants or obligations shall be read into
this Agreement against the Backup Servicer.
Section 3.14. RETENTION OF SERVICER. The Servicer hereby covenants and
agrees to act as such under this Agreement until the termination of the
Trust, subject to and in accordance with the terms and conditions of this
Agreement.
Section 3.15. FIDELITY BOND. The Servicer shall maintain a fidelity
bond in such form and amount as is customary for entities acting as custodian
of funds and documents in respect of consumer contracts on behalf of
institutional investors.
Section 3.16. DUTIES OF THE SERVICER UNDER THE INDENTURE. The Servicer
shall, and hereby agrees that it will, perform on behalf of the Trust and the
Owner Trustee the following duties of the Trust or the Owner Trustee, as
applicable, under the Indenture (references are to the applicable Sections in
the Indenture):
(a) the direction to the Paying Agents, if any, to deposit moneys
with the Indenture Trustee (Section 3.03);
(b) the obtaining and preservation of the Issuer's qualification to
do business in each jurisdiction in which such qualification is or shall be
necessary to protect the validity and enforceability of the Indenture, the
Notes, the Indenture Collateral and each other instrument and agreement
included in the Trust Estate (Section 3.04);
(c) the preparation of all supplements, amendments, financing
statements, continuation statements, instruments of further assurance and
other instruments, in accordance with Section 3.05 of the Indenture,
necessary to protect the Trust Estate (Section 3.05);
(d) the delivery of the Opinion of Counsel on the Closing Date and
the annual delivery of Opinions of Counsel, in accordance with Section 3.06
of the Indenture, as to the Trust Estate, and the annual delivery of the
Officer's Certificate and certain other statements, in accordance with
Section 3.09 of the Indenture, as to compliance with the Indenture
(Sections 3.06 and 3.09);
(e) the preparation and obtaining of documents and instruments
required for the release of the Issuer from its obligations under the
Indenture (Section 3.10(b));
(f) the monitoring of the Issuer's obligations as to the satisfaction
and discharge of the Indenture and the preparation of an Officer's
Certificate and the
-50-
<PAGE>
obtaining of the Opinion of Counsel and the Independent Certificate
relating thereto (Section 4.01);
(g) the preparation of any written instruments required to confirm
more fully the authority of any co-trustee or separate trustee and any
written instruments necessary in connection with the resignation or removal
of any co-trustee or separate trustee (Sections 6.08 and 6.10);
(h) the opening of one or more accounts in the Trust's name, the
preparation of Issuer Orders, Officer's Certificates and Opinions of
Counsel and all other actions necessary with respect to investment and
reinvestment of funds in the Trust Accounts (Sections 8.02 and 8.03);
(i) the preparation of Trust Orders and the obtaining of Opinions of
Counsel with respect to the execution of supplemental indentures (Sections
9.01, 9.02 and 9.03);
(j) the preparation of all Officer's Certificates, Opinions of
Counsel and Independent Certificates with respect to any requests by the
Issuer to the Indenture Trustee to take any action under the Indenture
(Section 11.01(a));
(k) the preparation and delivery of Officer's Certificates and the
obtaining of Independent Certificates, if necessary, for the release of
property from the lien of the Indenture (Section 11.01(b)); and
(l) the recording of the Indenture, if applicable (Section 11.15).
In addition to the duties of the Servicer set forth above, the Servicer
shall, and hereby agrees that it will, prepare, distribute and file any
reports required by Section 313(b) of the Trust Indenture Act of 1939 as a
result of any transfer of Receivables. Such distribution and filing is to be
effected by the Servicer's distribution and filing of the Servicer's
Certificate.
Section 3.17. DAILY REPORT. The Servicer shall provide to the
Indenture Trustee, the Owner Trustee and JPMD a daily report setting forth
the principal collections with respect to the Receivables for the previous
day.
Section 3.18. CERTAIN DUTIES OF THE SERVICER UNDER THE TRUST AGREEMENT.
The Servicer shall, and hereby agrees that it will, monitor the Trust's
compliance with all applicable provisions of state and federal securities
laws, notify the Trust and the Administrator of any actions to be taken by
the Trust necessary for compliance with such laws and prepare on behalf of
the Trust and the Administrator all notices, filings or other documents or
instruments required to be filed under such laws.
-51-
<PAGE>
ARTICLE IV
DISTRIBUTIONS; STATEMENTS TO
CERTIFICATEHOLDERS AND NOTEHOLDERS
Section 4.1. TRUST ACCOUNTS. (a) The Servicer shall establish the
Collection Account in the name of the Indenture Trustee for the benefit of
the Certificateholders and in respect of the Secured Obligations. The
Collection Account shall be an Eligible Account and initially shall be a
segregated trust account established with the Indenture Trustee and
maintained with the Indenture Trustee.
(b) The Servicer shall establish the Note Distribution Account in the
name of the Indenture Trustee in respect of the Secured Obligations. The
Note Distribution Account shall be an Eligible Account and initially shall be
a segregated trust account established with the Indenture Trustee and
maintained with the Indenture Trustee.
(c) The Servicer shall establish the Spread Account in the name of the
Indenture Trustee for the benefit of the Certificateholders and in respect of
the Secured Obligations. The Spread Account shall be an Eligible Account and
initially shall be a segregated trust account established with the Indenture
Trustee and maintained with the Indenture Trustee.
(d) The Servicer shall establish the Principal Funding Account in the
name of the Indenture Trustee for the benefit of the Certificateholders and
in respect of the Secured Obligations. The Principal Funding Account shall
be an Eligible Account and initially shall be a segregated trust account
established with the Indenture Trustee and maintained with the Indenture
Trustee.
(e) All amounts held in the Collection Account, the Note Distribution
Account, the Spread Account and the Principal Funding Account (collectively,
the "Trust Accounts") shall, to the extent permitted by applicable laws,
rules and regulations, be invested, as directed by the Servicer, in Eligible
Investments that mature not later than one Business Day prior to the
Distribution Date for the Monthly Period to which such amounts relate. Any
such written direction shall certify that any such investment is authorized
by this Section 4.1. Any investment of funds in the Trust Accounts 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 Indenture
Trustee, (b) with respect to securities held in such account, such securities
shall be (i) certificated securities (as such term is used in N.Y. UCC
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
-52-
<PAGE>
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 Indenture Trustee'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 Indenture Trustee on the records of such
institution, and such institution shall have sent the Indenture Trustee 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
Indenture Trustee 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 Indenture Trustee. Subject to the other
provisions hereof, the Indenture Trustee shall have sole control over each
such investment and the income thereon, and any certificate or other
instrument evidencing any such investment, if any, shall be delivered
directly to the Indenture Trustee or its agent, together with each document
of transfer, if any, necessary to transfer title to such investment to the
Indenture Trustee in a manner which complies with this Section 4.1. All
interest, dividends, gains upon sale and other income from, or earnings on,
investments of funds in the Trust Accounts (other than the Spread Account)
shall be deposited in the Collection Account and distributed on the next
Distribution Date pursuant to Section 4.6. All interest, dividends, gains
upon sale and other income from, or earnings on, investments of funds in the
Spread Account shall remain in the Spread Account. The Servicer shall
deposit in the applicable Trust Account an amount equal to any net loss on
such investments immediately as realized.
(f) On each Transfer Date, the Servicer shall deposit in the Collection
Account (i) all Scheduled Payments and prepayments of Receivables received by
the Servicer after the Cutoff Date and on or prior to the Business Day
immediately preceding the applicable Transfer Date or received by the Lockbox
Bank after the Cutoff Date and on or prior to the second Business Day
immediately preceding the applicable Transfer Date and (ii) all Liquidation
Proceeds and proceeds of Insurance Policies realized in respect of a Financed
Vehicle and applied by the Servicer after the Cutoff Date.
Section 4.2. COLLECTIONS. (a) The Servicer shall establish the
Subcollection Account in the name of the Indenture Trustee for the benefit of
the Certificateholders and the Noteholders. The Subcollection Account shall
be an Eligible Account and shall initially be established with the Indenture
Trustee. The Servicer shall remit directly to the Subcollection Account
without deposit into any intervening account all payments by or on behalf of
the Obligors on the Receivables and all Liquidation Proceeds received by the
Servicer, in each case, as soon as practicable, but in no event later than
the Business Day
-53-
<PAGE>
after receipt thereof. Within two days of deposit of payments into the
Subcollection Account, the Indenture Trustee shall transfer all amounts
credited to the Subcollection Account on account of such payments to the
Collection Account. Amounts in the Subcollection Account shall not be
invested.
(b) On each Deposit Date related to a Distribution Date (i) prior to
the Purchase Termination Date and (ii) so long as the Facility Balance is
less than or equal to the Facility Limit, all amounts on deposit in the
Collection Account allocable the Noteholders' Principal Distributable Amount
and the Certificateholders' Principal Distributable Amount shall be deposited
into the Principal Funding Account. On each Deposit Date preceding a
Distribution Date on or after the occurrence of the Purchase Termination
Date, amounts on deposit in the Principal Funding Account shall be deposited
into the Note Distribution Account or the Certificate Distribution Account,
as Collections and applied in accordance with Section 4.6 hereof. On each
Deposit Date preceding a Distribution Date on which the Facility Balance
would exceed the Facility Limit (after giving effect to a reduction thereof
requested by the Seller) (provided that a Purchase Termination Date shall not
have been declared pursuant to Section 2.1(c)(2)), amounts on deposit in the
Principal Funding Account equal to such excess shall be deposited into the
Note Distribution Account as Collections and applied in accordance with
Section 4.6 hereof. Notwithstanding the foregoing, if on any Determination
Date the amount on deposit in the Principal Funding Account exceeds the
aggregate Purchase Price with respect to Receivables to be purchased during
the remainder of the Monthly Period during which such Determination Date
occurs, as determined by the Servicer in its sole discretion (the amount of
such excess, the "Principal Funding Excess Amount"), an amount equal to the
Principal Funding Excess Amount shall be deposited into the Note Distribution
Account and the Certificate Distribution Account, as applicable, and applied
in accordance with Section 4.6 hereof.
(c) Notwithstanding the provisions of subsection (a) hereof, the
Servicer will be entitled to be reimbursed from amounts on deposit in the
Collection Account with respect to a Monthly Period for amounts previously
deposited in the Collection Account but later determined by the Servicer or
the Lockbox Bank to have resulted from mistaken deposits or postings or
checks returned for insufficient funds. The amount to be reimbursed
hereunder shall be paid to the Servicer on the related Distribution Date
pursuant to Section 4.6(iii) upon certification by the Servicer of such
amounts and the provision of such information to the Indenture Trustee as may
be necessary in the opinion of the Indenture Trustee to verify the accuracy
of such certification.
Section 4.3. APPLICATION OF COLLECTIONS. For the purposes of this
Agreement, all collections for a Monthly Period shall be applied by the
Servicer as follows:
(a) With respect to each Receivable, payments by or on behalf of the
Obligor thereof (other than of Supplemental Servicing Fees with respect to
such Receivable, to the extent collected) shall be applied to interest and
principal with respect to such Receivable
-54-
<PAGE>
in accordance with the terms of such Receivable. With respect to each
Liquidated Receivable, Liquidation Proceeds shall be applied to interest and
principal with respect to such Receivable in accordance with the terms of
such Receivable, and then to any Insurance Add-On Amount due and payable with
respect to such Receivable. The Servicer shall not be entitled to any
Supplemental Servicing Fees with respect to a Liquidated Receivable.
(b) With respect to each Receivable that has become a Purchased
Receivable on any Deposit Date, the Purchase Amount shall be applied, for
purposes of this Agreement only, to interest and principal on the Receivable
in accordance with the terms of the Receivable as if the Purchase Amount had
been paid by the Obligor on the Accounting Date. The Servicer shall not be
entitled to any Supplemental Servicing Fees with respect to such a
Receivable. Nothing contained herein shall relieve any Obligor of any
obligation relating to any Receivable.
(c) All amounts collected that are payable to the Servicer as
Supplemental Servicing Fees hereunder shall be deposited in the Collection
Account and paid to the Servicer in accordance with Section 4.6(iii).
(d) All payments by or on behalf of an Obligor received with respect to
any Purchased Receivable after the Accounting Date immediately preceding the
Deposit Date on which the Purchase Amount was paid by the Seller, OFL or the
Servicer shall be paid to the Seller, OFL or the Servicer, respectively, and
shall not be included in the Available Funds.
Section 4.4. MONTHLY ADVANCES. (a) As of any Determination Date as of
which no Trigger Event has occurred, and any previous Trigger Event has been
Deemed Cured, (i) the Servicer shall be obligated to make a Monthly Advance
on the related Deposit Date in an amount equal to the lesser of (x) the
aggregate Collection Shortfall with respect to Receivables for which a
Scheduled Payment was due during such Monthly Period and (y) the Net Advance
Amount; and (ii) to the extent the amount the Servicer is obligated to
advance pursuant to sub-clause (i) above is less than the Net Advance Amount
(such amount, the "Net Advance Shortfall"), the Seller shall be obligated to
make a Monthly Advance on the related Deposit Date in an amount equal to the
lesser of (x) the aggregate Collection Shortfall with respect to Receivables
for which no Scheduled Payment was due during such Monthly Period and (y) the
Net Advance Shortfall; PROVIDED, HOWEVER, that neither the Servicer nor the
Seller shall be required to make a Monthly Advance with respect to a
Receivable extended pursuant to Section 3.2(b) for any Monthly Period during
which no Scheduled Payment is due according to the terms of such extension.
(b) As of any Determination Date as of which a Trigger Event has occurred,
or as of which any previous Trigger Event has not been Deemed Cured, the
Servicer and the Seller, as specified below, shall be required to make Monthly
Advances as follows: if there
-55-
<PAGE>
are Collection Shortfalls with respect to any Receivables, the Servicer, with
respect to Receivables for which a Scheduled Payment was due during such
Monthly Period, or the Seller, with respect to Receivables for which no
Scheduled Payment was due during such Monthly Period, shall make a Monthly
Advance equal to the amount of such Collection Shortfall; PROVIDED, HOWEVER,
that neither the Servicer nor the Seller shall be required to make a Monthly
Advance for a Collection Shortfall with respect to a Receivable extended
pursuant to Section 3.2(b) for any Monthly Period during which no Scheduled
Payment is due according to the terms of such extension.
(c) On or before each Deposit Date, the Servicer and the Seller, as
applicable, shall deposit in the Collection Account the aggregate amount of
Monthly Advances required for the related Monthly Period in immediately
available funds (subject to Section 4.8).
(d) The Servicer shall be entitled to be reimbursed for Outstanding
Monthly Advances made in accordance with Section 4.4(a)(i) or Section 4.4(b)
pursuant to Section 4.6(i), Section 4.7(i) or Section 4.8 with respect to any
Receivable with respect to which a Collection Shortfall existed from the
following sources received on any day subsequent to the Distribution Date in
respect of which such Monthly Advance was made: (i) subsequent payments by or
on behalf of the Obligor with respect to such Receivable, (ii) collections of
Liquidation Proceeds with respect to such Receivable if such Receivable becomes
a Liquidated Receivable and (iii) payment of any Purchase Amount with respect to
such Receivable if such Receivable becomes a Purchased Receivable. If any
Receivable shall become a Liquidated Receivable and the Servicer shall not have
been fully reimbursed for Outstanding Monthly Advances with respect to such
Receivable from the sources of funds previously described in this paragraph, the
Servicer shall be entitled to reimbursement from collections on Receivables
other than the Receivable in respect of which such Outstanding Monthly Advance
shall have been made.
Section 4.5. ADDITIONAL DEPOSITS. On or before each Deposit Date, the
Servicer or OFL shall deposit in the Collection Account the aggregate Purchase
Amounts with respect to Administrative Receivables and Warranty Receivables,
respectively. All such deposits of Purchase Amounts shall be made in
immediately available funds.
Section 4.6. DISTRIBUTIONS. On each Distribution Date (except as
otherwise provided in priorities (v) and (vii) below), the Indenture Trustee
shall (based on the information contained in the Servicer's Certificate
delivered on the related Determination Date) distribute the following amounts
and in the order of priority specified below. Within each order of priority
(other than priority (viii) or (ix)), amounts shall be deemed withdrawn first
from Available Funds and second from any Deficiency Claim Amount.
(i) first, from the Distribution Amount, (A) to the Trust for payment
of any taxes due and unpaid with respect to the Trust, to the extent such
taxes have not been previously paid by OFL or by the Servicer pursuant to
Section 3.8, and (B)
-56-
<PAGE>
then to the Servicer, the amount of Outstanding Monthly Advances for
which the Servicer is entitled to be reimbursed pursuant to Section
4.4(d) and for which the Servicer has not previously been reimbursed
pursuant to Section 4.8;
(ii) second, from the Distribution Amount, to the Owner Trustee, any
accrued and unpaid fees of the Owner Trustee in accordance with the Trust
Agreement and including amounts with respect to which the Administrator is
entitled to be reimbursed pursuant to the Administration Agreement; to the
Indenture Trustee, any accrued and unpaid fees of the Indenture Trustee in
accordance with the Indenture; to any Lockbox Bank, Custodian, Backup
Servicer or Administrator (including the Owner Trustee or Indenture Trustee
if acting in any such additional capacity), any accrued and unpaid fees (in
each case, to the extent such Person has not previously received such
amount from the Servicer or OFL), to the Backup Servicer, any transition
expenses (not to exceed $50,000) in accordance with Section 8.3; PROVIDED,
HOWEVER, if the accrued and unpaid fees of the Owner Trustee, the Indenture
Trustee, the Backup Servicer and the Administrator to be distributed
pursuant to this clause (ii) are in excess of the amount (the "Servicer Fee
Threshold") obtained by dividing (x) .20% of the Aggregate Principal
Balance by (y) twelve, any accrued and unpaid fees in excess of the
Servicer Fee Threshold remaining to be distributed pursuant to this clause
(ii) shall not be distributed pursuant to this clause (ii) but shall be
distributed after the distributions to be made pursuant to clause (v) below
but before the distributions to be made pursuant to clause (vi) below;
(iii) third, from the Distribution Amount, to the Servicer, the Basic
Servicing Fee for the related Monthly Period, any Supplemental Servicing
Fees for the related Monthly Period, and any amounts specified in Section
4.2(b), to the extent the Servicer has not reimbursed itself in respect of
such amounts pursuant to Section 4.8;
(iv) fourth, from the Distribution Amount, to the Note Distribution
Account, an amount equal to the Noteholders' Interest Distributable Amount
for such Distribution Date;
(v) fifth, to the Note Distribution Account, (w) on each Distribution
Date, an amount equal to the Noteholders' Percentage of any Principal
Funding Excess Amount, (x) on each Distribution Date prior to the Purchase
Termination Date on which the Facility Balance exceeds the Facility Limit,
an amount equal to the excess of (1) the Facility Balance over (2) the
Facility Limit and (y) on each Distribution Date on or after the Purchase
Termination Date, from the Distribution Amount, an amount equal to the
Noteholders' Principal Distributable Amount for such Distribution Date;
-57-
<PAGE>
(vi) sixth, from the Distribution Amount, to the Certificate
Distribution Account, an amount equal to the Certificateholders' Interest
Distributable Amount for such Distribution Date;
(vii) seventh, to the Certificate Distribution Account, (x) on each
Distribution Date, an amount equal to the Certificateholders' Percentage of
any Principal Funding Excess Amount and (y) on each Distribution Date on or
after the Purchase Termination Date, from the Distribution Amount, an
amount equal to the Certificateholders' Principal Distributable Amount for
such Distribution Date; and
(viii) eighth, (A) if (i) a Trigger Event shall have occurred or (ii)
any previous Trigger Event has not been Deemed Cured and OFL is no longer
required to maintain any hedging arrangement in accordance with Section
2.1(b)(1)(xiv) hereof, any remaining Available Funds shall be deposited
into the Spread Account; or (B) if no Trigger Event shall have occurred and
be continuing and any previous Trigger Event shall have been Deemed Cured,
FIRST, from Available Funds, if any amounts are due and owing to any
Indemnified Party (as such term is used in the Note Purchase Agreement)
under Section 11.01, Section 11.04 or Section 11.05 of the Note Purchase
Agreement, such amount shall be deposited into the Note Distribution
Account for distribution to such Indemnified Parties, SECOND, from
Available Funds, if any amounts are due and owing to any Indemnified Party
(as such term is used in the Certificate Purchase Agreement) under Section
11.01, Section 11.04 or Section 11.05 of the Certificate Purchase
Agreement, such amount shall be deposited into the Certificate Distribution
Account for distribution to such Indemnified Parties, and THIRD, any
remaining Available Funds shall be released to the Seller.
Section 4.7. DISTRIBUTIONS ON TRUST PROPERTY LIQUIDATION. On any Trust
Property Liquidation Date, the Indenture Trustee shall (based on the information
contained in the Servicer's Certificate delivered pursuant to Section 3.9(b))
distribute the following amounts and in the order of priority specified below.
Within each order of priority amounts shall be withdrawn first from Available
Funds and second from any Deficiency Claim Amount.
(i) first, from the Distribution Amount and, without duplication,
from amounts deposited into the Collection Account pursuant to Section
9.1(b), (A) to the Trust for payment of any taxes due and unpaid with
respect to the Trust, to the extent such taxes have not been previously
paid by OFL or by the Servicer pursuant to Section 3.8, and (B) then to the
Servicer, the amount of Outstanding Monthly Advances for which the Servicer
is entitled to be reimbursed pursuant to Section 4.4(d) and for which the
Servicer has not previously been reimbursed pursuant to Section 4.8;
-58-
<PAGE>
(ii) second, from the Distribution Amount and, without duplication,
from amounts deposited into the Collection Account pursuant to Section
9.1(b), to the Owner Trustee, any accrued and unpaid fees of the Owner
Trustee in accordance with the Trust Agreement and including amounts with
respect to which the Administrator is entitled to be reimbursed pursuant to
the Administration Agreement; to the Indenture Trustee, any accrued and
unpaid fees of the Indenture Trustee in accordance with the Indenture; to
any Lockbox Bank, Custodian, Backup Servicer or Administrator (including
the Owner Trustee or Indenture Trustee if acting in any such additional
capacity), any accrued and unpaid fees (in each case, to the extent such
Person has not previously received such amount from the Servicer or OFL),
to the Backup Servicer, any transition expenses (not to exceed $50,000) in
accordance with Section 8.3; PROVIDED, HOWEVER, if the accrued and unpaid
fees of the Owner Trustee, the Indenture Trustee, the Backup Servicer and
the Administrator to be distributed pursuant to this clause (ii) are in
excess of the Servicer Fee Threshold, any accrued and unpaid fees in excess
of the Servicer Fee Threshold remaining to be distributed pursuant to this
clause (ii) shall not be distributed pursuant to this clause (ii) but shall
be distributed after the distributions to be made pursuant to clause (v)
below but before the distributions to be made pursuant to clause (vi)
below;
(iii) third, from the Distribution Amount and, without duplication,
from amounts deposited into the Collection Account pursuant to Section
9.1(b), to the Servicer, the Basic Servicing Fee, any Supplemental
Servicing Fees that have accrued and remain unpaid and any amounts
specified in Section 4.2(b), to the extent the Servicer has not reimbursed
itself in respect of such amounts pursuant to Section 4.8;
(iv) fourth, from the Distribution Amount and, without duplication,
from amounts deposited into the Collection Account pursuant to Section
9.1(b), to the Note Distribution Account, an amount equal to all accrued
and unpaid interest on the Notes to and including the Trust Property
Liquidation Date, plus all breakage payments on the Notes specified in the
Note Purchase Agreement (together with any amounts required to fund the
Commercial Paper Funding Account pursuant to the Note Purchase Agreement);
(v) fifth, from the Distribution Amount and, without duplication,
from amounts deposited into the Collection Account pursuant to Section
9.1(b), to the Note Distribution Account, an amount equal to the
Outstanding principal amount of Notes;
(vi) sixth, from the Distribution Amount and, without duplication,
from amounts deposited into the Collection Account pursuant to Section
9.1(b), to the Certificate Distribution Account, an amount equal to all
accrued and unpaid interest
-59-
<PAGE>
on the Certificates to and including the Trust Property Liquidation Date
plus all breakage payments on the Certificates as specified in the
Certificate Purchase Agreement;
(vii) seventh, from the Distribution Amount and, without duplication,
from amounts deposited into the Collection Account pursuant to Section
9.1(b), to the Certificate Distribution Account, an amount equal to the
Certificate Balance; and
(viii) eighth, from Available Funds and, without duplication, from
amounts deposited into the Collection Account pursuant to Section 9.1(b),
FIRST, if any amounts are due and owing to any Indemnified Party (as such
term is used in the Note Purchase Agreement) under Section 11.01, Section
11.04 or Section 11.05 of the Note Purchase Agreement, such amount shall be
deposited into the Note Distribution Account for distribution to such
Indemnified Parties and SECOND, from Available Funds and, without
duplication, from amounts deposited into the Collection Account pursuant to
Section 9.1(b), if any amounts are due and owing to any Indemnified Party
(as such term is used in the Certificate Purchase Agreement) under Section
11.01, Section 11.04 or Section 11.05 of the Certificate Purchase
Agreement, such amount shall be deposited into the Certificate Distribution
Account for distribution to such Indemnified Parties.
Section 4.8. NET DEPOSITS. Subject to payment by the Servicer of amounts
otherwise payable pursuant to Section 4.6(ii) and provided that no Servicer
Termination Event shall have occurred and be continuing with respect to such
Servicer, the Servicer may make the remittances to be made by it pursuant to
Sections 4.2, 4.4 and 4.5 net of amounts (which amounts may be netted prior to
any such remittance for a Monthly Period) to be distributed to it pursuant to
Sections 3.8, 4.2(b) and 4.6(i); PROVIDED, HOWEVER, that the Servicer shall
account for all of such amounts in the related Servicer's Certificate as if such
amounts were deposited and distributed separately; and, PROVIDED, FURTHER, that
if an error is made by the Servicer in calculating the amount to be deposited or
retained by it, with the result that an amount less than required is deposited
in the Collection Account, the Servicer shall make a payment of the deficiency
to the Collection Account, immediately upon becoming aware, or receiving notice
from the Indenture Trustee, of such error.
Section 4.9. STATEMENTS TO CERTIFICATEHOLDERS AND NOTEHOLDERS. (a) On
each Distribution Date, the Owner Trustee shall deliver to each
Certificateholder (other than the General Partner) and JPMD, a statement based
on information in the Servicer's Certificate delivered on the related
Determination Date pursuant to Section 3.9, setting forth for the Monthly Period
or Interest Accrual Period, as applicable, relating to such Distribution Date
the following information:
(i) the amount of such distribution allocable to principal;
-60-
<PAGE>
(ii) the amount of such distribution allocable to interest;
(iii) the amount of such distribution payable out of amounts
withdrawn from the Spread Account;
(iv) the Certificate Balance and the remaining balance of the Notes
(after giving effect to distributions made on such Distribution Date);
(v) the Noteholders' Interest Carryover Shortfall, the
Certificateholders' Interest Carryover Shortfall and the
Certificateholders' Principal Carryover Shortfall, if any, and the change
in such amounts from the preceding statement; and
(vi) the amount of fees paid by the Trust with respect to such
Monthly Period.
Each amount set forth pursuant to subclauses (i) through (iv) above may be
expressed as a dollar amount per $1,000 of original principal balance of a
Certificate.
(b) On each Payment Date, the Indenture Trustee shall deliver to each
Noteholder and JPMD, a statement based on information in the Servicer's
Certificate delivered on the related Determination Date pursuant to Section 3.9,
setting forth for the Monthly Period or Interest Accrual Period, as applicable,
relating to such Payment Date the following information with respect to the
Notes:
(i) the amount of such distribution allocable to principal;
(ii) the amount of such distribution allocable to interest;
(iii) the amount of such distribution payable out of amounts
withdrawn from the Spread Account;
(iv) the outstanding principal balance of the Notes and the remaining
Certificate Balance (after giving effect to distributions made on such
Payment Date);
(v) the Noteholders' Interest Carryover Shortfall, the
Certificateholders' Interest Carryover Shortfall and the
Certificateholders' Principal Carryover Shortfall, if any, and the change
in such amounts from the preceding statement; and
(vi) the amount of fees paid by the Trust with respect to such
Monthly Period.
Each amount set forth pursuant to subclauses (i) through (iv) above may be
expressed as a dollar amount per $1,000 of original principal balance of a Note.
-61-
<PAGE>
Section 4.10. INDENTURE TRUSTEE AS AGENT. The Indenture Trustee, in
holding all funds in the Trust Accounts and in making distributions as provided
in this Agreement, shall act solely on behalf of and as agent for the
Certificateholders and the Noteholders.
Section 4.11. ELIGIBLE ACCOUNTS. Any account which is required to be
established as an Eligible Account pursuant to this Agreement and which ceases
to be an Eligible Account shall within 5 Business Days (or such longer period,
not to exceed 30 days, as to which each Rating Agency may consent) be
established as a new account which shall be an Eligible Account and any cash
and/or any investments shall be transferred to such new account.
ARTICLE V
THE SPREAD ACCOUNT
Section 5.1. WITHDRAWALS FROM SPREAD ACCOUNT. (a) In the event that the
Servicer's Certificate with respect to any Determination Date shall state that
the Deficiency Claim Amount (as defined below) with respect to the related
Distribution Date is greater than zero, then the Indenture Trustee shall, on the
Deposit Date, withdraw from the Spread Account an amount equal to the lesser of
(x) the Deficiency Claim Amount and (y) the amount on deposit in the Spread
Account, and deposit such amount into the Collection Account. The "Deficiency
Claim Amount" with respect to any Distribution Date shall equal the excess, if
any, of
(i) the amount required to be distributed pursuant to clauses (i) -
(vii) of Section 4.6, or clauses (i) - (vii) of Section 4.7, as applicable,
over
(ii) the Available Funds with respect to such Distribution Date.
(b) All amounts, if any, remaining on deposit in the Spread Account
immediately following the distribution of the amounts required by clauses (i) -
(vii) of Section 4.7 in connection with a sale of not less than all of the
Receivables in the Trust pursuant to Section 9.1(b) hereof shall be distributed
to the Seller.
ARTICLE VI
THE SELLER
Section 6.1. LIABILITY OF SELLER. The Seller shall be liable hereunder
only to the extent of the obligations in this Agreement specifically undertaken
by the Seller and the representations made by the Seller.
-62-
<PAGE>
Section 6.2. MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE
OBLIGATIONS OF, SELLER; AMENDMENT OF CERTIFICATE OF INCORPORATION. (a) The
Seller shall not merge or consolidate with any other Person or permit any
other Person to become the successor to the Seller's business without the
prior written consent of JPMD. The certificate of incorporation of any
corporation (i) into which the Seller may be merged or consolidated, (ii)
resulting from any merger or consolidation to which the Seller shall be a
party, or (iii) succeeding to the business of Seller, shall contain
provisions relating to limitations on business and other matters
substantively identical to those contained in the Seller's certificate of
incorporation. Any such successor corporation shall execute an agreement of
assumption of every obligation of the Seller under this Agreement and each
Related Document and, whether or not such assumption agreement is executed,
shall be the successor to the Seller under this Agreement without the
execution or filing of any document or any further act on the part of any of
the parties to this Agreement. The Seller shall provide prompt, written
notice of any merger, consolidation or succession pursuant to this Section
6.2 to the Owner Trustee, the Indenture Trustee, JPMD and the Rating
Agencies. Notwithstanding the foregoing, the Seller shall not merge or
consolidate with any other Person or permit any other Person to become a
successor to the Seller's business, unless (x) immediately after giving
effect to such transaction, no representation or warranty made pursuant to
Section 2.5 shall have been breached (for purposes hereof, such
representations and warranties shall speak as of the date of the consummation
of such transaction) and no event that, after notice or lapse of time, or
both, would become a Servicer Termination Event shall have occurred and be
continuing, (y) the Seller shall have delivered to the Owner Trustee, the
Indenture Trustee and JPMD an officer's certificate and an Opinion of Counsel
each stating that such consolidation, merger or succession and such agreement
of assumption comply with this Section 6.2 and that all conditions precedent,
if any, provided for in this Agreement relating to such transaction have been
complied with, and (z) the Seller shall have delivered to the Owner Trustee,
the Indenture Trustee and JPMD an Opinion of Counsel, stating, in the opinion
of such counsel, either (A) all financing statements and continuation
statements and amendments thereto have been executed and filed that are
necessary to preserve and protect the interest of the Trust in the Trust
Property and reciting the details of the filings or (B) no such action shall
be necessary to preserve and protect such interest.
(b) The Seller hereby agrees that it shall not (i) take any action
prohibited by Article XVI of its certificate of incorporation or (ii) without
the prior written consent of the Owner Trustee, the Indenture Trustee and
JPMD, amend Article III, Article IX, Article XIV or Article XVI of its
certificate of incorporation.
Section 6.3. LIMITATION ON LIABILITY OF SELLER AND OTHERS. The Seller and
any director or officer or employee or agent of the Seller may rely in good
faith on the advice of counsel or on any document of any kind prima facie
properly executed and submitted by any Person respecting any matters arising
under this Agreement. The Seller shall not be under any obligation to appear
in, prosecute or defend any legal action that is not
-63-
<PAGE>
incidental to its obligations as Seller of the Receivables under this
Agreement and that in its opinion may involve it in any expense or liability.
Section 6.4. SELLER MAY OWN CERTIFICATES OR NOTES. Each of the Seller and
any Affiliate of the Seller may in its individual or any other capacity become
the owner or pledgee of Certificates or Notes with the same rights as it would
have if it were not the Seller or an Affiliate thereof except as otherwise
specifically provided herein or in the Related Documents. Certificates or Notes
so owned by or pledged to the Seller or such Affiliate shall have an equal and
proportionate benefit under the provisions of this Agreement or any Related
Document, without preference, priority, or distinction as among all of the
Certificates or Notes, provided that any Certificates or Notes owned by the
Seller or any Affiliate thereof, during the time such Certificates or Notes are
owned by them, shall be without voting rights for any purpose set forth in this
Agreement or any Related Document. The Seller shall notify the Owner Trustee,
the Indenture Trustee and JPMD promptly after it or any of its Affiliates become
the owner or pledgee of a Certificate or Note.
Section 6.5. LIMITED RECOURSE UPON SECURITIZED OFFERING. As a condition
precedent to the optional redemption of the Notes under Section 10.01(b) of the
Indenture in connection with a Securitized Offering, the Seller shall be
obligated to purchase from the Trust, on or prior to the date on which such
redemption of Notes occurs, all Ineligible Receivables for a purchase price
equal to the Purchase Amount for such Ineligible Receivables.
ARTICLE VII
THE SERVICER
Section 7.1. LIABILITY OF SERVICER; INDEMNITIES. (a) The Servicer (in
its capacity as such and, in the case of OFL, without limitation of its
obligations under the Purchase Agreement) shall be liable hereunder only to the
extent of the obligations in this Agreement specifically undertaken by the
Servicer and the representations made by the Servicer.
(b) The Servicer shall defend, indemnify and hold harmless the Trust, the
Owner Trustee, the Indenture Trustee, the Backup Servicer, JPMD, their
respective officers, directors, agents and employees, the Certificateholders and
the Noteholders from and against any and all costs, expenses, losses, damages,
claims and liabilities, including reasonable fees and expenses of counsel and
expenses of litigation arising out of or resulting from the use, ownership or
operation by the Servicer or any Affiliate thereof of any Financed Vehicle.
-64-
<PAGE>
(c) The Servicer shall indemnify, defend and hold harmless the Trust,
the Owner Trustee, the Indenture Trustee, the Backup Servicer, JPMD, their
respective officers, directors, agents and employees, the Certificateholders
and the Noteholders from and against any taxes that may at any time be
asserted against the Trust, the Owner Trustee, the Indenture Trustee, the
Backup Servicer, JPMD, the Certificateholders or the Noteholders with respect
to the transactions contemplated in this Agreement, including, without
limitation, any sales, gross receipts, general corporation, tangible personal
property, privilege or license taxes (but not including any taxes asserted
with respect to, and as of the date of, the sale of the Receivables and the
other Trust Property to the Trust or the issuance and original sale of the
Certificates and the Notes, or federal or other income taxes arising out of
distributions on the Certificates) and costs and expenses in defending
against the same.
(d) The Servicer shall indemnify, defend and hold harmless the Trust,
the Owner Trustee, the Indenture Trustee, the Backup Servicer, JPMD, their
respective officers, directors, agents and employees, the Certificateholders
and the Noteholders from and against any and all costs, expenses, losses,
claims, damages, and liabilities to the extent that such cost, expense, loss,
claim, damage, or liability arose out of, or was imposed upon the Trust, the
Owner Trustee, the Indenture Trustee, the Backup Servicer, JPMD, the
Certificateholders or the Noteholders through the breach of this Agreement,
the negligence, willful misfeasance, or bad faith of the Servicer in the
performance of its duties under this Agreement or by reason of reckless
disregard of its obligations and duties under this Agreement.
(e) The Servicer shall indemnify, defend, and hold harmless the Owner
Trustee, in its individual capacity, its officers, directors, agents and
employees, from and against all costs, taxes (other than income taxes on fees
and expenses payable to the Owner Trustee), expenses, losses, claims, damages
and liabilities arising out of or incurred in connection with the acceptance
or performance of the trusts and duties contained in the Trust Agreement and
the Related Documents, except to the extent that such cost, taxes (other than
income taxes), expense, loss, claim, damage or liability (A) is due to the
willful misfeasance or gross negligence of the Owner Trustee, or (B) arises
from the Owner Trustee's breach of any of its representations or warranties
set forth in Section 7.3 of the Trust Agreement; PROVIDED, HOWEVER, that
amounts payable under this paragraph shall be increased by the amount of
income taxes actually paid by the Owner Trustee in respect of any indemnity
payment unless the Owner Trustee received or can reasonably be expected to
receive a tax deduction for the related loss or cost.
(f) Indemnification under this Article shall include, without limitation,
reasonable fees and expenses of counsel and expenses of litigation. If the
Servicer has made any indemnity payments pursuant to this Article and the
recipient thereafter collects any of such amounts from others, the recipient
shall promptly repay such amounts collected to the Servicer, without interest.
-65-
<PAGE>
(g) OFL, in its individual capacity, hereby acknowledges that the
indemnification provisions in the Purchase Agreement benefiting the Trust, the
Owner Trustee, the Indenture Trustee, the Backup Servicer and JPMD are
enforceable by each hereunder.
Section 7.2. MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE
OBLIGATIONS OF, THE SERVICER OR BACKUP SERVICER. (a) The Servicer shall not
merge or consolidate with any other person, convey, transfer or lease
substantially all its assets as an entirety to another Person, or permit any
other Person to become the successor to the Servicer's business unless, after
the merger, consolidation, conveyance, transfer, lease or succession, the
successor or surviving entity shall be an Eligible Servicer and shall be
capable of fulfilling the duties of the Servicer contained in this Agreement.
Any corporation (i) into which the Servicer may be merged or consolidated,
(ii) resulting from any merger or consolidation to which the Servicer shall
be a party, (iii) which acquires by conveyance, transfer, or lease
substantially all of the assets of the Servicer, or (iv) succeeding to the
business of the Servicer, in any of the foregoing cases shall execute an
agreement of assumption to perform every obligation of the Servicer under
this Agreement and, whether or not such assumption agreement is executed,
shall be the successor to the Servicer under this Agreement without the
execution or filing of any paper or any further act on the part of any of the
parties to this Agreement, anything in this Agreement to the contrary
notwithstanding; PROVIDED, HOWEVER, that nothing contained herein shall be
deemed to release the Servicer from any obligation. The Servicer shall
provide notice of any merger, consolidation or succession pursuant to this
Section 7.2(a) to the Owner Trustee, the Indenture Trustee, the Backup
Servicer, JPMD and each Rating Agency. Notwithstanding the foregoing, the
Servicer shall not merge or consolidate with any other Person or permit any
other Person to become a successor to the Servicer's business, unless (x)
immediately after giving effect to such transaction, no representation or
warranty made pursuant to Section 3.6 shall have been breached (for purposes
hereof, such representations and warranties shall speak as of the date of the
consummation of such transaction) and no event that, after notice or lapse of
time, or both, would become a Servicer Termination Event shall have occurred
and be continuing, (y) the Servicer shall have delivered to the Owner
Trustee, the Indenture Trustee and JPMD an Officer's Certificate and an
Opinion of Counsel each stating that such consolidation, merger or succession
and such agreement of assumption comply with this Section 7.2(a) and that all
conditions precedent, if any, provided for in this Agreement relating to such
transaction have been complied with, and (z) the Servicer shall have
delivered to the Owner Trustee, the Indenture Trustee and JPMD an Opinion of
Counsel, stating that, in the opinion of such counsel, either (A) all
financing statements and continuation statements and amendments thereto have
been executed and filed that are necessary to preserve and protect the
interest of the Owner Trustee and the Indenture Trustee in the Trust Property
and reciting the details of the filings or (B) no such action shall be
necessary to preserve and protect such interest.
(b) Any corporation (i) into which the Backup Servicer may be merged or
consolidated, (ii) resulting from any merger or consolidation to which the
Backup Servicer
-66-
<PAGE>
shall be a party, (iii) which acquires by conveyance, transfer or lease
substantially all of the assets of the Backup Servicer, or (iv) succeeding to
the business of the Backup Servicer, in any of the foregoing cases shall
execute an agreement of assumption to perform every obligation of the Backup
Servicer under this Agreement and, whether or not such assumption agreement
is executed, shall be the successor to the Backup Servicer under this
Agreement without the execution or filing of any paper or any further act on
the part of any of the parties to this Agreement, anything in this Agreement
to the contrary notwithstanding; PROVIDED, HOWEVER, that nothing contained
herein shall be deemed to release the Backup Servicer from any obligation.
Section 7.3. LIMITATION ON LIABILITY OF SERVICER, BACKUP SERVICER AND
OTHERS. (a) Neither the Servicer, the Backup Servicer nor any of the directors
or officers or employees or agents of the Servicer or Backup Servicer shall be
under any liability to the Trust, the Certificateholders or the Noteholders,
except as provided in this Agreement, for any action taken or for refraining
from the taking of any action pursuant to this Agreement; PROVIDED, HOWEVER,
that this provision shall not protect the Servicer, the Backup Servicer or any
such person against any liability that would otherwise be imposed by reason of a
breach of this Agreement or willful misfeasance, bad faith or negligence
(excluding errors in judgment) in the performance of duties, by reason of
reckless disregard of obligations and duties under this Agreement or any
violation of law by the Servicer, Backup Servicer or such person, as the case
may be; PROVIDED FURTHER, that this provision shall not affect any liability to
indemnify the Owner Trustee and the Indenture Trustee for costs, taxes,
expenses, claims, liabilities, losses or damages paid by the Owner Trustee or
the Indenture Trustee, each in its individual capacity. The Servicer, the
Backup Servicer and any director, officer, employee or agent of the Servicer or
Backup Servicer may rely in good faith on the advice of counsel or on any
document of any kind PRIMA FACIE properly executed and submitted by any Person
respecting any matters arising under this Agreement.
(b) The Backup Servicer shall not be liable for any obligation of the
Servicer contained in this Agreement, and the Owner Trustee, the Indenture
Trustee, the Seller, JPMD, the Noteholders and the Certificateholders shall look
only to the Servicer to perform such obligations.
Section 7.4. DELEGATION OF DUTIES. The Servicer may delegate duties under
this Agreement to an Affiliate of OFL with the prior written consent of JPMD,
the Indenture Trustee, the Owner Trustee and the Backup Servicer (which consent
shall not be unreasonably withheld). Neither OFL nor any party acting as
Servicer hereunder shall appoint any subservicer hereunder without the prior
written consent of JPMD, the Indenture Trustee, the Owner Trustee and the Backup
Servicer (which consent shall not be unreasonably withheld). Notwithstanding
the foregoing, the Servicer also may at any time and in its sole discretion
perform the specific duty of repossession of Financed Vehicles through
sub-contractors who are in the business of servicing automotive receivables,
-67-
<PAGE>
PROVIDED, HOWEVER, that no such delegation or sub-contracting of duties by the
Servicer shall relieve the Servicer of its responsibility with respect to such
duties.
Section 7.5. SERVICER AND BACKUP SERVICER NOT TO RESIGN. Subject to the
provisions of Section 7.2, neither the Servicer nor the Backup Servicer shall
resign from the obligations and duties imposed on it by this Agreement as
Servicer or Backup Servicer except upon a determination that by reason of a
change in legal requirements the performance of its duties under this Agreement
would cause it to be in violation of such legal requirements in a manner which
would have a material adverse effect on the Servicer or the Backup Servicer, as
the case may be, and JPMD does not elect to waive the obligations of the
Servicer or the Backup Servicer, as the case may be, to perform the duties which
render it legally unable to act or to delegate those duties to another Person.
Any such determination permitting the resignation of the Servicer or Backup
Servicer shall be evidenced by an Opinion of Counsel to such effect delivered
and acceptable to JPMD, the Owner Trustee and the Indenture Trustee. No
resignation of the Servicer shall become effective until the Backup Servicer or
a successor Servicer that is an Eligible Servicer shall have assumed the
responsibilities and obligations of the Servicer. No resignation of the Backup
Servicer shall become effective until a Person that is an Eligible Servicer
shall have assumed the responsibilities and obligations of the Backup Servicer;
PROVIDED, HOWEVER, that in the event a successor Backup Servicer is not
appointed within 60 days after the Backup Servicer has given notice of its
resignation and has provided the Opinion of Counsel required by this Section
7.5, the Backup Servicer may petition a court for its removal.
ARTICLE VIII
SERVICER TERMINATION EVENTS
Section 8.1. SERVICER TERMINATION EVENT. For purposes of this Agreement,
each of the following shall constitute a "Servicer Termination Event":
(a) Any failure by the Servicer to deliver to the Indenture Trustee
for distribution to Certificateholders or Noteholders any proceeds or
payment required to be so delivered under the terms of this Agreement (or,
if OFL is the Servicer, the Purchase Agreement);
(b) Failure by the Servicer to deliver to the Indenture Trustee, the
Owner Trustee and JPMD the Servicer's Certificate by the third Business Day
prior to the Distribution Date, or failure on the part of the Servicer to
observe its covenants and agreements set forth in Section 7.2(a);
(c) Failure on the part of the Servicer or the Seller duly to observe
or perform in any material respect any other covenants or agreements of the
Servicer or the Seller set forth in this Agreement (or, if OFL is the
Servicer, the Purchase
-68-
<PAGE>
Agreement), which failure (i) materially and adversely affects the
rights of Certificateholders or Noteholders and (ii) continues
unremedied for a period of 30 days after the date on which written
notice of such failure, requiring the same to be remedied, shall have
been given to the Servicer or the Seller by the Owner Trustee, the
Indenture Trustee or any Certificateholder or Noteholder;
(d) The occurrence of an Insolvency Event with respect to the Seller
or the Servicer;
(e) Any representation, warranty or statement of the Servicer or the
Seller made in this Agreement or any certificate, report or other writing
delivered pursuant hereto shall prove to be incorrect in any material
respect as of the time when the same shall have been made (excluding,
however, any representation or warranty set forth in Section 2.5(a)), and
the incorrectness of such representation, warranty or statement has a
material adverse effect on the Trust and, within 30 days after written
notice thereof shall have been given to the Servicer or the Seller by the
Owner Trustee, the Indenture Trustee or a Certificateholder or Noteholder,
the circumstances or condition in respect of which such representation,
warranty or statement was incorrect shall not have been eliminated or
otherwise cured; or
(f) An Event of Default under the Indenture shall have occurred.
Section 8.2. CONSEQUENCES OF A SERVICER TERMINATION EVENT. If a Servicer
Termination Event shall occur and be continuing, either the Indenture Trustee,
the Owner Trustee, JPMD, by notice given in writing to the Servicer (and to the
Indenture Trustee and the Owner Trustee if given by JPMD) may terminate all of
the rights and obligations of the Servicer under this Agreement. On or after
the receipt by the Servicer of such written notice, all authority, power,
obligations and responsibilities of the Servicer under this Agreement, whether
with respect to the Certificates, the Notes or the Trust Property or otherwise,
shall be terminated and automatically shall pass to, be vested in and become
obligations and responsibilities of the Backup Servicer (or such other successor
Servicer appointed pursuant to Section 8.3(b)); PROVIDED, HOWEVER, that the
successor Servicer shall have no liability with respect to any obligation which
was required to be performed by the terminated Servicer prior to the date that
the successor Servicer becomes the Servicer or any claim of a third party based
on any alleged action or inaction of the terminated Servicer. The successor
Servicer is authorized and empowered by this Agreement to execute and deliver,
on behalf of the terminated Servicer, as attorney-in-fact or otherwise, any and
all documents and other instruments and to do or accomplish all other acts or
things necessary or appropriate to effect the purposes of such notice of
termination, whether to complete the transfer and endorsement of the Receivables
and the other Trust Property and related documents to show the Owner Trustee as
lienholder or secured party on the related Lien Certificates, or otherwise. The
terminated Servicer agrees to cooperate with the successor Servicer in effecting
the termination of the responsibilities and rights of
-69-
<PAGE>
the terminated Servicer under this Agreement, including, without limitation,
the transfer to the successor Servicer for administration by it of all cash
amounts that shall at the time be held by the terminated Servicer for
deposit, or have been deposited by the terminated Servicer, in the Collection
Account or thereafter received with respect to the Receivables and the
delivery to the successor Servicer of all Receivable Files, Monthly Records
and Collection Records and a computer tape in readable form as of the most
recent Business Day containing all information necessary to enable the
successor Servicer or a successor Servicer to service the Receivables and the
other Trust Property. If requested by JPMD, the successor Servicer shall
terminate the Lockbox Agreement and direct the Obligors to make all payments
under the Receivables directly to the successor Servicer (in which event the
successor Servicer shall process such payments in accordance with Section
3.2(e)), or to a lockbox established by the successor Servicer at the
direction of JPMD, at the successor Servicer's expense. In addition to any
other amounts that are then payable to the terminated Servicer under this
Agreement, the terminated Servicer shall then be entitled to receive out of
Available Funds reimbursements for any Outstanding Monthly Advances (in
accordance with Section 4.4(d)) made during the period prior to the notice
pursuant to this Section 8.2 which terminates the obligation and rights of
the terminated Servicer under this Agreement. The Owner Trustee, the
Indenture Trustee and the successor Servicer may set off and deduct any
amounts owed by the terminated Servicer from any amounts payable to the
terminated Servicer pursuant to the preceding sentence. The terminated
Servicer shall grant the Owner Trustee, the Indenture Trustee, JPMD and the
successor Servicer reasonable access to the terminated Servicer's premises at
the terminated Servicer's expense.
Section 8.3. APPOINTMENT OF SUCCESSOR. (a) On and after (i) the time the
Servicer receives a notice of termination pursuant to Section 8.2 or (ii) the
resignation of the Servicer pursuant to Section 7.5, the Backup Servicer (unless
pursuant to Section 8.3(b) an alternate successor Servicer has been appointed)
shall be the successor in all respects to the Servicer in its capacity as
servicer under this Agreement and the transactions set forth or provided for in
this Agreement, and shall be subject to all the responsibilities, restrictions,
duties, liabilities and termination provisions relating thereto placed on the
Servicer by the terms and provisions of this Agreement. The Owner Trustee and
such successor shall take such action, consistent with this Agreement, as shall
be necessary to effectuate any such succession. If a successor Servicer is
acting as Servicer hereunder, it shall be subject to termination under Section
8.2 upon the occurrence of any Servicer Termination Event applicable to it as
Servicer and shall serve from term to term as provided in Section 3.14.
(b) If the Backup Servicer shall be legally unable or unwilling to act as
Servicer, the Backup Servicer, the Indenture Trustee, JPMD or the Owner Trustee
may petition a court of competent jurisdiction to appoint any Eligible Servicer
as the successor to the Servicer. Pending appointment pursuant to the preceding
sentence, the Backup Servicer shall act as successor Servicer unless it is
legally unable to do so, in which event the outgoing Servicer shall continue to
act as Servicer until a successor has been appointed and accepted such
appointment. Subject to Section 7.5, no provision of this Agreement shall be
construed as
-70-
<PAGE>
relieving the Backup Servicer of its obligation to succeed as successor
Servicer upon the termination of the Servicer pursuant to Section 8.2 or the
resignation of the Servicer pursuant to Section 7.5.
(c) Any successor Servicer shall be entitled to such compensation (whether
payable out of the Collection Account or otherwise) as the Servicer would have
been entitled to under the Agreement if the Servicer had not resigned or been
terminated hereunder. If any successor Servicer is appointed as a result of the
Backup Servicer's refusal (in contravention of the terms of this Agreement) to
act as Servicer although it is legally able to do so, JPMD and such successor
Servicer may agree on reasonable additional compensation to be paid to such
successor Servicer by the Backup Servicer, which additional compensation shall
be paid by the Backup Servicer in its individual capacity and solely out of its
own funds. If any successor Servicer is appointed for any reason other than the
Backup Servicer's refusal to act as Servicer although legally able to do so,
JPMD and such successor Servicer may agree on additional compensation to be paid
to such successor Servicer, which additional compensation shall be payable from
Available Funds. If the Backup Servicer is the successor Servicer, the Backup
Servicer shall be entitled to reimbursement, pursuant to Section 4.6(ii), of
reasonable transition expenses, not in excess of $50,000, incurred in acting as
successor Servicer. In addition, any successor Servicer shall be entitled to
reimbursement from Available Funds of reasonable transition expenses incurred in
acting as successor Servicer.
Section 8.4. NOTIFICATION TO CERTIFICATEHOLDERS AND NOTEHOLDERS. Upon any
termination of, or appointment of a successor to, the Servicer pursuant to this
Article VIII, the Owner Trustee shall give prompt written notice thereof to
Certificateholders at their respective addresses appearing in the Certificate
Register and to each Rating Agency, and the Indenture Trustee shall give prompt
written notice thereof to Noteholders at their respective addresses appearing in
the Note Register.
Section 8.5. WAIVER OF PAST DEFAULTS. A Note Majority or Certificate
Majority may, on behalf of all Holders of Notes and Certificates, waive any
default by the Servicer in the performance of its obligations hereunder and its
consequences. Upon any such waiver of a past default, such default shall cease
to exist, and any Servicer Termination Event arising therefrom shall be deemed
to have been remedied for every purpose of this Agreement. No such waiver shall
extend to any subsequent or other default or impair any right consequent
thereon.
-71-
<PAGE>
ARTICLE IX
TERMINATION
Section 9.1. OPTIONAL PURCHASE OF RECEIVABLES; LIQUIDATION OF TRUST
ESTATE. (a) On each Determination Date with respect to a Distribution Date
following the Distribution Date as of which the Aggregate Principal Balance is
less than 10% of the Facility Limit, the Servicer and the Seller each shall have
the option to purchase the corpus of the Trust; PROVIDED, HOWEVER, that the
amount to be paid for such purchase (as set forth in the following sentence)
shall be sufficient to pay the full amount of principal, premium, if any, and
interest then due and payable on the Notes and the Certificates, together with
any breakage payments (including amounts needed to fund the Commercial Paper
Funding Account pursuant to the Note Purchase Agreement). To exercise such
option, the Servicer or the Seller, as the case may be, shall pay the aggregate
Purchase Amounts for the Receivables, plus the appraised value of any other
property (including the right to receive any future recoveries) held as part of
the Trust, such appraisal to be conducted by an appraiser acceptable to the
Servicer and the Seller, and shall succeed to all interests in and to the Trust
Property. The fees and expenses related to such appraisal shall be paid by the
party exercising the option to purchase. The party exercising such option to
repurchase shall deposit the aggregate Purchase Amounts for the Receivables and
the amount of the appraised value of any other property held as part of the
Trust into the Collection Account, and the Indenture Trustee shall distribute
the amounts so deposited in accordance with Section 4.6.
(b) Prior to a Recapitalization, the Seller may purchase the Trust
Property and apply the proceeds of such purchase or purchases to redeem or pay
in full Outstanding Notes and Certificates; PROVIDED, THAT,
(1) the Seller shall have provided a written notice to the
Servicer, the Indenture Trustee, the Owner Trustee, the Backup
Servicer, JPMD and the Rating Agencies setting forth the Trust
Property Liquidation Date at least 3 days prior to such proposed Trust
Property Liquidation Date and stating whether such liquidation will be
a final termination of the Trust;
(2) the Seller shall pay at least one Business Day prior to the
Trust Property Liquidation Date the aggregate Purchase Amounts for the
Receivables, plus the appraised value of any other property (including
the right to receive any future recoveries) held as part of the Trust,
plus all breakage payments (including amounts needed to fund the
Commercial Paper Funding Account pursuant to the Note Purchase
Agreement) provided in the Note Purchase Agreement and the Certificate
Purchase Agreement, and the Seller shall succeed to all interests in
and to the Trust Property. Any such appraisal shall be conducted by
an appraiser acceptable to the Seller and JPMD and the fees and
expenses related thereto shall be paid by the Seller;
-72-
<PAGE>
(3) the source of funds for the purchase of Trust Property
specified in clause (2) above shall be fully disclosed to JPMD and
shall be acceptable to JPMD;
(4) each of the Seller and OFL shall provide an Officer's
Certificate executed by its Chief Financial Officer or Treasurer
stating that the Seller or OFL, as applicable, is not insolvent
(within the meaning of the Bankruptcy Code) prior to and will not be
insolvent (within the meaning of the Bankruptcy Code) subsequent to
the purchase of Trust Property;
(5) each of the Seller and OFL shall provide to JPMD such
Opinions of Counsel as JPMD shall deem necessary and advisable in
connection with the purchase of Trust Property; and
(6) the proceeds from the purchase are sufficient to pay all the
obligations required to be paid in clauses (i) through (vii) of
Section 4.7.
All proceeds from a sale of the Trust Property pursuant to this
Section 9.1(b) shall be deposited in the Collection Account for
distribution by the Indenture Trustee pursuant to Section 4.7 hereof.
(c) Upon any sale of the assets of the Trust pursuant to Section 9.2 of
the Trust Agreement, the Owner Trustee shall instruct the Indenture Trustee to
deposit the proceeds from such sale after all payments and reserves therefrom
have been made (the "Insolvency Proceeds") in the Collection Account. On the
Distribution Date on which the Insolvency Proceeds are deposited in the
Collection Account (or, if such proceeds are not so deposited on a Distribution
Date, on the Distribution Date immediately following such deposit), the Owner
Trustee shall instruct the Indenture Trustee to make the following deposits
(after the application on such Distribution Date of the Available Funds) from
the Insolvency Proceeds:
(i) (A) to the Trust for payment of any taxes due and unpaid with
respect to the Trust, to the extent such taxes have not been previously
paid by OFL or by the Servicer pursuant to Section 3.8; (B) to the
Servicer, the amount of Outstanding Monthly Advances for which the Servicer
is entitled to be reimbursed pursuant to Section 4.4(d) and for which the
Servicer has not previously been reimbursed pursuant to Section 4.8; (C) to
the Owner Trustee, any accrued and unpaid fees of the Owner Trustee in
accordance with the Trust Agreement and including amounts with respect to
which the Administrator is entitled to be reimbursed pursuant to the
Administration Agreement; (D) to the Indenture Trustee, any accrued and
unpaid fees of the Indenture Trustee in accordance with the Indenture; (E)
to any Lockbox Bank, Custodian, Backup Servicer or Administrator (including
the Owner Trustee or Indenture Trustee if acting in any such additional
capacity), any accrued and
-73-
<PAGE>
unpaid fees (in each case, to the extent such Person has not previously
received such amount from the Servicer or OFL); and (F) to the Servicer,
the Basic Servicing Fee for the related Monthly Period, any Supplemental
Servicing Fees for the related Monthly Period, and any amounts specified
in Section 4.2(b), to the extent the Servicer has not reimbursed itself
in respect of such amounts pursuant to Section 4.8;
(ii) to the Note Distribution Account, any portion of the
Noteholders' Interest Distributable Amount not otherwise deposited into the
Note Distribution Account on such Distribution Date plus any breakage
payments specified in the Note Purchase Agreement;
(iii) to the Note Distribution Account, the outstanding principal
balance of the Notes (after giving effect to the reduction in the
outstanding principal balance of the Notes to result from the deposits
otherwise made in the Note Distribution Account on such Distribution Date);
(iv) to the Certificate Distribution Account, any portion of the
Certificateholders' Interest Distributable Amount not otherwise deposited
into the Certificate Distribution Account on such Distribution Date plus
any breakage payments specified in the Certificate Purchase Agreement; and
(v) to the Certificate Distribution Account, the Certificate Balance
(after giving effect to the reduction in the Certificate Balance to result
from the deposits otherwise made in the Certificate Distribution Account on
such Distribution Date).
Any Insolvency Proceeds remaining after the deposits described above shall be
deposited into the Certificate Distribution Account.
(d) Notice of any termination of the Trust shall be given by the Servicer
to the Owner Trustee and the Indenture Trustee as soon as practicable after the
Servicer has received notice thereof.
ARTICLE X
MISCELLANEOUS PROVISIONS
Section 10.1. AMENDMENT. (a) This Agreement may be amended by the
Seller, the Servicer and the Trust, with the prior written consent of the
Indenture Trustee and JPMD (which consent shall not be unreasonably withheld)
but without the consent of any of the Noteholders or Certificateholders, (i) to
cure any ambiguity, (ii) to correct or supplement any provisions in this
Agreement or (iii) for the purpose of adding any provision to or changing in any
manner or eliminating any provision of this Agreement or of modifying in
-74-
<PAGE>
any manner the rights of the Noteholders or the Certificateholders; PROVIDED,
HOWEVER, that such action shall not, as evidenced by an Opinion of Counsel,
adversely affect in any material respect the interests of the Noteholders or
Certificateholders.
(b) This Agreement may also be amended from time to time by the Seller,
the Servicer and the Trust with the prior written consent of the Indenture
Trustee and the Backup Servicer (which consent shall not be unreasonably
withheld) and with the consent of a Certificate Majority and a Note Majority
(which consent of any Holder of a Certificate or Note given pursuant to this
Section or pursuant to any other provision of this Agreement shall be conclusive
and binding on such Holder and on all future Holders of such Certificate or Note
and of any Certificate or Note issued upon the transfer thereof or in exchange
thereof or in lieu thereof whether or not notation of such consent is made upon
the Certificate or Note) for the purpose of adding any provisions to or changing
in any manner or eliminating any of the provisions of this Agreement, or of
modifying in any manner the rights of the Holders of Certificates or Notes;
PROVIDED, HOWEVER, that, subject to the provisions of Section 5.04 of the
Indenture, no such amendment shall (a) increase or reduce in any manner the
amount of, or accelerate or delay the timing of, collections of payments on
Receivables or distributions required to be made on any Certificate or Note or
the Certificate Rate or Note Interest Rate, (b) amend any provisions of Section
4.6 in such a manner as to affect the priority of payment of interest, principal
or premium to Noteholders or Certificateholders, or (c) reduce the aforesaid
percentage required to consent to any such amendment or any waiver hereunder,
without the consent of the Holders of all Certificates or Notes then
outstanding.
(c) Prior to the execution of any such amendment or consent, the Owner
Trustee shall furnish written notification of the substance of such amendment or
consent to each Rating Agency.
(d) Promptly after the execution of any such amendment or consent, the
Owner Trustee shall furnish written notification of the substance of such
amendment or consent to each Certificateholder and the Indenture Trustee.
STP It shall not be necessary for the consent of Certificateholders or
Noteholders pursuant to Section 10.1(b) to approve the particular form of any
proposed amendment or consent, but it shall be sufficient if such consent shall
approve the substance thereof. The manner of obtaining such consents (and any
other consents of Certificateholders and Noteholders provided for in this
Agreement) and of evidencing the authorization of the execution thereof by
Certificateholders or Noteholders shall be subject to such reasonable
requirements as the Owner Trustee or Indenture Trustee, as applicable, may
prescribe, including the establishment of record dates.
(f) Prior to the execution of any amendment to this Agreement, the Owner
Trustee and the Backup Servicer shall be entitled to receive and rely upon an
Opinion of Counsel
-75-
<PAGE>
stating that the execution of such amendment is authorized or permitted by
this Agreement, in addition to the Opinion of Counsel referred to in Section
10.2(i). The Owner Trustee and the Backup Servicer may, but shall not be
obligated to, enter into any such amendment which affects the Owner Trustee's
and the Backup Servicer's own rights, duties or immunities under this
Agreement or otherwise.
Section 10.2. PROTECTION OF TITLE TO TRUST PROPERTY. (a) The Servicer
shall execute and file such financing statements and cause to be executed and
filed such continuation and other statements, all in such manner and in such
places as may be required by law fully to preserve, maintain and protect the
interest of the Trust, the Owner Trustee and the Indenture Trustee in the
Trust Property and in the proceeds thereof. The Servicer shall deliver (or
cause to be delivered) to the Owner Trustee, the Indenture Trustee and JPMD
file-stamped copies of, or filing receipts for, any document filed as
provided above, as soon as available following such filing.
(b) Neither the Seller, the Servicer nor the Trust shall change its
name, identity or corporate structure in any manner that would, could or
might make any financing statement or continuation statement filed by the
Seller in accordance with paragraph (a) above seriously misleading within the
meaning of Section 9-402(7) of the UCC, unless it shall have given the Owner
Trustee, the Indenture Trustee and JPMD at least 60 days' prior written
notice thereof, and shall promptly file appropriate amendments to all
previously filed financing statements and continuation statements.
(c) Each of the Seller, the Servicer and the Trust shall give the Owner
Trustee, the Indenture Trustee and JPMD at least 60 days' prior written
notice of any relocation of its principal executive office if, as a result of
such relocation, the applicable provisions of the UCC would require the
filing of any amendment of any previously filed financing or continuation
statement or of any new financing statement. The Servicer shall at all times
maintain each office from which it services Receivables and its principal
executive office within the United States of America.
(d) The Servicer shall maintain accounts and records as to each
Receivable accurately and in sufficient detail to permit (i) the reader
thereof to know at any time the status of such Receivable, including payments
and recoveries made and payments owing (and the nature of each) and (ii)
reconciliation between payments or recoveries on (or with respect to) each
Receivable and the amounts from time to time deposited in the Collection
Account in respect of such Receivable.
(e) The Servicer shall maintain its computer systems so that, from and
after the time of sale under this Agreement of the Receivables to the Trust,
the Servicer's master computer records (including any backup archives) that
refer to any Receivable indicate clearly (with reference to the particular
trust) that the Receivable is owned by the Trust. Indication of the Trust's
ownership of a Receivable shall be deleted from or modified on
76
<PAGE>
the Servicer's computer systems when, and only when, the Receivable has been
paid in full or repurchased by the Seller or Servicer.
(f) If at any time the Seller or the Servicer proposes to sell, grant a
security interest in, or otherwise transfer any interest in automotive
receivables to any prospective purchaser, lender or other transferee, the
Servicer shall give to such prospective purchaser, lender or other transferee
computer tapes, records or print-outs (including any restored from backup
archives) that, if they refer in any manner whatsoever to any Receivable,
indicate clearly that such Receivable has been sold and is owned by the Trust
unless such Receivable has been paid in full or repurchased by the Seller or
Servicer.
(g) The Servicer shall permit the Owner Trustee, the Indenture Trustee,
the Backup Servicer, JPMD and their respective agents, at any time to
inspect, audit and make copies of and abstracts from the Servicer's records
regarding any Receivables or any other portion of the Trust Property.
(h) The Servicer shall furnish to the Owner Trustee, the Indenture
Trustee, the Backup Servicer and JPMD at any time upon request a list of all
Receivables then held as part of the Trust, together with a reconciliation of
such list to the Schedule of Receivables and to each of the Servicer's
Certificates furnished before such request indicating removal of Receivables
from the Trust. Upon request, the Servicer shall furnish a copy of any list
to the Seller. The Owner Trustee shall hold any such list and Schedule of
Receivables for examination by interested parties during normal business
hours at the Corporate Trust Office upon reasonable notice by such Persons of
their desire to conduct an examination.
(i) The Seller and the Servicer shall deliver to the Owner Trustee, the
Indenture Trustee and JPMD simultaneously with the execution and delivery of
this Agreement and of each amendment thereto and upon the occurrence of the
events giving rise to an obligation to give notice pursuant to Section
10.2(b) or (c), an Opinion of Counsel either (a) stating that, in the opinion
of such Counsel, all financing statements and continuation statements have
been executed and filed that are necessary fully to preserve and protect the
interest of the Owner Trustee and the Indenture Trustee in the Receivables
and the other Trust Property, and reciting the details of such filings or
referring to prior Opinions of Counsel in which such details are given, or
(b) stating that, in the opinion of such counsel, no such action is necessary
to preserve and protect such interest.
(j) The Servicer shall deliver to the Owner Trustee, the Indenture
Trustee and JPMD, within 90 days after the beginning of each calendar year
beginning with the first calendar year beginning more than three months after
the Closing Date, an Opinion of Counsel, either (a) stating that, in the
opinion of such counsel, all financing statements and continuation statements
have been executed and filed that are necessary fully to preserve and protect
the interest of the Trust and the Indenture Trustee in the Receivables, and
reciting the details of such filings or referring to prior Opinions of
Counsel in which such
77
<PAGE>
details are given, or (b) stating that, in the opinion of such counsel, no
action shall be necessary to preserve and protect such interest.
Section 10.3. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York without regard
to the principles of conflicts of laws thereof and the obligations, rights
and remedies of the parties under this Agreement shall be determined in
accordance with such laws.
Section 10.4. SEVERABILITY OF PROVISIONS. If any one or more of the
covenants, agreements, provisions or terms of this Agreement shall be for any
reason whatsoever held invalid, then such covenants, agreements, provisions
or terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity
or enforceability of the other provisions of this Agreement or of the
Certificates or the Notes or the respective rights of the Holders thereof.
Section 10.5. ASSIGNMENT. Notwithstanding anything to the contrary
contained in this Agreement, except as provided in Section 7.2 or Section 8.2
(and as provided in the provisions of the Agreement concerning the
resignation of the Servicer and the Backup Servicer), this Agreement may not
be assigned by the Seller or the Servicer without the prior written consent
of the Owner Trustee, the Indenture Trustee, the Backup Servicer, JPMD and a
Certificate Majority (which consent, in the case of the Owner Trustee or the
Indenture Trustee, shall not be unreasonably withheld).
Section 10.6. THIRD-PARTY BENEFICIARIES. This Agreement shall inure to
the benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns. JPMD and its successors and assigns shall
be a third-party beneficiary to the provisions of this Agreement, and shall
be entitled to rely upon and directly to enforce such provisions of this
Agreement. Nothing in this Agreement, express or implied, shall give to any
Person, other than the parties hereto and their successors hereunder, any
benefit or any legal or equitable right, remedy or claim under this Agreement.
Section 10.7. [RESERVED].
Section 10.8. COUNTERPARTS. For the purpose of facilitating its
execution and for other purposes, this Agreement may be executed
simultaneously in any number of counterparts, each of which counterparts
shall be deemed to be an original, and all of which counterparts shall
constitute but one and the same instrument.
Section 10.9. INTENTION OF PARTIES. (a) The execution and delivery of
this Agreement and each Transfer Agreement shall constitute an
acknowledgement by the Seller, that it is intended that the assignment and
transfer contemplated herein and therein constitute a sale and assignment
outright, and not for security, of the Receivables and the other Trust
Property, conveying good title thereto free and clear of any Liens, from the
78
<PAGE>
Seller to the Trust, and that the Receivables and the other Trust Property
shall not be a part of the Seller's estate in the event of the insolvency,
receivership, conservatorship or the occurrence of another similar event, of,
or with respect to, the Seller. In the event that any such conveyance is
determined to be made as security for a loan made by the Trust or the
Certificateholders to the Seller, the Seller intends that it shall have
granted to the Owner Trustee a first priority security interest in all of the
Seller's right, title and interest in and to the Trust Property conveyed to
the Trust pursuant to Section 2.1 of this Agreement, and that this Agreement
shall constitute a security agreement under applicable law.
(b) The execution and delivery of this Agreement shall constitute an
acknowledgement by the Seller and the Owner Trustee on behalf of the
Certificateholders that they intend that the Certificates will qualify as
indebtedness, and that the Trust will be treated as a security device, for
federal income tax purposes. The Seller and the Owner Trustee on behalf of
the Certificateholders further acknowledge that they intend, in the event
that the Certificates are deemed for federal income tax purposes to represent
equity interests in the Trust, that the Trust will be treated for federal
income tax purposes as a partnership, rather than an association taxable as a
corporation. The powers granted and obligations undertaken in this Agreement
shall be construed so as to further such intent.
Section 10.10. NOTICES. All demands, notices and communications under
this Agreement shall be in writing, personally delivered or mailed by
certified mail-return receipt requested, and shall be deemed to have been
duly given upon receipt (a) in the case of OFL, the Seller or the Servicer,
at the following address: Olympic Receivables Finance Corp. II, 7825
Washington Avenue South, Suite 410, Minneapolis, Minnesota 55439-2435, with
copies to: Olympic Financial Ltd., 7825 Washington Avenue South,
Minneapolis, Minnesota 55439-2435, Attention: John A. Witham, (b) in the
case of the Owner Trustee, at the Corporate Trust Office, (c) in the case of
the Indenture Trustee and, for so long as the Indenture Trustee is the Backup
Servicer, at Sixth Street and Marquette Avenue, Minneapolis, Minnesota
55479-0069, Attention: Corporate Trust Department, (d) in the case of each
Rating Agency, 99 Church Street, New York, New York 10007 (for Moody's) and
26 Broadway, New York, New York 10004 (for Standard & Poor's), Attention:
Asset-Backed Surveillance, (e) in the case of JPMD, J.P. Morgan Delaware, 902
Market Street, Wilmington, Delaware 19801, Attention: Asset Finance Group,
and (f) any notice required or permitted to be mailed to a Certificateholder
or a Noteholder shall be given by first class mail, postage prepaid, at the
address of such Holder as shown in the Certificate Register or the Note
Register (as the case may be), and any notice so mailed within the time
prescribed in this Agreement shall be conclusively presumed to have been duly
given, whether or not the Certificateholder or the Noteholder receives such
notice.
Section 10.11. LIMITATION OF LIABILITY. It is expressly understood and
agreed by the parties hereto that (a) this Agreement is executed and
delivered by Wilmington Trust Company, not individually or personally but
solely as Owner Trustee of the Trust under the Trust Agreement, in the
exercise of the powers and authority conferred and vested in
79
<PAGE>
it, (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 Wilmington Trust Company but
is made and intended for the purpose for binding only the Trust, (c) nothing
herein contained shall be construed as creating any liability on Wilmington
Trust Company, individually or personally, to perform any covenant either
expressed or implied contained herein, all such liability, if any, being
expressly waived by the parties to this Agreement and by any person claiming
by, through or under them and (d) under no circumstances shall Wilmington
Trust Company 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 or any related documents.
80
<PAGE>
IN WITNESS WHEREOF, the Issuer, the Seller, OFL, the Servicer and
the Backup Servicer have caused this Sale and Servicing Agreement to be duly
executed by their respective officers as of the day and year first above
written.
ISSUER:
OLYMPIC AUTOMOBILE RECEIVABLES
WAREHOUSE TRUST
By WILMINGTON TRUST COMPANY,
not in its individual capacity but solely as
Owner Trustee
By /s/ Emmett R. Harmon
----------------------------------------
Name: Emmett R. Harmon
Title: Vice President
SELLER:
OLYMPIC RECEIVABLES FINANCE
CORP. II
By /s/ John A. Witham
----------------------------------------
Name: John A. Witham
Title: Senior Vice President and
Chief Financial Officer
OLYMPIC FINANCIAL LTD.,
in its individual capacity and as Servicer
By /s/ John A. Witham
----------------------------------------
Name: John A. Witham
Title: Senior Vice President and
Chief Financial Officer
<PAGE>
BACKUP SERVICER:
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
By /s/ Robert N. Guimont
----------------------------
Name: Robert N. Guimont
Title: Assistant Vice President
Acknowledged and Accepted:
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION,
not in its individual capacity but as
Indenture Trustee
By /s/ Robert N. Guimont
------------------------------
Name: Robert N. Guimont
Title: Assistant Vice President
<PAGE>
SCHEDULE A
SCHEDULE OF RECEIVABLES
[Deemed Incorporated From Each Transfer Agreement]
<PAGE>
SCHEDULE B
REPRESENTATIONS AND WARRANTIES OF SELLER AND OFL
.1 CHARACTERISTICS OF RECEIVABLES. Each Receivable (A) was originated
by a Dealer for the retail sale of a Financed Vehicle in the ordinary course
of such Dealer's business and such Dealer had all necessary licenses and
permits to originate Receivables in the state where such Dealer was located,
was fully and properly executed by the parties thereto, was purchased by OFL
from such Dealer under an existing Dealer Agreement with OFL and was validly
assigned by such Dealer to OFL, (B) contains customary and enforceable
provisions such as to render the rights and remedies of the holder thereof
adequate for realization against the collateral security, and (C) is fully
amortizing and provides for level monthly payments (provided that the payment
in the first Monthly Period and the final Monthly Period of the life of the
Receivable may be minimally different from the level payment) which, if made
when due, shall fully amortize the Amount Financed over the original term.
.2 NO FRAUD OR MISREPRESENTATION. Each Receivable was originated by a
Dealer and was sold by the Dealer to OFL without any fraud or
misrepresentation on the part of such Dealer in either case.
.3 COMPLIANCE WITH LAW. All requirements of applicable federal, state
and local laws, and regulations thereunder (including, without limitation,
usury laws, the Federal Truth-in-Lending Act, the Equal Credit Opportunity
Act, the Fair Credit Billing Act, the Fair Credit Reporting Act, the Fair
Debt Collection Practices Act, the Federal Trade Commission Act, the
Magnuson-Moss Warranty Act, the Federal Reserve Board's Regulations "B" and
"Z", the Soldiers' and Sailors' Civil Relief Act of 1940, the Minnesota Motor
Vehicle Retail Installment Sales Act, and state adaptations of the National
Consumer Act and of the Uniform Consumer Credit Code and other consumer
credit laws and equal credit opportunity and disclosure laws) in respect of
all of the Receivables and each and every sale of Financed Vehicles, have
been complied with in all material respects, and each Receivable and the sale
of the Financed Vehicle evidenced by each Receivable complied at the time it
was originated or made and now complies in all material respects with all
applicable legal requirements.
.4 ORIGINATION. Each Receivable is a United States dollar obligation
of an Obligor domiciled in the United States and such Receivable was
originated in the United States.
.5 BINDING OBLIGATION. Each Receivable represents the genuine, legal,
valid and binding payment obligation of the Obligor thereon, enforceable by
the holder thereof in accordance with its terms, except (A) as enforceability
may be limited by bankruptcy, insolvency, reorganization or similar laws
affecting the enforcement of creditors' rights generally and by equitable
limitations on the availability of specific remedies, regardless of whether
such enforceability is considered in a proceeding in equity or at law and (B)
as such Receivable may
1
<PAGE>
be modified by the application after the related Cutoff Date of the Soldiers'
and Sailors' Civil Relief Act of 1940, as amended; and all parties to each
Receivable had full legal capacity to execute and deliver such Receivable and
all other documents related thereto and to grant the security interest
purported to be granted thereby.
.6 NO GOVERNMENT OBLIGOR. No Obligor is the United States of America
or any State or any agency, department, subdivision or instrumentality
thereof.
.7 OBLIGOR BANKRUPTCY. At the applicable Cutoff Date, no Obligor had
been identified on the records of OFL as being, and, to the best of the
Seller's knowledge, no Obligor is the subject of a current bankruptcy
proceeding.
.8 SCHEDULE OF RECEIVABLES. The information set forth in the Schedule
of Receivables has been produced from the Electronic Ledger and was true and
correct in all material respects as of the close of business on the
applicable Cutoff Date.
.9 MARKING RECORDS. By the Closing Date or by each Transfer Date, as
applicable, the Seller will have caused the portions of the Electronic Ledger
relating to the Receivables to be clearly and unambiguously marked to show
that the Receivables constitute part of the Trust Property and are owned by
the Trust in accordance with the terms of this Agreement.
.10 MONTHLY TAPE. The Monthly Tape made available by the Seller to the
Backup Servicer and the Indenture Trustee was complete and accurate in all
respects as of the date delivered, and includes a description of the same
Receivables that are described in the Schedule of Receivables.
.11 ADVERSE SELECTION. No selection procedures adverse to the
Noteholders or the Certificateholders were utilized in selecting the
Receivables from those receivables owned by OFL which met the selection
criteria contained in this Agreement.
.12 CHATTEL PAPER. The Receivables constitute chattel paper within the
meaning of the UCC as in effect in the States of Minnesota and New York.
.13 ONE ORIGINAL. There is only one original executed copy of each
Receivable.
.14 RECEIVABLE FILES COMPLETE. The complete Receivable File (other
than item (iv) in Section 2.2 of this Agreement) is in the possession of OFL
at its corporate office. The complete Receivable File for each Receivable
will be in the possession of the Custodian within ten Business Days after the
conveyance of the Receivable from OFL to the Seller and from the Seller to
the Trust. By such date, there will exist a Receivable File pertaining to
each Receivable and such Receivable File contains (a) a fully executed
original of the Receivable, (b) a certificate of insurance, application form
for insurance signed by the Obligor, or a signed representation letter
2
<PAGE>
from the Obligor named in the Receivable pursuant to which the Obligor has
agreed to obtain physical damage insurance for the related Financed Vehicle,
or copies thereof, or a documented verbal confirmation by an insurance agent
for the Obligor of a policy number for an insurance policy for the Financed
Vehicle, (c) the original Lien Certificate or application therefor or a
letter from the applicable Dealer agreeing unconditionally to repurchase the
related Receivable if the certificate of title is not received by OFL within
180 days, and (d) a credit application signed by the Obligor, or a copy
thereof. Each of such documents which is required to be signed by the
Obligor has been signed by the Obligor in the appropriate spaces. All blanks
on any form have been properly filled in and each form has otherwise been
correctly prepared. The complete Receivable File for each Receivable
currently is in the possession of the Custodian.
.15 RECEIVABLES IN FORCE. No Receivable has been satisfied,
subordinated or rescinded, and the Financed Vehicle securing each such
Receivable has not been released from the lien of the related Receivable in
whole or in part. No provisions of any Receivable have been waived, altered
or modified in any respect since its origination, except by instruments or
documents identified in the Receivable File. No Receivable has been modified
as a result of application of the Soldiers' and Sailors' Civil Relief Act of
1940, as amended.
.16 LAWFUL ASSIGNMENT. No Receivable was originated in, or is subject
to the laws of, any jurisdiction the laws of which would make unlawful, void
or voidable the sale, transfer and assignment of such Receivable under this
Agreement or pursuant to transfers of the Notes or the Certificates. With
respect to such sale, transfer and assignment of such Receivable under this
Agreement or pursuant to transfers of the Notes or the Certificates, either
(1) no consent is required or (2) all required consents have been obtained.
.17 GOOD TITLE. No Receivable has been sold, transferred, assigned or
pledged by OFL to any Person other than the Seller or by the Seller to any
Person other than the Trust; immediately prior to the conveyance of the
Receivables pursuant to the Purchase Agreement or any Assignment Agreement,
OFL was the sole owner of and had good and indefeasible title thereto, free
and clear of any Lien; immediately prior to the conveyance of the Receivables
to the Trust pursuant to this Agreement or any Transfer Agreement, as
applicable, the Seller was the sole owner thereof and had good and
indefeasible title thereto, free of any Lien and, upon execution and delivery
of this Agreement or any Transfer Agreement, as applicable, by the Seller,
the Trust shall have good and indefeasible title to and will be the sole
owner of such Receivables, free of any Lien. No Dealer has a participation
in, or other right to receive, proceeds of any Receivable. Neither OFL nor
the Seller has taken any action to convey any right to any Person that would
result in such Person having a right to payments received under the related
Insurance Policies or the related Dealer Agreements or Dealer Assignments or
to payments due under such Receivables.
.18 SECURITY INTEREST IN FINANCED VEHICLE. Each Receivable created or
shall create a valid, binding and enforceable first priority security
interest in favor of OFL in the Financed
3
<PAGE>
Vehicle. The Lien Certificate and original certificate of title for each
Financed Vehicle show, or if a new or replacement Lien Certificate is being
applied for with respect to such Financed Vehicle the Lien Certificate will
be received within 180 days of the Closing Date or any Transfer Date, as
applicable, and will show OFL named as the original secured party under each
Receivable as the holder of a first priority security interest in such
Financed Vehicle. With respect to each Receivable for which the Lien
Certificate has not yet been returned from the Registrar of Titles, OFL has
received written evidence from the related Dealer that such Lien Certificate
showing OFL as first lienholder has been applied for or a letter from the
applicable Dealer agreeing unconditionally to repurchase the related
Receivable if the certificate of title is not received by OFL within 180
days. OFL's security interest has been validly assigned by OFL to the
Seller, by the Seller to the Owner Trustee pursuant to this Agreement or any
Transfer Agreement, as applicable, and by the Trust to the Indenture Trustee
pursuant to the Indenture. Immediately after the sale, transfer and
assignment thereof to the Trust, each Receivable will be secured by an
enforceable and perfected first priority security interest in the Financed
Vehicle in favor of the Trust as secured party, which security interest is
prior to all other liens upon and security interests in such Financed Vehicle
which now exist or may hereafter arise or be created (except, as to priority,
for any lien for taxes, labor or materials affecting a Financed Vehicle). As
of each Cutoff Date, there were no Liens or claims for taxes, work, labor or
materials affecting a Financed Vehicle which are or may be Liens prior or
equal to the lien of the related Receivable.
.19 ALL FILINGS MADE. All filings (including, without limitation, UCC
filings) required to be made by any Person and actions required to be taken
or performed by any Person in any jurisdiction to give the Trust a first
priority perfected lien on, or ownership interest in, the Receivables and the
proceeds thereof and the other Trust Property have been made, taken or
performed.
.20 NO IMPAIRMENT. Neither OFL nor the Seller has done anything to
convey any right to any Person that would result in such Person having a
right to payments due under the Receivable or otherwise to impair the rights
of the Trust, the Indenture Trustee, JPMD, the Noteholders and the
Certificateholders in any Receivable or the proceeds thereof.
.21 RECEIVABLE NOT ASSUMABLE. No Receivable is assumable by another
Person in a manner which would release the Obligor thereof from such
Obligor's obligations to the Seller with respect to such Receivable.
.22 NO DEFENSES. No Receivable is subject to any right of rescission,
setoff, counterclaim or defense and no such right has been asserted or
threatened with respect to any Receivable.
.23 NO DEFAULT. There has been no default, breach, violation or event
permitting acceleration under the terms of any Receivable (other than payment
delinquencies of not more than 30 days), and no condition exists or event has
occurred and is continuing that with notice,
4
<PAGE>
the lapse of time or both would constitute a default, breach, violation or
event permitting acceleration under the terms of any Receivable, and there
has been no waiver of any of the foregoing. As of any Cutoff Date or any
Transfer Date, as applicable, no Financed Vehicle had been repossessed.
.24 INSURANCE. As of the Closing Date or as of any Transfer Date, as
applicable, each Financed Vehicle is covered by a comprehensive and collision
insurance policy (i) in an amount at least equal to the lesser of (a) its
maximum insurable value or (b) the principal amount due from the Obligor
under the related Receivable, (ii) naming OFL as loss payee and (iii)
insuring against loss and damage due to fire, theft, transportation,
collision and other risks generally covered by comprehensive and collision
coverage. Each Receivable requires the Obligor to maintain physical loss and
damage insurance, naming OFL and its successors and assigns as additional
insured parties, and each Receivable permits the holder thereof to obtain
physical loss and damage insurance at the expense of the Obligor if the
Obligor fails to do so. No Financed Vehicle was or had previously been
insured under a policy of Force-Placed Insurance on the related Cutoff Date.
.25 PAST DUE. As of the related Cutoff Date, no Receivable was more
than 30 days past due and no funds have been advanced by the Seller, the
Servicer, any Dealer, or anyone acting on behalf of any of them in order to
cause any Receivable to qualify under this representation.
.26 REMAINING PRINCIPAL BALANCE. As of the related Cutoff Date, each
Receivable had a remaining principal balance equal to or greater than
$500.00, and the Principal Balance of each Receivable set forth in the
Schedule of Receivables is true and accurate in all material respects.
.27 MATURITY. Each Receivable has an original maturity of at least
three months.
.28 CERTAIN CHARACTERISTICS. (A) No Receivable has an initial payment
date more than three months subsequent to the related Cutoff Date; (B) No
Receivable has a final scheduled payment date on or before the related
Transfer Date; (C) The Principal Balance of each Receivable set forth in
Schedule of Receivables is true and accurate in all material respects as of
the related Cutoff Date; and (D) after giving effect to the conveyance of
Receivables on each Transfer Date, (i) the aggregate of the Principal
Balances of Receivables with original maturities ranging from 72 to 84 months
shall not exceed 7.5% of the aggregate of the Principal Balances of all
Receivables on such Transfer Date, and (ii) the aggregate of the Principal
Balances of Receivables attributable to loans originated under OFL's
"Classic" program shall not exceed 40% of the aggregate of the Principal
Balances of all Receivables on such Transfer Date.
.29 PAYMENTS TO LOCKBOX BANK. The Obligor with respect to each
Receivable, as of the related Transfer Date, is required to make all
Scheduled Payments to the Lockbox Bank.
5
<PAGE>
SCHEDULE C
SERVICING POLICIES AND PROCEDURES
<PAGE>
EXHIBIT B
FORM OF CUSTODIAN AGREEMENT
<PAGE>
EXHIBIT D
FORM OF PURCHASE AGREEMENT
<PAGE>
EXHIBIT E
FORM OF SERVICER'S CERTIFICATE
<PAGE>
EXHIBIT F
FORM OF TRANSFER AGREEMENT
TRANSFER AGREEMENT, dated as of _________________ 199__, among Olympic
Automobile Receivables Warehouse Trust, a Delaware business trust (the
"Trust"), Olympic Receivables Finance Corp. II, a Delaware corporation (the
"Seller"), and Olympic Financial Ltd., a Minnesota corporation (the
"Servicer"), pursuant to the Sale and Servicing Agreement referred to below.
W I T N E S S E T H:
WHEREAS, the Trust, the Seller and the Servicer are parties to the Sale
and Servicing Agreement, dated as of December 28, 1995 (hereinafter as such
agreement may have been, or may from time to time be, amended, supplemented
or otherwise modified, the "Sale and Servicing Agreement");
WHEREAS, pursuant to the Sale and Servicing Agreement, the Seller wishes to
convey Receivables and certain related property to the Trust; and
WHEREAS, the Trust is willing to accept such conveyance subject to the
terms and conditions hereof and of the Sale and Servicing Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements hereinafter contained, and for other good and valuable
consideration, the receipt of which is hereby acknowledged, the Trust, the
Seller and the Servicer hereby agree as follows:
II DEFINED TERMS. Capitalized terms used herein shall have the
meanings ascribed to them in the Sale and Servicing Agreement unless
otherwise defined herein.
"CUTOFF DATE" shall mean, with respect to the Receivables conveyed
hereby, __________, 199__.
"TRANSFER DATE" shall mean, with respect to the Receivables conveyed
hereby, __________, 199__.
III SCHEDULE OF RECEIVABLES. The Schedule of Receivables attached
hereto as Exhibit A is a supplement to the Schedule of Receivables attached
as Schedule A to the Sale and
<PAGE>
Servicing Agreement. The Receivables listed in the Schedule of Receivables
constitute the Receivables to be conveyed pursuant to this Agreement on the
Transfer Date.
IV CONVEYANCE OF RECEIVABLES. Subject to the conditions specified in
Section 2.1(b) of the Sale and Servicing Agreement and in consideration of
the Trust's delivery to or upon the order of the Seller of the Purchase
Price, the Seller does hereby sell, transfer, assign, and otherwise convey to
the Trust, without recourse (but without limitation of its obligations in the
Sale and Servicing Agreement, the Purchase Agreement and this Agreement), all
of the right, title and interest of the Seller, whether now existing or
hereafter acquired, in and to the Receivables listed on Schedule A hereto and
the related Other Conveyed Property, an assignment of the rights of the
Seller under the Purchase Agreement, all funds on deposit from time to time
in the Trust Accounts and all investments therein and proceeds thereof, and
all proceeds of the foregoing. OFL and the Seller acknowledge that such
Receivables have previously been sold, transferred, assigned and conveyed to
the Seller pursuant to one or more Assignment Agreements pursuant to the
Purchase Agreement, and OFL hereby confirms such prior sale, transfer,
assignment and conveyance.
V REQUIRED INFORMATION.
.1 Aggregate Principal Balance of Receivables to be
transferred: $________________.
.2 Purchase Price for Receivables: $_________________.
.3 Facility Balance after giving
effect to the conveyance
contemplated hereby: $_________________.
VI INCORPORATION OF SALE AND SERVICING AGREEMENT. This Transfer
Agreement is made pursuant to and upon the representations, warranties and
agreements on the part of OFL and the Seller contained in the Sale and
Servicing Agreement and shall be governed in all respects by the Sale and
Servicing Agreement.
VII RATIFICATION OF SALE AND SERVICING AGREEMENT. As supplemented by
this Agreement, the Sale and Servicing Agreement is in all respects ratified
and confirmed and the Sale and Servicing Agreement as so supplemented by this
Agreement shall be read, taken and construed as one and the same instrument.
VII COUNTERPARTS. This Agreement may be executed in two or more
counterparts (and by different parties in separate counterparts), each of
which shall be an original but all of which together shall constitute one and
the same instrument.
F-2
<PAGE>
IX GOVERNING LAW. This Agreement shall be construed in accordance
with the laws of the State of New York, without reference to its conflict of
law provisions, and the obligations, rights and remedies of the parties
hereunder shall be determined in accordance with such laws.
IN WITNESS WHEREOF, the Trust, the Seller and the Servicer have caused
this Agreement to be duly executed and delivered by their respective duly
authorized officers as of the day and the year first above written.
OLYMPIC AUTOMOBILE RECEIVABLES
WAREHOUSE TRUST
By WILMINGTON TRUST COMPANY,
not in its individual capacity but solely as Owner
Trustee
By
------------------------------------------
Name:
Title:
OLYMPIC RECEIVABLES FINANCE CORP. II
By
------------------------------------------
Name:
Title:
OLYMPIC FINANCIAL LTD.
By
------------------------------------------
Name:
Title:
F-3
<PAGE>
EXECUTION COPY
AMENDMENT
Dated as of June 12, 1996
to
SALE AND SERVICING AGREEMENT
Dated as of December 28, 1995
among
OLYMPIC AUTOMOBILE RECEIVABLES WAREHOUSE TRUST
Issuer
OLYMPIC RECEIVABLES FINANCE CORP. II
Seller
OLYMPIC FINANCIAL LTD.
In its individual capacity and as Servicer
and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
Backup Servicer
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I
DEFINITIONS
ARTICLE II
AMENDMENT
SECTION 2.1. Amendment to Section 1.1 of the Sale and Servicing
Agreement . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 2.2. Amendment to Section 2.1 of the Sale and Servicing
Agreement . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 2.3. Amendment to Section 4.1 of the Sale and Servicing
Agreement . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 2.4. Amendment to Section 4.6 of the Sale and Servicing
Agreement . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 2.5. Amendment to Section 5.1 of the Sale and Servicing
Agreement . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 2.6. Amendment to Section 10.10 of the Sale and Servicing
Agreement . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 2.7. Amendment to Schedule B of the Sale and Servicing
Agreement . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE III
MISCELLANEOUS
SECTION 3.1. Counterparts. . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 3.2. Governing Law; Entire Agreement . . . . . . . . . . . . . 4
SECTION 3.3. Headings. . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 3.4. Sale and Servicing Agreement in Full Force and
Effect as Amended . . . . . . . . . . . . . . . . . . . . 4
-i-
<PAGE>
AMENDMENT dated as of June 12, 1996 (the "AMENDMENT") to SALE AND SERVICING
AGREEMENT dated as of December 28, 1995 (the "SALE AND SERVICING AGREEMENT"),
among Olympic Automobile Receivables Warehouse Trust (the "ISSUER"), Olympic
Receivables Finance Corp. II, a Delaware corporation, as Seller (the "SELLER"),
Olympic Financial Ltd., a Minnesota corporation, in its individual capacity and
as Servicer, (the "SERVICER") and Norwest Bank Minnesota, National Association,
a national banking association, as Backup Servicer (the "BACKUP SERVICER").
WHEREAS, the Issuer, the Seller, the Servicer and the Backup Servicer have
entered into the Sale and Servicing Agreement;
WHEREAS, pursuant to Section 10.1(b) of the Sale and Servicing Agreement,
the Issuer, the Seller and the Servicer desire to amend the Sale and Servicing
Agreement in certain respects as provided below;
WHEREAS, each of the Indenture Trustee, the Backup Servicer, a Certificate
Majority and a Note Majority has consented to this Amendment as required by
Section 10.1(b) of the Sale and Servicing Agreement;
WHEREAS, it is the intent of the parties that this Amendment be effective
as of the date set forth above (the "EFFECTIVENESS DATE");
NOW, THEREFORE, the parties to this Amendment hereby agree as follows:
ARTICLE I
DEFINITIONS
Unless otherwise defined herein or the context otherwise requires, defined
terms used herein shall have the meanings ascribed thereto in the Sale and
Servicing Agreement.
ARTICLE II
AMENDMENT
SECTION 2.1. AMENDMENT TO SECTION 1.1 OF THE SALE AND SERVICING AGREEMENT.
(a) Clause (i) of the definition of "DEEMED CURED" in Section 1.1 of the
Sale and Servicing Agreement is hereby amended to read in its entirety as
follows:
(i) As of any Determination Date and with respect to a Trigger Event,
no Trigger Event has occurred and is continuing as of such Determination Date or
as of any of
<PAGE>
the two consecutively preceding Determination Dates for related Monthly
Periods during which there were Receivables in the Trust;
(b) Clause (g) of the definition of "ELIGIBLE INVESTMENTS" in Section 1.1
of the Sale and Servicing Agreement is hereby amended by adding the following
immediately after the word "investment":
"(including, without limitation, a hedging arrangement)"
(c) The definition of "FACILITY LIMIT" in Section 1.1 of the Sale and
Servicing Agreement is hereby amended to read in its entirety as follows:
FACILITY LIMIT: $329,700,000.
(d) The definition of "JPMD" in Section 1.1 of the Sale and Servicing
Agreement is hereby amended to read in its entirety as follows:
JPMD: Morgan Guaranty Trust Company of New York, in its capacity as
Administrative Agent for DFC and the purchasers under the DFC Asset Purchase
Agreement and as agent for the banks under the Program Facility, or as agent for
the Investor Group.
(e) The definition of "MAXIMUM PRINCIPAL BALANCE" in Section 1.1 of the
Sale and Servicing Agreement is hereby amended to read in its entirety as
follows:
MAXIMUM PRINCIPAL BALANCE: With respect to the Notes, $300,000,000
(excluding capitalized interest thereon).
(f) The definition of "TRIGGER EVENT" in Section 1.1 of the Sale and
Servicing Agreement is hereby amended to read in its entirety as follows:
TRIGGER EVENT: As of any Determination Date, (i) if the Net Excess Spread
Percentage shall be less than 5.0% but equal to or greater than 4.0%; (ii) if
the Net Excess Spread Percentage shall be less than 4.0% but equal to or greater
than 3.0%; and (iii) if the Net Excess Spread Percentage shall be less than
3.0%.
(g) Section 1.1. of the Sale and Servicing Agreement is hereby further
amended by adding the following defined terms and definitions:
MAXIMUM PROGRAM SIZE: The sum of (i) the Maximum Principal Balance PLUS
(ii) the Maximum Certificate Balance.
REQUISITE AMOUNT: As of any Determination Date, (i) if no Trigger Event
shall have occurred, and all previous Trigger Events shall have been Deemed
Cured, zero; and (ii) if a Trigger Event shall have occurred (and until such
Trigger Event shall have been Deemed
-2-
<PAGE>
Cured), (x) if such Trigger Event is of the type described in clause (i) of
the definition thereof, 1.0% of the Maximum Program Size, (y) if such
Trigger Event is of the type described in clause (ii) of the definition
thereof, 2.0% of the Maximum Program Size, and (z) if such Trigger Event is
of the type described in clause (iii) of the definition thereof, an unlimited
amount.
SPREAD ACCOUNT AVAILABLE AMOUNT: An amount equal to 75% of all amounts
deposited into the Spread Account after the occurrence of a Trigger Event of the
type described in clause (iii) of the definition thereof and until such Trigger
Event of the type described in clause (iii) of the definition thereof is Deemed
Cured.
SECTION 2.2. AMENDMENT TO SECTION 2.1 OF THE SALE AND SERVICING AGREEMENT.
(a) Section 2.1(b)(1)(viii) of the Sale and Servicing Agreement is hereby
amended by deleting the number "72" and substituting therefor "73."
SECTION 2.3. AMENDMENT TO SECTION 4.1 OF THE SALE AND SERVICING AGREEMENT.
Section 4.1(e) of the Sale and Servicing Agreement is hereby amended by adding
the words ";PROVIDED HOWEVER, that amounts on deposit in the Spread Account up
to an amount equal to the Spread Account Available Amount may be used to
establish a hedging arrangement with a longer term in accordance with clause (g)
of the definition of Eligible Investments" following the end of the first
sentence of such Section.
SECTION 2.4. AMENDMENT TO SECTION 4.6 OF THE SALE AND SERVICING AGREEMENT.
Section 4.6(viii)(A) of the Sale and Servicing Agreement is hereby amended to
read in its entirety as follows:
(A) if (i) a Trigger Event shall have occurred or (ii) any previous
Trigger Event has not been Deemed Cured and in either case OFL is no longer
required to maintain any hedging arrangement in accordance with Section
2.1(b)(1)(xiv) hereof, an amount equal to the lesser of (x) all remaining
Available Funds and (y) the excess, if any, of the Requisite Amount as of
the immediately preceding Determination Date over the amount on deposit in
the Spread Account as of such date, shall be deposited into the Spread
Account;
SECTION 2.5. AMENDMENT TO SECTION 5.1 OF THE SALE AND SERVICING AGREEMENT.
Section 5.1 of the Sale and Servicing Agreement is hereby amended by adding the
following subsection (c) immediately following Section 5.1(b):
(c) If a Trigger Event of the type described in clause (i) or clause
(ii) of the definition thereof shall have occurred and subsequently be
Deemed Cured (so long as no Trigger Event of the type described in clause
(iii) of the definition thereof shall have occurred upon or after the
occurrence of such Trigger Event and on or prior to the Distribution Date
described below), then, on the Distribution Date immediately following the
Determination Date on which such Trigger Event shall be Deemed
-3-
<PAGE>
Cured, all amounts on deposit in the Spread Account in respect of amounts
deposited therein pursuant to SECTION 4.6(VIII) as a result of the occurrence
of such Trigger Event (after making all distributions required pursuant to
SECTIONS 4.6(I) - (VII) on such Distribution Date) shall be distributed to
the Seller.
SECTION 2.6. AMENDMENT TO SECTION 10.10 OF THE SALE AND SERVICING
AGREEMENT. Section 10.10 of the Sale and Servicing Agreement is hereby amended
by deleting the words "902 Market Street, Wilmington, Delaware 19801" and
substituting therefor "500 Stanton Christiana Road, Newark, Delaware 19713-
2107."
SECTION 2.7. AMENDMENT TO SCHEDULE B OF THE SALE AND SERVICING AGREEMENT.
Clause (D)(i) of Paragraph 28 of Schedule B to the Sale and Servicing Agreement
is hereby amended by deleting the number "72" and substituting therefor "73."
ARTICLE III
MISCELLANEOUS
SECTION 3.1. COUNTERPARTS. This Amendment may be executed by the parties
hereto in several counterparts, each of which shall be deemed to be an original
and all of which shall constitute together but one and the same agreement. This
Amendment shall become effective when the Servicer shall have received (a)
counterparts hereof executed on behalf of the Issuer, the Seller and the
Servicer, (b) the consents of the Backup Servicer, the Indenture Trustee and
JPMD, as sole Certificateholder, and as Administrative Agent for Delaware
Funding Corporation, the sole Noteholder, to the terms of this Amendment and
(c) evidence of written notice to S&P and Moody's of this Amendment.
SECTION 3.2. GOVERNING LAW; ENTIRE AGREEMENT. THIS AMENDMENT SHALL BE
DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE
STATE OF NEW YORK. This Amendment and the Sale and Servicing Agreement (and all
exhibits, annexes and schedules thereto) constitute the entire understanding
among the parties hereto with respect to the subject matter hereof and supersede
any prior agreements, written or oral, with respect thereto.
SECTION 3.3. HEADINGS. The various headings of this Amendment are
inserted for convenience only and shall not affect the meaning or interpretation
of this Amendment or any provisions hereof or thereof.
SECTION 3.4. SALE AND SERVICING AGREEMENT IN FULL FORCE AND EFFECT AS
AMENDED. Except as specifically stated herein, all of the terms and conditions
of the Sale and Servicing Agreement shall remain in full force and effect. All
references to the Sale and Servicing Agreement in any other document or
instrument shall be deemed to mean the Sale and Servicing Agreement, as amended
by this Amendment. This Amendment shall not constitute
-4-
<PAGE>
a novation of the Sale and Servicing Agreement, but shall constitute an
amendment thereto. The parties hereto agree to be bound by the terms and
obligations of the Sale and Servicing Agreement, as amended by this
Amendment, as though the terms and obligations of the Sale and Servicing
Agreement were set forth herein.
-5-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their authorized officers, all as of the date and
year first above written.
ISSUER:
OLYMPIC AUTOMOBILE RECEIVABLES WAREHOUSE TRUST
By WILMINGTON TRUST COMPANY,
not in its individual capacity but solely as
Owner Trustee
By: __________________________________
Name:
Title:
SELLER:
OLYMPIC RECEIVABLES FINANCE CORP. II
By: __________________________________
Name:
Title:
SERVICER:
OLYMPIC FINANCIAL LTD.,
in its individual capacity and as Servicer
By: __________________________________
Name:
Title:
-6-
<PAGE>
AGREED AND CONSENTED:
BACKUP SERVICER:
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, not in
its individual capacity but as Backup Servicer
By: __________________________________
Name:
Title:
INDENTURE TRUSTEE:
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, not in
its individual capacity but as Indenture Trustee
By: __________________________________
Name:
Title:
MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as sole
Certificateholder, and as Administrative Agent for
Delaware Funding Corporation, as sole Noteholder
By: __________________________________
Name:
Title:
-7-
<PAGE>
EXECUTION COPY
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
AMENDMENT NO. 2
Dated as of September 30, 1996
to
SALE AND SERVICING AGREEMENT
Dated as of December 28, 1995
among
OLYMPIC AUTOMOBILE RECEIVABLES WAREHOUSE TRUST
Issuer
OLYMPIC RECEIVABLES FINANCE CORP. II
Seller
OLYMPIC FINANCIAL LTD.
In its individual capacity and as Servicer
and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
Backup Servicer
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS
ARTICLE II
AMENDMENT
SECTION 2.1. Amendment to Section 1.1 of the Sale and Servicing
Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 2.2. Amendment to Section 2.1 of the Sale and Servicing
Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 2.3. Amendment to Section 4.1 of the Sale and Servicing
Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 2.4. Amendment to Section 4.6 of the Sale and Servicing
Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 2.5. Amendment to Section 5.1 of the Sale and Servicing
Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 2.6. Amendment to Section 9.1 of the Sale and Servicing
Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE III
MISCELLANEOUS
SECTION 3.1. Counterparts. . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 3.2. Governing Law; Entire Agreement . . . . . . . . . . . . . 5
SECTION 3.3. Headings. . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 3.4. Sale and Servicing Agreement in Full Force and Effect as
Amended. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
i
<PAGE>
AMENDMENT NO. 2 dated as of September 30, 1996 (the "AMENDMENT") to SALE
AND SERVICING AGREEMENT dated as of December 28, 1995 and amended as of
June 12, 1996 (as amended, the "SALE AND SERVICING AGREEMENT"), among Olympic
Automobile Receivables Warehouse Trust (the "ISSUER"), Olympic Receivables
Finance Corp. II, a Delaware corporation, as Seller (the "SELLER"), Olympic
Financial Ltd., a Minnesota corporation, in its individual capacity and as
Servicer, (the "SERVICER") and Norwest Bank Minnesota, National Association,
a national banking association, as Backup Servicer (the "BACKUP SERVICER").
WHEREAS, the Issuer, the Seller, the Servicer and the Backup Servicer have
entered into the Sale and Servicing Agreement;
WHEREAS, pursuant to Section 10.1(b) of the Sale and Servicing Agreement,
the Issuer, the Seller and the Servicer desire to amend the Sale and Servicing
Agreement in certain respects as provided below;
WHEREAS, each of the Indenture Trustee, the Backup Servicer, a Certificate
Majority and a Note Majority has consented to this Amendment as required by
Section 10.1(b) of the Sale and Servicing Agreement;
WHEREAS, it is the intent of the parties that this Amendment be effective
as of the date set forth above (the "EFFECTIVENESS DATE");
NOW, THEREFORE, the parties to this Amendment hereby agree as follows:
ARTICLE I
DEFINITIONS
Unless otherwise defined herein or the context otherwise requires, defined
terms used herein shall have the meanings ascribed thereto in the Sale and
Servicing Agreement.
ARTICLE II
AMENDMENT
SECTION 2.1. AMENDMENT TO SECTION 1.1 OF THE SALE AND SERVICING AGREEMENT.
(a) The definition of "COLLECTED FUNDS" in Section 1.1 of the Sale and
Servicing Agreement is hereby amended by adding the following at the end of
such definition:
<PAGE>
"and any payments under, or proceeds from, any Eligible Interest Rate
Cap Agreement maintained pursuant to SECTION 2.1(B)(1)(XIV)."
(b) The definition of "NET EXCESS SPREAD PERCENTAGE" in Section 1.1 of
the Sale and Servicing Agreement is hereby amended (i) by deleting the words
"hedging arrangements" in the parenthetical phrase immediately following the
word "Receivables" and inserting in their place the words "Eligible Interest
Rate Cap Agreement" and (ii) by inserting the symbol ")" immediately after the
words "Section 2.1(b)(xiv)."
(c) The definition of "NET LOSS RATE" in Section 1.1 of the Sale and
Servicing Agreement is hereby amended (i) by inserting the words "the
annualized total of the difference between" immediately following the words
"the numerator of which is equal to" and (ii) by deleting the word "less" and
inserting in its place the word "MINUS."
(d) The definition of "REQUISITE AMOUNT" in Section 1.1 of the Sale and
Servicing Agreement is hereby amended to read in its entirety as follows:
REQUISITE AMOUNT: As of any Determination Date, (i) if no Trigger
Event shall have occurred, and all previous Trigger Events shall have
been Deemed Cured, 1.0% of the sum of the Note Balance on such
Determination Date PLUS the Certificate Balance on such Determination
Date; and (ii) if a Trigger Event shall have occurred (and until such
Trigger Event shall have been Deemed Cured), (x) if such Trigger
Event is of the type described in clause (i) of the definition
thereof, 1.0% of the Maximum Program Size PLUS 1.0% of the sum of the
Note Balance on such Determination Date PLUS the Certificate Balance
on such Determination Date, (y) if such Trigger Event is of the type
described in clause (ii) of the definition thereof, 2.0% of the
Maximum Program Size PLUS 1.0% of the sum of the Note Balance on such
Determination Date PLUS the Certificate Balance on such Determination
Date, and (z) if such Trigger Event is of the type described in
clause (iii) of the definition thereof, an unlimited amount.
(e) Section 1.1 of the Sale and Servicing Agreement is hereby further
amended by deleting the following defined terms and the corresponding
definitions: EXCESS YIELD CONDITION, EXCESS YIELD PERCENTAGE and SPREAD
ACCOUNT AVAILABLE AMOUNT.
(f) Section 1.1. of the Sale and Servicing Agreement is hereby further
amended by adding the following defined terms and definitions:
ELIGIBLE INTEREST RATE CAP AGREEMENT: An interest rate cap agreement that:
(i) is on a standard ISDA form; (ii) is an amortizing interest rate cap with a
maturity date that is no earlier than the final scheduled payment date with
respect to the last maturing Receivable in the Trust; (iii) is issued by a bank
or other financial institution whose short term unsecured
-2-
<PAGE>
debt obligations are rated A-1+/P-1 by Standard & Poor's and Moody's,
respectively or that it is otherwise acceptable to JPMD; (iv) has a capped
interest rate equal to a 30-day LIBOR rate of 9.50% per annum; (v) provides
that any payments made by the counterparty shall be made directly to the
Collection Account; (vi) provides that it may not be materially amended,
terminated, waived or assigned by the counterparty without the prior written
consent of the Note Majority and the Certificate Majority; (vii) provides
that it may be sold by the Trust on any Trust Property Liquidation Date on
which not less than all of the Receivables in the Trust are disposed
pursuant to Section 9.1; and (viii) is otherwise in form and substance
reasonably satisfactory to JPMD.
SECTION 2.2. AMENDMENT TO SECTION 2.1 OF THE SALE AND SERVICING AGREEMENT.
(a) Section 2.1(b)(1)(xiv) of the Sale and Servicing Agreement is hereby
amended to read in its entirety as follows:
(xiv) (A) on any Transfer Date, OFL shall have established, in
accordance with Section 2.2(b)(1)(ix) of the Receivables Purchase
Agreement, in the name of the Trustee for the benefit of the Noteholders
and the Certificateholders, an Eligible Interest Rate Cap Agreement in a
notional amount equal to or greater than the sum of the Note Balance PLUS
the Certificate Balance on such Transfer Date (after taking into account
the transfer of Receivables to the Trust on such date);
(b) Section 2.1(b)(1)(xv) of the Sale and Servicing Agreement is hereby
amended by deleting the number "40%" and substituting therefor "55%."
(c) Section 2.1(b)(1) of the Sale and Servicing Agreement is hereby
amended by adding the following subsection (xvi) immediately following Section
2.1(b)(1)(xv):
(xvi) the Seller shall have deposited into the Spread Account an
amount at least equal to 1.0% of the aggregate of the Principal Balances
of the Receivables sold to the Trust on such Transfer Date;
(d) Section 2.1(b)(1) of the Sale and Servicing Agreement is hereby
further amended by renumbering Section 2.1(b)(1)(xvi) as Section
2.1(b)(1)(xvii) and by renumbering Section 2.1(b)(1)(xvii) as Section
2.1(b)(1)(xviii).
(e) Section 2.1(c)(2)(viii) of the Sale and Servicing Agreement is hereby
amended by deleting the word "or" at the end thereof.
(f) Section 2.1(c)(2)(ix) of the Sale and Servicing Agreement is hereby
amended to read in its entirety as follows:
-3-
<PAGE>
(ix) on any Determination Date after the first Transfer Date but
prior to the Purchase Termination Date, (A) the Delinquency Ratio shall
exceed 3.50%; (B) the Portfolio Loss Ratio shall exceed 2.50%; (C) the
Warehousing Loss Ratio shall exceed 1.0%; or (D) the Average Net Excess
Spread Percentage shall be less than 1.5%; or
(g) Section 2.1(c)(2) of the Sale and Servicing Agreement is hereby
amended by adding the following subsection (x) immediately following Section
2.1(c)(2)(ix):
(x) The notional amount of the Eligible Interest Rate Cap Agreement
required pursuant to Section 2.1(b)(1)(xiv) shall on any date be less than
the sum of the Note Balance PLUS the Certificate Balance on such date
(after taking into account the transfer of Receivables to the Trust, if
any, on such date).
SECTION 2.3. AMENDMENT TO SECTION 4.1 OF THE SALE AND SERVICING AGREEMENT.
Section 4.1(e) of the Sale and Servicing Agreement is hereby amended by deleting
the words "; PROVIDED HOWEVER, that amounts on deposit in the Spread Account up
to an amount equal to the Spread Account Available Amount may be used to
establish a hedging arrangement with a longer term in accordance with clause (g)
of the definition of "Eligible Investments" following the end of the first
sentence of such Section.
SECTION 2.4. AMENDMENT TO SECTION 4.6 OF THE SALE AND SERVICING AGREEMENT.
Section 4.6(viii) of the Sale and Servicing Agreement is hereby amended to read
in its entirety as follows:
(viii) eighth, FIRST, an amount equal to the lesser of (x) all
remaining Available Funds and (y) the excess, if any, of the Requisite
Amount as of the immediately preceding Determination Date over the amount
on deposit in the Spread Account as of such date (after taking into account
all withdrawals from the Spread Account on such Distribution Date), shall
be deposited into the Spread Account; SECOND, from Available Funds, if any
amounts are due and owing to any Indemnified Party (as such term is used in
the Note Purchase Agreement) under Section 11.01, Section 11.04 or Section
11.05 of the Note Purchase Agreement, such amount shall be deposited into
the Note Distribution Account for distribution to such Indemnified Parties,
THIRD, from Available Funds, if any amounts are due and owing to any
Indemnified Party (as such term is used in the Certificate Purchase
Agreement) under Section 11.01, Section 11.04 or Section 11.05 of the
Certificate Purchase Agreement, such amount shall be deposited into the
Certificate Distribution Account for distribution to such Indemnified
Parties, and FOURTH, any remaining Available Funds shall be released to the
Seller.
SECTION 2.5. AMENDMENT TO SECTION 5.1 OF THE SALE AND SERVICING AGREEMENT.
Section 5.1(c) of the Sale and Servicing Agreement is hereby amended by deleting
the words "respect of amounts deposited therein pursuant to Section 4.6(viii) as
a result of the
-4-
<PAGE>
occurrence of such Trigger Event" and substituting therefor the words "excess
of the Requisite Amount as of such date."
SECTION 2.6. AMENDMENT TO SECTION 9.1 OF THE SALE AND SERVICING AGREEMENT.
Section 9.1(b)(2) of the Sale and Servicing Agreement is hereby amended by
deleting the words "at least one Business Day prior to" and substituting
therefor the words "no later than 11:00 A.M. (New York time) on."
ARTICLE III
MISCELLANEOUS
SECTION 3.1. COUNTERPARTS. This Amendment may be executed by the parties
hereto in several counterparts, each of which shall be deemed to be an original
and all of which shall constitute together but one and the same agreement. This
Amendment shall become effective when: (1) the Servicer shall have received (a)
counterparts hereof executed on behalf of the Issuer, the Seller and the
Servicer, (b) the consents of the Backup Servicer, the Indenture Trustee and
JPMD, as sole Certificateholder, and as Administrative Agent for Delaware
Funding Corporation, the sole Noteholder, to the terms of this Amendment and
(c) evidence of written notice to Standard & Poor's and Moody's of this
Amendment and (2) OFL shall have caused the delivery of an Opinion of Counsel to
JPMD with respect to true-sale and non-substantive consolidation matters (or a
bring-down of the Opinion of Counsel with respect to these matters delivered on
the Closing Date) satisfactory to JPMD.
SECTION 3.2. GOVERNING LAW; ENTIRE AGREEMENT. THIS AMENDMENT SHALL BE
DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE
STATE OF NEW YORK. This Amendment and the Sale and Servicing Agreement (and all
exhibits, annexes and schedules thereto) constitute the entire understanding
among the parties hereto with respect to the subject matter hereof and supersede
any prior agreements, written or oral, with respect thereto.
SECTION 3.3. HEADINGS. The various headings of this Amendment are
inserted for convenience only and shall not affect the meaning or interpretation
of this Amendment or any provisions hereof or thereof.
SECTION 3.4. SALE AND SERVICING AGREEMENT IN FULL FORCE AND EFFECT AS
AMENDED. Except as specifically stated herein, all of the terms and conditions
of the Sale and Servicing Agreement shall remain in full force and effect. All
references to the Sale and Servicing Agreement in any other document or
instrument shall be deemed to mean the Sale and Servicing Agreement, as amended
by this Amendment. This Amendment shall not constitute a novation of the Sale
and Servicing Agreement, but shall constitute an amendment thereto. The parties
hereto agree to be bound by the terms and obligations of the Sale and Servicing
-5-
<PAGE>
Agreement, as amended by this Amendment, as though the terms and obligations of
the Sale and Servicing Agreement were set forth herein.
-6-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their authorized officers, all as of the date and
year first above written.
ISSUER:
OLYMPIC AUTOMOBILE RECEIVABLES WAREHOUSE TRUST
By WILMINGTON TRUST COMPANY,
not in its individual capacity but solely as
Owner Trustee
By: /s/ Denise M. Geran
-------------------------------------------
Name: Denise M. Geran
Title: Financial Services Officer
SELLER:
OLYMPIC RECEIVABLES FINANCE CORP. II
By: __________________________________
Name:
Title:
SERVICER:
OLYMPIC FINANCIAL LTD.,
in its individual capacity and as Servicer
By: __________________________________
Name:
Title:
-7-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their authorized officers, all as of the date and
year first above written.
ISSUER:
OLYMPIC AUTOMOBILE RECEIVABLES WAREHOUSE TRUST
By WILMINGTON TRUST COMPANY,
not in its individual capacity but solely as
Owner Trustee
By: ___________________________________________
Name:
Title:
SELLER:
OLYMPIC RECEIVABLES FINANCE CORP. II
By: /s/ John Witham
------------------------------------------
Name: John Witham
Title: EVP/CFO
SERVICER:
OLYMPIC FINANCIAL LTD.,
in its individual capacity and as Servicer
By: /s/ Mike Sherman
------------------------------------------
Name: Mike Sherman
Title: VP/Treasurer
-8-
<PAGE>
AGREED AND CONSENTED:
BACKUP SERVICER:
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, not in
its individual capacity but as Backup Servicer
By: /s/ Illegible
------------------------------------------
Name:
Title:
INDENTURE TRUSTEE:
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, not in
its individual capacity but as Indenture Trustee
By: /s/ Illegible
------------------------------------------
Name:
Title:
MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as sole
Certificateholder, and as Administrative Agent for
Delaware Funding Corporation, as sole Noteholder
By: __________________________________
Name:
Title:
-9-
<PAGE>
AGREED AND CONSENTED:
BACKUP SERVICER:
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, not in
its individual capacity but as Backup Servicer
By: __________________________________
Name:
Title:
INDENTURE TRUSTEE:
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, not in
its individual capacity but as Indenture Trustee
By: __________________________________
Name:
Title:
MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as sole
Certificateholder, and as Administrative Agent for
Delaware Funding Corporation, as sole Noteholder
By: /s/ Illegible
------------------------------------------
Name:
Title:
-10-
<PAGE>
EXECUTION COPY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AMENDMENT NO. 3
Dated as of January 17, 1997
to
SALE AND SERVICING AGREEMENT
Dated as of December 28, 1995
among
OLYMPIC AUTOMOBILE RECEIVABLES WAREHOUSE TRUST
Issuer
OLYMPIC RECEIVABLES FINANCE CORP. II
Seller
OLYMPIC FINANCIAL LTD.
In its individual capacity and as Servicer
and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
Backup Servicer
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS
ARTICLE II
AMENDMENT
SECTION 2.1. Amendment to Section 1.1 of the Sale and Servicing
Agreement . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 2.2. Amendment to Section 2.1 of the Sale and Servicing
Agreement . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 2.3. Amendment to Section 3.6 of the Sale and Servicing
Agreement . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE III
MISCELLANEOUS
SECTION 3.1. Counterparts. . . . . . . . . . . . . . . . . . . . . . 4
SECTION 3.2. Governing Law; Entire Agreement . . . . . . . . . . . . 5
SECTION 3.3. Headings. . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 3.4. Sale and Servicing Agreement in Full Force and
Effect as Amended . . . . . . . . . . . . . . . . . . . 5
-i-
<PAGE>
AMENDMENT NO. 3 dated as of January 17, 1997 (the "AMENDMENT") to SALE AND
SERVICING AGREEMENT dated as of December 28, 1995 and amended as of June 12,
1996 and September 30, 1996 (as amended, the "SALE AND SERVICING AGREEMENT"),
among Olympic Automobile Receivables Warehouse Trust (the "ISSUER"), Olympic
Receivables Finance Corp. II, a Delaware corporation, as Seller (the "SELLER"),
Olympic Financial Ltd., a Minnesota corporation, in its individual capacity and
as Servicer, (the "SERVICER") and Norwest Bank Minnesota, National Association,
a national banking association, as Backup Servicer (the "BACKUP SERVICER").
WHEREAS, the Issuer, the Seller, the Servicer and the Backup Servicer have
entered into the Sale and Servicing Agreement;
WHEREAS, pursuant to Section 10.1(b) of the Sale and Servicing Agreement,
the Issuer, the Seller and the Servicer desire to amend the Sale and Servicing
Agreement in certain respects as provided below;
WHEREAS, each of the Indenture Trustee, the Backup Servicer, a Certificate
Majority and a Note Majority has consented to this Amendment as required by
Section 10.1(b) of the Sale and Servicing Agreement;
WHEREAS, it is the intent of the parties that this Amendment be effective
as of the date set forth above (the "EFFECTIVENESS DATE");
NOW, THEREFORE, the parties to this Amendment hereby agree as follows:
ARTICLE I
DEFINITIONS
Unless otherwise defined herein or the context otherwise requires,
defined terms used herein shall have the meanings ascribed thereto in the
Sale and Servicing Agreement.
ARTICLE II
AMENDMENT
SECTION 2.1. AMENDMENT TO SECTION 1.1 OF THE SALE AND SERVICING AGREEMENT.
(a) The definition of "AVERAGE NET EXCESS SPREAD PERCENTAGE" is hereby
amended to read in its entirety as follows:
<PAGE>
"(i) As of (x) the first Determination Date on which there are
Receivables in the Trust or (y) the second Determination Date on which
there are Receivables in the Trust immediately following a Trust Property
Liquidation Date, or if no Trust Property Liquidation Date has occurred,
the Closing Date, in case of the first such Determination Date, the Net
Excess Spread Percentage as of the Accounting Date for the related Monthly
Period and in the case of the second such Determination Date, the average
of the Net Excess Spread Percentages for the two preceding Monthly Periods,
calculated as of the Accounting Date of each such Monthly Period; and (ii)
as of any subsequent Determination Date on which there are Receivables in
the Trust, the average of the Net Excess Spread Percentages for the three
preceding Monthly Periods during which there were Receivables in the
Trust, calculated as of the Accounting Date of each such Monthly Period."
(b) The definition of "ELIGIBLE INTEREST RATE CAP AGREEMENT" in Section
1.1 of the Sale and Servicing Agreement is hereby amended by adding the
following immediately after clause (ii) thereof:
(iii) is purchased in a minimum notional amount of at least
$100,000,000;
(c) The definition of "ELIGIBLE INTEREST RATE CAP AGREEMENT" in Section 1.1
of the Sale and Servicing Agreement is hereby further amended by renumbering
clause (iii) as clause (iv), clause (iv) as clause (v), clause (v) as clause
(vi), clause (vi) as clause (vii), clause (vii) as clause (viii) and clause
(viii) as clause (ix).
(d) The definition of "REQUISITE AMOUNT" in Section 1.1 of the Sale and
Servicing Agreement is hereby amended to read in its entirety as follows:
"As of any Determination Date, (i) if no Trigger Event shall have
occurred, and all previous Trigger Events shall have been Deemed Cured,
4.0% of the sum of the Note Balance on such Determination Date PLUS the
Certificate Balance on such Determination Date; and (ii) if a Trigger
Event shall have occurred (and until such Trigger Event shall have been
Deemed Cured), (x) if such Trigger Event is of the type described in clause
(i) of the definition thereof, 1.0% of the Maximum Program Size PLUS 4.0%
of the sum of the Note Balance on such Determination Date PLUS the
Certificate Balance on such Determination Date, (y) if such Trigger Event
is of the type described in clause (ii) of the definition thereof, 2.0% of
the Maximum Program Size PLUS 4.0% of the sum of the Note Balance on such
Determination Date PLUS the Certificate Balance on such Determination Date,
and (z) if such Trigger Event is of the type described in clauses (iii) or
(iv) of the definition thereof, an unlimited amount."
(e) The definition of "TRIGGER EVENT" in Section 1.1 of the Sale and
Servicing Agreement is hereby amended to read in its entirety as follows:
-2-
<PAGE>
TRIGGER EVENT: As of any Determination Date, (i) if the Net
Excess Spread Percentage shall be less than 5.0% but equal to or
greater than 4.0%; (ii) if the Net Excess Spread Percentage shall be
less than 4.0% but equal to or greater than 3.0%; (iii) if the Net
Excess Spread Percentage shall be less than 3.0% and (iv) if the
Warehousing Loss Ratio shall exceed 0.75%.
(f) Section 1.1. of the Sale and Servicing Agreement is hereby further
amended by adding the following defined terms and definitions:
FINANCED REPOSSESSIONS: Receivables with respect to loans financing
the purchase of Vehicles that were previously repossessed by or for the
benefit of the Servicer.
WAREHOUSING PERIOD: (i) The period beginning upon the first sale of
Receivables to the Trust and ending on the day immediately preceding a
Trust Property Liquidation Date on which all of the Receivables in the
Trust are purchased and (ii) thereafter, any period beginning upon the
first sale of Receivables to the Trust immediately following a Trust
Property Liquidation Date on which all of the Receivables in the Trust are
purchased and ending on the day immediately preceding a Trust Property
Liquidation Date on which all of the Receivables in the Trust are
purchased.
SECTION 2.2. AMENDMENT TO SECTION 2.1 OF THE SALE AND SERVICING AGREEMENT.
(a) Section 2.1(b)(1) of the Sale and Servicing Agreement is hereby
amended by adding the following subsection immediately following Section
2.1(b)(1)(xv):
(xvi) after giving effect to the conveyance of Receivables on such
Transfer Date, the aggregate of the Principal Balances of Receivables
attributable to loans classified as Financed Repossessions shall not exceed
3.0% of the aggregate of the Principal Balances of all Receivables on such
Transfer Date;
(b) Section 2.1(b)(1) of the Sale and Servicing Agreement is hereby
further amended by renumbering Section 2.1(b)(1)(xvi) as
Section 2.1(b)(1)(xvii), by renumbering Section 2.1 (b)(1)(xvii) as
Section 2.1(b)(1)(xviii) and by renumbering Section 2.l(b)(1)(xviii) as
Section 2.1(b)(1)(xix).
(c) Section 2.1(b)(1)(xvi) of the Sale and Servicing Agreement is hereby
amended by deleting the reference to "1.0%" and substituting therefor "4.0%".
(d) Clause (D) of Section 2.1(c)(2)(ix) of the Sale and Servicing
Agreement is hereby amended to read in its entirety as follows:
(D) the Average Net Excess Spread Percentage shall be less than 4.0%;
-3-
<PAGE>
(e) Section 2.1(c)(2) of the Sale and Servicing Agreement is hereby
amended by adding the following subsection immediately following
Section 2.1(c)(2)(x):
(xi) Any Warehousing Period exceeds 120 days.
SECTION 2.3. AMENDMENT TO ARTICLE III OF THE SALE AND SERVICING AGREEMENT.
Article III of the Sale and Servicing Agreement is hereby amended by adding the
following section immediately following Section 3.18:
Section 3.19. MONTHLY REPORTS. The Servicer (if OFL is the Servicer)
shall deliver to JPMD on or prior to the 20th of each month (or if the
twentieth is not a Business Day, the next succeeding Business Day), the
"Internal Static Pool Analysis" with respect to the Receivables and OFL's
"Credit Administration" report (together, the "MONTHLY REPORTS"), in each
case with respect to the immediately preceding Monthly Period. If JPMD
does not receive the Monthly Reports in accordance with the preceding
sentence, JPMD shall provide written notice of non-delivery thereof to the
Servicer.
SECTION 2.4. AMENDMENT TO SECTION 8.1 OF THE SALE AND SERVICING AGREEMENT.
Section 8.1(b) of the Sale and Servicing Agreement is hereby amended by
inserting the following immediately following the words "Servicer's Certificate"
in such section:
"or failure by the Servicer (if OFL is the Servicer) to deliver to
JPMD the Monthly Reports required by SECTION 3.19 within 10 days of
receipt of the notice of non-delivery required under SECTION 3.19"
SECTION 2.5. AMENDMENT TO SCHEDULE B TO SALE AND SERVICING AGREEMENT.
(a) Clause 28(D)(i) of Schedule B is hereby amended (i) by deleting the
reference to "72" and substituting therefor "73" and (ii) by deleting the word
"and" at the end of such clause.
(b) Clause 28(D)(ii) of Schedule B is hereby amended by deleting the
reference to "40%" and substituting therefor "55%".
(c) Clause 28(D) is hereby amended by adding the following immediately
following clause (ii) thereof:
"; and (iii) the aggregate of the Principal Balances of Receivables
attributable to loans classified as Financed Repossessions shall not
exceed 3.0% of the aggregate of the Principal Balances of all
Receivables on such Transfer Date"
-4-
<PAGE>
ARTICLE III
MISCELLANEOUS
SECTION 3.1. COUNTERPARTS. This Amendment may be executed by the
parties hereto in several counterparts, each of which shall be deemed to be
an original and all of which shall constitute together but one and the same
agreement. This Amendment shall become effective when: (1) the Servicer
shall have received (a) counterparts hereof executed on behalf of the Issuer,
the Seller and the Servicer, (b) the consents of the Backup Servicer, the
Indenture Trustee and JPMD, as sole Certificateholder, and as Administrative
Agent for Delaware Funding Corporation, the sole Noteholder, to the terms of
this Amendment and (c) evidence of written notice to Standard & Poor's and
Moody's of this Amendment and (2) OFL shall have caused the delivery to JPMD
of an Opinion of Counsel with respect to truesale and non-substantive
consolidation matters (or a bring-down of the Opinion of Counsel with respect
to these matters delivered on the Closing Date) satisfactory to JPMD.
SECTION 3.2. GOVERNING LAW; ENTIRE AGREEMENT. THIS AMENDMENT SHALL BE
DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE
STATE OF NEW YORK. This Amendment and the Sale and Servicing Agreement (and
all exhibits, annexes and schedules thereto) constitute the entire understanding
among the parties hereto with respect to the subject matter hereof and supersede
any prior agreements, written or oral, with respect thereto.
SECTION 3.3. HEADINGS. The various headings of this Amendment are inserted
for convenience only and shall not affect the meaning or interpretation of this
Amendment or any provisions hereof or thereof.
SECTION 3.4. SALE AND SERVICING AGREEMENT IN FULL FORCE AND EFFECT AS
AMENDED. Except as specifically stated herein, all of the terms and conditions
of the Sale and Servicing Agreement shall remain in full force and effect. All
references to the Sale and Servicing Agreement in any other document or
instrument shall be deemed to mean the Sale and Servicing Agreement, as amended
by this Amendment. This Amendment shall not constitute a novation of the Sale
and Servicing Agreement, but shall constitute an amendment thereto. The parties
hereto agree to be bound by the terms and obligations of the Sale and Servicing
Agreement, as amended by this Amendment, as though the terms and obligations of
the Sale and Servicing Agreement were set forth herein.
-5-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their authorized officers, all as of the date and
year first above written.
ISSUER:
OLYMPIC AUTOMOBILE RECEIVABLES
WAREHOUSE TRUST
By WILMINGTON TRUST COMPANY,
not in its individual capacity but
solely as Owner Trustee
By:
------------------------------------
Name:
Title:
SELLER:
OLYMPIC RECEIVABLES FINANCE CORP. II
By:
------------------------------------
Name:
Title:
SERVICER:
OLYMPIC FINANCIAL LTD.,
in its individual capacity and as
Servicer
By:
------------------------------------
Name:
Title:
-6-
<PAGE>
AGREED AND CONSENTED:
BACKUP SERVICER:
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, not in its individual
capacity but as Backup Servicer
By:
------------------------------------
Name:
Title:
INDENTURE TRUSTEE:
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, not in its individual
capacity but as Indenture Trustee
By:
------------------------------------
Name:
Title:
MORGAN GUARANTY TRUST COMPANY OF NEW
YORK, as sole Certificateholder, and as
Administrative Agent for Delaware
Funding Corporation, as sole Noteholder
By:
------------------------------------
Name:
Title:
-7-
<PAGE>
EXECUTION COPY
AGREEMENT TO INCREASE PURCHASE COMMITMENT AND CONSENT
dated as of June 12, 1996
Relating to
NOTE PURCHASE AGREEMENT
among
OLYMPIC AUTOMOBILE RECEIVABLES WAREHOUSE TRUST
as Seller,
OLYMPIC FINANCIAL LTD.
as Servicer and in its individual capacity,
DELAWARE FUNDING CORPORATION
as Purchaser,
and
MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
as Administrative Agent for the benefit of the DFC Owners,
<PAGE>
THIS AGREEMENT dated as of June 12, 1996 (this "Agreement") is by and
among OLYMPIC AUTOMOBILE RECEIVABLES WAREHOUSE TRUST, a Delaware business trust
(the "SELLER"), OLYMPIC FINANCIAL, LTD., a Minnesota corporation, as Servicer
and in its individual capacity ("OFL"), DELAWARE FUNDING CORPORATION (with its
respective successors and assigns, the "PURCHASER"), and MORGAN GUARANTY TRUST
COMPANY OF NEW YORK (successor to J.P. Morgan Delaware), as Administrative
Agent, for the benefit of the DFC Owners (the "ADMINISTRATIVE AGENT"), and
relates to the Note Purchase Agreement dated as of December 28, 1995 (as amended
from time to time, the "NOTE PURCHASE AGREEMENT"), by and among the parties
listed above. Capitalized terms used in this Agreement and not otherwise
defined shall have the meanings assigned to such terms in the Note Purchase
Agreement.
RECITALS
WHEREAS, pursuant to Section 2.05(b) of the Note Purchase Agreement,
the Seller may request in writing an increase in the Purchase Commitment and
such increase will become effective if the Purchaser and the Administrative
Agent agree thereto; and
WHEREAS, pursuant to Section 8.06 of the Note Purchase Agreement, the
Seller agreed not to make any material amendment to the Trust Agreement, the
Sale and Servicing Agreement or the Indenture without prior written consent of
the Purchaser; and
WHEREAS, pursuant to Section 9.06 of the Note Purchase Agreement, OFL
agreed not to make any material amendment to the Sale and Servicing Agreement
without the prior written consent of the Purchasers; and
WHEREAS, the Purchaser and the Administrative Agent desire to agree to
the Seller's request for an increase in the Purchase Commitment, and to amend
the Trust Agreement, the Sale and Servicing Agreement and the Indenture.
NOW THEREFORE, in consideration of the premises and the agreements
contained herein, the parties to this Agreement agree as follows:
SECTION 1. INCREASE IN PURCHASE COMMITMENT. The Purchaser and the
Administrative Agent agree to the increase of the Purchase Commitment from
$200,000,000 to $300,000,000.
SECTION 2. CONSENT TO AMENDMENT TO TRUST DOCUMENTS. The Purchaser
hereby consents, pursuant to Sections 8.06 and 9.06 of the Note Purchase
Agreement, to the Amendment to Trust Agreement, Amendment to Sale and Servicing
Agreement and Supplemental Indenture of even date herewith, substantially in the
forms attached to this Amendment as Exhibit A.
2
<PAGE>
SECTION 3. NOTE PURCHASE AGREEMENT IN FULL FORCE AND EFFECT AS
SUPPLEMENTED. Except as specifically stated herein, all of the terms and
conditions of the Note Purchase Agreement shall remain in full force and effect.
All references to the Note Purchase Agreement in any other document or
instrument shall be deemed to mean the Note Purchase Agreement, as supplemented
by this Agreement. This Agreement shall not constitute a novation of the Note
Purchase Agreement, but shall constitute a supplement thereto. The parties
hereto agree to be bound by the terms and obligations of the Note Purchase
Agreement, as supplemented by this Agreement, as though the terms and
obligations of the Note Purchase Agreement were set forth herein.
SECTION 4. EFFECTIVENESS. This Agreement shall become effective as
of June 12, 1996, upon receipt by the Administrative Agent of (a) executed
counterparts of this Agreement; (b) an executed copy of the First Amendment to
DFC Asset Purchase Agreement, dated as of the date hereof, evidencing the
increase in the commitment amounts of the DFC Purchasers; (c) an executed copy
of the Agreement to Increase Aggregate Purchase Commitments and Consent, dated
the date hereof, relating to the Certificate Purchase Agreement among the
Seller, OFL, the financial institution party thereto and Morgan Guaranty Trust
Company of New York; and (d) confirmation by each of S&P and Moody's of the
then-current ratings of the Commercial Paper Notes.
SECTION 4. COUNTERPARTS. This Agreement may be executed in any
number of counterparts and by separate parties hereto on separate counterparts,
each of which when executed shall be deemed an original, but all such
counterparts taken together shall constitute one and the same instrument.
SECTION 5. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK.
3
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
OLYMPIC AUTOMOBILE RECEIVABLES WAREHOUSE
TRUST,
as Seller
By: Wilmington Trust Company, not in its
individual capacity but solely as Owner
Trustee
By:___________________________
Name:
Title:
OLYMPIC FINANCIAL LTD.
By:___________________________
Name:
Title: Treasurer
DELAWARE FUNDING CORPORATION,
as Purchaser
By: Morgan Guaranty Trust
Company of New York,
as attorney-in-fact for
Delaware Funding Corporation
By:___________________________
Name:
Title:
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK,
as Administrative Agent
By:___________________________
Name:
Title:
4
<PAGE>
EXECUTION COPY
- --------------------------------------------------------------------------------
AGREEMENT TO EXTEND PURCHASE
COMMITMENT EXPIRATION DATE
dated as of December 20, 1996
Relating to
NOTE PURCHASE AGREEMENT
among
OLYMPIC AUTOMOBILE RECEIVABLES WAREHOUSE TRUST
as Seller,
OLYMPIC FINANCIAL LTD.
as Servicer and in its individual capacity,
DELAWARE FUNDING CORPORATION
as Purchaser,
and
MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
as Administrative Agent for the benefit of the DFC Owners,
- --------------------------------------------------------------------------------
<PAGE>
THIS AGREEMENT TO EXTEND PURCHASE COMMITMENT EXPIRATION DATE dated as
of December 20, 1996 (this "AGREEMENT") Relating to the Note Purchase Agreement
dated as of December 28, 1995 (as amended from time to time, the "NOTE PURCHASE
AGREEMENT") by and among OLYMPIC AUTOMOBILE RECEIVABLES WAREHOUSE TRUST, a
Delaware business trust (the "SELLER"), OLYMPIC FINANCIAL, LTD., a Minnesota
corporation, as Servicer and in its individual capacity ("OFL"), DELAWARE
FUNDING CORPORATION (with its respective successors and assigns, the
"PURCHASER"), and MORGAN GUARANTY TRUST COMPANY OF NEW YORK (successor to J.P.
Morgan Delaware), as Administrative Agent, for the benefit of the DFC Owners
(the "ADMINISTRATIVE AGENT"), is by and among the parties listed above.
Capitalized terms used in this Agreement and not otherwise defined shall have
the meanings assigned to such terms in the Note Purchase Agreement.
RECITALS
WHEREAS, pursuant to Section 2.04 of the Note Purchase Agreement, the
parties to the Note Purchase Agreement are permitted to extend the Purchase
Commitment Expiration Date by mutual agreement in writing; and
WHEREAS, the parties to the Note Purchase Agreement desire to extend
the Purchase Commitment Expiration Date.
NOW THEREFORE, in consideration of the premises and the agreements
contained herein, the parties to this Agreement agree as follows:
SECTION 1. EXTENSION OF PURCHASE COMMITMENT EXPIRATION DATE. The
parties hereto agree to extend the Purchase Commitment Expiration Date such that
clause (i) of the definition of "Purchase Commitment Expiration Date" now reads
"January 17, 1997.
SECTION 2. NOTE PURCHASE AGREEMENT IN FULL FORCE AND EFFECT AS
SUPPLEMENTED. Except as specifically stated herein, all of the terms and
conditions of the Note Purchase Agreement shall remain in full force and
effect. All references to the Note Purchase Agreement in any other document
or instrument shall be deemed to mean the Note Purchase Agreement, as
supplemented by this Agreement. This Agreement shall not constitute a
novation of the Note Purchase Agreement, but shall constitute a supplement
thereto. The parties hereto agree to be bound by the terms and obligations
of the Note Purchase Agreement, as supplemented by this Amendment, as though
the terms and obligations of the Note Purchase Agreement were set forth
herein.
SECTION 3. EFFECTIVENESS. This Agreement shall become effective
as of December 20, 1996, upon receipt by the Administrative Agent of the
following: (a) executed counterparts of this Agreement; (b) an executed copy
of the Second Amendment and Consent Relating to DFC Asset Purchase Agreement,
dated as of the date hereof, evidencing the extension of the commitment terms
<PAGE>
and the change of the commitment amounts of certain DFC Purchasers; (c) an
executed copy of the First Amendment and Consent Relating to Certificate
Purchase Agreement among the Seller, OFL, the "Purchasers" named therein and
Morgan Guaranty Trust Company of New York; (d) an Officer's Certificate from
each of the Seller, OFL and ORFC II, each in form and substance reasonably
acceptable to the Purchaser and its counsel, dated as of the date of this
Agreement, to the effect that (i) the representations and warranties of the
Seller, OFL and ORFC II in the Sale and Servicing Agreement, the Note
Purchase Agreement, the Certificate Purchase Agreement, the Purchase
Agreement and the Trust Agreement, as applicable, are true and correct as of
the date hereof; (ii) OFL, the Seller and ORFC II are in compliance with
their respective covenants in the Sale and Servicing Agreement, the Note
Purchase Agreement, the Certificate Purchase Agreement, the Purchase
Agreement and the Trust Agreement, as applicable, as of the date hereof; and
(iii) no Note Purchase Termination Event or event which with the passage of
time could become a Note Purchase Termination Event shall have occurred and
be continuing as of the date hereof; and (e) confirmation by each of S&P and
Moody's of the then-current ratings of the Commercial Paper Notes.
SECTION 4. PRIOR UNDERSTANDINGS. This Agreement sets forth the
entire understanding of the parties relating to the subject matter hereof, and
supersedes all prior understandings and agreements, whether written or oral.
SECTION 5. COUNTERPARTS. This Agreement may be executed in any
number of counterparts and by separate parties hereto on separate counterparts,
each of which when executed shall be deemed an original, but all such
counterparts taken together shall constitute one and the same instrument.
SECTION 6. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK.
2
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
OLYMPIC AUTOMOBILE RECEIVABLES
WAREHOUSE TRUST,
as Seller
By: Wilmington Trust Company,
not in its individual
capacity but solely as
Owner Trustee
By: /s/ Denise M. Geran
________________________________
Name: DENISE M. GERAN
Title: Financial Services Officer
OLYMPIC FINANCIAL LTD.
By: /s/ illegible
__________________________________
Name:
Title: Treasurer
DELAWARE FUNDING CORPORATION,
as Purchaser
By: Morgan Guaranty Trust
Company of New York,
as attorney-in-fact for
Delaware Funding Corporation
By: /s/ Richard A. Burke
__________________________________
Name: RICHARD A. BURKE
Title: Vice President
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK,
as Administrative Agent
By: /s/ Richard A. Burke
__________________________________
Name: RICHARD A. BURKE
Title: Vice President
3
<PAGE>
EXECUTION COPY
- ------------------------------------------------------------------------------
FIRST AMENDMENT
AND CONSENT
dated as of January 17, 1997
Relating to
NOTE PURCHASE AGREEMENT
among
OLYMPIC AUTOMOBILE RECEIVABLES WAREHOUSE TRUST
as Seller,
OLYMPIC FINANCIAL LTD.
as Servicer and in its individual capacity,
DELAWARE FUNDING CORPORATION
as Purchaser,
and
MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
as Administrative Agent for the benefit of the DFC Owners,
- ------------------------------------------------------------------------------
<PAGE>
THIS FIRST AMENDMENT AND CONSENT dated as of January 17, 1997 (this
"AMENDMENT") Relating to the Note Purchase Agreement dated as of December 28,
1995 (as amended from time to time, the "NOTE PURCHASE AGREEMENT") by and
among OLYMPIC AUTOMOBILE RECEIVABLES WAREHOUSE TRUST, a Delaware business
trust (the "SELLER"), OLYMPIC FINANCIAL, LTD., a Minnesota corporation, as
Servicer and in its individual capacity ("OFL"), DELAWARE FUNDING CORPORATION
(with its respective successors and assigns, the "PURCHASER"), and MORGAN
GUARANTY TRUST COMPANY OF NEW YORK (successor to J.P. Morgan Delaware), as
Administrative Agent, for the benefit of the DFC Owners (the "ADMINISTRATIVE
AGENT"), is by and among the parties listed above. Capitalized terms used in
this Amendment and not otherwise defined shall have the meanings assigned to
such terms in the Note Purchase Agreement.
RECITALS
WHEREAS, pursuant to Section 13.01 of the Note Purchase Agreement,
the parties to the Note Purchase Agreement may agree in writing to amend such
Agreement; and
WHEREAS, pursuant to Section 2.04 of the Note Purchase Agreement,
the parties to the Note Purchase Agreement are permitted to extend the
Purchase Commitment Expiration Date by mutual agreement in writing; and
WHEREAS, pursuant to Section 2.05(a) of the Note Purchase
Agreement, the Seller may reduce the unused Purchase Commitment and such
reduction will become effective upon the Seller's providing the
Administrative Agent with written notice of such reduction thereto; and
WHEREAS, pursuant to Section 8.06 of the Note Purchase Agreement,
the Seller agreed not to make any material amendment to the Sale and
Servicing Agreement without prior written consent of the Purchaser; and
WHEREAS, pursuant to Section 9.06 of the Note Purchase Agreement,
OFL agreed not to make any material amendment to the Sale and Servicing
Agreement or the Purchase Agreement without the prior written consent of the
Purchaser; and
WHEREAS, the parties to the Note Purchase Agreement desire to amend
the Note Purchase Agreement in certain respects as provided herein, including
by amending certain definitions, adding certain covenants and adding certain
Note Purchase Termination Events; and
WHEREAS, the parties to the Note Purchase Agreement desire to
extend the Purchase Commitment Expiration Date by amending the related
definition in the Note Purchase Agreement; and
<PAGE>
WHEREAS, the Purchaser and the Administrative Agent desire to
accept this Amendment as notice of the reduction of the amount of the
Purchase Commitment; and
WHEREAS, the Purchasers desire to consent to the amendments to the
Sale and Servicing Agreement and the Purchase Agreement.
NOW THEREFORE, in consideration of the premises and the agreements
contained herein, the parties to this Amendment agree as follows:
SECTION 1. NEW DEFINITIONS. The following new definitions are
hereby added to Section 1.01 of the Note Purchase Agreement:
"CAPITAL BASE" shall mean, at any date, OFL's Tangible Net Worth at
such date.
"CAPITAL BASE PROCEEDS," for any period, shall mean the proceeds
received by OFL from any sale of equity securities during such period (net
of direct, out-of-pocket expenses incurred in connection with such sale).
"CHANGE OF CONTROL" shall mean the occurrence of any of the following
with respect to OFL:
(a) (i) a majority of the directors of OFL shall be Persons other
than Persons (x) for whose election proxies shall have been solicited by
the board of directors of OFL or (y) who are then serving as directors
appointed by the board of directors to fill vacancies on the board of
directors caused by death or resignation (but not by removal) or to fill
newly-created directorships or (ii) any person or group of persons (within
the meaning of Section 13 or 14 of the Securities Exchange Act of 1934, as
amended) shall have acquired beneficial ownership (within the meaning of
Rule 13d-3 promulgated by the Securities and Exchange Commission under
said Act) of 50% or more in voting power of the outstanding voting stock
of OFL; or
(b) OFL shall fail to own, directly or indirectly, 100% of the
outstanding capital stock of ORFC II.
"GAAP" means generally accepted accounting principles set forth from
time to time in the opinions and pronouncements of the Accounting
Principles Board and the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting
Standards Board (or agencies with similar functions of comparable stature
and authority within the U.S. accounting profession), which are
applicable to the circumstances as of the date of any determination.
2
<PAGE>
"NET INCOME" shall mean, for any period, OFL's after-tax net income
for such period determined in accordance with GAAP but after deduction of
dividend payments on OFL's Cumulative Convertible Exchangeable Preferred
Stock (as described in OFL's Amendment No. 3 to Form S-1 Registration
Statement dated November 22, 1993).
"NET WORTH" shall mean the total of all assets appearing on OFL's
balance sheet after deducting all proper reserves (including reserves for
depreciation, obsolescence and amortization) minus all liabilities of OFL,
in each case determined in accordance with GAAP.
"PERMITTED ACQUISITION" shall mean the acquisition by OFL or any of
its subsidiaries of any Person that is a going concern that satisfies the
conditions specified in that certain Credit Agreement dated as of July 11,
1996, among OFL, the several institutions party thereto, Bank of America
National Trust and Savings Association, as agent and First Bank National
Association, as co-manager.
"TANGIBLE NET WORTH" shall mean, at any time, OFL's Net Worth at such
time, excluding the value of goodwill (other than goodwill arising from a
Permitted Acquisition), trademarks, trade names, copyrights, patents,
licenses and similar intangibles but specifically including, all of OFL's
Finance Income Receivables (calculated in a manner consistent with OFL's
audited consolidated balance sheet as of December 31, 1995) as at such
time.
SECTION 2. EXTENSION AND AMENDMENT OF PURCHASE COMMITMENT
EXPIRATION DATE. The parties hereto agree to extend the Purchase Commitment
Expiration Date and to amend such definition. The definition of "Purchase
Commitment Expiration Date" is hereby amended to read as follows:
"PURCHASE COMMITMENT EXPIRATION DATE" means the earliest of
(i) December 19, 1997, (ii) June 30, 1997, but only if either (A) a
"Purchase Commitment Expiration Date" occurs by reason of clause (ii) of
such definition in the Certificate Purchase Agreement or (B) the
Purchaser, in its sole and absolute discretion, determines to terminate
its Purchase Commitment hereunder and so notifies the Seller and OFL in
writing on or before May 30, 1997, (iii) the date on which an event which
causes or might cause a Note Purchase Termination Event occurs, and (iv)
the date on which a Securitized Offering occurs; provided that the
Purchase Commitment Expiration Date may be extended from time to time in
accordance with Section 2.04 hereof.
SECTION 3. ADDITIONAL REQUIREMENTS FOR INCREMENTAL PURCHASES. (a)
Section 2.03(a)(ii) of the Note Purchase Agreement is hereby amended to read
as follows:
3
<PAGE>
(ii) The Administrative Agent shall have received a completed Notice
of Incremental Purchase by 2:00 p.m., New York City time, on the Business
Day immediately preceding such Incremental Purchase Date (or if any such
Notice is received after 2:00 p.m., the related Incremental Purchase shall
occur on the second Business Day following such receipt);
(b) Clause (vi) of Section 2.03(a) is hereby amended to include a
reference to the Note Purchase Agreement and now reads as follows:
(vi) The Seller, the Owner Trustee, the General Partner, OFL and ORFC
II shall be in compliance with all of their respective covenants contained
in the Trust Agreement, the Sale and Servicing Agreement, the Purchase
Agreement, each Assignment Agreement, each Transfer Agreement, the
Indenture and this Note Purchase Agreement;
SECTION 4. DECREASE IN PURCHASE COMMITMENT. In accordance with
the provisions of Section 2.05(a) of the Note Purchase Agreement, the
Purchaser and the Administrative Agent acknowledge that this Amendment
constitutes notice of the reduction of the Purchase Commitment from
$300,000,000 to $225,000,000.
SECTION 5. ADDITION OF NOTE PURCHASE TERMINATION EVENT. The
following event is added as a new clause (j) to Section 2.08 of the Note
Purchase Agreement as an additional "Note Purchase Termination Event":
(j) a Change of Control shall have occurred without the consent of
the Administrative Agent.
SECTION 6. ADDITIONAL OFL COVENANT. The following new OFL
covenant is added as new Section 9.07 to the Note Purchase Agreement and
reads as follows:
SECTION 9.07. MINIMUM CAPITAL BASE.
(a) OFL will not permit its consolidated Capital Base, on the last
day of its fiscal year, to be less than the sum of (i) its consolidated
Capital Base on the last day of the immediately preceding fiscal year,
PLUS (ii) to the extent Net Income for such fiscal year is greater than
zero, Net Income for such fiscal year PLUS (iii) Capital Base Proceeds
for such fiscal year.
(b) OFL will not permit its consolidated Capital Base, on the last
day of any fiscal quarter other than the last day of its fiscal year, to
be less than the sum (i) 95% of its consolidated Capital Base on the last
day of the immediately preceding fiscal year PLUS (ii) Capital Base
Proceeds since the last day of the immediately preceding fiscal year.
4
<PAGE>
SECTION 7. AMENDMENT TO NOTICE OF INCREMENTAL PURCHASE. The
Notice of Incremental Purchase, included as Exhibit D to the Note Purchase
Agreement, is hereby amended and now reads as set forth in the Exhibit D
attached to this Amendment.
SECTION 8. CONSENT TO AMENDMENT TO SALE AND SERVICING AGREEMENT
AND PURCHASE AGREEMENT. The Purchaser hereby consents, pursuant to Sections
8.06 and 9.06 of the Note Purchase Agreement, to Amendment No. 3 to Sale and
Servicing Agreement and Amendment No. 3 to Receivables Purchase Agreement,
each of even date herewith, substantially in the forms attached to this
Amendment as Appendices A and B.
SECTION 9. NOTE PURCHASE AGREEMENT IN FULL FORCE AND EFFECT AS
AMENDED. Except as specifically stated herein, all of the terms and
conditions of the Note Purchase Agreement shall remain in full force and
effect. All references to the Note Purchase Agreement in any other document
or instrument shall be deemed to mean the Note Purchase Agreement, as amended
by this Amendment. This Amendment shall not constitute a novation of the
Note Purchase Agreement, but shall constitute an amendment thereto. The
parties hereto agree to be bound by the terms and obligations of the Note
Purchase Agreement, as amended by this Amendment, as though the terms and
obligations of the Note Purchase Agreement were set forth herein.
SECTION 10. EFFECTIVENESS. This Amendment shall become effective
as of January 17, 1997, upon receipt by the Administrative Agent of the
following: (a) executed counterparts of this Amendment; (b) an executed copy
of the Third Amendment and Consent Relating to DFC Asset Purchase Agreement,
dated as of the date hereof, evidencing the extension of the commitment terms
and the reduction of the commitment amounts of the DFC Purchasers; (c) an
executed copy of the Second Amendment and Consent Relating to Certificate
Purchase Agreement among the Seller, OFL, the "Purchasers" named therein and
Morgan Guaranty Trust Company of New York; (d) executed counterparts of each
of Amendment No. 3 to the Sale and Servicing Agreement and Amendment No. 3 to
Receivables Purchase Agreement, each dated as of the date hereof; (e) an
Officer's Certificate from each of the Seller, OFL and ORFC II, each in form
and substance reasonably acceptable to the Purchaser and its counsel, dated
as of the date of this Amendment, to the effect that (i) the representations
and warranties of the Seller, OFL and ORFC II in the Sale and Servicing
Agreement, the Note Purchase Agreement, the Certificate Purchase Agreement,
the Purchase Agreement and the Trust Agreement, as applicable, are true and
correct as of the date hereof; (ii) OFL, the Seller and ORFC II are in
compliance with their respective covenants in the Sale and Servicing
Agreement, the Note Purchase Agreement, the Certificate Purchase Agreement,
the Purchase Agreement and the Trust Agreement, as applicable, as of the date
hereof; and (iii) no Note Purchase Termination Event or event which with the
passage of time could become a Note Purchase Termination Event shall have
occurred and be continuing
5
<PAGE>
as of the date hereof; (f) opinions of counsel to each of OFL, the Seller and
ORFC II, dated as of the date hereof, to the effect that (i) as to OFL and
ORFC II, this Amendment and the Amendments referenced in clauses (b) through
(d) of this Section 13 have been duly authorized, executed and delivered and
(ii) as to OFL, the Seller and ORFC II, such Amendments and the Agreements
amended thereby are enforceable obligations of the Seller, OFL and ORFC II,
as applicable; (g) an executed copy of the Amendment of DFC Fee Letter dated
the date hereof; and (h) confirmation by each of S&P and Moody's of the
then-current ratings of the Commercial Paper Notes.
SECTION 11. PRIOR UNDERSTANDINGS. This Amendment sets forth the
entire understanding of the parties relating to the subject matter hereof,
and supersedes all prior understandings and agreements, whether written or
oral.
SECTION 12. COUNTERPARTS. This Amendment may be executed in any
number of counterparts and by separate parties hereto on separate
counterparts, each of which when executed shall be deemed an original, but
all such counterparts taken together shall constitute one and the same
instrument.
SECTION 13. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK.
6
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Amendment to be
executed by their respective officers thereunto duly authorized, as of the
date first above written.
OLYMPIC AUTOMOBILE RECEIVABLES
WAREHOUSE TRUST,
as Seller
By: Wilmington Trust Company, not in its
individual capacity but solely as Owner
Trustee
By: /s/ [illegible]
____________________________________
Name:
Title:
OLYMPIC FINANCIAL LTD.
By:_____________________________________
Name:
Title: Treasurer
DELAWARE FUNDING CORPORATION,
as Purchaser
By: Morgan Guaranty Trust
Company of New York,
as attorney-in-fact for
Delaware Funding Corporation
By:______________________________________
Name:
Title:
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK,
as Administrative Agent
By:______________________________________
Name:
Title:
7
<PAGE>
EXHIBIT D
to Note
Purchase Agreement
Form of Notice of
Incremental Purchase or Repayment/Redemption
Olympic Automobile Receivables Trust, 1996-A
Variable Funding Notes
A. Proposed Incremental Purchase or
Repayment/Redemption Date: __________
B. Certificate Balance of Investor Certificates $__________
C. Outstanding Amount of Notes (prior to giving
effect to Incremental Purchase or
Repayment/Redemption, as applicable, on date
hereof) $__________
D. Amount of requested Incremental Purchase
(lesser of minimum amount of $__________ or
remaining DFC Purchase Commitment) $__________
E. Repayment/Redemption Amount $__________
F. Outstanding Amount of Notes (after giving
effect to Incremental Purchase or
Repayment/Redemption, as applicable, on date
hereof) $__________
G. Facility Limit $__________
H. Remaining Facility Limit $__________
I. Calculations (after giving effect to the
conveyance of Receivables on the related
Transfer Date)
1. The aggregate Principal Balance of
Receivables with original maturities from 73
to 84 months divided by the aggregate of the
Principal Balances of all Receivables
(maximum of 7.5%) ____________%
2. The aggregate Principal Balance of
Receivables attributable to loans originated
under OFL's "Classic" program divided by the
aggregate of the Principal Balances of all
Receivables (maximum of 55%) ____________%
3. The aggregate Principal Balance of
Receivables attributable to loans defined by
OFL as "Financed Repossessions" divided by
the aggregate of the Principal Balances of
all Receivables (maximum of 3.0%) ____________%
4. Weighted Average Coupon of Receivables ____________%
<PAGE>
5. Weighted Average Maturity of
Receivables ____________%
J. Certifications (applicable only with
respect to an Incremental Purchase)
1. The information relating to the Receivables to be
purchased by Olympic Automobile Receivables Warehouse
Trust, (the "Trust") and pledged to Norwest Bank
Minnesota, National Association, as trustee (the "Indenture
Trustee") under the Indenture dated as of December 28,
1995, as amended (the "Indenture"), is true and correct.
2. The representations and warranties of Olympic
Financial Ltd., ("OFL"), in the Sale and Servicing
Agreement dated as of December 28, 1995, as amended (the
"Sale and Servicing Agreement"), among the Trust, Olympic
Receivables Financial Corp. II ("ORFC II"), OFL, in its
individual capacity and as servicer of the Receivables, and
Norwest Bank Minnesota, National Association, the
Receivables Purchase Agreement dated December 28, 1995, as
amended, by and between OFL and ORFC II and the Note
Purchase Agreement dated as of December 28, 1995, as
amended (the "Note Purchase Agreement"), by and among the
Trust, OFL, in its individual capacity and as servicer of
the Receivables, Delaware Funding Corporation and Morgan
Guaranty Trust Company of New York are true and correct in
all material respects as of the date hereof.
3. The representations of the Trust in the Note Purchase
Agreement are true and correct in all material respects as
of the date hereof.
4. The representations of ORFC II in the Sale and
Servicing Agreement are true and correct in all material
respects as of the date hereof.
5. The Incremental Purchase Conditions specified in
Section 2.03(a) of the Note Purchase Agreement have been
satisfied and/or will be satisfied as of the applicable
Incremental Purchase Date.
D-2
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Amendment to be
executed by their respective officers thereunto duly authorized, as of the
date first above written.
OLYMPIC AUTOMOBILE RECEIVABLES
WAREHOUSE TRUST,
as Seller
By: Wilmington Trust Company,
not in its individual
capacity but solely as
Owner Trustee
By: /s/ [illegible]
____________________________
Name:
Title:
OLYMPIC FINANCIAL LTD.
By:
____________________________
Name:
Title: Treasurer
DELAWARE FUNDING CORPORATION,
as Purchaser
By: Morgan Guaranty Trust
Company of New York,
as attorney-in-fact for
Delaware Funding Corporation
By: -------------------------------
Name:
Title:
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK,
as Administrative Agent
By: -------------------------------
Name:
Title:
7
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Amendment to be
executed by their respective officers thereunto duly authorized, as of the
date first above written.
OLYMPIC AUTOMOBILE RECEIVABLES
WAREHOUSE TRUST,
as Seller
By: Wilmington Trust Company,
not in its individual
capacity but solely as
Owner Trustee
By:_________________________________
Name:
Title:
OLYMPIC FINANCIAL LTD.
By:/s/ Michael J. Sherman
_________________________________
Name: Michael J. Sherman
Title: Treasurer
DELAWARE FUNDING CORPORATION,
as Purchaser
By: Morgan Guaranty Trust
Company of New York,
as attorney-in-fact for
Delaware Funding Corporation
By:_________________________________
Name:
Title:
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK,
as Administrative Agent
By:_________________________________
Name:
Title:
7
<PAGE>
(i) The Collateral Agent, by the execution hereof, acknowledges receipt
of the Pledged Shares on behalf of Financial Security.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Pledge Agreement on the date first above written.
OLYMPIC FINANCIAL LTD.
By:_________________________________
Name:
Title:
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
as Collateral Agent
By:_________________________________
Name:
Title:
FINANCIAL SECURITY ASSURANCE INC.
By: /s/ [illegible]
_________________________________
Name:
Title:
<PAGE>
EXECUTION COPY
- -------------------------------------------------------------------------------
AGREEMENT TO
INCREASE AGGREGATE PURCHASE COMMITMENTS AND CONSENT
dated as of June 12, 1996
Relating to
CERTIFICATE PURCHASE AGREEMENT
among
OLYMPIC AUTOMOBILE RECEIVABLES WAREHOUSE TRUST
as Seller,
OLYMPIC FINANCIAL LTD.
as Servicer and in its individual capacity,
THE FINANCIAL INSTITUTIONS SIGNATORY HERETO
as Purchasers,
and
MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
as Agent for the Purchasers
- -------------------------------------------------------------------------------
<PAGE>
THIS AGREEMENT dated as of June 12, 1996 (this "AGREEMENT") is by
and among OLYMPIC AUTOMOBILE RECEIVABLES WAREHOUSE TRUST, a Delaware business
trust (the "SELLER"), OLYMPIC FINANCIAL LTD., a Minnesota corporation, as
Servicer (as defined below) and in its individual capacity ("OFL"), MORGAN
GUARANTY TRUST COMPANY OF NEW YORK (successor to J.P. Morgan Delaware), as a
purchaser (a "PURCHASER" or "MORGAN"), and MORGAN GUARANTY TRUST COMPANY OF
NEW YORK (successor to J.P. Morgan Delaware), as agent for the benefit of the
Purchasers from time to time (the "PURCHASERS' AGENT"), and relates to the
Certificate Purchase Agreement dated as of December 28, 1995 (as amended from
time to time, the "CERTIFICATE PURCHASE AGREEMENT"), by and among the Seller,
OFL, Morgan, as the sole Purchaser and the Purchasers' Agent. Capitalized
terms used in this Agreement and not otherwise defined shall have the
meanings assigned to such terms in the Certificate Purchase Agreement.
RECITALS
WHEREAS, pursuant to Section 2.05(b) of the Certificate Purchase
Agreement, the Seller may request in writing an increase in the aggregate of
the Purchase Commitments and such increase will become effective if the
Purchasers and the Purchasers' Agent agree thereto or if an additional
Purchaser agrees to accept all or a portion of the increase in the aggregate
Purchase Commitments; and
WHEREAS, pursuant to Section 8.05 of the Certificate Purchase
Agreement, the Seller agreed not to make any material amendment to the Trust
Agreement, the Sale and Servicing Agreement or the Indenture without the
prior written consent of the Purchasers; and
WHEREAS, pursuant to Section 9.05 of the Certificate Purchase
Agreement, OFL agreed not to make any material amendment to the Sale and
Servicing Agreement without the prior written consent of the Purchasers; and
WHEREAS, Morgan is currently the sole Purchaser under the
Certificate Purchase Agreement; and
WHEREAS, Morgan and the Purchasers' Agent desire to agree to the
Seller's request for an increase in the aggregate Purchase Commitments and to
consent to the amendment of the Trust Agreement, the Sale and Servicing
Agreement and the Indenture.
NOW THEREFORE, in consideration of the premises and the agreements
contained herein, the parties to this Agreement agree as follows:
SECTION 1. INCREASE IN PURCHASE COMMITMENTS. Morgan and the
Purchasers' Agent agree to the increase of the aggregate of the Purchase
Commitments from $19,800,000 to $29,700,000. Following such increase,
Morgan's Purchase Percentage will remain at 100% and its Purchase Commitment
will be increased. Morgan
<PAGE>
will evidence its increased Purchase Commitment by executing a
signature page to this Agreement. Such signature page shall supersede the
signature pages to the Certificate Purchase Agreement, and from and after the
date of this Agreement, all references to the signature pages of the
Certificate Purchase Agreement shall refer to the signature pages to this
Agreement.
SECTION 2. CONSENT TO AMENDMENT TO TRUST DOCUMENTS. The Purchaser
hereby consents, pursuant to Section 8.05 and 8.06 of the Certificate
Purchase Agreement, to the Amendment to Trust Agreement, Amendment to Sale
and Servicing Agreement and Supplemental Indenture of even date herewith,
substantially in the forms attached hereto as Exhibit A.
SECTION 3. CERTIFICATE PURCHASE AGREEMENT IN FULL FORCE AND EFFECT
AS SUPPLEMENTED. Except as specifically stated herein, all of the terms and
conditions of the Certificate Purchase Agreement shall remain in full force
and effect. All references to the Certificate Purchase Agreement in any
other document or instrument shall be deemed to mean the Certificate Purchase
Agreement, as supplemented by this Agreement. This Agreement shall not
constitute a novation of the Certificate Purchase Agreement, but shall
constitute a supplement thereto. The parties hereto agree to be bound by the
terms and obligations of the Certificate Purchase Agreement, as supplemented
by this Agreement, as though the terms and obligations of the Certificate
Purchase Agreement were set forth herein.
SECTION 4. EFFECTIVENESS. This Agreement shall become effective
as of June 12, 1996.
SECTION 5. COUNTERPARTS. This Agreement may be executed in any
number of counterparts and by separate parties hereto on separate
counterparts, each of which when executed shall be deemed an original, but
all such counterparts taken together shall constitute one and the same
instrument.
SECTION 6. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK.
2
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the
date first above written.
OLYMPIC AUTOMOBILE RECEIVABLES
WAREHOUSE TRUST
as Seller
By: Wilmington Trust Company, not in its
individual capacity but solely as Owner
Trustee
By:___________________________
Name:
Title:
OLYMPIC FINANCIAL LTD., as
Servicer and in its
individual capacity
By:___________________________
Name:
Title: Treasurer
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Purchaser
Purchase By:___________________________
Commitment: $29,700,000 Name:
Purchase Percentage: 100% Title:
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Purchasers'
Agent
By:___________________________
Name:
Title:
3
<PAGE>
EXECUTION COPY
FIRST AMENDMENT
AND CONSENT
dated as of December 20, 1996
Relating to
CERTIFICATE PURCHASE AGREEMENT
among
OLYMPIC AUTOMOBILE RECEIVABLES WAREHOUSE TRUST
as Seller,
OLYMPIC FINANCIAL LTD.
as Servicer and in its individual capacity,
THE PARTIES SIGNATORY HERETO
as Purchasers,
and
MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
as Agent for the Purchasers
<PAGE>
THIS FIRST AMENDMENT AND CONSENT dated as of December 20, 1996 (this
"AMENDMENT") Relating to the Certificate Purchase Agreement dated as of December
28, 1995 (as amended and supplemented from time to time, the "CERTIFICATE
PURCHASE AGREEMENT"), by and among OLYMPIC AUTOMOBILE RECEIVABLES WAREHOUSE
TRUST, a Delaware business trust (the "SELLER"), OLYMPIC FINANCIAL LTD., a
Minnesota corporation, as Servicer (as defined below) and in its individual
capacity ("OFL"), MORGAN GUARANTY TRUST COMPANY OF NEW YORK (successor to J.P.
MORGAN DELAWARE) ("MGT"), and Olympic Receivables Finance Corp. II ("ORFC II")
(each of MGT and ORFC II, a "PURCHASER" and together, the "PURCHASERS"), and
MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as agent for the benefit of the
Purchasers (the "PURCHASERS' AGENT"), is by and among the parties listed above.
Capitalized terms used in this Amendment and not otherwise defined shall have
the meanings assigned to such terms in the Certificate Purchase Agreement.
RECITALS
WHEREAS, pursuant to Section 13.01 of the Certificate Purchase
Agreement, the parties to such Agreement are authorized to amend the Certificate
Purchase Agreement in a written amendment signed by all parties thereto; and
WHEREAS, pursuant to Section 2.04 of the Certificate Purchase
Agreement, the parties may agree in writing to the extension of the Purchase
Commitment Expiration Date; and
WHEREAS, pursuant to the Certificate Purchase Agreement, only
"financial institutions" are permitted to become "Purchasers" thereunder; and
WHEREAS, MGT is currently the sole Purchaser under the Certificate
Purchase Agreement; and
WHEREAS, ORFC II has agreed to become a Purchaser under the
Certificate Purchase Agreement; and
WHEREAS, the parties to the Certificate Purchase Agreement desire to
amend the definition of "Purchaser" therein in order to permit ORFC II to become
a Purchaser; and
WHEREAS, the parties to the Certificate Purchase Agreement desire to
extend the Purchase Commitment Expiration Date by amending the related
definition in the Certificate Purchase Agreement; and
WHEREAS, due to the addition of ORFC II as a Purchaser under the
Certificate Purchase Agreement, the Purchase Commitments and Purchaser
Percentages will be affected as evidenced herein.
<PAGE>
NOW THEREFORE, in consideration of the premises and the agreements
contained herein, the parties to this Amendment agree as follows:
SECTION 1. AMENDMENT OF DEFINITION OF PURCHASER. (a) The first
paragraph of the Certificate Purchase Agreement is amended by deleting the words
"each FINANCIAL INSTITUTION which has executed a signature page thereto or an
Assignment of Purchase Commitment in the form of Exhibit A hereto (each a
"PURCHASER" and together, the "PURCHASERS")" and inserting in its place the
phrase "each PURCHASER (as defined below)."
(b) A new definition of "Purchaser" is added to Section 1.01 of the
Certificate Purchase Agreement and reads as follows:
"PURCHASER" means ORFC II or any financial institution which has
executed a signature page to this Agreement or an Assignment of Purchase
Commitment in the form of Exhibit A hereto, or the successors or assigns of
any of the above.
SECTION 2. ADDITIONAL PURCHASER; EVIDENCE OF PURCHASE COMMITMENTS AND
PURCHASE PERCENTAGES. ORFC II hereby agrees to become a Purchaser under the
Certificate Purchase Agreement. Following the addition of ORFC II as a
Purchaser, MGT's Purchase Percentage and Purchase Commitment will be revised.
The Purchasers will evidence their respective Purchase Commitments and Purchase
Percentages by executing signature pages to this Amendment. Such signature
pages shall supersede the signature pages to the Certificate Purchase Agreement,
and from and after the date of this Amendment, all references to the signature
pages of the Certificate Purchase Agreement shall refer to the signature pages
to this Amendment.
SECTION 3. EXTENSION AND AMENDMENT OF PURCHASE COMMITMENT EXPIRATION
DATE. The parties hereto agree to extend the Purchase Commitment Expiration
Date and to amend such definition. The definition of "Purchase Commitment
Expiration Date" in Section 1.01 of the Certificate Purchase Agreement is hereby
amended to read as follows:
"PURCHASE COMMITMENT EXPIRATION DATE" means the earliest of
(i) January 17, 1997, (ii) the date on which an event which causes or might
cause a Certificate Purchase Termination Event occurs, and (iii) the date
on which a Securitized Offering occurs; provided that the Purchase
Commitment Expiration Date may be extended from time to time in accordance
with Section 2.04 hereof.
SECTION 4. CERTIFICATE PURCHASE AGREEMENT IN FULL FORCE AND EFFECT AS
AMENDED AND SUPPLEMENTED. Except as specifically stated herein, all of the
terms and conditions of the Certificate Purchase Agreement shall remain in full
force and effect. All references to the Certificate Purchase Agreement in any
other document or instrument shall be deemed to mean the Certificate Purchase
Agreement, as amended and supplemented by
-2-
<PAGE>
this Amendment. This Amendment shall not constitute a novation of the
Certificate Purchase Agreement, but shall constitute an amendment and
supplement thereto. The parties hereto agree to be bound by the terms and
obligations of the Certificate Purchase Agreement, as supplemented by this
Amendment, as though the terms and obligations of the Certificate Purchase
Agreement were set forth herein.
SECTION 5. EFFECTIVENESS. This Amendment shall become effective as
of December 20, 1996 upon receipt by the Purchasers' Agent of (i) counterparts
of this Amendment, duly executed by each of the parties hereto, (ii) notice that
the conditions to effectiveness of the Agreement to Extend Purchase Commitment
Expiration Date Relating to Note Purchase Agreement dated the date hereof have
been satisfied and (iii) confirmation by each of S&P and Moody's of the then-
current ratings of the Commercial Paper Notes.
SECTION 6. PRIOR UNDERSTANDINGS. This Amendment sets forth the
entire understanding of the parties relating to the subject matter hereof, and
supersedes all prior understandings and agreements, whether written or oral.
SECTION 7. COUNTERPARTS. This Amendment may be executed in any
number of counterparts and by separate parties hereto on separate counterparts,
each of which when executed shall be deemed an original, but all such
counterparts taken together shall constitute one and the same instrument.
SECTION 8. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK.
-3-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Amendment to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
OLYMPIC AUTOMOBILE RECEIVABLES
WAREHOUSE TRUST
as Seller
By:/s/ Mike Sherman
-----------------------------------
Name: Mike Sherman
Title: Treasurer
OLYMPIC FINANCIAL LTD., as
Servicer and in its
individual capacity
By:/s/ Mike Sherman
-----------------------------------
Name: Mike Sherman
Title: Treasurer
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as a
Purchaser
By:/s/ Richard A. Burke
Purchase -----------------------------------
Commitment: $14,850,000 Name: Richard A. Burke
Purchase Percentage: 50% Title: Vice President
OLYMPIC RECEIVABLES FINANCE
CORP. II, as a Purchaser
By:/s/ illegible
Purchase -----------------------------------
Commitment: $14,850,000 Name:
Purchase Percentage: 50% Title:
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK,
as Purchasers' Agent
By:/s/ Richard A. Burke
-----------------------------------
Name: Richard A. Burke
Title: Vice President
-4-
<PAGE>
EXECUTION COPY
- -------------------------------------------------------------------------------
SECOND AMENDMENT
AND CONSENT
dated as of January 17, 1997
Relating to
CERTIFICATE PURCHASE AGREEMENT
among
OLYMPIC AUTOMOBILE RECEIVABLES WAREHOUSE TRUST
as Seller,
OLYMPIC FINANCIAL LTD.
as Servicer and in its individual capacity,
THE PARTIES SIGNATORY HERETO
as Purchasers,
and
MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
as Agent for the Purchasers
- -------------------------------------------------------------------------------
<PAGE>
THIS SECOND AMENDMENT AND CONSENT dated as of January 17, 1997 (this
"AMENDMENT") Relating to the Certificate Purchase Agreement dated as of December
28, 1995 and amended as of December 20, 1996 (as amended and supplemented from
time to time, the "CERTIFICATE PURCHASE AGREEMENT"), by and among OLYMPIC
AUTOMOBILE RECEIVABLES WAREHOUSE TRUST, a Delaware business trust (the
"SELLER"), OLYMPIC FINANCIAL LTD., a Minnesota corporation, as Servicer (as
defined below) and in its individual capacity ("OFL"), MORGAN GUARANTY TRUST
COMPANY OF NEW YORK (successor to J.P. MORGAN DELAWARE) ("MGT"), and Olympic
Receivables Finance Corp. II ("ORFC II") (each of MGT and ORFC II, a "PURCHASER"
and together, the "PURCHASERS"), and MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
as agent for the benefit of the Purchasers (the "PURCHASERS' AGENT"), is by and
among the parties listed above. Capitalized terms used in this Amendment and
not otherwise defined shall have the meanings assigned to such terms in the
Certificate Purchase Agreement.
RECITALS
WHEREAS, pursuant to Section 13.01 of the Certificate Purchase
Agreement, the parties to such Agreement are authorized to amend the Certificate
Purchase Agreement in a written amendment signed by all parties thereto; and
WHEREAS, pursuant to Section 2.04 of the Certificate Purchase
Agreement, the parties may agree in writing to the extension of the Purchase
Commitment Expiration Date; and
WHEREAS, pursuant to Section 2.05(a) of the Certificate Purchase
Agreement, the Seller may notify the Purchasers' Agent in writing of the
Seller's determination to reduce the aggregate of the Purchase Commitments, such
reduction to become effective in the manner provided in the Certificate Purchase
Agreement; and
WHEREAS, pursuant to Section 8.05 of the Certificate Purchase
Agreement, the Seller agreed not to make any material amendment to the Sale and
Servicing Agreement without the prior written consent of the Purchasers; and
WHEREAS, pursuant to Section 9.05 of the Certificate Purchase
Agreement, OFL agreed not to make any material amendment to the Sale and
Servicing Agreement or the Purchase Agreement without the prior written consent
of the Purchasers; and
WHEREAS, the parties to the Certificate Purchase Agreement desire to
further amend the Certificate Purchase Agreement to, among other things, change
certain of the Incremental Purchase Conditions, add certain covenants and change
certain rates and fees; and
WHEREAS, the parties to the Certificate Purchase Agreement desire to
extend the Purchase Commitment Expiration Date by amending the related
definition in the Certificate Purchase Agreement; and
<PAGE>
WHEREAS, MGT and the Purchasers' Agent desire to accept this Amendment
as the Seller's notice of reduction of the aggregate Purchase Commitments; and
WHEREAS, due to the reduction of the Purchase Commitments, the
Purchase Commitments will be affected as evidenced herein; and
WHEREAS, the Purchasers and the Purchasers' Agent desire to consent to
amendment of the Sale and Servicing Agreement and the Purchase Agreement.
NOW THEREFORE, in consideration of the premises and the agreements
contained herein, the parties to this Amendment agree as follows:
SECTION 1. NEW DEFINITIONS. The following new
definitions are hereby added to Section 1.01 of the Certificate
Purchase Agreement:
"CAPITAL BASE" shall mean, at any date, OFL's Tangible
Net Worth at such date.
"CAPITAL BASE PROCEEDS," for any period, shall mean the proceeds
received by OFL from any sale of equity securities during such period (net
of direct, out-of-pocket expenses incurred in connection with such sale).
"CHANGE OF CONTROL" shall mean the occurrence of any of the following
with respect to OFL:
(a) (i) a majority of the directors of OFL shall be Persons other than
Persons (x) for whose election proxies shall have been solicited by the
board of directors of OFL or (y) who are then serving as directors
appointed by the board of directors to fill vacancies on the board of
directors caused by death or resignation (but not by removal) or to fill
newly-created directorships or (ii) any person or group of persons (within
the meaning of Section 13 or 14 of the Securities Exchange Act of 1934, as
amended) shall have acquired beneficial ownership (within the meaning of
Rule 13d-3 promulgated by the Securities and Exchange Commission under said
Act) of 50% or more in voting power of the outstanding voting stock of OFL;
or
(b) OFL shall fail to own, directly or indirectly, 100% of the
outstanding capital stock of ORFC II.
"GAAP" means generally accepted accounting principles set forth from
time to time in the opinions and pronouncements of the Accounting
Principles Board and the American Institute of Certified Public Accountants
and statements and pronouncements of the Financial Accounting Standards
Board (or agencies with similar functions of comparable stature and
authority within the U.S. accounting
2
<PAGE>
profession), which are applicable to
the circumstances as of the date of any determination.
"NET INCOME" shall mean, for any period, OFL's after-tax net income
for such period determined in accordance with GAAP but after deduction of
dividend payments on OFL's Cumulative Convertible Exchangeable Preferred
Stock (as described in OFL's Amendment No. 3 to Form S-1 Registration
Statement dated November 22, 1993).
"NET WORTH" shall mean the total of all assets appearing on OFL's
balance sheet after deducting all proper reserves (including reserves for
depreciation, obsolescence and amortization) minus all liabilities of OFL,
in each case determined in accordance with GAAP.
"PERMITTED ACQUISITION" shall mean the acquisition by OFL or any of
its subsidiaries of any Person that is a going concern that satisfies the
conditions specified in that certain Credit Agreement dated as of July 11,
1996, among OFL, the several institutions party thereto, Bank of America
National Trust and Savings Association, as agent and First Bank National
Association, as co-manager.
"TANGIBLE NET WORTH" shall mean, at any time, OFL's Net Worth at such
time, excluding the value of goodwill (other than goodwill arising from a
Permitted Acquisition), trademarks, trade names, copyrights, patents,
licenses and similar intangibles but specifically including, all of OFL's
Finance Income Receivables (calculated in a manner consistent with OFL's
audited consolidated balance sheet as of December 31, 1995) as at such
time.
SECTION 2. INCREASE IN EURODOLLAR RATE UNDER CERTAIN CIRCUMSTANCES.
The parties hereto agree to increase the Eurodollar Rate if and for so long as
any Warehousing Period (as defined in the Sale and Servicing Agreement) exceeds
90 days and accordingly the definition of "Eurodollar Rate" in Section 1.01 of
the Certificate Purchase Agreement is hereby amended to read as follows:
"EURODOLLAR RATE" shall mean, with respect to any Certificate Funding
Period, a rate per annum equal to Adjusted LIBOR for such Certificate
Funding Period plus either (i) 0.55% of one percent per annum or (ii) if
and for so long as any Warehousing Period exceeds 90 days, 0.80% of one
percent per annum. Each determination of the Eurodollar Rate shall be
calculated on the basis of actual days elapsed and a year of 360 days.
SECTION 3. EXTENSION AND AMENDMENT OF PURCHASE COMMITMENT EXPIRATION
DATE. The parties hereto agree to extend the Purchase Commitment Expiration
Date and to amend such
definition. The definition of "Purchase Commitment Expiration
3
<PAGE>
Date" in Section 1.01 of the Certificate Purchase Agreement is hereby
amended to read as follows:
"PURCHASE COMMITMENT EXPIRATION DATE" means the earliest of
(i) December 19, 1997, (ii) June 30, 1997, but only if any Purchaser, in
its sole and absolute discretion, determines to terminate its Purchase
Commitment hereunder and so notifies the Seller, OFL and the Purchasers'
Agent in writing on or before May 30, 1997 and such terminating Purchaser's
Purchase Commitment is not accepted by another existing or new Purchaser or
Purchasers, (iii) the date on which an event which causes or might cause a
Certificate Purchase Termination Event occurs, and (iv) the date on which a
Securitized Offering occurs; provided that the Purchase Commitment
Expiration Date may be extended from time to time in accordance with
Section 2.04 hereof.
SECTION 4. ADDITIONAL INCREMENTAL PURCHASE CONDITIONS. (a) Clause
(ii) of Section 2.03(a) of the Certificate Purchase Agreement is hereby amended
to read as follows:
(ii) The Purchasers' Agent shall have received a completed Notice of
Incremental Purchase by 2:00 p.m., New York City time, on the third LIBOR
Business Day before such Incremental Purchase Date (if any such Notice is
received after 2:00 p.m., the related Incremental Purchase shall occur on
the fourth LIBOR Business Day following such receipt);
(b) Clause (vi) of Section 2.03(a) is hereby amended to include a
reference to the Certificate Purchase Agreement and now reads as follows:
(vi) The Seller, the Owner Trustee, the General Partner, OFL and ORFC
II shall be in compliance with all of their respective covenants contained
in the Trust Agreement, the Sale and Servicing Agreement, the Purchase
Agreement, each Assignment Agreement, each Transfer Agreement, the
Indenture and this Certificate Purchase Agreement;
SECTION 5. CHANGE IN AMOUNT OF INCREMENTAL PURCHASE. Section 2.03(b)
of the Certificate Purchase Agreement is hereby amended to require that each
Incremental Purchase be made in the amount of the aggregate unused Purchase
Commitments under the Certificate Purchase Agreement and now reads as follows:
(b) Each Incremental Purchase shall be requested in the amount equal
to the aggregate of the unused Purchase Commitments hereunder and the
initial Funding Rate on the Investor Certificates purchased on each such
Incremental Purchase Date shall be based on the Euro-Dollar Rate.
SECTION 6. DECREASE IN PURCHASE COMMITMENTS. In accordance with the
provisions of Section 2.05(a) of the Certificate Purchase Agreement, the
Purchasers and the
4
<PAGE>
Purchasers' Agent acknowledge notice of the reduction in the
aggregate of the Purchase Commitments from $29,700,000 to $22,275,000.
Following such reduction, the Purchasers' Purchase Percentage will remain
unchanged, and the Purchase Commitments will be revised proportionately. The
Purchasers will evidence their respective Purchase Commitments and Purchase
Percentages by executing signature pages to this Amendment. Such signature
pages shall supersede the signature pages to the Certificate Purchase Agreement,
and from and after the date of this Amendment, all references to the signature
pages of the Certificate Purchase Agreement shall refer to the signature pages
to this Amendment.
SECTION 7. ADDITION OF CERTIFICATE PURCHASE TERMINATION EVENT. The
following event is added as a new clause (g) to Section 2.07 of the Certificate
Purchase Agreement as an additional "Certificate Purchase Termination Event":
(g) a Change of Control shall have occurred without the consent of the
Purchasers' Agent.
SECTION 8. ADDITIONAL OFL COVENANTS. The following new OFL covenant
is added as new Section 9.06 to the Certificate Purchase Agreement and reads as
follows:
SECTION 9.06. MINIMUM CAPITAL BASE.
(a) OFL will not permit its consolidated Capital Base, on the last day
of its fiscal year, to be less than the sum of (i) its consolidated Capital
Base on the last day of the immediately preceding fiscal year, PLUS (ii) to
the extent Net Income for such fiscal year is greater than zero, Net Income
for such fiscal year PLUS (iii) Capital Base Proceeds for such fiscal year.
(b) OFL will not permit its consolidated Capital Base, on the last day
of any fiscal quarter other than the last day of its fiscal year, to be
less than the sum (i) 95% of its consolidated Capital Base on the last day
of the immediately preceding fiscal year PLUS (ii) Capital Base Proceeds
since the last day of the immediately preceding fiscal year.
SECTION 9. INCREASE IN PURCHASE AVAILABILITY FEE UNDER CERTAIN
CIRCUMSTANCES. The parties hereto agree to increase the Purchase Availability
Fee if and for so long as any Warehousing Period (as defined in the Sale and
Servicing Agreement) exceeds 90 days and accordingly, Section 10.02(b) of the
Certificate Purchase Agreement is amended to read as follows:
(b) OFL shall pay to each Purchaser a Purchase Availability Fee,
payable quarterly in arrears, on the last day of each calendar quarter
during the period such Purchaser has a Purchase Commitment under this
Certificate Purchase Agreement and on the Purchase Commitment Expiration
5
<PAGE>
Date, as the same may be extended from time to time. The Purchase
Availability Fee for each Purchaser shall be a per annum fee equal to such
Purchaser's average daily unused Purchase Commitment multiplied by either
(i) .35% per annum or (ii) if and for so long as any Warehousing Period
exceeds 90 days, .45% per annum.
SECTION 10. AMENDMENT TO NOTICE OF INCREMENTAL PURCHASE. The Notice
of Incremental Purchase, included as Exhibit C to the Certificate Purchase
Agreement, is hereby amended and now reads as set forth in the Exhibit C
attached to this Amendment.
SECTION 11. CONSENT TO AMENDMENT TO SALE AND SERVICING AGREEMENT AND
PURCHASE AGREEMENT. The Purchasers hereby consent, pursuant to Section 8.05 and
9.05 of the Certificate Purchase Agreement, to the Amendment No. 3 to Sale and
Servicing Agreement and Amendment No. 3 to Receivables Purchase Agreement, each
of even date herewith, substantially in the forms attached hereto as Appendices
A and B.
SECTION 12. CERTIFICATE PURCHASE AGREEMENT IN FULL FORCE AND EFFECT
AS AMENDED AND SUPPLEMENTED. Except as specifically stated herein, all of the
terms and conditions of the Certificate Purchase Agreement shall remain in full
force and effect. All references to the Certificate Purchase Agreement in any
other document or instrument shall be deemed to mean the Certificate Purchase
Agreement, as amended and supplemented by this Amendment. This Amendment shall
not constitute a novation of the Certificate Purchase Agreement, but shall
constitute an amendment and supplement thereto. The parties hereto agree to be
bound by the terms and obligations of the Certificate Purchase Agreement, as
supplemented by this Amendment, as though the terms and obligations of the
Certificate Purchase Agreement were set forth herein.
SECTION 13. EFFECTIVENESS. This Amendment shall become effective as
of January 17, 1997 upon receipt by the Purchasers' Agent of (i) counterparts of
this Amendment, duly executed by each of the parties hereto, (ii) notice that
the conditions to effectiveness of the First Amendment and Consent Relating to
Note Purchase Agreement dated the date hereof have been satisfied and
(iii) confirmation by each of S&P and Moody's of the then-current ratings of the
Commercial Paper Notes.
SECTION 14. PRIOR UNDERSTANDINGS. This Amendment sets forth the
entire understanding of the parties relating to the subject matter hereof, and
supersedes all prior understandings and agreements, whether written or oral.
SECTION 15. COUNTERPARTS. This Amendment may be executed in any
number of counterparts and by separate parties hereto on separate counterparts,
each of which when executed shall be deemed an original, but all such
counterparts taken together shall constitute one and the same instrument.
6
<PAGE>
SECTION 16. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK.
7
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Amendment to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
OLYMPIC AUTOMOBILE RECEIVABLES
WAREHOUSE TRUST
as Seller
By: Wilmington Trust Company, as Owner
Trustee
By:/s/ illegible
----------------------------
Name: Authorized Officer
OLYMPIC FINANCIAL LTD., as
Servicer and in its
individual capacity
By:/s/ Michael J. Sherman
----------------------------
Name: Michael J. Sherman
Title: Treasurer
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as a
Purchaser
Purchase By:/s/ Richard A. Burke
Commitment: $11,137,500 ----------------------------
Purchase Percentage: 50% Name: Richard A. Burke
Title: Vice President
OLYMPIC RECEIVABLES FINANCE
CORP. II, as a Purchaser
Purchase By:/s/ John A. Witham
Commitment: $11,137,500 ----------------------------
Purchase Percentage: 50% Name: John A. Witham
Title: Senior Vice President
& Chief Financial Officer
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK,
as Purchasers' Agent
By:/s/ Richard A. Burke
----------------------------
Name: Richard A. Burke
Title: Vice President
8
<PAGE>
EXHIBIT C
to Certificate
Purchase Agreement
Form of Notice of
Incremental Purchase or Repayment/Redemption
Olympic Automobile Receivables Warehouse Trust
Variable Funding Certificates
A. Proposed Incremental Purchase or
Repayment/Redemption Date: __________
B. Certificate Balance of Investor Certificates
(prior to giving effect to Incremental
Purchase or Repayment/Redemption, as
applicable, on date hereof) $__________
C. Amount of requested Incremental Purchase
(amount of remaining aggregate Purchase
Commitments) $__________
D. Repayment/Redemption Amount $__________
E. Certificate Balance of Investor Certificates
(after giving effect to Incremental Purchase
or Repayment/Redemption, as applicable, on
date hereof) $__________
F. Facility Limit $__________
G. Remaining Facility Limit $__________
H. Calculations (after giving effect to the
conveyance of Receivables on the related
Transfer Date)
1. The aggregate Principal Balance of
Receivables with original maturities from 73
to 84 months divided by the aggregate of the
Principal Balances of all Receivables (maximum
of 7.5%) __________%
2. The aggregate Principal Balance of
Receivables attributable to loans originated
under OFL's "Classic" program divided by the
aggregate of the Principal Balances of all
Receivables (maximum of 55%) __________%
3. The aggregate Principal Balance of
Receivables attributable to loans defined by
OFL as "Financed Repossessions" divided by the
aggregate of the Principal Balances of all
Receivables (maximum of 3.0%) __________%
4. Weighted Average Coupon of Receivables __________%
5. Weighted Average Maturity of Receivables __________%
<PAGE>
I. Certifications (applicable only with respect
to an Incremental Purchase)
1. The information relating to the Receivables to be
purchased by Olympic Automobile Receivables Warehouse Trust
(the "Trust") and pledged to Norwest Bank Minnesota,
National Association, as trustee (the "Indenture Trustee")
under the Indenture dated as of December 28, 1995, as
amended (the "Indenture"), is true and correct.
2. The representations and warranties of Olympic
Financial Ltd. ("OFL") in the Sale and Servicing Agreement
dated as of December 28, 1995, as amended (the "Sale and
Servicing Agreement"), among the Trust, Olympic Receivables
Financial Corp. ("ORFC II"), OFL, in its individual
capacity and as servicer of the Receivables, and Norwest
Bank Minnesota, National Association, the Receivables
Purchase Agreement dated December 28, 1995, as amended, by
and between OFL and ORFC II and the Certificate Purchase
Agreement dated as of December 28, 1995, as amended (the
"Certificate Purchase Agreement"), by and among the Trust,
OFL, in its individual capacity and as servicer of the
Receivables, the financial institutions which executed
signature pages thereto and Morgan Guaranty Trust Company
of New York are true and correct in all material respects
as of the date hereof.
3. The representations of the Trust in the Certificate
Purchase Agreement are true and correct in all material
respects as of the date hereof.
4. The representations of ORFC II in the Sale and
Servicing Agreement are true and correct in all material
respects as of the date hereof.
C-2
<PAGE>
5. The Incremental Purchase Conditions specified in
Section 2.03(a) of the Certificate Purchase Agreement have
been satisfied and/or will be satisfied as of the
applicable Incremental Purchase Date.
OLYMPIC AUTOMOBILE RECEIVABLES WAREHOUSE TRUST
By: Wilmington Trust Company, as Owner
Trustee
By: ________________________
Authorized Officer
OLYMPIC FINANCIAL LTD.
By: ________________________
Authorized Officer
Date: ____________________
C-3
<PAGE>
ASSET PURCHASE AGREEMENT
Dated as of December 28, 1995
J.P. MORGAN DELAWARE, as purchaser agent (in such capacity, the
"AGENT"), and as agent for the purchasers of the Purchased Note (hereinafter
defined) (in such capacity, for the benefit of Delaware Funding Corporation and
the purchasers hereunder, as their interests may appear, the "ADMINISTRATIVE
AGENT"), and each of the parties (each an "APA PURCHASER") who has executed a
signature page to this Asset Purchase Agreement (this "ASSET PURCHASE
AGREEMENT") or an Assignment of Purchase Commitment in the form of Exhibit A
hereto agree as follows:
RECITALS
WHEREAS Olympic Financial Ltd. ("OFL"), as seller, and Olympic
Receivables Financial Corp. II ("ORFC II"), as buyer, have entered into a
Receivables Purchase Agreement and Assignment dated as of December 28, 1995 (the
"PURCHASE AGREEMENT") and will from time to time enter into assignment
agreements providing for the sale and assignment by OFL to ORFC II of a pool of
specified Receivables;
WHEREAS ORFC II, as seller, and Olympic Automobile Receivables
Warehouse Trust (the "TRUST"), as buyer, have entered into a Sale and Servicing
Agreement dated as of December 28, 1995 (the "SALE AND SERVICING AGREEMENT")
with OFL, in its individual capacity and as Servicer, and Norwest Bank
Minnesota, National Association, as Backup Servicer, and will from time to time
enter into transfer agreements providing for the sale and assignment by ORFC II
to the Trust of a pool of Specified Receivables;
WHEREAS the Trust has entered into an Indenture dated as of December
28, 1995 (the "INDENTURE") with Norwest Bank Minnesota, National Association, as
trustee (the "INDENTURE TRUSTEE"), providing for the issuance of the Variable
Funding Notes (the "NOTES");
WHEREAS the Administrative Agent, Delaware Funding Corporation
("DFC"), OFL, in its individual capacity and as Servicer, and the Trust have
entered into a Note Purchase Agreement dated as of December 28, 1995 (the "NOTE
PURCHASE AGREEMENT"), pursuant to which DFC through the Administrative Agent, as
agent for DFC, has purchased the Notes and has agreed to fund, from time to
time, increases in the principal balance (the "OUTSTANDING AMOUNT") of the Notes
(each, an "INCREMENTAL PURCHASE") (the "PURCHASED NOTE" or "PURCHASED
INTEREST");
WHEREAS DFC may from time to time sell undivided percentage interests
in the Purchased Note ("PERCENTAGE INTERESTS") to the APA Purchasers;
<PAGE>
WHEREAS each APA Purchaser has agreed to purchase Percentage Interests
that from time to time may be offered for sale by the Administrative Agent on
behalf of DFC during the term of its Purchase Commitment (as defined below)
under this Asset Purchase Agreement;
NOW, THEREFORE, in consideration of the mutual agreements herein
contained, the parties hereto agree as follows:
1. DEFINITIONS. Unless otherwise defined herein, the terms defined
in the Indenture, the Trust Agreement or Note Purchase Agreement, as applicable,
are used herein as therein defined.
2. PURCHASE OF PERCENTAGE INTERESTS.
(a) An APA Purchaser shall become a party hereto (i) by executing
and delivering to the Agent a counterpart of the signature page to this Asset
Purchase Agreement or (ii) in accordance with the procedures set forth in
Section 9 hereof. Thereupon, upon approval of such proposed APA Purchaser by
the Transferor in accordance with the provisions of Section 9(b)(2) and
acceptance and recording by the Agent in the Register (defined below), such
APA Purchaser shall become a party to this Asset Purchase Agreement from and
after the effective date set forth on such signature page. APA Purchasers
may become parties hereto at different times and from time to time in
accordance with the foregoing procedure. The signature page shall set forth
the initial undivided percentage (such initial percentage, as it may be
changed from time to time, the "PERCENTAGE") interest in the Purchased Note
that an APA Purchaser has agreed to purchase hereunder, the maximum
Outstanding Amount of the Percentage Interest in the Purchased Note that an
APA Purchaser is obligated to purchase hereunder plus accrued and unpaid
interest on the Purchased Note (the "MAXIMUM PURCHASE"), the effective date
of the purchase commitment and the expiration date of the purchase commitment
(the "PURCHASE TERMINATION DATE"). No Downgraded Purchaser (as defined
below) shall be permitted to extend its Purchase Termination Date. In the
event that any APA Purchaser desires to extend its Purchase Termination Date
for a Maximum Purchase amount that is less than the amount of its Maximum
Purchase prior to DFC's request for an extension of the Purchase Termination
Date, DFC, in its sole and absolute discretion, may accept such extension;
PROVIDED, HOWEVER, that such APA Purchaser shall be deemed to be a Reducing
Purchaser (as defined below) for purposes of Section 13(g) to the extent of
such APA Purchaser's Reduced Amount (as defined below).
For the purposes of this Asset Purchase Agreement, "DOWNGRADED
PURCHASER" means any APA Purchaser that has its commercial paper or short-term
deposit rating lowered below (a) P-1 by Moody's or (b) A-1+ by S&P and "NON-
EXTENDING PURCHASER" shall mean an APA Purchaser that has not consented to the
extension of its Purchase Termination Date.
2
<PAGE>
(b) From time to time upon notice from the Agent to each APA
Purchaser, each of the APA Purchasers severally and not jointly shall purchase,
on the terms and conditions herein set forth, in accordance with their
respective Percentages, Percentage Interests that the Administrative Agent, as
agent for DFC, offers for sale, up to such Purchaser's Maximum Purchase. In
addition, the Administrative Agent, as agent for DFC, shall offer for sale to
each APA Purchaser, and each APA Purchaser shall purchase, on the terms and
conditions herein set forth, in accordance with their respective Percentages, a
100% Percentage Interest in the Outstanding Amount of the Purchased Note, up to
each such APA Purchaser's Maximum Purchase, if any of the following events
occurs (each, a "Put Event"): (i) an Event of Default specified in Section
5.01(v) or (vi) of the Indenture, (ii) a Note Purchase Termination Event
specified in Section 2.08(d) or (h) of the Note Purchase Agreement, or (iii) a
Purchase Termination Event specified in Section 2.1(c)(2)(ix) of the Sale and
Servicing Agreement. Upon the occurrence of a Put Event, the Administrative
Agent shall notify the Collateral Agent to instruct Morgan Guaranty Trust
Company of New York, as depositary and issuing and paying agent for DFC's
Commercial Paper Notes, to stop the issuance and delivery of Commercial Paper
Notes relating to the Seller.
(c) Each such notice of purchase referred to in Section 2(b) shall be
given no later than 11:00 a.m. (New York City time) on the Business Day of such
purchase (each, a "PURCHASE DATE"), shall be irrevocable, shall be sent by
telecopier, telex or cable to all APA Purchasers concurrently, and shall specify
the date of such purchase and the Outstanding Amount of Notes to be purchased
and the accrued and unpaid interest thereon. The Agent, after consultation with
OFL, shall request a rate (the "PURCHASER FUNDING RATE") for each period
designated by the Agent (each, a "TRANCHE PERIOD") during which a Percentage
Interest in a Purchased Note will be held by an APA Purchaser, which Purchaser
Funding Rate shall be calculated based on the Eurodollar Rate set pursuant to
the procedures set forth in the definition of "LIBOR" or Base Rate (each as
defined below and collectively, the "RATE"). Each Tranche Period based on a
Eurodollar Rate shall be a period of 1, 2 or 3 months; provided, however, that
if on the last day of any Tranche Period, the Seller has notified the
Administrative Agent that a Securitized Offering or a redemption of the Notes
with the proceeds of the sale of Trust Property is expected to occur within 30
days of such last day, the Tranche Period beginning on such last day may be
based on a 1-week, 2-week or 3-week LIBOR, with a 1-week Tranche Period selected
no more than twice in connection with such Securitized Offering or redemption of
the Notes. If the Agent has requested a Purchaser Funding Rate for any Tranche
Period to be calculated based on the Eurodollar Rate, the Purchaser Funding Rate
for such Tranche Period shall commence three LIBOR Business Days after notice of
such requested Purchaser Funding Rate (and prior to such commencement, shall be
set at the applicable Purchaser Funding Rate for the prior Tranche Period, if
applicable, or otherwise shall be calculated
3
<PAGE>
based on Base Rate). Each APA Purchaser will calculate the Purchaser Funding
Rate based on the Rate requested by the Agent and for the Tranche Period
designated by the Agent; PROVIDED, HOWEVER, that if the Agent has requested a
Purchaser Funding Rate based on the Eurodollar Rate, and either: (a) deposits
in United States dollars (in the applicable amounts) are not available to the
APA Purchasers generally in the London interbank market for such Tranche
Period, or (b) the Majority Purchasers advise the Agent that the Adjusted
LIBOR Rate (as defined below) will not adequately and fairly reflect the cost
to such APA Purchasers of maintaining or funding the Outstanding Amount of
the Notes based on the Eurodollar Rate, the Agent shall so notify the
Administrative Agent, whereupon until the Agent notifies the Administrative
Agent that such circumstances no longer exist, the obligation of the APA
Purchasers to accept a Purchaser Funding Rate based on the Eurodollar Rate
shall be suspended; and PROVIDED FURTHER, that for any Tranche Period
commencing on or after the occurrence of (1) any Default Rate Event or within
five Business Days of the Expiry Date (as defined in Section 13(i) hereof),
the Purchaser Funding Rate shall equal the Base Rate plus one (1) percent per
annum or (2) any Note Purchase Termination Event (other than a Default Rate
Event), the Purchaser Funding Rate shall equal the Adjusted LIBOR for such
Tranche Period plus one (1) percent per annum. Each APA Purchaser will
notify the Agent by 12:00 noon (New York City time) on the date two LIBOR
Business Days prior to the first day of the requested Tranche Period if, in
its judgment, the requested Purchaser Funding Rate based on the Eurodollar
Rate is not going to adequately reflect its cost. Each APA Purchaser will
establish the Purchaser Funding Rate based on the Eurodollar Rate at the
Eurodollar Rate and will establish the Rate based on the Base Rate at the
Base Rate. Prior to 2:00 p.m. (New York City time) on each Purchase Date,
each APA Purchaser shall pay the Agent for the account of DFC in immediately
available funds in United States dollars, by depositing to an account
designated by the Agent in New York City, an amount (such APA Purchaser's
"PURCHASE PRICE") equal to such APA Purchaser's Percentage of the lesser of
(x) the Outstanding Amount of Notes being purchased on such Purchase Date
plus accrued and unpaid interest thereon, if any (less any funds on deposit
with Morgan Guaranty Trust Company of New York, as Collateral Agent, for DFC
and the other specified parties, held in respect of such interest), and (y)
(I) the sum of (A) the aggregate Principal Balance of Receivables that are
not Liquidated Receivables as of the earlier of the Purchase Date or the date
on which the Put Event, if any, occurred, and (B) all Collected Funds
received by the Servicer that have not been deposited into the Collection
Account and applied in accordance with the provisions of the Sale and
Servicing Agreement divided by (II) a subordination reserve adjustment,
computed by adding to the number 1 an amount (expressed as a fraction) equal
to 50% of 9%.
4
<PAGE>
For the purpose of determining the Purchaser Funding Rate hereunder,
the following terms shall have the following meanings:
"BASE RATE" shall mean, with respect to each purchase of the
Purchased Note (or portion thereof), and with respect to each day during a
Tranche Period, commencing on the first Business Day of such Tranche Period,
a rate per annum equal to the higher of (i) the prime rate announced from
time to time by the Agent and in effect on the morning of each day and (ii)
the rate equal to the weighted average of the rates on overnight Federal
funds transactions with members of the Federal Reserve System arranged by
Federal funds brokers, as published for each day (or, if such day is not a
Business Day, the next succeeding Business Day) by the Federal Reserve Bank
of New York, or if such rate is not so published for any such day, the
average of the quotations for such day for such transactions received by the
Agent from three Federal funds brokers of recognized standing selected by it
plus one-half of one percent (1/2 of 1%). Each determination of the Base
Rate shall be calculated on the basis of actual days elapsed and a year of
365 or 366 days, as the case may be.
"EURODOLLAR RATE" shall mean, with respect to each purchase of the
Purchased Note (or portion thereof), and with respect to any Tranche Period, a
rate per annum equal to Adjusted LIBOR for such Tranche Period plus .375% of one
percent per annum. Each determination of the Eurodollar Rate shall be
calculated on the basis of actual days elapsed and a year of 360 days.
"ADJUSTED LIBOR" shall mean, with respect to each purchase of the
Purchased Note (or portion thereof), and with respect to any Tranche Period, a
rate per annum equal to the quotient obtained (rounded upwards, if necessary, to
the next higher 1/100 of 1%) by dividing (i) LIBOR for such Tranche Period by
(ii) a percentage equal to 100% minus the maximum rate of all reserve
requirements as specified in Regulation D of the Board of Governors of the
Federal Reserve System (or any successor to all or any portion thereof
establishing reserve requirements) including any marginal, emergency,
supplemental, special or other reserves, that are applicable to an APA Purchaser
during such Tranche Period in respect of eurocurrency or eurodollar funding,
lending or liabilities.
"LIBOR" shall mean, with respect to each purchase of the Purchased
Note (or portion thereof), and with respect to any Tranche Period, a rate per
annum determined by the Agent to be the rate at which deposits in Dollars are
offered to the Agent by prime banks in the London Interbank market at
approximately 11:00 a.m. (London time) two LIBOR Business Days before the first
day of such Tranche Period, for a period of time comparable to such Tranche
Period.
5
<PAGE>
"LIBOR BUSINESS DAY" shall mean any Business Day on which commercial
banks are open for dealings in Dollar deposits in London.
(d) Notwithstanding Section 2(c), an APA Purchaser shall not be
obligated to make purchases under such Section at any time in an amount that
would exceed such APA Purchaser's Maximum Purchase. Each APA Purchaser's
obligation shall be several, such that the failure of any APA Purchaser to
make payment to the Agent in connection with any purchase hereunder shall not
relieve any other APA Purchaser of its obligation hereunder to make payment
for the purchase by such other APA Purchaser up to such other APA Purchaser's
Maximum Purchase. If the Agent shall have been notified by any APA Purchaser
that such APA Purchaser will not (or if any APA Purchaser does not) make
available the amount that would represent such APA Purchaser's Percentage of
any purchase (other than a Non-Pro Rata Purchase (as defined below))
requested by the Agent or DFC, each other APA Purchaser agrees, subject to
the first sentence of this Section 2(d), to make available to the Agent a
ratable share of such amount (calculated on the basis of the Percentages of
the APA Purchasers that the Agent has determined will make such purchase).
The defaulting APA Purchaser agrees to purchase from each APA Purchaser that
shall have purchased a portion of such defaulting APA Purchaser's Percentage
(each such portion, a "DEFAULTED PORTION"), forthwith upon demand, the
Defaulted Portion so purchased, together with interest at the applicable
Purchaser Funding Rate on that portion of Outstanding Amount of the Purchased
Note funded by such APA Purchaser, for each day that an APA Purchaser is
required to fund a portion of the defaulting APA Purchaser's Percentage;
PROVIDED, if such defaulting APA Purchaser has not purchased such Defaulted
Portion within three Business Days following such demand, such defaulting APA
Purchaser shall thereafter be required to pay interest with respect to such
Defaulted Portion at the Base Rate plus 2% per annum.
(e) Each APA Purchaser shall be obligated to purchase Percentage
Interests under this Asset Purchase Agreement (its "PURCHASE COMMITMENT")
until the earliest of (i) the Purchase Termination Date of such APA
Purchaser's Purchase Commitment, (ii) the date on which the Agent notifies
the APA Purchaser that the Indenture has been discharged and satisfied and
the Outstanding Amount of the Notes and all accrued and unpaid interest
thereon have been paid in full and (iii) (A) the date DFC voluntarily
commences any proceeding or files any petition under any bankruptcy,
insolvency or similar law seeking the dissolution, liquidation or
reorganization of DFC, or (B) if involuntary proceedings or any involuntary
petition shall have been commenced or filed against DFC by any Person under
any bankruptcy, insolvency or similar law seeking the dissolution,
liquidation or reorganization of DFC, the earlier of (y) the date 60 days
following the commencement or filing of such proceeding or petition, if such
proceeding or petition has not been
6
<PAGE>
dismissed on or before such date or (z) the date on which an order of relief
has been entered against DFC.
(f) The Agent will hold, for the account of each APA Purchaser,
the Purchased Notes in which the Purchased Interests were purchased pursuant
to Section 2(b), and the Administrative Agent will be the registered holder
of the Purchased Notes for all purposes under the Note Purchase Agreement and
the Indenture. Within 10 Business Days of each purchase pursuant to Section
2(b) hereof, the Agent will deliver to each APA Purchaser a certificate in
the form of Exhibit B attached hereto reflecting each APA Purchaser's
ownership of the Percentage Interest so purchased.
(g) Notwithstanding that APA Purchasers may have purchased
Percentage Interests hereunder and may have received payments from Collected
Funds with respect to Receivables sufficient to repay such Percentage
Interests in whole or in part, each APA Purchaser may be called upon to
purchase additional Percentage Interests (not to exceed the Maximum Purchase
for each such APA Purchaser) until the expiration of such APA Purchaser's
Purchase Commitment pursuant to Section 2(e) hereof.
(h) In the event that DFC assigns any portion of the Purchased
Note to another Person (which is managed by the Agent and which in the
ordinary course of its business issues commercial paper or other securities
to fund its acquisition and maintenance of asset-backed certificates,
receivables or interests therein), sales of the Purchased Note by such other
Person may be made under this Asset Purchase Agreement on the same terms and
conditions as sales or assignments by DFC.
3. REGISTER. The Agent shall maintain at its address, 902 Market
Street, Wilmington, Delaware 19801, Attention: Asset Finance Group, a copy
of this Asset Purchase Agreement and each signature page hereto and each
Assignment of Purchase Commitment approved by the Trust in accordance with
the provisions of Section 9(b) and delivered to and accepted by the Agent and
a register for the recordation of the names and addresses of the APA
Purchasers, their Percentage Interests, effective dates and Purchase
Termination Dates, the Outstanding Amount of the Purchased Note owned by each
APA Purchaser from time to time and the Purchase Price relating thereto (the
"REGISTER"). The entries in the Register shall be conclusive and binding for
all purposes, absent manifest error, and the Trust, OFL, the Servicer, the
Agent and the APA Purchasers may treat each Person whose name is recorded in
the Register as an APA Purchaser hereunder for all purposes of this Asset
Purchase Agreement. The Register shall be available for inspection by the
Trustee, the Trust, OFL, the Servicer, or any APA Purchaser at any reasonable
time and from time to time during normal business hours upon reasonable prior
notice.
7
<PAGE>
4. DISTRIBUTION OF PAYMENTS.
(a) Whenever any amount of principal or interest is paid in
respect of such APA Purchaser's Percentage Interest in the Purchased Note and
such APA Purchaser's Percentage Interest has not been repurchased by DFC
pursuant to Section 10 hereof, the Administrative Agent will promptly pay, or
cause to be paid, out of funds received by it as a Noteholder under the
Indenture, to such APA Purchaser, in United States dollars, its Percentage of
such amount (adjusted for differences in the Purchaser Funding Rates to which
such APA Purchaser and DFC are entitled and further adjusted to reflect the
fact that, except as set forth below, such APA Purchaser is only entitled to
the applicable Purchaser Funding Rate on its Purchase Price) accrued from and
after the last date on which interest was paid in respect of such Percentage
Interest prior to the acquisition of such Percentage Interest by the APA
Purchaser.
(b) If, after the Agent has paid an APA Purchaser its Percentage
of any amount received by an APA Purchaser pursuant to paragraph (a) above,
such amount must be returned for any reason (including bankruptcy), such APA
Purchaser will repay to the Agent promptly the amount the Agent paid to such
APA Purchaser, whereupon such APA Purchaser's Purchased Interest, together
with accrued interest thereon, shall be deemed increased or reinstated, as
applicable, as if such amount had not been received by such APA Purchaser.
After an APA Purchaser has been paid (excluding any repayment referred to in
the immediately preceding sentence) its Percentage of the Outstanding Amount
of the Purchased Note plus accrued interest thereon (based on the Purchaser
Funding Rate to which such APA Purchaser is entitled and further adjusted to
reflect the fact that, except as set forth below, the APA Purchaser is only
entitled to the applicable Purchaser Funding Rate on its Purchase Price),
such APA Purchaser acknowledges that any remaining amounts of principal or
interest paid in connection with the Purchased Note to which such APA
Purchaser would otherwise be entitled by reason of its Purchased Interest
shall be paid to DFC for its own account.
(c) Each APA Purchaser's rights as a purchaser of Purchased
Interests shall be as set forth herein, but shall not include any right to
receive any fees set forth in the DFC Fee Letter, except as set forth in
Section 16.
5. REPRESENTATIONS AND WARRANTIES.
(a) Neither the Agent nor DFC makes any representation or warranty
or assumes any responsibility with respect to (i) any statements, warranties
or representations made in or in connection with the Purchase Agreement, any
Assignment Agreement, the Trust Agreement, the Indenture, the Sale and
Servicing Agreement, any Transfer Agreement, the Note Purchase Agreement, the
Custodian Agreement or other agreement or the execution, legality, validity,
enforceability, genuineness or sufficiency of the Purchase Agreement, any
Assignment Agreement, the Trust
8
<PAGE>
Agreement, the Indenture, the Note Purchase Agreement, the Sale and Servicing
Agreement, any Transfer Agreement, the Trust Agreement, the Indenture, the
Custodian Agreement or other agreement or any instrument or document
furnished pursuant thereto or in connection therewith, (ii) the value or
collectibility of any Receivable, (iii) the value of the Purchased Note or
(iv) the financial condition of the Trust, OFL, ORFC II, the Servicer or any
Affiliate thereof or the performance or observance by the Trust, OFL, ORFC
II, the Servicer or any Affiliate thereof of any of their respective
obligations under the Sale and Servicing Agreement, any Transfer Agreement,
the Purchase Agreement, any Assignment Agreement, the Note Purchase
Agreement, the Trust Agreement, the Indenture or other agreement or any
instrument or document furnished pursuant thereto or in connection therewith.
Each of the Agent, the Administrative Agent and DFC does represent to each
APA Purchaser, however, that the Percentage Interest which is sold to each
APA Purchaser hereunder pursuant to Section 2(b) is, at the time of sale,
free and clear of any adverse claims created by or arising as a result of
claims against the Agent, the Administrative Agent or DFC.
(b) Each APA Purchaser represents that this Asset Purchase
Agreement has been duly authorized, executed and delivered by such APA
Purchaser pursuant to its corporate powers and constitutes the legal, valid
and binding obligation of such APA Purchaser.
(c) Each APA Purchaser confirms that such APA Purchaser has
received such documents and information as such APA Purchaser has deemed
appropriate to make its own credit analysis and decision, independently and
without reliance on the Agent or DFC, to enter into this Asset Purchase
Agreement and will, independently and without reliance on the Agent or DFC
and based on such documents and information as such APA Purchaser shall deem
appropriate at the time, continue to make its own credit decisions in taking
or not taking action hereunder. The Administrative Agent will furnish to
each APA Purchaser copies of any financial or other documents that the
Administrative Agent receives from time to time under the Note Purchase
Agreement, but the Administrative Agent assumes no responsibility for the
authenticity, validity, accuracy or completeness thereof.
(d) Each APA Purchaser shall be deemed to have represented and
warranted at the time of any purchase of a Percentage Interest hereunder that
it is an "accredited investor" as defined in Rule 501, promulgated by the
Securities and Exchange Commission (the "COMMISSION") under the Securities
Act of 1933, as amended; such APA Purchaser understands that the offering and
sale of its Percentage Interest in the Purchased Note and the Notes have not
been and will not be registered under the Securities Act of 1933, as amended,
and have not and will not be registered or qualified under any applicable
"blue sky" law, and that the offering and sale of the Percentage Interests
and the Notes have not been reviewed by, passed on or submitted to any
Federal or state agency or commission, securities exchange or
9
<PAGE>
other regulatory body; and such APA Purchaser, through the Administrative
Agent, as agent for DFC, is acquiring its Percentage Interest without a view
to any distribution, resale or other transfer thereof; such APA Purchaser
will not resell or otherwise transfer its Percentage Interest or any portion
thereof, except (i) pursuant to an effective registration statement under the
Securities Act of 1933, as amended; (ii) in a transaction exempt from the
registration requirements of the Securities Act of 1933, as amended, and
applicable state securities or "blue sky" laws; (iii) to a person who the APA
Purchaser reasonably believes is a qualified institutional buyer (within the
meaning thereof in Rule 144A under the Securities Act of 1933, as amended)
that is aware that the resale or other transfer is being made in reliance
upon Rule 144A; or (iv) pursuant to Regulation S under the Securities Act of
1933, as amended. In connection therewith, such APA Purchaser hereby agrees
that it will not resell or otherwise transfer its Percentage Interest or any
portion thereof except as provided unless the purchaser thereof provides to
the Administrative Agent an opinion of counsel to the effect that such
purchase is in compliance with the registration provisions of the federal
securities laws and any applicable provisions under state securities law or
pursuant to an available exemption from such provisions.
6. LIABILITY OF THE AGENT, ETC. None of the Agent, the
Administrative Agent, DFC or the Referral Agent shall be liable to any APA
Purchaser in connection with (i) the administration of the Agreement or (ii)
this Asset Purchase Agreement or any purchases hereunder (except pursuant to
the Agent's representation in Section 5(a) hereof), in either case except for
its own gross negligence or willful misconduct. Without limiting the
foregoing, the Agent, DFC and the Referral Agent (i) may consult with legal
counsel (including counsel for the Trust, OFL or the Servicer), independent
public accountants or other experts and shall not be liable for any action
taken or omitted to be taken in good faith in accordance with the advice of
such counsel, accountants or other experts, (ii) shall not be responsible for
the performance or observance by the Trust, OFL, the Servicer or any
Affiliate or agent thereof of any of the terms, covenants or conditions of
the Sale and Servicing Agreement, the Purchase Agreement, the Note Purchase
Agreement, the Trust Agreement, the Indenture or other agreement or any
instrument or document furnished pursuant thereto or in connection therewith,
(iii) shall incur no liability by acting upon any notice, consent,
certificate or other instrument or writing believed to be genuine and signed
or sent by the proper party and (iv) shall not be deemed to be acting as any
APA Purchaser's trustee or otherwise in a fiduciary capacity hereunder or
under or in connection with the Indenture or the Purchased Note.
10
<PAGE>
7. RIGHTS OF THE AGENT. The Agent reserves the right, in its
sole discretion (subject to the next sentence), to, and at the request of the
Majority Purchasers will, exercise any rights and remedies available to it,
as the Administrative Agent, under the Sale and Servicing Agreement, the
Purchase Agreement, the Note Purchase Agreement, the Trust Agreement, the
Indenture or other agreement or pursuant to applicable law, and also to agree
to any amendment, modification or waiver of the Sale and Servicing Agreement,
the Purchase Agreement, the Note Purchase Agreement, the Trust Agreement, the
Indenture or other agreement or any instrument or document delivered pursuant
thereto or in connection therewith, in each case only to the extent its
consent is required as "Administrative Agent," "JPMD" or "Noteholder"
pursuant to the relevant document. Notwithstanding the foregoing, the Agent,
when acting either in its capacity as Agent or as Administrative Agent on
behalf of DFC, agrees that it shall not,
(a) without the prior written consent of each APA Purchaser,
(i) consent to any amendment, modification or waiver of any
provision of the Indenture in any way that would reduce the amount or
priority of principal or interest that is payable on account of the
Notes or delay any scheduled date for payment thereof;
(ii) agree to a different Purchaser Funding Rate from the Rate
set forth herein;
(iii) amend or waive the Note Purchase Termination Event
relating to the bankruptcy of the Trust, OFL or ORFC II; or
(iv) amend any provision of the Note Purchase Agreement which
amendment would have the effect of increasing or changing the nature
of any liabilities assumed by the APA Purchasers as contemplated in
Section 8 below; or
(b) without the prior written consent of the "Majority Purchasers"
(defined below),
(i) consent to any amendment of the definitions of "Delinquent
Receivable,""Liquidated Receivable," Purchased Receivable,"
"Noteholders' Percentage," "Outstanding Amount," "Excess Spread,"
"Excess Yield Condition," "Net Portfolio Losses," "Portfolio Loss
Ratio," "Delinquency Ratio," "Warehousing Loss Ratio," "Excess Yield
Percentage," "Average Excess Yield Percentage," "Average Net Excess
Spread Percentage," "Net Excess Spread Percentage," "Net Loss
Percentage," or "Trigger Event" contained in the Sale and Servicing
Agreement;
11
<PAGE>
(ii) amend or not declare to be a "Purchase Termination Event"
the Purchase Termination Event specified in Section 2.1(c)(2)(ix) of
the Sale and Servicing Agreement; or
(iii) amend or waive a Note Purchase Termination Event specified
in Section 2.08(e), (f) or (g) of the Note Purchase Agreement;
"MAJORITY PURCHASERS" shall mean Persons owning undivided Percentage
Interests in the Purchased Note that aggregate more than 50% of the total
outstanding principal amount of the Purchased Note; PROVIDED, that solely for
purposes of each such computation, (1) APA Purchasers shall be deemed
(whether or not they shall have made purchases hereunder) to own undivided
interests equal to their respective Percentages of the Outstanding Amount of
the Purchased Note, (2) the portion of the Outstanding Amount of the
Purchased Note owned by DFC shall be deemed to be reduced by the amounts set
forth in clause (1) and also by the amount of any undivided interests in the
Purchased Note owned by Persons other than APA Purchasers and (3) defaulting
APA Purchasers shall be deemed not to own undivided interests in the
Purchased Note; or
(c) Subject to Sections 7(a) and (b) above, amend, modify or waive
any provision of the Sale and Servicing Agreement or the Indenture that
requires the approval or consent of a specified percentage of Noteholders
without the consent of APA Purchasers owning undivided Percentage Interests
in the Purchased Note (determined as set forth in the definition of
"Majority Purchasers" above) equal to such specified percentage.
Notwithstanding anything to the contrary contained in this Section
7, nothing herein shall affect any obligation under the Sale and Servicing
Agreement, the Purchase Agreement, the Trust Agreement or the Indenture, if
any, to give notice to, or seek the consent of, Moody's and S&P to any
amendment or waiver of any provision of the Sale and Servicing Agreement, the
Purchase Agreement, the Trust Agreement or the Indenture.
8. OBLIGATIONS OF THE APA PURCHASERS, INCLUDING CONFIDENTIALITY.
Each APA Purchaser agrees to abide by, and be liable for, any obligations set
forth in the Note Purchase Agreement on the part of the DFC Owners (as
defined therein) (other than the provisions therein relating to DFC's
Commercial Paper Notes). Furthermore, each APA Purchaser understands that
the Sale and Servicing Agreement, the Purchase Agreement, the Note Purchase
Agreement, the Trust Agreement and the Indenture are confidential documents
and no APA Purchaser will disclose them to any other Person except with the
Agent's prior written consent or to APA Purchaser's legal counsel if such
counsel agrees to hold them confidential, or upon request, to any regulatory
authority having jurisdiction over such APA Purchaser, or as required by law,
or as required or requested by any
12
<PAGE>
Governmental Authority. Notwithstanding the foregoing, any APA Purchaser
may, in connection with any assignment or participation or proposed
assignment or participation pursuant to Section 9 or 10 hereof, disclose to
the assignee or participant or proposed assignee or participant any
information relating to the Trust, OFL, ORFC II or the Servicer furnished to
such APA Purchaser by or on behalf of the Trust, OFL, ORFC II or the Servicer
or by the Agent; PROVIDED, that prior to any such disclosure, the assignee or
participant or proposed assignee or participant agrees to preserve the
confidentiality of any confidential information relating to the Trust, OFL,
ORFC II or the Servicer received by it from any of the foregoing entities.
9. ASSIGNABILITY.
(a) Each APA Purchaser may assign to any Eligible Assignee (defined
below) or to any other existing APA Purchaser all or a portion of its rights and
obligations under this Asset Purchase Agreement (including, without limitation,
all or a portion of its Purchase Commitment and any Percentage Interests owned
by it); PROVIDED, HOWEVER, that
(i) each such assignment shall be of a constant, and not a varying,
percentage of all of such APA Purchaser's rights and obligations under this
Asset Purchase Agreement,
(ii) the amount of unused Maximum Purchase and/or Purchased Interest
being assigned pursuant to each assignment shall in no event be less than
the lesser of $10,000,000 and the assigning APA Purchaser's Maximum
Purchase, and
(iii) the parties to each such assignment shall execute and deliver
to the Agent, for its acceptance and recording in the Register, an
Assignment of Purchase Commitment in the form of Exhibit A attached hereto,
together with a processing and recordation fee of $2,500.
Upon such execution, delivery, acceptance and recording, from and
after the effective date specified in the Assignment of Purchase Commitment,
(x) the assignee thereunder shall be a party hereto and, to the extent that
rights and obligations hereunder have been assigned to it pursuant to this
Asset Purchase Agreement, have the rights and obligations of an APA Purchaser
hereunder and (y) the assignor thereunder shall, to the extent that rights
and obligations hereunder have been assigned by it pursuant to this Asset
Purchase Agreement, relinquish its rights and be released from its
obligations under this Asset Purchase Agreement (and, in the case of an
assignment covering all or the remaining portion of an assigning APA
Purchaser's rights and obligations under this Asset Purchase Agreement, such
APA Purchaser shall cease to be a party hereto). Notwithstanding the
foregoing, no assignment hereunder shall be effective unless (i) the
documents evidencing such assignment are satisfactory to Moody's and S&P and
(ii) the assignee has
13
<PAGE>
delivered to Moody's and S&P an opinion of counsel to the assignee
satisfactory to each of Moody's and S&P stating that the obligations of the
assignee under this Asset Purchase Agreement are the legal, valid and binding
obligations of the assignee, enforceable against the assignee in accordance
with their terms.
(b) For purposes of this Asset Purchase Agreement, (i) the term
"APA PURCHASER" shall mean a party executing a counterpart of a signature
page hereto and each Eligible Assignee that shall become a party to this
Asset Purchase Agreement pursuant to this Section 9, and (ii) the term
"ELIGIBLE ASSIGNEE" shall mean any Person which (A) is reasonably acceptable
to the Agent, (B) is approved by OFL which approval shall not be unreasonably
withheld, (C) either (x) has short-term debt rated at least "P-1" by Moody's
and "A-1+" by S&P or (y) is acceptable to Moody's and S&P and (D) executes an
Assignment of Purchase Commitment.
(c) Upon its receipt of an Assignment of Purchase Commitment
executed by an assigning APA Purchaser and by an assignee who is an Eligible
Assignee or who is an existing APA Purchaser, the Agent shall (i) accept such
Assignment of Purchase Commitment, (ii) record the information contained
therein in the Register and (iii) give prompt notice thereof to OFL.
10. REPURCHASE BY DFC.
(a) Provided no Note Purchase Termination Event has occurred and
is continuing, DFC may, upon one Business Day's prior written notice to S&P
and Moody's and the Agent (which shall notify the APA Purchasers on the day
that it receives such notice), repurchase Percentage Interests (the
"REPURCHASED INTERESTS") from an APA Purchaser at a repurchase price equal to
such APA Purchaser's Percentage Interest in the Outstanding Amount of the
Purchased Note related to such Repurchased Interest plus accrued and unpaid
interest, if any, at the applicable Purchaser Funding Rate for such
Repurchased Interest (the "REPURCHASE AMOUNT"); PROVIDED, that the repurchase
of any Repurchased Interest shall only occur (a) during a Tranche Period
during which the Purchaser Funding Rate is based on the Base Rate and (b) on
the last day of a Tranche Period during which the Purchaser Funding Rate is
based on the Eurodollar Rate, unless the Seller requests, and the Agent in
its sole discretion agrees to, an earlier repurchase date. Prior to 2:00
p.m. (New York City time) on the date of such repurchase, DFC shall pay the
Agent for the account of each applicable APA Purchaser in immediately
available funds in Dollars, by depositing to an account designated by the
Agent in New York City, the Repurchase Amount, plus any applicable Breakage
Payments, for each Repurchased Interest. The Agent shall promptly pay each
APA Purchaser in immediately available funds in United States dollars its
respective share of the Repurchase Amount.
(b) Within 10 Business Days of each repurchase pursuant to Section
10(a) hereof, each APA Purchaser will deliver
14
<PAGE>
to DFC the certificate delivered to such APA Purchaser pursuant to Section
2(f) reflecting DFC's ownership of the Repurchased Interest repurchased.
11. PARTICIPATIONS. Each APA Purchaser may sell participations to
one or more banks or other entities (each, a "PARTICIPANT") (which
Participant, unless it is an investment bank or a full service commercial
bank, is not a competitor of OFL or any of its Affiliates) in or to all or a
portion of its rights and obligations under this Asset Purchase Agreement
(including, without limitation, all or a portion of its Purchase Commitment
and the Percentage Interests owned by it); PROVIDED, HOWEVER, that (i) such
APA Purchaser's obligations under this Asset Purchase Agreement (including,
without limitation, its Purchase Commitment hereunder) shall remain unchanged
and (ii) such APA Purchaser shall remain solely responsible to the other
parties hereto for the performance of such obligations, (iii) the Agent shall
continue to deal solely and directly with such APA Purchaser in connection
with such APA Purchaser's rights and obligations under this Asset Purchase
Agreement and (iv) no Participant shall have any greater right to any
compensation or indemnification from the Agent, the Administrative Agent, the
Trust or OFL under this Asset Purchase Agreement, the Note Purchase
Agreement, the Sale and Servicing Agreement or the Indenture than the APA
Purchaser would be entitled to receive hereunder or thereunder. The Trust,
the Agent, the Administrative Agent, OFL and the other APA Purchasers shall
continue to deal solely and directly with such APA Purchaser in connection
with such APA Purchaser's rights and obligations under this Asset Purchase
Agreement.
12. CHANGE IN FACILITY LIMIT AND DFC'S PURCHASE COMMITMENT.
(a) If, pursuant to Section 2.05 of the Note Purchase Agreement,
the Trust shall request an increase in the Facility Limit (as defined in the
Sale and Servicing Agreement) and/or DFC's Purchase Commitment (as defined in
the Note Purchase Agreement), then (i) the Agent shall promptly notify each
APA Purchaser of the increase in DFC's Purchase Commitment and (ii) if an
additional APA Purchaser has agreed to sign this Asset Purchase Agreement
with a Maximum Purchase equal to 102% of the increase in DFC's Purchase
Commitment, then on the effective date of such increase, each other APA
Purchaser's Percentage under its Purchase Commitment shall be proportionately
reduced and each APA Purchaser's Maximum Purchase amount shall remain the
same; PROVIDED, HOWEVER, that if the Agent has not notified the APA
Purchasers in the notification provided pursuant to clause (i) above that an
additional APA Purchaser has agreed to sign this Asset Purchase Agreement
with a Maximum Purchase equal to 102% of the increase in DFC's Purchase
Commitment, each APA Purchaser may elect to maintain its Percentage under its
Purchase Commitment by executing and delivering, within ten days after
receipt of notice of such increase, a new signature page to this Asset
Purchase
15
<PAGE>
Agreement reaffirming its Percentage and indicating its new Maximum Purchase
amount.
(b) If, pursuant to Section 2.05 of the Note Purchase Agreement,
the Facility Limit and/or DFC's Purchase Commitment shall be decreased, then
(i) the Agent shall promptly notify each APA Purchaser of the decrease in
DFC's Purchase Commitment and (ii) on the effective date of such decrease,
each APA Purchaser's Percentage under its Purchase Commitment shall remain
the same and each APA Purchaser's Maximum Purchase amount shall be
proportionately decreased; PROVIDED, HOWEVER, that if the Agent shall notify
the APA Purchasers in the notification provided pursuant to clause (i) above
that DFC's Purchase Commitment will be reduced by an amount equal to a
Downgraded Purchaser's Maximum Purchase, then each non-Downgraded Purchaser
may elect to increase its APA Purchaser's Percentage and maintain its Maximum
Purchase at the same amount as was in effect immediately prior to the
reduction in DFC's Purchase Commitment by executing and delivering, within
ten days after receipt of notice of such decrease, a new signature page to
this Asset Purchase Agreement reaffirming its Maximum Purchase amount and
indicating its new Percentage.
13. MISCELLANEOUS.
(a) Each APA Purchaser will on demand reimburse the Agent its
Percentage share of any and all reasonable costs and expenses (including,
without limitation, reasonable fees and disbursements of counsel), which may
be incurred in connection with collecting any principal or interest with
respect to the Purchased Note in which an APA Purchaser purchases Percentage
Interests hereunder, for which the Agent is not promptly reimbursed by the
Trust.
(b) The Agent and its Affiliates may accept deposits from, lend
money or otherwise extend credit to, act as trustee under indentures of, and
generally engage in any kind of business with, the Trust, OFL, ORFC II, the
Servicer and any of their Affiliates and any Person who may do business with
or own securities of the Trust, OFL, ORFC II, the Servicer or any Affiliate,
all as though this Asset Purchase Agreement had not been entered into and
without any duty to account therefor to any APA Purchaser.
(c) Subject to Section 11.04 of the Note Purchase Agreement, any
taxes due and payable on any payments to be made to any APA Purchaser
hereunder shall be such APA Purchaser's sole responsibility. Each APA
Purchaser warrants that it is not subject to any taxes, charges, levies or
withholdings with respect to payments under the Asset Purchase Agreement that
are imposed by means of withholding by any applicable taxing authority
("WITHHOLDING TAX"). Each APA Purchaser agrees to provide the Agent, from
time to time upon the Agent's request, completed and signed copies of any
documents that may be required by an applicable taxing authority to certify
such APA Purchaser's
16
<PAGE>
exemption from Withholding Tax with respect to payments to be made to such
APA Purchaser under this Asset Purchase Agreement; and each APA Purchaser
agrees to hold the Agent harmless from any Withholding Tax imposed due to
such APA Purchaser's failure to establish that it is not subject to
Withholding Tax.
(d) The Agent shall furnish to each APA Purchaser upon request,
until the later of (i) such APA Purchaser's Purchase Termination Date and
(ii) the date on which such APA Purchaser's Percentage Interest in the
Purchased Note and all other amounts payable to such APA Purchaser hereunder
have been paid in full, a copy of the annual audited financial statements of
DFC, promptly upon the same becoming available, and, as requested by such APA
Purchaser, copies of such other financial information that the Agent may have
received from the Servicer or OFL.
(e) Each APA Purchaser shall promptly notify the Agent of any
downgrading in the ratings of the short-term unsecured debt securities or
deposits of such APA Purchaser below (i) P-1 by Moody's or (ii) A-1+ by S&P
(such APA Purchaser, a "DOWNGRADED PURCHASER"). The Agent shall have the
right, in its sole discretion, to terminate the right and obligation of any
Downgraded Purchaser to purchase a Percentage Interest in the Purchased Note;
PROVIDED, that the Agent shall not terminate the right and obligation of any
Downgraded Purchaser hereunder unless either (i) one or more Eligible
Assignees or other APA Purchasers have agreed to accept, in the aggregate,
effective as of the date of termination, such terminated APA Purchaser's
Maximum Purchase, (ii) DFC's Purchase Commitment has been reduced by an
amount equal to the product of (A) the terminated Downgraded Purchaser's
Maximum Purchase and (B) one (1) divided by 102%, and each non-terminated APA
Purchaser has agreed to increase its APA Purchaser's Percentage and maintain
its Maximum Purchase at the same amount as was in effect immediately prior to
the reduction in DFC's Purchase Commitment or (iii) DFC obtains liquidity
support satisfactory to Moody's and S&P and, solely with respect to how such
liquidity support affects this Asset Purchase Agreement only, OFL, in an
amount not less than such terminated Downgraded Purchaser's Maximum Purchase.
Such termination shall be effective upon written notice to such effect
delivered by the Agent to such Downgraded Purchaser, whereupon all of the
rights and obligations hereunder of such Downgraded Purchaser shall
terminate; PROVIDED, that upon such termination, the Downgraded Purchaser
shall continue to have the rights and obligations of an APA Purchaser with
respect to the outstanding Percentage Interest in the Purchased Note
purchased by it pursuant to the terms of this Asset Purchase Agreement prior
to such termination.
(f) Each APA Purchaser shall promptly notify the Agent of any
event of which it has knowledge which will entitle such APA Purchaser to
compensation pursuant to Section 11.05 of the Note Purchase Agreement (an
"AFFECTED PURCHASER"). The Agent shall have the right to terminate the
rights and obligations of any Affected Purchaser and to purchase a portion of
the Purchased Interest hereunder and, in the event OFL requests that the
Agent
17
<PAGE>
terminate such rights and obligations of the Affected Purchaser, the Agent
shall use its best efforts to find a replacement APA Purchaser (or Eligible
Assignee) or to cause the other APA Purchasers to accept the Affected
Purchaser's rights and obligations hereunder; PROVIDED that the Agent shall
not terminate such rights and obligations of any Affected Purchaser unless
either: (i) (A) one or more Eligible Assignees or other APA Purchasers have
agreed to accept, in the aggregate, effective as of the date of termination,
such Affected Purchaser's Maximum Purchase, and (B) such Eligible Assignee(s)
or APA Purchaser(s) shall have repurchased the Repurchased Interest, if any,
of the terminated Affected Purchaser by paying the Repurchase Amount or (ii)
DFC's Purchase Commitment has been reduced by an amount at least equal to the
product of (A) the Affected Purchaser's Maximum Purchase and (B) one (1)
divided by 102%, and each remaining APA Purchaser has agreed, notwithstanding
Section 12(b) hereof, to increase its APA Purchaser's Percentage and maintain
its Maximum Purchase at the same amount as was in effect immediately prior to
the reduction in DFC's Purchase Commitment. Such termination shall be
effective upon written notice to such effect delivered by the Agent to such
Affected Purchaser, whereupon the Purchase Termination Date of such Affected
Purchaser shall be deemed to have occurred. Upon such termination, the
Affected Purchaser shall cease to have any rights or obligations with respect
to future purchases of interests in the Purchased Note under this Asset
Purchase Agreement but shall continue to have the rights and obligations of
an APA Purchaser with respect to the portion of the Purchased Interest
purchased by it, together with all other rights due and owing to it, pursuant
to the terms of this Asset Purchase Agreement immediately prior to such
termination. The Agent shall use its best efforts to find Eligible
Assignee(s) or APA Purchaser(s) to replace an Affected Purchaser.
(g) On the fifth Business Day prior to any Non-Extending
Purchaser's Expiry Date (defined below), such Non-Extending Purchaser shall,
upon the request of the Agent, and subject to the limitations imposed by
Section 2(c) hereof, make a Non-Pro Rata Purchase (defined below) in an
amount up to such APA Purchaser's Maximum Purchase or, if such Non-Extending
Purchaser has extended its Purchase Termination Date for a Purchase
Commitment that is less than the amount of its Maximum Purchase (a "REDUCING
PURCHASER") prior to such extension, such Non-Pro Rata Purchase shall be in
an amount equal to the difference between such APA Purchaser's Maximum
Purchase prior to such extension and such APA Purchaser's Purchase Commitment
amount as extended (such amount is hereinafter referred to as the "REDUCED
AMOUNT"). The amount of such Non-Pro Rata Purchase to be made by a
Non-Extending Purchaser or Reducing Purchaser shall be an amount equal to the
product of (i) the difference between (A) DFC's Purchase Commitment MINUS the
aggregate outstanding APA Purchasers' Purchased Interests (excluding such
Non-Pro Rata Purchase) and (B) an amount equal to the difference between (x)
the aggregate of the Maximum Purchase of the APA Purchasers whose obligations
to purchase Purchased Interests hereunder do
18
<PAGE>
not expire on such Expiry Date (including the reduced Maximum Purchase of
the Reducing Purchaser) and (y) the aggregate outstanding Purchased Interests
of all APA Purchasers whose obligations to purchase Purchased Interests
hereunder do not expire on such Expiry Date (including the Purchased
Interests of a Reducing Purchaser that do not constitute the Reduced Amount
for such APA Purchaser) and (ii) a fraction the numerator of which is such
Non-Extending Purchaser's Maximum Purchase, or Reduced Amount, as the case
may be, and the denominator of which is the aggregate of the Maximum
Purchases or Reduced Amounts of all of the Non-Extending Purchasers whose
obligations to purchase Purchased Interests hereunder expire on such Expiry
Date; PROVIDED, HOWEVER, that upon receipt of notice that an APA Purchaser
will become a Non-Extending Purchaser or a Reducing Purchaser, DFC shall
promptly request a determination from each of Moody's and S&P of whether
failure to request such a purchase will result in the reduction or withdrawal
of its then current rating, if any, of the Commercial Paper, and if DFC shall
have received written confirmation from each of S&P and Moody's prior to the
fifth Business Day immediately preceding such Expiry Date that such failure
will not result in a rating reduction or withdrawal of DFC's Commercial Paper
Notes, DFC shall not request and such Non-Extending Purchaser or Reducing
Purchaser shall not be required to make, such purchase. The Non-Pro Rata
Purchase amount shall be held in the Non-Pro Rata Funding Account as provided
in Section 13(i) hereof and shall be returned to the Non-Extending Purchaser
or Reducing Purchaser, as the case may be, on such APA Purchaser's Expiry
Date if and to the extent that the aggregate of the Maximum Purchase of all
APA Purchasers whose obligations to purchase Purchased Interests do not
expire on such Expiry Date is at least equal to the greater of (A) the
aggregate Outstanding Amount of all Notes on such Expiry Date and (B) DFC's
Purchase Commitment (after giving effect to any reduction thereof pursuant to
Section 2.05 of the Note Purchase Agreement) on such Expiry Date.
Notwithstanding any provision in the Agreement or the Note Purchase Agreement
to the contrary, following the Expiry Date of any Non-Extending Purchaser and
the related Non-Pro Rata Purchase, if any, such Non-Extending Purchaser shall
have no further obligation to Purchase Interests under this Asset Purchase
Agreement or to make any Incremental Purchase under the Note Purchase
Agreement or the Indenture. A Non-Extending Purchaser's Non-Pro Rata
Purchase shall be deemed to constitute such Purchaser's Purchased Interest
hereunder on and after such APA Purchaser's Expiry Date.
(h) On the 30th day (or if such day is not a Business Day, the
next succeeding Business Day) after any APA Purchaser becomes a Downgraded
Purchaser, unless DFC shall have replaced such Downgraded Purchaser pursuant
to Section 13(e) hereof, the Agent, as agent for DFC, shall request such
Downgraded Purchaser to make, and if such request is made such Downgraded
Purchaser shall make in accordance with the provisions hereof, subject to the
limitations imposed by Section 2(c) hereof, a purchase in an amount equal to
the Maximum Purchase MINUS the outstanding Percentage Interests of such APA
Purchaser; PROVIDED, HOWEVER,
19
<PAGE>
that if DFC shall have requested at least 15 Business Days prior to such 30th
day from each of Moody's and S&P written confirmation that the failure to
request such a purchase or assignment will not result in the reduction or
withdrawal of its then current rating, if any, of the Commercial Paper, and
if such written confirmation is received by DFC prior to such 30th day, the
Agent shall not request, and such Downgraded Purchaser shall not make, such
purchase or accept such assignment. A Downgraded Purchaser's Non-Pro Rata
Purchase shall be the functional equivalent of such APA Purchaser's Maximum
Purchase and if and to the extent the Agent notifies such Downgraded
Purchaser of its obligation to purchase a Percentage Interest, moneys in the
Non-Pro Rata Funding Account shall be used to fund such Downgraded
Purchaser's Percentage of the Percentage Interest and shall thereafter
constitute such APA Purchaser's Purchased Interest.
(i) The Agent will promptly give each Non-Extending Purchaser or
Downgraded Purchaser, as applicable, telephonic notice (confirmed in writing
promptly thereafter) of the aggregate amount of the Non-Pro Rata Purchases
required pursuant to Section 13(g) or Section 13(h) hereof. If such
telephonic notice is received by an APA Purchaser prior to 12:00 noon (New
York City time) on any such Business Day, the requested Non-Pro Rata Purchase
shall be made by the Non-Extending Purchaser or Downgraded Purchaser, as
applicable, by 2:00 p.m. (New York City time) on such Business Day. If such
telephonic notice is not received prior to 12:00 noon (New York City time) on
such Business Day, the requested Non-Pro Rata Purchase shall be made by the
Non-Extending Purchaser or Downgraded Purchaser, as applicable, by 2:00 p.m.
(New York City time) on the Business Day next succeeding the Business Day on
which such telephonic notice is given. A Non-Pro Rata Purchase shall be made
by the Non-Extending Purchaser or Downgraded Purchaser, as applicable, by a
payment to the Agent of the amount of such Non-Pro Rata Purchase. Such
amount shall be deposited by the Agent into a Non-Pro Rata Funding Account
established by the Agent in connection with each Non-Pro Rata Purchase (each,
a "NON-PRO RATA FUNDING ACCOUNT"). Moneys in a Non-Pro Rata Funding Account
shall be invested by the Agent in obligations that are rated A-1+ by S&P and
P-1 by Moody's. Earnings on such investments (after deducting any losses),
if any, shall be paid by the Agent to the Downgraded Purchaser or
Non-Extending Purchaser, as the case may be, whose deposit funded such
Non-Pro Rata Funding Account on such Downgraded or Non-Extending Purchaser's
Expiry Date (or such earlier date on which such Downgraded or Non-Extending
Purchaser is replaced).
For purposes of this Asset Purchase Agreement, "EXPIRY DATE" shall
mean the later of (i) December 26, 1996, or, if said day is not a Business
Day, the Business Day next preceding said day, and (ii) such later date
agreed to by the Agent and an APA Purchaser, and "NON-PRO RATA PURCHASE"
shall mean a purchase of Percentage Interests pursuant to Section 13(g) or
13(h).
20
<PAGE>
(j) THIS ASSET PURCHASE AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
(k) This Asset Purchase Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an
original and all of which when taken together shall constitute one and the
same agreement. Delivery of an executed counterpart of a signature page to
this Asset Purchase Agreement by telecopier shall be as effective as delivery
of a manually executed counterpart of this Asset Purchase Agreement.
(l) The APA Purchasers and DFC may, from time to time, enter into
agreements amending, modifying or supplementing this Asset Purchase Agreement
with the prior written consent of OFL. Any such agreement must be in writing
and shall be effective only to the extent specifically set forth in such
writing; provided that DFC shall not amend any provision of this Asset
Purchase Agreement without having given prior notice thereof to Moody's and
S&P and without the prior written confirmation from each of Moody's and S&P
that such amendment would not result in the reduction or withdrawal of the
then current rating, if any, of the Commercial Paper.
(m) This Asset Purchase Agreement constitutes the entire agreement
between the parties hereto with respect to the matters covered hereby and
supersedes all prior agreements and understandings between the parties. This
Asset Purchase Agreement will inure to the benefit of and be binding upon the
parties hereto and their respective successors and permitted assigns, and no
other person will have any right or obligation hereunder.
14. BANKRUPTCY PETITION AGAINST DFC. Each APA Purchaser and the
Agent hereby covenants and agrees that, prior to the date which is one year
and one day after the later of (i) the payment in full of all outstanding
Commercial Paper and (ii) the payment in full of all outstanding Commercial
Paper of any subsidiary of DFC, it will not institute against, or join any
other Person in instituting against DFC any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceeding or other similar proceeding
under the laws of the United States or any state of the United States.
15. LIMITED RECOURSE TO DFC. Notwithstanding anything to the
contrary contained herein, all obligations of DFC shall be payable by DFC
only to the extent of assets available therefor and, to the extent assets are
not available or are insufficient for the payment thereof, shall not
constitute a claim against DFC.
16. FEES. DFC shall pay to each APA Purchaser a liquidity fee
(the "LIQUIDITY FEE"), payable quarterly in arrears, on the last day of each
calendar quarter during the period such APA Purchaser has a Purchase
Commitment under this
21
<PAGE>
Asset Purchase Agreement and on the earlier of the Expiration Date or such
Purchaser's Purchase Termination Date, as the same may be extended from time
to time. The Liquidity Fee for each APA Purchaser shall be a per annum fee
equal to such APA Purchaser's average daily unused Maximum Purchase
multiplied by .15% per annum.
22
<PAGE>
Signature Page
with respect to
the Olympic Automobile Receivables Warehouse Trust
Variable Funding Notes
Asset Purchase Agreement
Dated as of December 28, 1995
J.P. Morgan Delaware,
as Agent and as
Administrative Agent
By: /s/ Richard A. (illegible)
---------------------------
Authorized Signature
Title:
<PAGE>
Signature Page
with respect to
the Olympic Automobile Receivables Warehouse Trust
Variable Funding Notes
Asset Purchase Agreement
Dated December 28, 1995
SECTION 1.
Initial Percentage: 43.65%
SECTION 2.
Maximum Purchase: $89,000,000
SECTION 3.
Effective Date of Purchase Commitment: December 28, 1995
SECTION 4.
Purchase Termination Date: December 26, 1996
J.P. MORGAN DELAWARE
902 Market Street
Wilmington, Delaware 19801
By: /s/ Richard A. (illegible)
-------------------------
Authorized Signature
-------------------------
Title
<PAGE>
Signature Page
with respect to
the Olympic Automobile Receivables Warehouse Trust
Variable Funding Notes
Asset Purchase Agreement
Dated December 28, 1995
SECTION 1.
Initial Percentage: 24.5%
SECTION 2.
Maximum Purchase: $50,000,000
SECTION 3.
Effective Date of Purchase Commitment: December 28, 1995
SECTION 4.
Purchase Termination Date: December 26, 1996
BANK OF AMERICA ILLINOIS
231 South LaSalle Street
Chicago, Illinois 60690
By: /s/ Erik Ford
--------------------------------
Erik Ford
Vice President
--------------------------------
Title as Attorney-in-fact
<PAGE>
Signature Page
with respect to
the Olympic Automobile Receivables Warehouse Trust
Variable Funding Notes
Asset Purchase Agreement
Dated December 28, 1995
SECTION 1.
Initial Percentage: 7.35%
SECTION 2.
Maximum Purchase: $15,000,000
SECTION 3.
Effective Date of Purchase Commitment: December 28, 1995
SECTION 4.
Purchase Termination Date: December 26, 1996
THE BANK OF NOVA SCOTIA,
ATLANTA AGENCY
Suite 2700
600 Peachtree Street, N.E.
Atlanta, Georgia 30308
By: /s/ F.C.H. Ashby
--------------------------------
Authorized Signature
Senior Manager Loan Operations
--------------------------------
Title
<PAGE>
Signature Page
with respect to
the Olympic Automobile Receivables Warehouse Trust
Variable Funding Notes
Asset Purchase Agreement
Dated December 28, 1995
SECTION 1.
Initial Percentage: 24.5%
SECTION 2.
Maximum Purchase: $50,000,000
SECTION 3.
Effective Date of Purchase Commitment: December 28, 1995
SECTION 4.
Purchase Termination Date: December 26, 1996
DRESDNER BANK AG CHICAGO AND GRAND
CAYMAN BRANCH
Suite 2700
190 South LaSalle Street
Chicago, IL 60603
By: (illegible)
--------------------------------
Authorized Signature
SVP
--------------------------------
Title
By: (illegible)
--------------------------------
Authorized Signature
(illegible)
--------------------------------
Title
<PAGE>
The undersigned hereby consents to the sale from time to time by
J.P. Morgan Delaware, as Agent for the undersigned, of undivided interests in
the Purchased Note owned by the undersigned, pursuant to the Asset Purchase
Agreement to which this is attached.
DELAWARE FUNDING CORPORATION
By: J.P. Morgan Delaware,
as attorney-in-fact for
Delaware Funding Corporation
By: Richard A. (illegible)
--------------------------------
Authorized Signature
--------------------------------
Title
<PAGE>
Exhibit A
Signature Page
with respect to
the Olympic Automobile Receivables Warehouse Trust
Variable Funding Notes
Asset Purchase Agreement
Dated December ____, 1995
SECTION 1.
Purchase Commitment Percentage Assigned: ________%
Assignor's remaining Purchase Commitment
Percentage: ________%
Outstanding Amount of the
Percentage Interests Assigned: $__________
Outstanding Amount of Assignor's remaining
Percentage Interests: $__________
SECTION 2.
Assignee's Maximum Purchase: $__________
Assignor's remaining Maximum Purchase: $__________
SECTION 3.
Effective Date of this Assignment: __________, 19__
[NAME OF ASSIGNOR]
By: ________________________
Title:
[NAME OF ASSIGNEE]
[Address]
By: ________________________
Title:
Accepted this ____ day of
__________, 199__
J.P. MORGAN DELAWARE,
as Agent
By: ________________________
Authorized Signature
________________________
Title
<PAGE>
Exhibit B
PURCHASE CERTIFICATE
________________, 19___
[Date of Purchase]
[Name and Address of APA Purchaser]
[Delaware Funding Corporation]
Re: Olympic Automobile Receivables Warehouse Trust
Variable Funding Notes
Gentlemen:
This certificate confirms that on the date set forth above (the
"Purchase Date") you have [purchased]1/ [repurchased]2/ for your account and
risk, upon the terms and conditions of the Asset Purchase Agreement dated as
of December ____, 1995, among you, the undersigned and certain other parties,
an undivided interest (your "Percentage Interest") to the extent of ____% in
and to the Purchased Note held by the Agent and owned by [DFC] [name of APA
Purchaser from whom interest is being repurchased]2/, pursuant to the Note
Purchase Agreement dated as of December __, 1995 among Delaware Funding
Corporation, J.P. Morgan Delaware, Olympic Automobiles Receivables Warehouse
Trust and Olympic Financial Ltd.
We acknowledge receipt from you of the sum of $__________ in payment
of the Purchase Price for your Percentage Interest in the Purchased Note.
Very truly yours,
J.P. MORGAN DELAWARE,
as Agent
By:
--------------------------------
Authorized Signature
--------------------------------
Title
__________________
1/ To be inserted if certificate is being delivered in connection with a
purchase by a Purchaser.
2/ To be inserted if certificate is being delivered in connection with the
repurchase by DFC.
<PAGE>
EXECUTION COPY
FIRST AMENDMENT
TO
ASSET PURCHASE AGREEMENT
Olympic Automobile Receivables Warehouse Trust
Variable Funding Notes
THIS FIRST AMENDMENT dated as of June 12, 1996 (the "AMENDMENT") to
the ASSET PURCHASE AGREEMENT, dated as of December 28, 1995 (the "AGREEMENT")
among Morgan Guaranty Trust Company of New York (successor to J.P. Morgan
Delaware), as administrative agent (the "AGENT") and each of the parties
(collectively, the "APA PURCHASERS") who has (i) executed a signature page to
the Agreement or (ii) executed an Assignment of Purchase Commitment, is by and
among the parties listed above. Capitalized terms used in this Amendment and
not otherwise defined shall have the meanings assigned to such terms in the
Agreement.
RECITALS
WHEREAS, the Agent and the APA Purchasers wish to amend the Agreement
to add APA Purchasers and reallocate Maximum Purchases and Percentages among
existing and new APA Purchasers due to the increase in DFC's Purchase Commitment
and in the Facility Limit as provided herein, and Delaware Funding Corporation
and Olympic Financial Ltd. ("OFL") are willing to consent to such amendments
upon the terms provided for herein.
NOW THEREFORE, in consideration of the premises and the agreements
contained herein, the parties hereto agree as follows:
SECTION 1. NEW PURCHASERS. This Amendment provides for the addition
of new Purchasers to the Asset Purchase Agreement, such addition to be evidenced
by the execution by such new Purchasers of the signature pages attached hereto
as Exhibit A.
SECTION 2. CONSENT TO INCREASE IN FACILITY LIMIT AND DFC'S PURCHASE
LIMIT. In accordance with the provisions of Section 12(a) of the Agreement, all
of the Purchasers who execute the attached signature pages hereby consent to the
increase in the Facility Limit and DFC's Purchase Limit from $200,000,000 to
$300,000,000.
SECTION 3. CONSENT TO AMENDMENT TO TRUST DOCUMENTS. In accordance
with the provisions of Section 7(b) of the Agreement, all of the Purchasers who
execute the attached signature pages hereby consent to the Amendment to Trust
<PAGE>
Agreement, Amendment to Sale and Servicing Agreement and Supplemental Indenture
of even date herewith, substantially in the forms attached to this Amendment as
Exhibit B.
SECTION 4. AMENDMENTS OF SIGNATURE PAGES. As a result of the
addition of new Purchasers and the increase in DFC's Purchase Commitment,
pursuant to Sections 2(a), 12(a) and 13(l) of the Agreement, the Percentages and
Maximum Purchases of existing APA Purchasers are being revised. The Percentages
and Maximum Purchases of the new and existing (as revised) APA Purchasers are
specified in the executed signature pages attached to this Amendment as Exhibit
A. The attached signature pages shall supersede the signature pages to the
Agreement dated December 28, 1995, and from and after the date of this Amendment
all references to the signature pages of the Agreement shall refer to the
signature pages attached as Exhibit A to this Amendment.
SECTION 5. EFFECTIVENESS. The amendments provided for by this
Amendment shall become effective as of June 12, 1996, upon receipt by the Agent
of (i) counterparts of this Amendment, duly executed by each of the parties
hereto and (ii) written confirmation from each of S&P and Moody's that such
amendments will not result in a downgrade in the ratings of the Commercial Paper
Notes.
SECTION 6. AGREEMENT IN FULL FORCE AND EFFECT AS AMENDED. Except as
specifically amended or waived hereby, all of the terms and conditions of the
Agreement shall remain in full force and effect. All references to the
Agreement in any other document or instrument shall be deemed to mean such
Agreement as amended by this Amendment. This Amendment shall not constitute a
novation of the Agreement, but shall constitute an amendment thereof. The
parties hereto agree to be bound by the terms and obligations of the Agreement,
as amended by this Amendment, as though the terms and obligations of the
Agreement were set forth herein.
SECTION 7. COUNTERPARTS. This Amendment may be executed in any
number of counterparts and by separate parties hereto on separate counterparts,
each of which when executed shall be deemed an original, but all such
counterparts taken together shall constitute one and the same instrument.
SECTION 8. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
SECTION 9. DEFINED TERMS. Capitalized terms used herein and not
otherwise defined shall have the meanings assigned to such terms in the
Agreement.
2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
the Agreement to be duly executed by their respective authorized officers as of
the day and year first above written.
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By:
------------------------
Title:
Acknowledged and consented to:
June 12, 1996
DELAWARE FUNDING CORPORATION
By: Morgan Guaranty Trust Company
of New York,
as attorney-in-fact for
Delaware Funding Corporation
By:
------------------------
Authorized Signatory
------------------------
Title
OLYMPIC FINANCIAL LIMITED
By:
------------------------
Authorized Signatory
------------------------
Title
3
<PAGE>
EXHIBIT A
Signature Page
with respect to
Olympic Automobile Receivables Warehouse Trust
Variable Funding Notes
Asset Purchase Agreement
Dated as of December 28, 1995
Amended as of June 12, 1996
Morgan Guaranty Trust Company of
New York,
as Agent and as Administrative
Agent
By:
----------------------
Authorized Signature
------------------------
Title
<PAGE>
Signature Page
with respect to
Olympic Automobile Receivables Warehouse Trust
Variable Funding Notes
Asset Purchase Agreement
SECTION 1.
Percentage: 28.33%
SECTION 2.
Maximum Purchase: $85,000,000
SECTION 3.
Effective Date of Purchase Commitment: June 12, 1996
SECTION 4.
Purchase Termination Date: December 26, 1996
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
500 Stanton Christiana Road
Newark, Delaware 19713-2107
By:
------------------------
Authorized Signature
------------------------
Title
<PAGE>
Signature Page
with respect to
Olympic Automobile Receivables Warehouse Trust
Variable Funding Notes
Asset Purchase Agreement
SECTION 1.
Percentage: 16.67%
SECTION 2.
Maximum Purchase: $50,000,000
SECTION 3.
Effective Date of Purchase Commitment: June 12, 1996
SECTION 4.
Purchase Termination Date: December 26, 1996
BANK OF AMERICA ILLINOIS
231 South LaSalle Street
Chicago, Illinois 60690
By:
------------------------
Title:
By:
------------------------
Title:
A-3
<PAGE>
Signature Page
with respect to
Olympic Automobile Receivables Warehouse Trust
Variable Funding Notes
Asset Purchase Agreement
SECTION 1.
Percentage: 5.00%
SECTION 2.
Maximum Purchase: $15,000,000
SECTION 3.
Effective Date of Purchase Commitment: June 12, 1996
SECTION 4.
Purchase Termination Date: December 26, 1996
THE BANK OF NOVA SCOTIA,
ATLANTA AGENCY
Suite 2700
600 Peachtree Street, N.E.
Atlanta, Georgia 30308
By:
------------------------
Title:
By:
------------------------
Title:
A-4
<PAGE>
Signature Page
with respect to
Olympic Automobile Receivables Warehouse Trust
Variable Funding Notes
Asset Purchase Agreement
SECTION 1.
Percentage: 16.67%
SECTION 2.
Maximum Purchase: $50,000,000
SECTION 3.
Effective Date of Purchase Commitment: June 12, 1996
SECTION 4.
Purchase Termination Date: December 26, 1996
DRESDNER BANK AG, NEW YORK AND
GRAND CAYMAN BRANCHES
Suite 2700
1900 South LaSalle Street
Chicago, Illinois 60603
By: ________________________
Title:
By: ________________________
Title:
A-5
<PAGE>
Signature Page
with respect to
Olympic Automobile Receivables Warehouse Trust
Variable Funding Notes
Asset Purchase Agreement
SECTION 1.
Percentage: 8.33%
SECTION 2.
Maximum Purchase: $25,000,000
SECTION 3.
Effective Date of Purchase Commitment: June 12, 1996
SECTION 4.
Purchase Termination Date: December 26, 1996
COMMERZBANK AKTIENGESELLSCHAFT,
CHICAGO BRANCH
311 S. Wacker Drive
Chicago, Illinois 60606
By:
------------------------
Title:
By:
------------------------
Title:
A-6
<PAGE>
Signature Page
with respect to
Olympic Automobile Receivables Warehouse Trust
Variable Funding Notes
Asset Purchase Agreement
SECTION 1.
Percentage: 8.33%
SECTION 2.
Maximum Purchase: $25,000,000
SECTION 3.
Effective Date of Purchase Commitment: June 12, 1996
SECTION 4.
Purchase Termination Date: December 26, 1996
HARRIS TRUST AND SAVINGS BANK
111 West Monroe Street
P.O. Box 755
Chicago, Illinois 60690
By:
------------------------
Title:
By:
------------------------
Title:
A-7
<PAGE>
Signature Page
with respect to
Olympic Automobile Receivables Warehouse Trust
Variable Funding Notes
Asset Purchase Agreement
SECTION 1.
Percentage: 16.67%
SECTION 2.
Maximum Purchase: $50,000,000
SECTION 3.
Effective Date of Purchase Commitment: June 12, 1996
SECTION 4.
Purchase Termination Date: December 26, 1996
BANCO SANTANDER, NEW YORK BRANCH
453 East 53rd Street
New York, New York 10022
By:
------------------------
Title:
By:
------------------------
Title:
A-8
<PAGE>
EXECUTION COPY
SECOND AMENDMENT
AND CONSENT
RELATING TO
ASSET PURCHASE AGREEMENT
Olympic Automobile Receivables Warehouse Trust
Variable Funding Notes
THIS SECOND AMENDMENT AND CONSENT dated as of December 20, 1996
(the "SECOND AMENDMENT") Relating to the ASSET PURCHASE AGREEMENT, dated as
of December 28, 1995 and amended as of June 12, 1996 (the "AGREEMENT") among
Morgan Guaranty Trust Company of New York (successor to J.P. Morgan
Delaware), as administrative agent (the "AGENT") and each of the parties
(collectively, the "APA PURCHASERS") who has (i) executed a signature page to
the Agreement or (ii) executed an Assignment of Purchase Commitment, is by
and among the parties listed above. Capitalized terms used in this Second
Amendment and not otherwise defined shall have the meanings assigned to such
terms in the Agreement.
RECITALS
WHEREAS, December 26, 1996 is the Purchase Termination Date for
each of the current APA Purchasers and is also the Expiry Date specified in
the Agreement; and
WHEREAS, in accordance with the provisions of Section 2(a) of the
Agreement, Bank of America Illinois (the "Non-Extending Purchaser") has
notified the Agent that it will not consent to the extension of its Purchase
Termination Date; and
WHEREAS, the Agent and the APA Purchasers (other than the
Non-Extending Purchaser) wish to amend the Agreement to extend each APA
Purchaser's (other than the Non-Extending Purchaser) Purchase Termination
Date and the Expiry Date; and
WHEREAS, two APA Purchasers, Harris Trust and Savings Bank and
Morgan Guaranty Trust Company of New York, desire to increase their Maximum
Purchases; and
WHEREAS, due to the withdrawal of the Non-Extending Purchaser and
the increase of the Maximum Purchases of two current APA Purchasers, the
Percentages of the remaining APA Purchasers will be affected as evidenced
herein; and
WHEREAS, in accordance with the provisions of Section 13(l) of the
Agreement, Delaware Funding Corporation and Olympic Financial Ltd. ("OFL") are
willing to consent to this Second Amendment upon the terms provided for herein.
<PAGE>
NOW THEREFORE, in consideration of the premises and the agreements
contained herein, the parties hereto agree as follows:
SECTION 1. EXTENSION OF PURCHASE TERMINATION DATE. Each APA
Purchaser who executes an attached signature page hereby consents to the
extension of such APA Purchaser's Purchase Termination Date to the date
specified on such signature page.
SECTION 2. INCREASE IN MAXIMUM PURCHASES. Each of Harris Trust
and Savings Bank and Morgan Guaranty Trust Company of New York, by execution
of its attached signature page, hereby agrees to the increase in its Maximum
Purchase to the amount stated therein.
SECTION 3. EXTENSION AND AMENDMENT OF THE "EXPIRY DATE." The
definition of "Expiry Date" in the last paragraph of Section 13(i) of the
Agreement is hereby amended to read as follows:
For purposes of this Asset Purchase Agreement, "EXPIRY DATE" shall
mean, for each APA Purchaser, the later of (i) January 17, 1997 and
(ii) such later date agreed to by the Agent and such APA Purchaser,
SECTION 4. AMENDMENTS OF SIGNATURE PAGES. As a result of the
withdrawal of the Non-Extending Purchaser as an APA Purchaser and the
increase in the Maximum Purchases of certain APA Purchasers as provided in
Section 2 of this Second Amendment, the Percentages of remaining APA
Purchasers are being revised. The Percentages and extended Purchase
Termination Dates of the remaining APA Purchasers are specified in the
executed signature pages attached to this Amendment as Exhibit A. The
attached signature pages shall supersede the signature pages to the Agreement
dated June 12, 1996, and from and after the date of this Second Amendment all
references to the signature pages of the Agreement shall refer to the
signature pages attached as Exhibit A to this Second Amendment.
SECTION 5. EFFECTIVENESS. The amendments provided for by this
Second Amendment shall become effective as of December 20, 1996, upon receipt
by the Agent of (i) counterparts of this Amendment, duly executed by each of
the parties hereto, (ii) notice that the conditions to effectiveness of the
Agreement to Extend Purchase Commitment Expiration Date Relating to Note
Purchase Agreement dated the date hereof have been satisfied and (iii)
confirmation by each of S&P and Moody's of the then-current ratings of the
Commercial Paper Notes.
SECTION 6. AGREEMENT IN FULL FORCE AND EFFECT AS AMENDED. Except
as specifically amended or waived hereby, all of the terms and conditions of
the Agreement shall remain in full force and effect. All references to the
Agreement in any other document or instrument shall be deemed to mean such
Agreement as amended by this Second Amendment. This Second Amendment shall
not constitute a novation of the Agreement, but shall constitute
2
<PAGE>
an amendment thereof. The parties hereto agree to be bound by the terms and
obligations of the Agreement, as amended by this Second Amendment, as though
the terms and obligations of the Agreement were set forth herein.
SECTION 7. PRIOR UNDERSTANDINGS. This Second Amendment sets forth
the entire understanding of the parties relating to the subject matter
hereof, and supersedes all prior understandings and agreements, whether
written or oral.
SECTION 8. COUNTERPARTS. This Second Amendment may be executed in
any number of counterparts and by separate parties hereto on separate
counterparts, each of which when executed shall be deemed an original, but
all such counterparts taken together shall constitute one and the same
instrument.
SECTION 9. GOVERNING LAW. THIS SECOND AMENDMENT SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
SECTION 10. DEFINED TERMS. Capitalized terms used herein and not
otherwise defined shall have the meanings assigned to such terms in the
Agreement.
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Second
Amendment to the Agreement to be duly executed by their respective authorized
officers as of the day and year first above written.
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By: /s/ ILLEGIBLE
----------------------------------
Title: VICE PRESIDENT
Acknowledged and consented to:
December 20, 1996
DELAWARE FUNDING CORPORATION
By: Morgan Guaranty Trust Company
of New York,
as attorney-in-fact for
Delaware Funding Corporation
By: /s/ ILLEGIBLE
----------------------------------
Authorized Signatory
VICE PRESIDENT
----------------------------------
Title
OLYMPIC FINANCIAL LIMITED
By:
----------------------------------
Authorized Signatory
----------------------------------
Title
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Second
Amendment to the Agreement to be duly executed by their respective authorized
officers as of the day and year first above written.
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By:
----------------------------------
Title:
Acknowledged and consented to:
December 20, 1996
DELAWARE FUNDING CORPORATION
By: Morgan Guaranty Trust Company
of New York,
as attorney-in-fact for
Delaware Funding Corporation
By:
----------------------------------
Authorized Signatory
----------------------------------
Title
OLYMPIC FINANCIAL LIMITED
By: /s/ ILLEGIBLE
----------------------------------
Authorized Signatory
----------------------------------
Title
5
<PAGE>
EXHIBIT A
Signature Page
with respect to
Olympic Automobile Receivables Warehouse Trust
Variable Funding Notes
Asset Purchase Agreement
Dated as of December 28, 1995
Amended as of June 12, 1996
Amended as of December 20, 1996
Morgan Guaranty Trust Company of
New York,
as Agent and as Administrative
Agent
By: /s/ ILLEGIBLE
-----------------------------------
Authorized Signature
VICE PRESIDENT
-----------------------------------
Title
<PAGE>
Signature Page
with respect to
Olympic Automobile Receivables Warehouse Trust
Variable Funding Notes
Asset Purchase Agreement
SECTION 1.
Percentage: 36.67%
SECTION 2.
Maximum Purchase: $110,000,000
SECTION 3.
Effective Date of Purchase Commitment: December 20, 1996
SECTION 4.
Purchase Termination Date: January 17, 1997
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
500 Stanton Christiana Road
Newark, Delaware 19713-2107
By: /s/ ILLEGIBLE
-----------------------------------
Authorized Signature
VICE PRESIDENT
-----------------------------------
Title
A-2
<PAGE>
Signature Page
with respect to
Olympic Automobile Receivables Warehouse Trust
Variable Funding Notes
Asset Purchase Agreement
SECTION 1.
Percentage: 5.00%
SECTION 2.
Maximum Purchase: $15,000,000
SECTION 3.
Effective Date of Purchase Commitment: December 20, 1996
SECTION 4.
Purchase Termination Date: January 17, 1997
THE BANK OF NOVA SCOTIA,
ATLANTA AGENCY
Suite 2700
600 Peachtree Street, N.E.
Atlanta, Georgia 30308
By: /s/ A.S. Norsworthy
-----------------------------------
Title:
A.S. NORSWORTHY
SR. TEAM LEADER-LOAN OPERATIONS
By:
-----------------------------------
Title:
A-3
<PAGE>
Signature Page
with respect to
Olympic Automobile Receivables Warehouse Trust
Variable Funding Notes
Asset Purchase Agreement
SECTION 1.
Percentage: 8.33%
SECTION 2.
Maximum Purchase: $25,000,000
SECTION 3.
Effective Date of Purchase Commitment: December 20, 1996
SECTION 4.
Purchase Termination Date: January 17, 1997
COMMERZBANK AKTIENGESELLSCHAFT,
CHICAGO BRANCH
311 S. Wacker Drive
Chicago, Illinois 60606
By: /s/ W.B. Peterson
-----------------------------------
Title: WILLIAM BRENT PETERSON
Assistant Vice President
By: /s/ J. Timothy Shortly
-----------------------------------
Title: J. TIMOTHY SHORTLY
Senior Vice President
A-4
<PAGE>
Signature Page
with respect to
Olympic Automobile Receivables Warehouse Trust
Variable Funding Notes
Asset Purchase Agreement
SECTION 1.
Percentage: 16.67%
SECTION 2.
Maximum Purchase: $50,000,000
SECTION 3.
Effective Date of Purchase Commitment: December 20, 1996
SECTION 4.
Purchase Termination Date: January 17, 1997
DRESDNER BANK AG, NEW YORK
AND GRAND CAYMAN BRANCHES
Suite 2700
1900 South LaSalle Street
Chicago, Illinois 60603
By: /s/ ILLEGIBLE
-----------------------------------
Title: VICE PRESIDENT
By: /s/ ILLEGIBLE
-----------------------------------
Title: Vice President
A-5
<PAGE>
Signature Page
with respect to
Olympic Automobile Receivables Warehouse Trust
Variable Funding Notes
Asset Purchase Agreement
SECTION 1.
Percentage: 16.67%
SECTION 2.
Maximum Purchase: $50,000,000
SECTION 3.
Effective Date of Purchase Commitment: December 20, 1996
SECTION 4.
Purchase Termination Date: January 17, 1997
HARRIS TRUST AND SAVINGS BANK
111 West Monroe Street
P.O. Box 755
Chicago, Illinois 60690
By: /s/ ILLEGIBLE
-----------------------------------
Title: V.P.
By:
-----------------------------------
Title:
A-6
<PAGE>
Signature Page
with respect to
Olympic Automobile Receivables Warehouse Trust
Variable Funding Notes
Asset Purchase Agreement
SECTION 1.
Percentage: 16.67%
SECTION 2.
Maximum Purchase: $50,000,000
SECTION 3.
Effective Date of Purchase Commitment: December 20, 1996
SECTION 4.
Purchase Termination Date: January 17, 1997
BANCO SANTANDER, NEW YORK BRANCH
453 East 53rd Street
New York, New York 10022
By: /s/ ILLEGIBLE
-----------------------------------
Title: VP
By: /s/ ILLEGIBLE
-----------------------------------
Title:
A-7
<PAGE>
EXECUTION COPY
THIRD AMENDMENT
AND CONSENT
RELATING TO
ASSET PURCHASE AGREEMENT
Olympic Automobile Receivables Warehouse Trust
Variable Funding Notes
THIS THIRD AMENDMENT AND CONSENT dated as of January 17, 1997 (the
"THIRD AMENDMENT") Relating to the ASSET PURCHASE AGREEMENT, dated as of
December 28, 1995 and amended as of June 12, 1996 and December 20, 1996 (the
"AGREEMENT") among Morgan Guaranty Trust Company of New York (successor to
J.P. Morgan Delaware), as administrative agent (the "AGENT") and each of the
parties (collectively, the "APA PURCHASERS") who has (i) executed a signature
page to the Agreement or (ii) executed an Assignment of Purchase Commitment,
is by and among the parties listed above. Capitalized terms used in this
Third Amendment and not otherwise defined shall have the meanings assigned to
such terms in the Agreement.
RECITALS
WHEREAS, January 17, 1997 is the Purchase Termination Date for each
of the current APA Purchasers and is also the Expiry Date specified in the
Agreement; and
WHEREAS, in accordance with the provisions of Section 2(a) of the
Agreement, Dresdner Bank AG Chicago and Grand Cayman Branch (the
"Non-Extending Purchaser") has notified the Agent that it will not consent to
the extension of its Purchase Termination Date; and
WHEREAS, the Agent and the APA Purchasers (other than the
Non-Extending Purchaser) wish to amend the Agreement to extend each APA
Purchaser's (other than the Non-Extending Purchaser) Purchase Termination
Date and the Expiry Date; and
WHEREAS, in accordance with the provisions of Section 2(a) of the
Agreement, Morgan Guaranty Trust Company of New York, as an APA Purchaser (in
such capacity, the "Reducing Purchaser") has notified the Agent that it wants
to reduce its Maximum Purchase following the January 17, 1997 Purchase
Termination Date; and
WHEREAS, the Seller has determined to reduce the Facility Limit and
DFC's Purchase Commitment, such reduction to be effective as of January 17,
1997; and
<PAGE>
WHEREAS, due to the withdrawal of the Non-Extending Purchaser, the
decrease in the Maximum Purchase of the Reducing Purchaser and the reduction
in DFC's Purchase Commitment and in the Facility Limit, the Percentages of
the remaining APA Purchasers will be affected as evidenced herein; and
WHEREAS, in a First Amendment and Consent relating to the Note
Purchase Agreement dated the date hereof, the Agent has been given the right
to consent to a Change of Control (as defined in such First Amendment) of OFL
and desires to be governed by the Majority Purchasers in determining whether
to grant such consent; and
WHEREAS, the Agent has agreed to increase the Liquidity Fee payable
to the APA Purchasers under certain circumstances; and
WHEREAS, in accordance with the provisions of Section 13(l) of the
Agreement, Delaware Funding Corporation and Olympic Financial Ltd. ("OFL")
are willing to consent to this Third Amendment upon the terms provided for
herein; and
WHEREAS, pursuant to Section 7(b) of the Agreement, the Agent is
required to obtain the consent of the Majority Purchasers before consenting
to amendments to the Sale and Servicing Agreement.
NOW THEREFORE, in consideration of the premises and the agreements
contained herein, the parties hereto agree as follows:
SECTION 1. EXTENSION OF PURCHASE TERMINATION DATE. Each APA
Purchaser who executes an attached signature page hereby consents to the
extension of such APA Purchaser's Purchase Termination Date to the date
specified on such signature page.
SECTION 2. DECREASE IN MAXIMUM PURCHASE. The Reducing Purchaser,
by execution of its attached signature page, hereby agrees to the decrease in
its Maximum Purchase to the amount stated therein.
SECTION 3. ACKNOWLEDGEMENT OF DECREASE IN FACILITY LIMIT AND DFC'S
PURCHASE LIMIT. In accordance with the provisions of Section 12(b) of the
Agreement, all of the APA Purchasers who execute the attached signature pages
hereby acknowledge the reduction in the Facility Limit and DFC's Purchase
Limit from $300,000,000 to $225,000,000.
SECTION 4. EXTENSION AND AMENDMENT OF THE "EXPIRY DATE." The
definition of "Expiry Date" in the last paragraph of Section 13(i) of the
Agreement is hereby amended to read as follows:
For purposes of this Asset Purchase Agreement, "EXPIRY DATE" shall
mean, for each APA Purchaser, the earlier of (i) December 19, 1997 or
(ii) June 30, 1997, but only if
2
<PAGE>
either (a) such APA Purchaser determines, in its sole and absolute
discretion, to terminate its Purchase Commitment hereunder and so
notifies the Agent and OFL in writing on or before May 27, 1997 or (b)
DFC terminates its Purchase Commitment under the Note Purchase Agreement,
SECTION 5. RIGHT OF MAJORITY PURCHASERS TO CONSENT TO CHANGE OF
CONTROL. A new clause (iv) is added to Section 7(b) of the Agreement and
reads as follows:
(iv) consent to a Change of Control with respect to OFL;
SECTION 6. INCREASE OF LIQUIDITY FEE UNDER CERTAIN CIRCUMSTANCES.
The last sentence of Section 16 of the Agreement is hereby amended to read as
follows:
The Liquidity Fee for each APA Purchaser shall be a per annum fee equal to,
for each day, such APA Purchaser's unused Maximum Purchase multiplied by
either (i) .15% per annum or (ii) if and for so long as any Warehousing
Period (as defined in the Sale and Servicing Agreement) exceeds 90 days,
.25% per annum.
SECTION 7. CONSENT TO AMENDMENT TO SALE AND SERVICING AGREEMENT.
In accordance with the provisions of Section 7(b) of the Agreement, all of
the Purchasers who execute the attached signature pages hereby consent to
Amendment No. 3 to Sale and Servicing Agreement of even date herewith,
substantially in the form attached to this Third Amendment as Exhibit B.
SECTION 8. AMENDMENTS OF SIGNATURE PAGES. As a result of the
withdrawal of the Non-Extending Purchaser as an APA Purchaser and the
decrease in the Maximum Purchase of the Reducing Purchaser as provided in
Section 2 of this Third Amendment, pursuant to Sections 2(a), 12(b) and 13(l)
of the Agreement, the Percentages of remaining APA Purchasers are being
revised. The Percentages and extended Purchase Termination Dates of the
remaining APA Purchasers are specified in the executed signature pages
attached to this Third Amendment as Exhibit A. The attached signature pages
shall supersede the signature pages to the Agreement dated December 20, 1996,
and from and after the date of this Third Amendment all references to the
signature pages of the Agreement shall refer to the signature pages attached
as Exhibit A to this Third Amendment.
SECTION 9. EFFECTIVENESS. The amendments provided for by this
Third Amendment shall become effective as of January 17, 1997, upon receipt
by the Agent of (i) counterparts of this Third Amendment, duly executed by
each of the parties hereto, (ii) notice that the conditions to effectiveness
of the First Amendment and Consent Relating to Note Purchase Agreement dated
the date hereof have been satisfied and (iii) confirmation by each of S&P and
Moody's of the then-current ratings of the Commercial Paper Notes.
3
<PAGE>
SECTION 10. AGREEMENT IN FULL FORCE AND EFFECT AS AMENDED. Except
as specifically amended or waived hereby, all of the terms and conditions of
the Agreement shall remain in full force and effect. All references to the
Agreement in any other document or instrument shall be deemed to mean such
Agreement as amended by this Third Amendment. This Third Amendment shall not
constitute a novation of the Agreement, but shall constitute an amendment
thereof. The parties hereto agree to be bound by the terms and obligations
of the Agreement, as amended by this Third Amendment, as though the terms and
obligations of the Agreement were set forth herein.
SECTION 11. PRIOR UNDERSTANDINGS. This Third Amendment sets forth
the entire understanding of the parties relating to the subject matter
hereof, and supersedes all prior understandings and agreements, whether
written or oral.
SECTION 12. COUNTERPARTS. This Third Amendment may be executed in
any number of counterparts and by separate parties hereto on separate
counterparts, each of which when executed shall be deemed an original, but
all such counterparts taken together shall constitute one and the same
instrument.
SECTION 13. GOVERNING LAW. THIS THIRD AMENDMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
SECTION 14. DEFINED TERMS. Capitalized terms used herein and not
otherwise defined shall have the meanings assigned to such terms in the
Agreement.
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Third
Amendment to the Agreement to be duly executed by their respective authorized
officers as of the day and year first above written.
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By: /s/ Richard A. Burke
------------------------
Title: Richard A. Burke
Vice President
Acknowledged and consented to:
January 17, 1997
DELAWARE FUNDING CORPORATION
By: Morgan Guaranty Trust Company
of New York,
as attorney-in-fact for
Delaware Funding Corporation
By: /s/ Richard A. Burke
------------------------
Authorized Signatory
Richard A. Burke
Vice President
------------------------
Title
OLYMPIC FINANCIAL LIMITED
By:
--------------------------
Authorized Signatory
--------------------------
Title
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Third
Amendment to the Agreement to be duly executed by their respective authorized
officers as of the day and year first above written.
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By:
------------------------
Title:
Acknowledged and consented to:
January 17, 1997
DELAWARE FUNDING CORPORATION
By: Morgan Guaranty Trust Company
of New York,
as attorney-in-fact for
Delaware Funding Corporation
By:
--------------------------
Authorized Signatory
--------------------------
Title
OLYMPIC FINANCIAL LTD.
By: /s/ Michael J. Sherman
-------------------------
Authorized Signatory
Michael J. Sherman
Treasurer
-------------------------
Title
5
<PAGE>
EXHIBIT A
Signature Page
with respect to
Olympic Automobile Receivables Warehouse Trust
Variable Funding Notes
Asset Purchase Agreement
Dated as of December 28, 1995
Amended as of June 12, 1996
Amended as of December 20, 1996
Amended as of January 17, 1997
Morgan Guaranty Trust Company of New York,
as Agent and as Administrative Agent
By: /s/ Richard A. Burke
------------------------
Authorized Signature
Richard A. Burke
Vice President
------------------------
Title
<PAGE>
Signature Page
with respect to
Olympic Automobile Receivables Warehouse Trust
Variable Funding Notes
Asset Purchase Agreement
SECTION 1.
Percentage: 37.78%
SECTION 2.
Maximum Purchase: $85,000,000
SECTION 3.
Effective Date of Purchase Commitment: January 17, 1997
SECTION 4.
Purchase Termination Date: December 19, 1997*
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
500 Stanton Christiana Road
Newark, Delaware 19713-2107
By: /s/ Richard A. Burke
------------------------
Authorized Signature
Richard A. Burke
Vice President
------------------------
Title
- -------------
* At the option of the APA Purchaser named above, June 30, 1997.
<PAGE>
Signature Page
with respect to
Olympic Automobile Receivables Warehouse Trust
Variable Funding Notes
Asset Purchase Agreement
SECTION 1.
Percentage: 6.67%
SECTION 2.
Maximum Purchase: $15,000,000
SECTION 3.
Effective Date of Purchase Commitment: January 17, 1997
SECTION 4.
Purchase Termination Date: December 19, 1997*
THE BANK OF NOVA SCOTIA,
ATLANTA AGENCY
Suite 2700
600 Peachtree Street, N.E.
Atlanta, Georgia 30308
By: /s/ F.C.H. Ashby
------------------------
Title: F.C.H. Ashby
Senior Manager Loan Operations
- -------------
* At the option of the APA Purchaser named above, June 30, 1997.
<PAGE>
Signature Page
with respect to
Olympic Automobile Receivables Warehouse Trust
Variable Funding Notes
Asset Purchase Agreement
SECTION 1.
Percentage: 11.11%
SECTION 2.
Maximum Purchase: $25,000,000
SECTION 3.
Effective Date of Purchase Commitment: January 17, 1997
SECTION 4.
Purchase Termination Date: December 19, 1997*
COMMERZBANK AKTIENGESELLSCHAFT, CHICAGO BRANCH
311 S. Wacker Drive
Chicago, Illinois 60606
By: /s/ Paul Karlin
------------------------
Title: Paul Karlin
Assistant Treasurer
By: /s/ J. Timothy Shortly
------------------------
Title: J. Timothy Shortly
Senior Vice President
- -------------
* At the option of the APA Purchaser named above, June 30, 1997.
<PAGE>
Signature Page
with respect to
Olympic Automobile Receivables Warehouse Trust
Variable Funding Notes
Asset Purchase Agreement
SECTION 1.
Percentage: 22.22%
SECTION 2.
Maximum Purchase: $50,000,000
SECTION 3.
Effective Date of Purchase Commitment: January 17, 1997
SECTION 4.
Purchase Termination Date: December 19, 1997*
HARRIS TRUST AND SAVINGS BANK
111 West Monroe Street
P.O. Box 755
Chicago, Illinois 60690
By: /s/ ILLEGIBLE
------------------------
Title: Illegible
By: V.P.
------------------------
Title:
- -------------
* At the option of the APA Purchaser named above, June 30, 1997.
<PAGE>
Signature Page
with respect to
Olympic Automobile Receivables Warehouse Trust
Variable Funding Notes
Asset Purchase Agreement
SECTION 1.
Percentage: 22.22%
SECTION 2.
Maximum Purchase: $50,000,000
SECTION 3.
Effective Date of Purchase Commitment: January 17, 1997
SECTION 4.
Purchase Termination Date: December 19, 1997*
BANCO SANTANDER, NEW YORK BRANCH
453 East 53rd Street
New York, New York 10022
By: /s/ Dom J. Rodriguez
------------------------
Title: Dom J. Rodriguez
Vice President
BANCO SANTANDER
By: /s/ Robert E. Schlegel
------------------------
Title: Robert E. Schlegel
Vice President
Manager-Corporate Banking
BANCO SANTANDER
- -------------
* At the option of the APA Purchaser named above, June 30, 1997.
<PAGE>
EXECUTION COPY
_______________________________________________________________________________
RECEIVABLES PURCHASE AGREEMENT AND ASSIGNMENT
between
OLYMPIC RECEIVABLES FINANCE CORP.
Purchaser
and
OLYMPIC FINANCIAL LTD.
Seller
dated as of
December 3, 1996
_______________________________________________________________________________
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I
DEFINITIONS
SECTION 1.1. General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.2. Specific Terms. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.3. Usage of Terms. . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 1.4. Certain References. . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 1.5. No Recourse . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 1.6. Action by or Consent of Holders . . . . . . . . . . . . . . . . . . 7
SECTION 1.7. Material Adverse Effect . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE II
CONVEYANCE OF THE RECEIVABLES
AND THE OTHER CONVEYED PROPERTY
SECTION 2.1. Purchase Price. . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 2.2. Conveyance of Receivables . . . . . . . . . . . . . . . . . . . . . 8
SECTION 2.3. Delivery of Receivable Files. . . . . . . . . . . . . . . . . . . . 9
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. Representations and Warranties of OFL . . . . . . . . . . . . . . . 10
SECTION 3.2. Representations and Warranties of ORFC. . . . . . . . . . . . . . . 12
ARTICLE IV
COVENANTS OF OFL
SECTION 4.1. Protection of Title of ORFC.. . . . . . . . . . . . . . . . . . . . 14
SECTION 4.2. Other Liens or Interests. . . . . . . . . . . . . . . . . . . . . . 16
SECTION 4.3. Costs and Expenses. . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 4.4. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE V
REPURCHASES
SECTION 5.1. Repurchase of Receivables Upon Breach of
Warranty. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 5.2. Reassignment of Purchased Receivables . . . . . . . . . . . . . . . 19
SECTION 5.3. Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
<PAGE>
Page
----
<S> <C> <C>
ARTICLE VI
MISCELLANEOUS
SECTION 6.1. Liability of OFL. . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 6.2. Merger or Consolidation of OFL or ORFC. . . . . . . . . . . . . . . 20
SECTION 6.3. Limitation on Liability of OFL and Others . . . . . . . . . . . . . 21
SECTION 6.4. Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 6.5. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 6.6. Merger and Integration. . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 6.7. Severability of Provisions. . . . . . . . . . . . . . . . . . . . . 22
SECTION 6.8. Intention of the Parties. . . . . . . . . . . . . . . . . . . . . . 22
SECTION 6.9. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 6.10. Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 6.11. Conveyance of the Receivables and the Other Conveyed Property to
an Assignee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 6.12. Nonpetition Covenant. . . . . . . . . . . . . . . . . . . . . . . . 23
SCHEDULE
- ---------
SCHEDULE A SCHEDULE OF RECEIVABLES
SCHEDULE B REPRESENTATIONS AND WARRANTIES OF SELLER
EXHIBIT
- -------
EXHIBIT A FORM OF ASSIGNMENT AGREEMENT
</TABLE>
<PAGE>
RECEIVABLES PURCHASE AGREEMENT AND ASSIGNMENT
THIS RECEIVABLES PURCHASE AGREEMENT AND ASSIGNMENT, dated as of
December 3, 1996, executed between Olympic Receivables Finance Corp., a Delaware
corporation, as purchaser ("ORFC"), and Olympic Financial Ltd., a Minnesota
corporation, as seller ("OFL").
W I T N E S S E T H :
WHEREAS, ORFC has agreed from time to time to purchase from OFL and
OFL, pursuant to this Agreement, has agreed from time to time to sell and assign
to ORFC the Receivables and Other Conveyed Property.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements hereinafter contained, and for other good and valuable consideration,
the receipt of which is hereby acknowledged, ORFC and OFL, intending to be
legally bound, hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. GENERAL. The specific terms defined in this Article
include the plural as well as the singular. The words, "herein," "hereof" and
"hereunder" and other words of similar import refer to this Agreement as a whole
and not to any particular Article, Section or other subdivision, and Article,
Section, Schedule and Exhibit references, unless otherwise specified, refer to
Articles and Sections of and Schedules and Exhibits to this Agreement.
SECTION 1.2. SPECIFIC TERMS. Whenever used in this Agreement, the
following words and phrases, unless the context otherwise requires, shall have
the following meanings:
"ACCOUNTING DATE" means with respect to any Receivables the date
specified, if applicable, in the related Servicing Agreement.
z
"AFFILIATE" means, with respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under direct or indirect
common control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person, means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
<PAGE>
"AGREEMENT" shall mean this Receivables Purchase Agreement and
Assignment and all amendments hereof and supplements hereto.
"AMOUNT FINANCED" has the meaning specified, with respect to any
Receivable, in the related Servicing Agreement.
"ASSIGNEE" means, collectively, each Person specified in the relevant
Securitization Document or Warehousing Document to whom ORFC assigns or
otherwise transfers specified Receivables and the related Other Conveyed
Property.
"ASSIGNMENT AGREEMENT" means, with respect to any Receivables, the
assignment agreement between OFL and ORFC pursuant to which OFL sells and
assigns Receivables to ORFC, the form of which is attached hereto as Exhibit A.
"ASSIGNMENT DATE" means any date on which Receivables are sold and
assigned to ORFC pursuant to Section 2.2.
"BACKUP SERVICER" means, if applicable, any backup servicer or its
successor in interest, or such Person as shall have been appointed as Backup
Servicer or successor Servicer pursuant to any Servicing Agreement.
"BUSINESS DAY" means any day other than a Saturday, Sunday, legal
holiday or other day on which commercial banking institutions in Minneapolis,
Minnesota, New York, New York or any other location of any successor Servicer,
any Trustee or Collateral Agent are obligated by law, executive order or
governmental decree to be closed.
"CLOSING DATE" means December 3, 1996.
"COLLECTION ACCOUNT" has the meaning specified, with respect to any
Receivable, in the related Servicing Agreement.
"COLLATERAL AGENT" has the meaning specified, if applicable, in any
Servicing Agreement.
"COMPUTER TAPE" means the computer tape generated on behalf of ORFC
that provides information relating to Receivables and that was used by OFL
and ORFC in selecting the Receivables conveyed hereunder and under any
Related Document.
"CRAM DOWN LOSS" means, with respect to a Receivable, if a court of
appropriate jurisdiction in an insolvency proceeding shall have issued an
order reducing the Principal Balance of such Receivable, the amount of such
reduction. A "Cram Down Loss" shall be deemed to have occurred on the date of
issuance of such order.
"CUSTODIAN" means, collectively, each Custodian specified in a
Servicing Agreement or other Related Document.
2
<PAGE>
"CUT-OFF DATE" means, with respect to any Receivables, the date
specified in the related Warehousing Documents or Securitization Documents.
"DEALER" means a seller of new or used automobiles or light trucks
that originated one or more of the Receivables and sold the respective
Receivable, directly or indirectly, to OFL under an existing agreement between
such seller and OFL.
"DEALER AGREEMENT" means an agreement between OFL and a Dealer
relating to the sale of retail installment sales contracts and installment notes
to OFL and all documents and instruments relating thereto.
"DEALER ASSIGNMENT" means, with respect to a Receivable, the executed
assignment executed by a Dealer conveying such Receivable to OFL.
"DEPOSIT DATE" means that date specified, with respect to a
Receivable, in the related Servicing Agreement.
"FINANCED VEHICLE" means a new or used automobile or light truck,
together with all accessories thereto, securing or purporting to secure an
Obligor's indebtedness under a Receivable.
"FORCE-PLACED INSURANCE" means insurance that the Servicer may, if an
Obligor fails to obtain or maintain a comprehensive and collision insurance
policy, obtain with respect to the related Financed Vehicle.
"HOLDERS" means any "Holder" of a Security as defined in any
applicable Related Document.
"INSURANCE AGREEMENT" means collectively, each insurance agreement
dated as of a date on or after the date hereof, executed and delivered by among
others, a Security Insurer, an Assignee, ORFC and OFL.
"INSURANCE POLICY" means, with respect to a Receivable, any insurance
policy benefiting the holder of the Receivable providing loss or physical
damage, credit life, credit disability, theft, mechanical breakdown or similar
coverage with respect to the Financed Vehicle or the Obligor.
"INSURER DEFAULT" with respect to any Security Insurer has the meaning
specified in any Servicing Agreement(s) covering Receivables backing a Security
insured by such Security Insurer.
"LIEN" means any security interest, lien, charge, pledge, preference,
equity or encumbrance of any kind, including tax liens, mechanics' liens and any
liens that attach by operation of law.
3
<PAGE>
"LIEN CERTIFICATE" means, with respect to a Financed Vehicle, an
original certificate of title, certificate of lien or other notification issued
by the Registrar of Titles of the applicable state to a secured party which
indicates that the lien of the secured party on the Financed Vehicle is recorded
on the original certificate of title. In any jurisdiction in which the original
certificate of title is required to be given to the Obligor, the term "Lien
Certificate" shall mean only a certificate or notification issued to a secured
party.
"LIQUIDATED RECEIVABLE" has the meaning specified, with respect to a
Receivable, in the related Servicing Agreement.
"LIQUIDATION PROCEEDS" means, with respect to a Liquidated Receivable,
all amounts realized with respect to such Receivable (other than amounts
withdrawn from a spread account or other like account and drawings under a
Security Policy) net of (i) reasonable expenses incurred by the Servicer in
connection with the collection of such Receivable and the repossession and
disposition of the Financed Vehicle and (ii) amounts that are required to be
refunded to the Obligor on such Receivable; PROVIDED, HOWEVER, that the
Liquidation Proceeds with respect to any Receivable shall in no event be less
than zero.
"OBLIGOR" means 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.
"OTHER CONVEYED PROPERTY" means all monies at any time paid or payable
on the Receivables or in respect thereof after the applicable Cut-Off Date
(including amounts due on or before the applicable Cut-Off Date but received by
OFL after such Cut-Off Date), the security interests of OFL in the Financed
Vehicles, the Insurance Policies and any proceeds from any Insurance Policies
relating to the Receivables, the Obligors or the Financed Vehicles, including
rebates of premiums, and any Force-Placed Insurance relating to the Receivables,
rights of OFL against Dealers with respect to the Receivables under the Dealer
Agreements and the Dealer Assignments, all items contained in the Receivable
Files, any and all other documents or electronic records that OFL keeps on file
in accordance with its customary procedures relating to the Receivables, the
Obligors or the Financed Vehicles, property (including the right to receive
future Liquidation Proceeds) that secures a Receivable and that has been
acquired by or on behalf of OFL pursuant to liquidation of such Receivable, all
present and future claims, demands, causes and choses in action in respect of
the Receivables and any or all of the foregoing and all payments on or under and
all proceeds of every kind and nature whatsoever in respect of the Receivables
and any and all of the foregoing, including all proceeds of the conversion,
voluntary or involuntary, into cash or other liquid property, all cash proceeds,
accounts, accounts receivables, notes, drafts, acceptances, chattel paper,
checks, deposit accounts, insurance proceeds, condemnation awards, rights
4
<PAGE>
to payment of any and every kind and other forms of obligations and
receivables, instruments and other property which at any time constitute all
or part of or are included in the proceeds of the Receivables and any of the
foregoing.
"PERSON" means any legal person, including any individual,
corporation, partnership, joint venture, estate, association, joint stock
company, trust, unincorporated organization or government or any agency or
political subdivision thereof, or any other entity.
"PRINCIPAL BALANCE" means, with respect to any Receivable, as of any
date, the Amount Financed minus (i) that portion of all amounts received on or
prior to such date and allocable to principal in accordance with the terms of
the Receivable, and (ii) any Cram Down Loss in respect of such Receivable.
"PURCHASE AMOUNT" with respect to a Receivable has the meaning
specified, if applicable, in the Servicing Agreement related to such Receivable.
"PURCHASED RECEIVABLE" has the meaning specified, if applicable, in
the related Servicing Agreement.
"RATING AGENCY" means any nationally recognized statistical rating
organization selected by OFL or ORFC to rate any of the Securities or that
determines a capital charge with respect to the issuance of a Security Policy by
a Security Insurer or any other party specified as such in the Servicing
Agreement or other Related Document.
"RECEIVABLE" means a retail installment sales contract or promissory
note (and related security agreement) for a new or used automobile or light
truck (and all accessories thereto) that is included in the Schedule of
Receivables, and all rights and obligations under such a contract.
"RECEIVABLE FILES" means the documents, electronic entries,
instruments and writings with respect to a Receivable required to be transferred
to, and held by, the Custodian pursuant to a Warehousing Document or
Securitization Document relating to such Receivable.
"REGISTRAR OF TITLES" means, with respect to any state, the
governmental agency or body responsible for the registration of, and the
issuance of certificates of title relating to, motor vehicles and liens thereon.
"RELATED DOCUMENTS" has the meaning specified in each Servicing
Agreement. The Related Documents to be executed by any party are referred to
herein as "such party's Related Documents," "its Related Documents" or by a
similar expression.
5
<PAGE>
"REPURCHASE DATE" means the date specified, if applicable, in the
relevant Warehousing Document.
"REPURCHASE EVENT" means the occurrence of a breach of any of OFL's
representations and warranties contained in Section 3.1(a) hereof that
materially and adversely affects the interests of ORFC or any assignee in the
related Receivables or any other event which requires the repurchase of a
Receivable by OFL under a Servicing Agreement or this Agreement.
"REPURCHASED RECEIVABLES" has the meaning specified, if applicable, in
the relevant Warehousing Document.
"SCHEDULE OF RECEIVABLES" means the schedule of all automobile retail
installment loan contracts and promissory notes sold and transferred pursuant to
this Agreement which is attached hereto as Schedule A, as such Schedule shall be
supplemented from time to time (a) by each Schedule of Receivables with respect
to each Assignment Agreement, which Schedules of Receivables shall be deemed
incorporated and made a part of Schedule A hereto and (b) to reflect the
repurchase from ORFC of Receivables repurchased by OFL hereunder or purchased by
a Servicer under any Servicing Agreement. OFL shall maintain a Master Schedule
A reflecting all such sales, transfers , repurchases and purchases. With
respect to an Assignment Agreement, "Schedule of Receivables" shall mean the
Schedule attached to such Assignment Agreement as Exhibit A thereto.
"SCHEDULE OF REPRESENTATIONS" means the Schedule of Representations
and Warranties attached hereto as Schedule B.
"SECURITIZATION DOCUMENT" means each Servicing Agreement and Related
Document related to a transfer of Receivables in connection with the public sale
or private placement of term securities backed by such Receivables.
"SECURITY" means any note, certificate or other security backed by
Receivables that is issued pursuant to a Warehousing Document or a
Securitization Document.
"SECURITY INSURER" means each financial guaranty insurance company
issuing a Security Policy, as specified in any Servicing Agreement.
"SECURITY POLICY" means any "Note Policy," "Certificate Policy" or
other policy of financial guaranty insurance with respect to a Security defined
as such in the relevant Servicing Agreement.
"SERVICER" means OFL and any successor in interest, as applicable,
pursuant to the related Servicing Agreement.
"SERVICING AGREEMENT" means, collectively, each servicing agreement or
sale and servicing agreement dated as of a
6
<PAGE>
date on or after the date hereof relating to the Receivables assigned
hereunder.
"TRUSTEE" means any indenture trustee, owner trustee or other trustee
specified as such in a Securitization Document or Warehousing Document.
"UCC" means The Uniform Commercial Code as in effect in the relevant
jurisdiction.
"WAREHOUSING DOCUMENT" means each Servicing Agreement and Related
Document related to a transfer of Receivables in connection with a warehousing
facility for the financing of such Receivables in anticipation of the later
repurchase, sale or term resecuritization of such Receivables.
SECTION 1.3. USAGE OF TERMS. With respect to all terms used in this
Agreement, the singular includes the plural and the plural the singular; words
importing any gender include the other gender; references to "writing" include
printing, typing, lithography, and other means of reproducing words in a visible
form; references to agreements and other contractual instruments include all
subsequent amendments thereto or changes therein entered into in accordance with
their respective terms and not prohibited by this Agreement, a Warehousing
Document or a Securitization Document or a Servicing Agreement; references to
Persons include their permitted successors and assigns; and the terms "include"
or "including" mean "include without limitation" or "including without
limitation."
SECTION 1.4. CERTAIN REFERENCES. All references to the Principal
Balance of a Receivable as of an Accounting Date shall refer to the close of
business on such day, or as of the first day of a calendar month shall refer to
the opening of business on such day. All references to the last day of a
calendar month shall refer to the close of business on such day.
SECTION 1.5. NO RECOURSE. Without limiting the obligations of OFL
hereunder, no recourse may be taken, directly or indirectly, under this
Agreement or any certificate or other writing delivered in connection herewith
or therewith, against any stockholder, officer or director, as such, of OFL, or
any stockholder, officer or director, as such, of any predecessor or successor
of OFL.
SECTION 1.6. ACTION BY OR CONSENT OF HOLDERS. Whenever any provision
of this Agreement refers to action to be taken, or consented to, by Holders,
such provision shall be deemed to refer to Holders of record as of the
applicable record date immediately preceding the date on which such action is to
be taken, or consent given, by Holders. Solely for the purposes of any action
to be taken, or consented to, by Holders, any Security registered in the name of
ORFC, OFL or any Affiliate thereof shall be deemed not to be outstanding and the
principal amount evidenced thereby shall not be taken into account in
determining
7
<PAGE>
whether the requisite principal amount necessary to effect any such action or
consent has been obtained; PROVIDED, HOWEVER, that solely for the purpose of
determining whether a Trustee is entitled to rely upon any such action or
consent, only Securities which the related Trustee knows to be so owned shall
be so disregarded.
SECTION 1.7. MATERIAL ADVERSE EFFECT. Whenever a determination is to
be made under this Agreement as to whether a given event, action, course of
conduct or set of facts or circumstances could or would have a material adverse
effect on any Securities and the interests of the Holders therein (or any
similar or analogous determination), such determination shall be made without
taking into account the funds available from claims under any Security Policy or
withdrawals from any reserve accounts.
ARTICLE II
CONVEYANCE OF THE RECEIVABLES
AND THE OTHER CONVEYED PROPERTY
SECTION 2.1. PURCHASE PRICE. In consideration of the conveyance
of the Receivables and the related Other Conveyed Property to ORFC on each
Assignment Date, ORFC shall pay or cause to be paid to OFL an amount equal to
the product of (x) the outstanding Principal Balance of each Receivable and
(y) 100%. Such amount shall be paid to OFL, by wire transfer of immediately
available funds on the date of such conveyance, to the extent of the net
proceeds received by ORFC upon its contemporaneous conveyance of such
Receivables to an Assignee pursuant to a Warehousing Document or
Securitization Document. The balance shall be payable (a) with respect to
any Receivable transferred pursuant to a Warehousing Document, upon the
subsequent transfer of such Receivable pursuant to a Securitization Document,
to the extent the net proceeds received by ORFC upon such subsequent transfer
exceeds the amount paid by ORFC to effect the retransfer of such Receivable
to ORFC pursuant to such Warehousing Document, and (b) with respect to any
Receivable transferred pursuant to a Securitization Document, within ninety
days after such transfer.
SECTION 2.2. CONVEYANCE OF RECEIVABLES.
(a) Subject to the conditions set forth in paragraph (b) below,
OFL, pursuant to the mutually agreed upon terms contained herein and pursuant
to one or more Assignment Agreements, shall sell, transfer, assign and
otherwise convey to ORFC without recourse (but without limitation of its
obligations in this Agreement or its obligations as Servicer under any
Servicing Agreement, all of the right, title and interest of OFL, whether
then existing or thereafter acquired, in and to all accounts, contract
rights, general intangibles, chattel paper, instruments, documents, money,
deposit accounts, certificates of deposit, goods, letters of credit, advices
of credit and
8
<PAGE>
uncertificated securities consisting of, arising from or relating to the
Receivables listed on the Schedule of Receivables and the related Other
Conveyed Property. It is the intention of ORFC and OFL that the transfers
and assignments contemplated by this Agreement and each Assignment Agreement
shall constitute a sale of the Receivables and the Other Conveyed Property
from OFL to ORFC, conveying good title thereto free and clear of any Liens,
and the Receivables and Other Conveyed Property shall not be a part of OFL's
estate in the event of the filing of a bankruptcy petition by or against OFL
under any bankruptcy or similar law.
(b) OFL shall transfer to ORFC the Receivables and the related Other
Conveyed Property as described in paragraph (a) above only upon the satisfaction
of each of the following conditions on or prior to the related Assignment Date:
(i) OFL shall have delivered to ORFC and the related Assignee a duly
executed Assignment Agreement (including an acceptance by ORFC), which
shall include a Schedule of Receivables listing the Receivables being
transferred on such Assignment Date;
(ii) as of such Assignment Date, OFL shall not have been insolvent nor
shall OFL have been rendered insolvent by such sale and assignment nor
shall OFL be aware of any pending insolvency;
(iii) OFL shall have taken any action necessary or, if requested by
any Security Insurer, advisable, to obtain or maintain the first priority
perfected ownership interest of ORFC in the Receivables and Other Conveyed
Property; and
(iv) no selection procedures believed by OFL to be adverse to the
interests of ORFC, any Assignee or any Holders shall have been utilized by
OFL or ORFC in selecting the Receivables.
SECTION 2.3. DELIVERY OF RECEIVABLE FILES. OFL shall deliver to the
Custodian on each Assignment Date the following documents:
(i) The fully executed original of the Receivable (together with the
original of any agreements modifying the Receivable, including without
limitation any extension agreements);
(ii) A certificate of insurance, application form for insurance signed
by the Obligor or a signed representation letter from the Obligor named in
the Receivable pursuant to which the Obligor has agreed to obtain physical
damage insurance for the related Financed Vehicle, or a documented verbal
confirmation by the insurance agent for the Obligor of a policy number for
an insurance policy for the Financed Vehicle;
9
<PAGE>
(iii) The original credit application, or a copy thereof, of each
Obligor, on OFL's customary form, or on a form approved by OFL, for such
application; and
(iv) The original certificate of title (when received) and otherwise
such documents, if any, that OFL keeps on file in accordance with its
customary procedures indicating that the Financed Vehicle is owned by the
Obligor and subject to the interest of OFL as first lienholder or secured
party (including any Lien Certificate received by OFL), or if such original
certificate of title has not yet been received, a copy of the application
therefor, showing OFL as secured party, or a letter from the applicable
Dealer agreeing unconditionally to repurchase the related Receivable if the
certificate of title is not received by OFL within 180 days.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. REPRESENTATIONS AND WARRANTIES OF OFL. OFL makes the
following representations and warranties, on which ORFC relies in purchasing the
Receivables and the Other Conveyed Property. Such representations are made as
of the execution and delivery of this Agreement and on each Assignment Date, and
shall survive the sale, transfer and assignment of the Receivables and the Other
Conveyed Property under such Assignment Agreements, and the sale, transfer and
assignment thereof by ORFC under any Securitization Document or Warehousing
Document. OFL and ORFC agree that pursuant to the relevant Securitization
Document or Warehousing Document ORFC will assign to the relevant Assignee all
of ORFC's rights under this Agreement with respect to Receivables sold,
transferred or assigned pursuant to any Securitization Document or Warehousing
Document and not repurchased by ORFC, and the related Other Conveyed Party, and
that such Assignee will thereafter be entitled to enforce this Agreement against
OFL in such Assignee's own name.
(a) SCHEDULE OF REPRESENTATIONS. The representations and warranties
set forth on the Schedule of Representations are true and correct with
respect to each Receivable on the date it is sold by OFL to ORFC hereunder.
(b) ORGANIZATION AND GOOD STANDING. OFL has been duly organized and
is validly existing as a corporation in good standing under the laws of the
State of Minnesota, with power and authority to own its properties and to
conduct its business as such properties are currently owned and such
business is currently conducted, and had at all relevant times, and now
has, power, authority and legal right to acquire, own and sell the
Receivables and the Other Conveyed Property transferred to ORFC.
10
<PAGE>
(c) DUE QUALIFICATION. OFL is duly qualified to do business as a
foreign corporation in good standing, and has obtained all necessary
licenses and approvals, in all jurisdictions in which the ownership or
lease of its property or the conduct of its business requires such
qualification.
(d) POWER AND AUTHORITY. OFL has the power and authority to execute
and deliver this Agreement, each Assignment Agreement and its Related
Documents and to carry out its terms and their terms, respectively; OFL has
full power and authority to sell and assign the Receivables and the Other
Conveyed Property to be sold and assigned to and deposited with ORFC under
each Assignment Agreement and has duly authorized such sale and assignment
to ORFC by all necessary corporate action; and the execution, delivery and
performance of this Agreement, each Assignment Agreement and OFL's Related
Documents have been duly authorized by OFL by all necessary corporate
action.
(e) VALID SALE; BINDING OBLIGATIONS. This Agreement and each
Assignment Agreement have been duly executed and delivered and shall effect
a valid sale, transfer and assignment of the Receivables and the Other
Conveyed Property, enforceable against OFL and creditors of and purchasers
from OFL; and this Agreement, each Assignment Agreement and OFL's Related
Documents constitute legal, valid and binding obligations of OFL
enforceable in accordance with their respective terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization or
other similar laws affecting the enforcement of creditors' rights generally
and by general principles of equity, regardless of whether such
enforceability is considered in a proceeding in equity or at law.
(f) NO VIOLATION. The consummation of the transactions contemplated
by this Agreement, each Assignment Agreement and the Related Documents and
the fulfillment of the terms of this Agreement, each Assignment Agreement
and the Related Documents do not and shall not conflict with, result in any
breach of any of the terms and provisions of or constitute (with or without
notice, lapse of time or both) a default under, the articles of
incorporation or bylaws of OFL, or any indenture, agreement, mortgage, deed
of trust or other instrument to which OFL is a party or by which it or any
of its property is bound, or result in the creation or imposition of any
Lien upon any of OFL's properties pursuant to the terms of any such
indenture, agreement, mortgage, deed of trust or other instrument, other
than this Agreement and each Assignment Agreement, or violate any law,
order, rule or regulation applicable to OFL of any court or of any federal
or state regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over OFL or any of its properties.
11
<PAGE>
(g) NO PROCEEDINGS. There are no proceedings or investigations
pending or, to OFL's knowledge, threatened against OFL, before any court,
regulatory body, administrative agency or other tribunal or governmental
instrumentality having jurisdiction over OFL or its properties (i)
asserting the invalidity of this Agreement, any Assignment Agreement or any
of the Related Documents, (ii) seeking to prevent the issuance of any
Securities or the consummation of any of the transactions contemplated by
this Agreement, any Assignment Agreement or any of the Related Documents,
(iii) seeking any determination or ruling that might materially and
adversely affect the performance by OFL of its obligations under, or the
validity or enforceability of, this Agreement, any Assignment Agreement or
any of the Related Documents or (iv) seeking to affect adversely the
federal income tax or other federal, state or local tax attributes of, or
seeking to impose any excise, franchise, transfer or similar tax upon, the
transfer and acquisition of the Receivables and the Other Conveyed Property
hereunder, under any Assignment Agreement or under any of the Related
Documents.
(h) CHIEF EXECUTIVE OFFICE. The chief executive office of OFL is
located at 7825 Washington Avenue South, Suite 400, Minneapolis, MN
55439-2435.
SECTION 3.2. REPRESENTATIONS AND WARRANTIES OF ORFC. ORFC makes the
following representations and warranties, on which OFL relies in selling,
assigning, transferring and conveying the Receivables and the Other Conveyed
Property to ORFC hereunder and under each Assignment Agreement. Such
representations are made as of the execution and delivery of this Agreement and
each Assignment Agreement, but shall survive the sale, transfer and assignment
of the Receivables and the Other Conveyed Property hereunder and under each
Assignment Agreement and the sale, transfer and assignment thereof by ORFC to an
Assignee pursuant to any Related Document.
(a) ORGANIZATION AND GOOD STANDING. ORFC has been duly organized
and is validly existing and in good standing as a corporation under the
laws of the State of Delaware, with the power and authority to own its
properties and to conduct its business as such properties are currently
owned and such business is currently conducted, and had at all relevant
times, and has, full power, authority and legal right to acquire and
own the Receivables and the Other Conveyed Property, and to transfer
the Receivables and the Other Conveyed Property to an Assignee pursuant
to any Related Document.
(b) DUE QUALIFICATION. ORFC is duly qualified to do business as a
foreign corporation in good standing, and has obtained all necessary
licenses and approvals in all jurisdictions where the failure to do so
would materially and adversely affect ORFC's ability to acquire the
12
<PAGE>
Receivables or the Other Conveyed Property or the validity or
enforceability of the Receivables and the Other Conveyed Property or to
perform ORFC's obligations hereunder, under any Assignment Agreement and
under the Related Documents.
(c) POWER AND AUTHORITY. ORFC has the power, authority and legal
right to execute and deliver this Agreement and each Assignment Agreement
and to carry out the terms hereof and thereof and to acquire the
Receivables and the Other Conveyed Property hereunder; and the execution,
delivery and performance of this Agreement and each Assignment Agreement
and all of the documents required pursuant hereto and thereto have been
duly authorized by ORFC by all necessary action.
(d) NO CONSENT REQUIRED. ORFC is not required to obtain the consent
of any other Person, or any consent, license, approval or authorization or
registration or declaration with, any governmental authority, bureau or
agency in connection with the execution, delivery or performance of this
Agreement, each Assignment Agreement and the Related Documents, except for
such as have been obtained, effected or made.
(e) BINDING OBLIGATION. This Agreement and each Assignment Agreement
constitute legal, valid and binding obligations of ORFC, enforceable
against ORFC in accordance with their terms, subject, as to enforceability,
to applicable bankruptcy, insolvency, reorganization, conservatorship,
receivership, liquidation and other similar laws and to general equitable
principles.
(f) NO VIOLATION. The execution, delivery and performance by ORFC of
this Agreement and each Assignment Agreement, the consummation of the
transactions contemplated by this Agreement, each Assignment Agreement and
the Related Documents and the fulfillment of the terms of this Agreement,
each Assignment Agreement and the Related Documents do not and will not
conflict with, result in any breach of any of the terms and provisions of,
or constitute (with or without notice or lapse of time) a default under,
the certificate of incorporation or bylaws of ORFC, or conflict with or
breach any of the terms or provisions of, or constitute (with or without
notice or lapse of time) a default under, any indenture, agreement,
mortgage, deed of trust or other instrument to which ORFC is a party or by
which ORFC is bound or to which any of its properties are subject, or
result in the creation or imposition of any Lien upon any of its properties
pursuant to the terms of any such indenture, agreement, mortgage, deed of
trust or other instrument (other than with respect to Receivables and the
related Other Conveyed Property being transferred under a Related Document,
under such Related Document), or violate any law, order, rule or
regulation, applicable to ORFC or its properties, of any federal or state
regulatory body, any
13
<PAGE>
court, administrative agency, or other governmental instrumentality
having jurisdiction over ORFC or any of its properties.
(g) NO PROCEEDINGS. There are no proceedings or investigations
pending, or, to the knowledge of ORFC, threatened against ORFC, before any
court, regulatory body, administrative agency, or other tribunal or
governmental instrumentality having jurisdiction over ORFC or its
properties: (i) asserting the invalidity of this Agreement, any Assignment
Agreement or any of the Related Documents, (ii) seeking to prevent the
consummation of any of the transactions contemplated by this Agreement, any
Assignment Agreement or any of the Related Documents, (iii) seeking any
determination or ruling that might materially and adversely affect the
performance by ORFC of its obligations under, or the validity or
enforceability of, this Agreement, any Assignment Agreement or any of the
Related Documents or (iv) that may adversely affect the federal or state
income tax attributes of, or seek to impose any excise, franchise, transfer
or similar tax upon, the transfer and acquisition of the Receivables and
the Other Conveyed Property hereunder or under any Assignment Agreement or
the transfer of the Receivables and the Other Conveyed Property to an
Assignee pursuant to any Related Document.
In the event of any breach of a representation and warranty made by ORFC
hereunder, OFL covenants and agrees that it will not take any action to pursue
any remedy that it may have hereunder, in law, in equity or otherwise, until a
year and a day have passed since the date on which all the Securities have been
paid in full. OFL and ORFC agree that damages will not be an adequate remedy
for such breach and that this covenant may be specifically enforced by ORFC or
by an Assignee under any Related Document.
ARTICLE IV
COVENANTS OF OFL
SECTION 4.1. PROTECTION OF TITLE OF ORFC.
(a) At or prior to the Closing Date, OFL shall have filed or caused
to be filed a UCC-1 financing statement, executed by OFL as seller or debtor,
naming ORFC as purchaser or secured party and describing the Receivables and
the Other Conveyed Property to be sold by OFL to ORFC as collateral, with the
office of the Secretary of State of the State of Minnesota and in such other
locations as ORFC shall have required. From time to time thereafter OFL
shall execute and file such financing statements and cause to be executed and
filed such continuation statements, all in such manner and in such places as
may be required by law fully to preserve, maintain and protect the interest
of ORFC under this Agreement and of each Assignee under any Securitization
14
<PAGE>
Document or Warehousing Document in the Receivables and the Other Conveyed
Property and in the proceeds thereof. OFL shall deliver (or cause to be
delivered) to ORFC and any party entitled thereto under any Securitization
Document or Warehousing Document file-stamped copies of, or filing receipts
for, any document filed as provided above, as soon as available following
such filing. In the event that OFL fails to perform its obligations under
this subsection, ORFC and any party entitled thereto under any Securitization
Document or Warehousing Document may do so, at the expense of OFL.
(b) Except for changing its name to Arcadia Financial Ltd., OFL
shall not change its name, identity, or corporate structure in any manner
that would, could or might make any financing statement or continuation
statement filed by OFL (or by ORFC or any party entitled to file a financing
statement under any Securitization Document or Warehousing Document on behalf
of OFL) in accordance with paragraph (a) above seriously misleading within
the meaning of Section 9-402(7) of the UCC, unless it shall have given ORFC
and any party entitled thereto under any Securitization Document or
Warehousing Document and each Security Insurer at least 60 days' prior
written notice thereof, and (including in connection with changing its name
to Arcadia Financial Ltd.) shall promptly file appropriate amendments to all
previously filed financing statements and continuation statements.
(c) OFL shall give ORFC, each Security Insurer (so long as an
Insurer Default with respect to such Security Insurer shall not have occurred
and be continuing) and any party entitled thereto under any Securitization
Document or Warehousing Document at least 60 days' prior written notice of
any relocation of its principal executive office if, as a result of such
relocation, the applicable provisions of the UCC would require the filing of
any amendment of any previously filed financing or continuation statement or
of any new financing statement. OFL shall at all times maintain each office
from which it services the Receivables and its principal executive office
within the United States of America.
(d) OFL shall maintain its computer systems so that, from and after
the time of any sale hereunder and under any Assignment Agreement of the
Receivables to ORFC and the conveyance under any Securitization Document or
Warehousing Document of the related Receivables by ORFC to an Assignee, OFL's
master computer records (including archives) that refer to any such
Receivable indicate clearly that such Receivable has been sold to ORFC and
has been conveyed by ORFC to such Assignee. Indication of such Assignee's
ownership of a Receivable shall be deleted from or modified on OFL's computer
systems when, and only when the Receivable shall have been paid in full or
shall have been repurchased by ORFC or OFL.
15
<PAGE>
(e) If at any time OFL shall propose to sell, grant a security
interest in, or otherwise transfer any interest in motor vehicle receivables
to any prospective purchaser, lender or other transferee, OFL shall give to
such prospective purchaser, lender, or other transferee computer tapes,
records, or print-outs (including any restored from archives) that, if they
shall refer in any manner whatsoever to any Receivable, shall indicate
clearly that such Receivable has been sold to ORFC and is owned by the
relevant Assignee pursuant to the applicable Securitization Document or
Warehousing Document.
SECTION 4.2. OTHER LIENS OR INTERESTS. Except for the conveyances
under any Assignment Agreement, OFL will not sell, pledge, assign or transfer to
any other Person, or grant, create, incur, assume or suffer to exist any Lien on
the Receivables or the Other Conveyed Property or any interest therein, and OFL
shall defend the right, title, and interest of ORFC and each Assignee under any
Securitization Document or Warehousing Document in and to the Receivables and
the Other Conveyed Property against all claims of third parties claiming through
or under OFL.
SECTION 4.3. COSTS AND EXPENSES. OFL shall pay all reasonable costs
and disbursements in connection with the performance of its obligations
hereunder, under any Assignment Agreement and under its Related Documents.
SECTION 4.4. INDEMNIFICATION.
(a) OFL shall defend, indemnify and hold harmless ORFC, each
Assignee, each Backup Servicer, each Collateral Agent, each Trustee, each
Security Insurer and the Holders from and against any and all costs,
expenses, losses, damages, claims, and liabilities arising out of or
resulting from any breach of any of OFL's representations and warranties
contained herein.
(b) OFL shall defend, indemnify and hold harmless ORFC, each
Assignee, each Backup Servicer, each Collateral Agent, each Trustee, each
Security Insurer and the Holders from and against any and all costs,
expenses, losses, damages, claims, and liabilities, arising out of or
resulting from the use, ownership or operation by OFL or any Affiliate
thereof, other than ORFC and the Issuer, of a Financed Vehicle.
(c) OFL will defend and indemnify ORFC, each Assignee, each Backup
Servicer, each Collateral Agent, each Trustee, each Security Insurer and the
Holders against any and all costs, expenses, losses, damages, claims and
liabilities arising out of or resulting from any action taken, or failed to
be taken, by OFL in respect of any of the Receivables other than in
accordance with this Agreement or any Warehousing Document or Securitization
Document.
16
<PAGE>
(d) OFL agrees to pay, and shall defend, indemnify and hold harmless
ORFC, each Assignee, each Backup Servicer, each Collateral Agent, each
Trustee, each Security Insurer and the Holders from and against any taxes
that may at any time be asserted against ORFC, any Assignee, any Backup
Servicer or any Holders with respect to the transactions contemplated in this
Agreement, including, without limitation, any sales, gross receipts, general
corporation, tangible or intangible personal property, privilege, or license
taxes (but not including any taxes asserted with respect to, and as of any
date of, the sale, transfer and assignment of any Receivables and Other
Conveyed Property to ORFC and of the sale, transfer and assignment of such
Receivables and Other Conveyed Property to an Assignee or the issuance and
sale of any Securities, or asserted with respect to ownership of the
Receivables and Other Conveyed Property which shall be indemnified by OFL
pursuant to clause (e) below, or federal, state or other income taxes,
arising out of distributions on the Securities or transfer taxes arising in
connection with the transfer of Securities) and costs and expenses in
defending against the same, arising by reason of the acts to be performed by
OFL under this Agreement or any Assignment Agreement or imposed against such
Persons.
(e) OFL agrees to pay, and to indemnify, defend and hold harmless
ORFC, each Assignee, each Backup Servicer, each Collateral Agent, each
Trustee, each Security Insurer and the Holders from, any taxes which may at
any time be asserted against such Persons with respect to, and as of the date
of, any conveyance or ownership of the Receivables or Other Conveyed Property
hereunder and under any Assignment Agreement or the issuance and sale of any
Securities, including, without limitation, any sales, gross receipts,
personal property, tangible or intangible personal property, privilege or
license taxes (but not including any federal or other income taxes, including
franchise taxes, arising out of the transactions contemplated hereby or
transfer taxes arising in connection with the transfer of the Securities) and
costs and expenses in defending against the same, arising by reason of the
acts to be performed by OFL under this Agreement or imposed against such
Persons.
(f) OFL shall defend, indemnify, and hold harmless ORFC, each
Assignee, each Backup Servicer, each Collateral Agent, each Trustee, each
Security Insurer and the Holders from and against any and all costs,
expenses, losses, claims, damages, and liabilities to the extent that such
cost, expense, loss, claim, damage, or liability arose out of, or was imposed
upon ORFC, any Assignee, any Backup Servicer and any Holders through the
negligence, willful misfeasance, or bad faith of OFL in the performance of
its duties under this Agreement or by reason of reckless disregard of OFL's
obligations and duties under this Agreement.
17
<PAGE>
(g) OFL shall indemnify, defend and hold harmless ORFC, each
Assignee, each Backup Servicer, each Collateral Agent, each Trustee, each
Security Insurer and the Holders from and against any loss, liability or
expense imposed upon, or incurred by, ORFC, any Assignee, any Backup Servicer
or any Holders as a result of the failure of any Receivable, or the sale of
the related Financed Vehicle, to comply with all requirements of applicable
law.
(h) OFL shall defend, indemnify, and hold harmless ORFC from and
against all costs, expenses, losses, claims, damages, and liabilities arising
out of or incurred in connection with the acceptance or performance of OFL's
duties as Servicer under any Servicing Agreement, except to the extent that
such cost, expense, loss, claim, damage, or liability shall be due to the
willful misfeasance, bad faith, or negligence (except for errors in judgment)
of ORFC.
(i) OFL shall indemnify, defend and hold harmless ORFC, each
Assignee, each Security Insurer, each Backup Servicer and the Holders from
and against any loss, liability or expense imposed upon, or incurred by,
ORFC, any Assignee, any Backup Servicer, any Trustee or any Holders as a
result of OFL's or ORFC's use of the name "Olympic."
Indemnification under this Section 4.4 shall include reasonable
fees and expenses of counsel and expenses of litigation and shall survive
maturity of the related Securities. The indemnity obligations hereunder
shall be in addition to any obligation that OFL may otherwise have.
ARTICLE V
REPURCHASES
SECTION 5.1. REPURCHASE OF RECEIVABLES UPON BREACH OF WARRANTY. Upon
the occurrence of a Repurchase Event with respect to a Receivable, OFL shall,
unless such breach shall have been cured in all material respects, repurchase
such Receivable from ORFC or the applicable Assignee, as applicable, and on or
before the related Deposit Date (with respect to a Purchased Receivable) or the
related Repurchase Date (with respect to Repurchased Receivables), OFL shall
deposit the Purchase Amount into the Collection Account as payment to ORFC or
such Assignee pursuant to the relevant Servicing Agreement or other Related
Document. It is understood and agreed that, except as set forth in Section 6.1,
the obligation of OFL to repurchase any Receivable as to which a breach has
occurred and is continuing shall, if such obligation is fulfilled, constitute
the sole remedy against OFL for such breach available to ORFC, any Security
Insurer, any Collateral Agent, any such Assignee or any Trustee on behalf of its
Holders. The provisions of this Section 5.1 are intended to grant to any such
Assignee a direct right
18
<PAGE>
against OFL to demand performance hereunder, and in connection therewith OFL
waives any requirement of prior demand against ORFC with respect to such
repurchase obligation. Any such purchase shall take place in the manner
specified in the related Servicing Agreement or other Related Document.
Notwithstanding any other provision of this Agreement or any Related Document
to the contrary, the obligation of OFL under this Section shall not terminate
upon a termination of OFL as Servicer under the related Servicing Agreement
and shall be performed in accordance with the terms hereof notwithstanding
the failure of the Servicer or ORFC to perform any of their respective
obligations with respect to such Receivable under such Servicing Agreement.
In addition to the foregoing and whether or not the related Receivable
shall have been purchased by OFL, OFL shall indemnify each such Assignee, each
Backup Servicer, each Collateral Agent, each Security Insurer, each Trustee and
the Holders against all costs, expenses, losses, damages, claims and
liabilities, including reasonable fees and expenses of counsel, which may be
asserted against or incurred by any of them as a result of third party claims
arising out of the events or facts giving rise to such Repurchase Events.
SECTION 5.2. REASSIGNMENT OF PURCHASED RECEIVABLES. Upon deposit in
the Collection Account of the Purchase Amount of any Receivable repurchased by
OFL under Section 5.1, ORFC shall take such steps as may be reasonably requested
by OFL in order to assign to OFL all of ORFC's and the relevant Assignee's
right, title and interest in and to such Receivable and all security and
documents and all Other Conveyed Property conveyed to ORFC and such Assignee
directly relating thereto, without recourse, representation or warranty, except
as to the absence of liens, charges or encumbrances created by or arising as a
result of actions of ORFC or such Assignee. Such assignment shall be a sale and
assignment outright, and not for security. If, following the reassignment of a
Purchased Receivable, in any enforcement suit or legal proceeding, it is held
that OFL may not enforce any such Receivable on the ground that it shall not be
a real party in interest or a holder entitled to enforce the Receivable, ORFC
shall, at the expense of OFL, take such steps as OFL deems reasonably necessary
to enforce the Receivable, including bringing suit in ORFC's or any such
Assignee's name or any Collateral Agent's name or the name of a Trustee on
behalf of its Holders.
SECTION 5.3. WAIVERS. No failure or delay on the part of ORFC, or
any Assignee, in exercising any power, right or remedy under this Agreement
shall operate as a waiver thereof, nor shall any single or partial exercise
of any such power, right or remedy preclude any other or future exercise
thereof or the exercise of any other power, right or remedy.
19
<PAGE>
ARTICLE VI
MISCELLANEOUS
SECTION 6.1. LIABILITY OF OFL. OFL shall be liable in accordance
herewith only to the extent of the obligations in this Agreement specifically
undertaken by OFL and the representations and warranties of OFL.
SECTION 6.2. MERGER OR CONSOLIDATION OF OFL OR ORFC. Any
corporation or other entity (i) into which OFL or ORFC may be merged or
consolidated, (ii) resulting from any merger or consolidation to which OFL or
ORFC is a party or (iii) succeeding to the business of OFL or ORFC, in the
case of ORFC, which corporation has a certificate of incorporation containing
provisions relating to limitations on business and other matters
substantively identical to those contained in ORFC's certificate of
incorporation or otherwise acceptable to the Security Insurers and the Rating
Agencies, provided that in any of the foregoing cases such corporation shall
execute an agreement of assumption to perform every obligation of OFL or
ORFC, as the case may be, under this Agreement and such party's Related
Documents and, whether or not such assumption agreement or agreements are
executed, shall be the successor to OFL or ORFC, as the case may be,
hereunder (without relieving OFL or ORFC of its responsibilities hereunder,
if it survives such merger or consolidation) without the execution or filing
of any document or any further act by any of the parties to this Agreement.
Notwithstanding the foregoing, ORFC shall not merge or consolidate with any
other Person or permit any other Person to become the successor to ORFC's
business without the prior written consent of each Security Insurer (so long
as no Insurer Default shall have occurred and be continuing with respect to
such Security Insurer). OFL or ORFC shall promptly inform the other party,
and, so long as an Insurer Default shall not have occurred and be continuing
with respect to such Security Insurer, each Security Insurer of such merger,
consolidation or purchase and assumption. Notwithstanding the foregoing, as
a condition to the consummation of the transactions referred to in clauses
(i), (ii) and (iii) above, (x) immediately after giving effect to such
transaction, no representation or warranty made pursuant to Sections 3.1 and
3.2 shall have been breached (for purposes hereof, such representations and
warranties shall speak as of the date of the consummation of such
transaction) and no event that, after notice or lapse of time, or both, would
become an event of default under any Insurance Agreement, shall have occurred
and be continuing, (y) OFL or ORFC, as applicable, shall have delivered to
each Trustee an officer's certificate and an opinion of counsel each stating
that such consolidation, merger or succession and such agreement of
assumption comply with this Section 6.2 and that all conditions precedent, if
any, provided for in this Agreement relating to such transaction have been
complied with, and (z) OFL or ORFC, as applicable, shall have delivered to
each Trustee an opinion of counsel, stating, in the opinion of such counsel,
either (A) all financing statements and
20
<PAGE>
continuation statements and amendments thereto have been executed and filed
that are necessary to preserve and protect the interest of each Assignee
under any Related Document in the Receivables and reciting the details of the
filings or (B) no such actions shall be necessary to preserve and protect
such interest.
SECTION 6.3. LIMITATION ON LIABILITY OF OFL AND OTHERS. OFL and
any director, officer, employee or agent may rely in good faith on the advice
of counsel or on any document of any kind prima facie properly executed and
submitted by any Person respecting any matters arising under this Agreement.
OFL shall not be under any obligation to appear in, prosecute or defend any
legal action that is not incidental to its obligations under this Agreement
or its Related Documents and that in its opinion may involve it in any
expense or liability.
SECTION 6.4. AMENDMENT.
(a) This Agreement may be amended by OFL and ORFC, without the consent
of any Assignee or any Holders, (i) to cure any ambiguity or (ii) to correct
any ambiguity with respect to any provision in this Agreement; PROVIDED,
HOWEVER, that such action shall not, as evidenced by an opinion of counsel
delivered to each Trustee and each Rating Agency, adversely affect in any
material respect the interests of any Assignee or any Holder.
(b) This Agreement may also be amended from time to time by OFL and
ORFC, with the prior written consent of each Security Insurer (so long as an
Insurer Default shall not have occurred and be continuing with respect to
such Security Insurer) or, if an Insurer Default shall have occurred and be
continuing, with the consent of each Assignee and each Trustee (or other
representative of the Holders of all securities backed by the affected
Receivables), for the purpose of adding any provisions to or changing in any
manner or eliminating any of the provisions of this Agreement, or of
modifying in any manner the rights of ORFC; PROVIDED, that if such amendment
will have a material adverse effect on any Holders of any Securities, the
consent of the Trustee or other representative for such Holders shall be
required for such amendment; PROVIDED FURTHER, HOWEVER, that no such
amendment shall increase or reduce in any manner the amount of, or accelerate
or delay the timing of, collections of payments on Receivables or
distributions that shall be required to be made on any Security.
(c) Prior to the execution of any amendment or consent referred to in
subsection (b), OFL shall have furnished written notification of the
substance of such amendment or consent to each Rating Agency.
21
<PAGE>
(d) It shall not be necessary for the consent of Holders pursuant to
this Section to approve the particular form of any proposed amendment or
consent, but it shall be sufficient if such consent shall approve the
substance thereof. The manner of obtaining such consents and of evidencing
the authorization of the execution thereof by Holders shall be subject to
such reasonable requirements as the related Trustee may prescribe,
including the establishment of record dates. The consent of any Holder
given pursuant to this Section or pursuant to any other provision of this
Agreement shall be conclusive and binding on such Holder and on all future
Holders of such Security and of any Security issued upon the transfer
thereof or in exchange thereof or in lieu thereof whether or not notation
of such consent is made upon the Security.
SECTION 6.5. NOTICES. All demands, notices and communications to OFL
or ORFC hereunder shall be in writing, personally delivered, or sent by
telecopier (subsequently confirmed in writing), delivered by reputable overnight
courier or mailed by certified mail, return receipt requested, and shall be
deemed to have been given upon receipt (a) in the case of OFL, to Olympic
Financial Ltd., 7825 Washington Avenue South, Minneapolis, Minnesota 55439-2435,
Attention: Treasurer, or such other address as shall be designated by OFL in a
written notice delivered to the other party or to the Issuer, as applicable or
(b) in case of ORFC, to Olympic Receivables Finance Corp., 7825 Washington
Avenue South, Minneapolis, Minnesota 55439-2435, Attention: Treasurer.
SECTION 6.6. MERGER AND INTEGRATION. Except as specifically stated
otherwise herein, this Agreement, each Assignment Agreement and the Related
Documents sets forth the entire understanding of the parties relating to the
subject matter hereof, and all prior understandings, written or oral, are
superseded by this Agreement and the Related Documents. This Agreement may not
be modified, amended, waived or supplemented except as provided herein.
SECTION 6.7. SEVERABILITY OF PROVISIONS. If any one or more of the
covenants, provisions or terms of this Agreement shall be for any reason
whatsoever held invalid, then such covenants, provisions or terms shall be
deemed severable from the remaining covenants, provisions or terms of this
Agreement and shall in no way affect the validity or enforceability of the other
provisions of this Agreement.
SECTION 6.8. INTENTION OF THE PARTIES. The execution and delivery of
this Agreement shall constitute an acknowledgement by OFL and ORFC that they
intend that the assignments and transfers herein contemplated pursuant to each
Assignment Agreement constitute a sale and assignment outright, and not for
security, of the Receivables and the Other Conveyed Property, conveying good
title thereto free and clear of any Liens, from OFL to ORFC, and that the
Receivables and the Other
22
<PAGE>
Conveyed Property shall not be a part of OFL's estate in the event of the
bankruptcy, reorganization, arrangement, insolvency or liquidation
proceeding, or other proceeding under any federal or state bankruptcy or
similar law, or the occurrence of another similar event, of, or with respect
to, OFL. In the event that such conveyance is determined to be made as
security for a loan made by ORFC, any Assignee or any Holders to OFL, the
parties intend that OFL shall have granted to ORFC a security interest in all
of OFL's right, title and interest in and to the Receivables and the Other
Conveyed Property conveyed pursuant to each Assignment Agreement, and that
this Agreement shall constitute a security agreement under applicable law.
SECTION 6.9. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE
PRINCIPLES OF CONFLICTS OF LAWS THEREOF AND THE OBLIGATIONS, RIGHTS AND REMEDIES
OF THE PARTIES UNDER THIS AGREEMENT SHALL BE DETERMINED IN ACCORDANCE WITH SUCH
LAWS.
SECTION 6.10. COUNTERPARTS. For the purpose of facilitating the
execution of this Agreement and for other purposes, this Agreement may be
executed simultaneously in any number of counterparts, each of which
counterparts shall be deemed to be an original, and all of which counterparts
shall constitute but one and the same instrument.
SECTION 6.11. CONVEYANCE OF THE RECEIVABLES AND THE OTHER CONVEYED
PROPERTY TO AN ASSIGNEE. OFL acknowledges that ORFC intends, pursuant to a
Servicing Agreement and other Related Document, to convey the Receivables and
the Other Conveyed Property, together with its rights under this Agreement, to
Assignees under Warehousing Documents and Securitization Documents. OFL
acknowledges and consents to such conveyance and waives any further notice
thereof and covenants and agrees that the representations and warranties of OFL
contained in this Agreement and the rights of ORFC hereunder are intended to
benefit each Security Insurer, each Assignee, each Collateral Agent and each
Trustee on behalf of its Holders. In furtherance of the foregoing, OFL
covenants and agrees to perform its duties and obligations hereunder, in
accordance with the terms hereof for the benefit of each Security Insurer, each
Assignee, each Collateral Agent and each Trustee on behalf of its Holders and
that, notwithstanding anything to the contrary in this Agreement, OFL shall be
directly liable to each such Assignee (notwithstanding any failure by the
Servicer, any Backup Servicer or ORFC to perform its duties and obligations
hereunder or under any Servicing Agreement) and that each such Assignee or the
related Security Insurer may enforce the duties and obligations of OFL under
this Agreement against OFL for the benefit of the related Assignee.
SECTION 6.12. NONPETITION COVENANT. OFL shall not petition or
otherwise invoke the process of any court or government authority for the
purpose of commencing or sustaining a case against ORFC under any federal or
state bankruptcy,
23
<PAGE>
insolvency or similar law or appointing a receiver,
liquidator, assignee, trustee, custodian, sequestrator or other similar official
of ORFC or any substantial part of its property, or ordering the winding up or
liquidation of the affairs of ORFC.
24
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Receivables Purchase
Agreement and Assignment to be duly executed by their respective officers as of
the day and year first above written.
OLYMPIC RECEIVABLES FINANCE CORP.,
as Purchaser
By: /s/ illegible
--------------------------
Name:
Title:
OLYMPIC FINANCIAL LTD.,
as Seller
By: /s/ illegible
--------------------------
Name:
Title:
[Signature Page to Receivables Purchase Agreement]
<PAGE>
SCHEDULE A
SCHEDULE OF RECEIVABLES
[Deemed Incorporated from each Assignment Agreement]
<PAGE>
SCHEDULE B
REPRESENTATIONS AND WARRANTIES OF OFL
1. CHARACTERISTICS OF RECEIVABLES. Each Receivable (A) was
originated by a Dealer for the retail sale of a Financed Vehicle in the
ordinary course of such Dealer's business and such Dealer had all necessary
licenses and permits to originate Receivables in the state where such Dealer
was located, was fully and properly executed by the parties thereto, was
purchased by OFL from such Dealer under an existing Dealer Agreement with OFL
and was validly assigned by such Dealer to OFL, (B) contains customary and
enforceable provisions such as to render the rights and remedies of the
holder thereof adequate for realization against the collateral security, and
(C) is a fully amortizing Receivable which provides for level monthly
payments (provided that the payment in the first calendar month and the final
calendar month of the life of the Receivable may be minimally different from
the level payment) which, if made when due, shall fully amortize the Amount
Financed over the original term.
2. NO FRAUD OR MISREPRESENTATION. Each Receivable was originated
by a Dealer and was sold by the Dealer to OFL without any fraud or
misrepresentation on the part of such Dealer in either case.
3. COMPLIANCE WITH LAW. All requirements of applicable federal,
state and local laws, and regulations thereunder (including, without
limitation, usury laws, the Federal Truth-in-Lending Act, the Equal Credit
Opportunity Act, the Fair Credit Billing Act, the Fair Credit Reporting Act,
the Fair Debt Collection Practices Act, the Federal Trade Commission Act, the
Magnuson-Moss Warranty Act, the Federal Reserve Board's Regulations "B" and
"Z," the Soldiers' and Sailors' Civil Relief Act of 1940, the Minnesota Motor
Vehicle Retail Installment Sales Act, and state adaptations of the National
Consumer Act and of the Uniform Consumer Credit Code and other consumer
credit laws and equal credit opportunity and disclosure laws) in respect of
all of the Receivables and each and every sale of Financed Vehicles, have
been complied with in all material respects, and each Receivable and the sale
of the Financed Vehicle evidenced by each Receivable complied at the time it
was originated or made and now complies in all material respects with all
applicable legal requirements.
4. ORIGINATION. Each Receivable was originated in the United
States.
5. BINDING OBLIGATION. Each Receivable represents the genuine,
legal, valid and binding payment obligation of the Obligor thereon,
enforceable by the holder thereof in accordance with its terms, except (A) as
enforceability may be limited by bankruptcy, insolvency, reorganization or
similar laws affecting
<PAGE>
the enforcement of creditors' rights generally and by general principles of
equity, regardless of whether such enforceability is considered in a
proceeding in equity or at law and (B) as such Receivable may be modified by
the application after its Cut-Off Date of the Soldiers' and Sailors' Civil
Relief Act of 1940, as amended; and all parties to each Receivable had full
legal capacity to execute and deliver such Receivable and all other documents
related thereto and to grant the security interest purported to be granted
thereby.
6. NO GOVERNMENT OBLIGOR. No Obligor is the United States of
America or any State or any agency, department, subdivision or
instrumentality thereof.
7. OBLIGOR BANKRUPTCY. At the applicable Cut-Off Date, no
Obligor had been identified on the records of OFL as being the subject of a
current bankruptcy proceeding.
8. SCHEDULE OF RECEIVABLES. The information set forth in the
most recent Schedule of Receivables delivered to an Assignee was true and
correct in all material respects as of the close of business on the
applicable Cut-Off Date.
9. MARKING RECORDS. On each Assignment Date, the portions of the
Electronic Ledger relating to the Receivables assigned to ORFC on such date
will be clearly and unambiguously marked to show that the Receivables were
sold to ORFC pursuant to this Agreement and each Assignment Agreement. On
each date on which Receivables are transferred by ORFC to an Assignee, OFL
will cause the portion of the Electronic Ledger relating to the Receivables
to be clearly and unambiguously marked to show that the Receivables were sold
by ORFC to an Assignee under the terms of the relevant Related Document.
10. COMPUTER TAPE. The Computer Tape, computer diskette or other
electronic transmission made available by OFL to ORFC and its assignee on
each Assignment Date was complete and accurate as of the applicable Cut-Off
Date, and includes a description of the same Receivables that are described
in the Schedule of Receivables.
11. ADVERSE SELECTION. No selection procedures adverse to an
Assignee or any Holders were utilized in selecting the Receivables from those
receivables owned by OFL which met the selection criteria contained in such
Related Document.
12. CHATTEL PAPER. The Receivables constitute chattel paper
within the meaning of the UCC as in effect in the States of Minnesota and New
York.
13. ONE ORIGINAL. There is only one original executed copy of
each Receivable.
14. RECEIVABLE FILES COMPLETE. On the applicable Assignment Date
there exists a complete Receivable File for each
B-2
<PAGE>
Receivable transferred on such date, and such Receivable File is in the
possession of the relevant Custodian on such Assignment Date. A Receivable
File pertaining to each Receivable will contain on the related Assignment
Date (a) a fully executed original of the Receivable, (b) a certificate of
insurance, application form for insurance signed by the Obligor or a signed
representation letter from the Obligor named in the Receivable pursuant to
which the Obligor has agreed to obtain physical damage insurance for the
Financed Vehicle, or a documented verbal confirmation by an insurance agent
for the Obligor of a policy number for an insurance policy for the Financed
Vehicle, (c) the original Lien Certificate or application therefor or a
letter from the applicable Dealer agreeing unconditionally to repurchase the
related Receivable if the certificate of title is not received by OFL within
180 days, and (d) a credit application of the Obligor or a copy thereof.
Each of such documents which is required to be signed by the Obligor will
have been signed by the Obligor in the appropriate spaces. All blanks on any
form will have been properly filled in and each form will otherwise have been
correctly prepared.
15. RECEIVABLES IN FORCE. No Receivable has been satisfied,
subordinated or rescinded, and the Financed Vehicle securing each such
Receivable has not been released from the lien of the related Receivable in
whole or in part. No provisions of any Receivable have been waived, altered
or modified in any respect since its origination, except by instruments or
documents identified in the Receivable File. No Receivable has been modified
as a result of application of the Soldiers' and Sailors' Civil Relief Act of
1940, as amended.
16. LAWFUL ASSIGNMENT. No Receivable was originated in, or is
subject to the laws of, any jurisdiction, the laws of which would make
unlawful, void or voidable the sale, transfer and assignment of such
Receivable under any Assignment Agreement, Servicing Agreement or other
Related Document or pursuant to transfers of any Securities.
17. GOOD TITLE. No Receivable has been sold, transferred,
assigned or pledged by OFL to any Person other than ORFC unless the same was
released prior to the transfer of such Receivable to ORFC; immediately prior
to the conveyance of the Receivables to ORFC pursuant to any Assignment
Agreement, OFL had good and indefeasible title thereto, free and clear of any
Lien; and immediately upon the transfer thereof, ORFC shall have good and
indefeasible title to and will be the sole owner of each Receivable, free of
any Lien, other than Liens created by ORFC pursuant to a Related Document.
No Dealer has a participation in, or other right to receive, proceeds of any
Receivable. OFL has not taken any action to convey any right to any Person
that would result in such Person having a right to payments received under
the related Insurance Policies or the related Dealer Agreements or Dealer
Assignments or to payments due under such Receivables.
B-3
<PAGE>
18. SECURITY INTEREST IN FINANCED VEHICLE. Each Receivable
creates a valid, binding and enforceable first priority security interest in
favor of OFL in the Financed Vehicle. The Lien Certificate and original
certificate of title for each Financed Vehicle show, or if a new or
replacement Lien Certificate is being applied for with respect to such
Financed Vehicle the Lien Certificate will be received within 180 days of the
related Assignment Date and will show, OFL named as the original secured
party under each Receivable as the holder of a first priority security
interest in such Financed Vehicle. With respect to each Receivable for which
the Lien Certificate has not yet been returned from the Registrar of Titles,
OFL has received written evidence from the related Dealer that such Lien
Certificate showing OFL as first lienholder has been applied for, or a letter
from the applicable Dealer agreeing unconditionally to repurchase the related
Receivable if the certificate of title is not received within 180 days.
OFL's security interest has been validly assigned by OFL to ORFC pursuant to
the applicable Assignment Agreement. Immediately after the sale, transfer
and assignment thereof by ORFC to an Assignee, each Receivable will be
secured by an enforceable and perfected first priority security interest in
the Financed Vehicle in favor of such Assignee as secured party, which
security interest is prior to all other Liens upon and security interests in
such Financed Vehicle which now exist or may hereafter arise or be created
(except, as to priority, for any lien for taxes, labor or materials affecting
a Financed Vehicle). As of the applicable Cut-Off Date there were no Liens
or claims for taxes, work, labor or materials affecting a Financed Vehicle
which are or may be Liens prior or equal to the lien of the related
Receivable.
19. ALL FILINGS MADE. All filings (including, without limitation,
UCC filings) required to be made by any Person and actions required to be
taken or performed by any Person in any jurisdiction to give ORFC a first
priority perfected lien on, or ownership interest in, the Receivables and the
Other Conveyed Property have been made, taken or performed.
20. NO IMPAIRMENT. OFL has not done anything to convey any right
to any Person that would result in such Person having a right to payments due
under a Receivable or otherwise to impair the rights of ORFC, any Assignee
and the related Trustee on behalf of its Holders in any Receivable or the
proceeds thereof.
21. RECEIVABLE NOT ASSUMABLE. No Receivable is assumable by
another Person in a manner which would release the Obligor thereof from such
Obligor's obligations to OFL with respect to such Receivable.
22. NO DEFENSES. No Receivable is subject to any right of
rescission, setoff, counterclaim or defense and no such right has been
asserted or threatened with respect to any Receivable.
B-4
<PAGE>
23. NO DEFAULT. There has been no default, breach, violation or
event permitting acceleration under the terms of any Receivable (other than
payment delinquencies of not more than 30 days), and no condition exists or
event has occurred and is continuing that with notice, the lapse of time or
both would constitute a default, breach, violation or event permitting
acceleration under the terms of any Receivable, and there has been no waiver
of any of the foregoing. As of the applicable Cut-Off Date, no Financed
Vehicle has been repossessed.
24. INSURANCE. As of the Assignment Date for the related
Receivable, each Financed Vehicle is covered by a comprehensive and collision
insurance policy (i) in an amount at least equal to the lesser of (a) its
maximum insurable value or (b) the principal amount due from the Obligor
under the related Receivable, (ii) naming OFL as loss payee and (iii)
insuring against loss and damage due to fire, theft, transportation,
collision and other risks generally covered by comprehensive and collision
coverage. Each Receivable requires the Obligor to maintain physical loss and
damage insurance, naming OFL and its successors and assigns as additional
insured parties, and each Receivable permits the holder thereof to obtain
physical loss and damage insurance at the expense of the Obligor if the
Obligor fails to do so. No Financed Vehicle was or had previously been
insured under a policy of Force-Placed Insurance on the related Cut-Off Date.
25. PAST DUE. As of the applicable Cut-Off Date, no Receivable
was more than 30 days past due and no funds have been advanced by OFL, ORFC,
the Servicer, any Dealer or anyone acting on behalf of any of them in order
to cause any Receivable to satisfy such requirement.
26. REMAINING PRINCIPAL BALANCE. As of the applicable Cut-Off
Date, each Receivable had a remaining principal balance equal to or greater
than $500.00 and the Principal Balance of each Receivable set forth in the
related Schedule of Receivables is true and accurate in all material respects.
27. ORIGINAL MATURITY. Each Receivable, and the Receivables as a
whole, had original maturities with the parameters represented and warranted
to by ORFC in the related Warehousing Document or Securitization Document.
If represented and warranted to by ORFC in the related Securitization
Document or Warehousing Document, each Receivable with an original maturity
of greater than 72 months is secured by a Financed Vehicle that is a new
automobile or an automobile that is less than one year old. If applicable,
no more than the percentage specified in the applicable Warehousing Document
or Securitization Document of the Receivables are Classic Receivables or are
secured by Financed Vehicles that are financed repossessions, or satisfy any
other applicable categorization with respect to Receivable type.
B-5
<PAGE>
28. COMPLIANCE WITH UNDERWRITING GUIDELINES. Each Receivable was
originated pursuant to OFL's underwriting standards which have not, without the
prior written consent of any Person specified in a Related Document, been
materially changed since the Closing Date.
B-6
<PAGE>
EXHIBIT A
FORM OF ASSIGNMENT AGREEMENT
THIS ASSIGNMENT AGREEMENT dated as of __________ __, ____, executed
between Olympic Receivables Finance Corp., a Delaware corporation, as
purchaser ("ORFC"), and Olympic Financial Ltd., a Minnesota corporation, as
seller ("OFL").
W I T N E S S E T H
WHEREAS, ORFC and OFL are parties to the Receivables Purchase
Agreement and Assignment dated as of December 3, 1996 (hereinafter as such
agreement may have been, or may from time to time be, amended, supplemented
or otherwise modified, the "Purchase Agreement"); and
WHEREAS, pursuant to the Purchase Agreement, OFL wishes to convey
Receivables and Other Conveyed Property (as each such term is defined in the
Purchase Agreement) to ORFC hereunder;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements hereinafter contained, and for other good and valuable
consideration, the receipt of which is hereby acknowledged, ORFC and OFL,
intending to be legally bound, hereby agree as follows:
1. DEFINITIONS. All terms defined in the Purchase Agreement
(whether directly or by reference to other documents) and used herein shall
have such defined meanings when used herein, unless otherwise defined herein.
"Assignment Date" shall mean, with respect to the Receivables and
the related Other Conveyed Property being conveyed hereby, __________ __,
____.
"Cut-Off Date" shall mean, with respect to the Receivables and the
related Other Conveyed Property being conveyed hereby, the date specified in
the Related Document(s) conveying such Receivables to an Assignee.
2. CONVEYANCE OF RECEIVABLES. Subject to the conditions
specified in Section 2.2(b) of the Purchase Agreement and subject to the
mutually agreed upon terms contained in the Purchase Agreement, OFL hereby
sells, transfers, assigns and otherwise conveys to ORFC without recourse (but
without limitation of its obligations in the Purchase Agreement, or any other
Related Document), all of the right, title and interest of OFL, whether now
existing or hereafter acquired, in and to all
<PAGE>
accounts, contract rights, general intangibles, chattel paper, instruments,
documents, money, deposit accounts, certificates of deposit, goods, letters
of credit, advices of credit and uncertificated securities consisting of,
arising from or relating to the Receivables listed on Schedule A hereto and
the related Other Conveyed Property.
3. COUNTERPARTS. This Assignment Agreement may be executed in
two or more counterparts, each of which shall be an original, but all of
which together shall constitute one and the same instrument.
4. GOVERNING LAW. This Assignment Agreement shall be governed by
and construed in accordance with the laws of the State of New York.
IN WITNESS WHEREOF, the undersigned have caused this Assignment
Agreement to be duly executed and delivered by their respective duly
authorized officers on the day and year first above written.
OLYMPIC RECEIVABLES FINANCE CORP.,
as Purchaser
By: _____________________________
Name:
Title:
OLYMPIC FINANCIAL LTD.,
as Seller
By: _____________________________
Name:
Title:
A-2
<PAGE>
EXECUTION COPY
______________________________________________________________________________
REPURCHASE AGREEMENT
Dated as of December 3, 1996
among
ARCADIA RECEIVABLES CONDUIT CORP.
Buyer
and
OLYMPIC RECEIVABLES FINANCE CORP.
Seller
______________________________________________________________________________
<PAGE>
Page
----
TABLE OF CONTENTS
1. APPLICABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
3. COMMITMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4. PAYMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5. SECURITY INTEREST . . . . . . . . . . . . . . . . . . . . . . . . . 8
6. PAYMENT, TRANSFER AND CUSTODY . . . . . . . . . . . . . . . . . . . 8
7. REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 10
8. EVENT OF DEFAULT. . . . . . . . . . . . . . . . . . . . . . . . . . 13
9. TERM OF COMMITMENT. . . . . . . . . . . . . . . . . . . . . . . . . 16
10. REPURCHASE OF RECEIVABLES UPON BREACH OF WARRANTY . . . . . . . . . 16
11. NOTICES AND OTHER COMMUNICATIONS. . . . . . . . . . . . . . . . . . 17
12. ENTIRE AGREEMENT; SEVERABILITY. . . . . . . . . . . . . . . . . . . 18
13. NON-ASSIGNABILITY; THIRD PARTY BENEFICIARIES. . . . . . . . . . . . 18
14. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
15. NO WAIVERS, ETC.. . . . . . . . . . . . . . . . . . . . . . . . . . 18
16. OPINIONS OF COUNSEL . . . . . . . . . . . . . . . . . . . . . . . . 19
17. ADDITIONAL CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . 19
18. FURTHER ASSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . 21
19. COUNTERPARTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
20. BINDING TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
21. COVENANT OF THE SELLER. . . . . . . . . . . . . . . . . . . . . . . 21
22. LIMITED RECOURSE. . . . . . . . . . . . . . . . . . . . . . . . . . 21
23. NONPETITION COVENANT. . . . . . . . . . . . . . . . . . . . . . . . 21
i
<PAGE>
EXHIBITS
- --------
EXHIBIT A - OPINIONS OF COUNSEL TO SELLER AND OLYMPIC
EXHIBIT B - ADDRESSES FOR NOTICES AND OTHER COMMUNICATIONS
EXHIBIT C - FORM OF CONFIRMATION LETTER
EXHIBIT D - FORM OF NOTICE OF REPURCHASE DATE
EXHIBIT E - FORM OF RECONVEYANCE OF PURCHASED RECEIVABLES
EXHIBIT F - FORM OF NOTICE OF REQUEST FOR AN ADVANCE
SCHEDULES
- ---------
SCHEDULE A - REPRESENTATIONS AND WARRANTIES OF SELLER
<PAGE>
THIS REPURCHASE AGREEMENT, dated as of December 3, 1996, is made among
ARCADIA RECEIVABLES CONDUIT CORP. (the "BUYER") and OLYMPIC RECEIVABLES FINANCE
CORP. (the "SELLER").
In consideration of the mutual agreements herein contained, and other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties agree as follows:
1. APPLICABILITY. From time to time prior to the Insurer Notice Date, the
parties hereto may enter into transactions in which the Buyer makes Advances for
the account of the Seller for deposit in the Collection Account and the Seller
transfers Receivables and the related other Seller Conveyed Property to the
Buyer from time to time against the release of funds from the Collection
Account, with a simultaneous agreement by Buyer to transfer to Seller such
Receivables and such other Seller Conveyed Property at a future date or, under
certain circumstances, on demand, against the deposit of funds by Seller into
the Collection Account. Each such transaction shall be referred to herein as a
"TRANSACTION" and shall be governed by this Repurchase Agreement (this
"AGREEMENT"). Capitalized terms used in this Agreement and not otherwise
defined herein shall have the meanings set forth in the Servicing Agreement
(including by way of reference to other documents).
2. DEFINITIONS.
(a) "ACT OF INSOLVENCY," with respect to any party, (i) the
commencement by such party as debtor of any case or proceeding under any
bankruptcy, insolvency, reorganization, liquidation, dissolution or similar law,
or such party seeking the appointment of a receiver, trustee, custodian or
similar official for such party or any substantial part of its property, or (ii)
the commencement of any such case or proceeding against such party, or another
seeking such an appointment, or the filing against a party of an application for
a protective decree under the provisions of the Securities Investor Protection
Act of 1970, which (A) is consented to or not timely contested by such party,
(B) results in the entry of an order for relief, such an appointment, the
issuance of such a protective decree or the entry of an order having a similar
effect, or (C) is not dismissed within 60 days, (iii) the making by a party of a
general assignment for the benefit of creditors, or (iv) the admission in
writing by a party of such party's inability to pay such party's debts as they
become due.
(b) "ADVANCE" means, individually and collectively, the advances
provided for in SECTION 3(a) hereof.
(c) "AUTO LOAN SECURITIZATION" means a public or private transfer of
Auto Receivables in the ordinary course of business and by which Olympic
directly or indirectly securitizes a pool of specified Auto Receivables.
<PAGE>
(d) "AUTO RECEIVABLE" means an installment sales contract or
promissory notes purchased by Olympic or a Subsidiary of Olympic from motor
vehicle dealers and secured by new and used automobiles and light trucks.
(e) "BUYER" means Arcadia Receivables Conduit Corp., a Delaware
corporation.
(f) "CAPITALIZED LEASE" means any lease which is or should be
capitalized on the books of the lessee in accordance with GAAP.
(g) "COMMITMENT AMOUNT" means $300,000,000.
(h) "CONFIRMATION" has the meaning set forth in SECTION 3(b) hereof.
(i) "CONTROLLING PARTY" has the meaning set forth in the Security
Agreement.
(j) "CUT-OFF DATE" means the date specified in the related
Confirmation with respect to each Transaction.
(k) "EVENT OF DEFAULT" has the meaning set forth in SECTION 8 hereof.
(l) "GAAP" means generally accepted accounting principles set forth
from time to time in the opinions and pronouncements of the Accounting
Principles Board and the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board (or
agencies with similar functions of comparable stature and authority within the
U.S. accounting profession), which are applicable to the circumstances as of the
date of any determination.
(m) "INDEBTEDNESS" means, with respect to any Person, without
duplication, all obligations, contingent or otherwise, which in accordance with
GAAP should be classified upon such Person's balance sheet as liabilities, but
in any event including the following (whether or not they should be classified
as liabilities upon such balance sheet): (a) all indebtedness for borrowed
money of such Person and all obligations of such Person secured by any mortgage,
pledge, security interest, lien, charge or other encumbrance existing on
property owned or acquired subject thereto, whether or not the obligation
secured thereby shall have been assumed and whether or not the obligation
secured is the obligation of such Person or another party; (b) any obligation of
such Person on account of deposits or advances; (c) any obligation of such
Person for the deferred purchase price of any property or services, except Trade
Accounts Payable; (d) any obligation of such Person as lessee under any
Capitalized Lease; (e) all guaranties, endorsements and other contingent
obligations of such Person in respect to Indebtedness of others (other than
endorsements of instruments for collection in the ordinary course
2
<PAGE>
of such Person's business); and (f) undertakings or agreements to reimburse
or indemnify issuers of letters of credit issued for the account of such
Person. For all purposes of this Agreement, the Indebtedness of any Person
shall include the Indebtedness of any partnership or joint venture in which
such Person is a general partner or a joint venturer.
(n) "INSURER NOTICE DATE" means the earlier of (i) the date specified
in the written notice delivered by the Security Insurer to the Seller, the
Buyer, the Indenture Trustee and the Collateral Agent, which date is the date on
and after which the Note Policy will not cover payments on Notes issued after
such date and (ii) the occurrence of an Amortization Event.
(o) "OLYMPIC" means Olympic Financial Ltd., a Minnesota corporation.
(p) "OTHER CONVEYED PROPERTY" has the meaning set forth in the
Purchase Agreement.
(q) "PURCHASE DATE" means a date prior to the Insurer Notice Date on
which Purchased Receivables are transferred by Seller to Buyer.
(r) "PURCHASE PERIOD" has the meaning set forth in the Note Purchase
Agreement.
(s) "PURCHASE PRICE" means with respect to each Purchase Date, the
price at which Purchased Receivables are transferred by Seller to Buyer, which
shall equal (x) the product of 0.98 and the outstanding Principal Balance of the
Premier Receivables and the Classic Receivables that are not Financed
Repossessions being transferred on such Purchase Date and (y) the product of
0.85 and the outstanding Principal Balance of Classic Receivables that are
Financed Repossessions being transferred on such Purchase Date.
(t) "PURCHASED RECEIVABLES" means the Receivables transferred by
Seller to Buyer in a Transaction hereunder, the related Other Conveyed Property
transferred hereunder and the Seller's rights as purchaser under the Purchase
Agreement and any Assignment Agreement related thereto.
(u) "RECEIVABLES SCHEDULE" has the meaning set forth in SECTION 3(b)
hereof.
(v) "REPURCHASE DATE" means, with respect to any Purchased
Receivable, the date on which Seller is required to repurchase such Purchased
Receivable from Buyer, which date shall be the earliest to occur of (i) the date
that is twelve months after the Purchase Date of such Purchased Receivable, (ii)
a date specified by the Seller upon at least three Business Days prior notice to
the Buyer, the Indenture Trustee and the Security Insurer in the form set forth
in EXHIBIT D, (iii) any date determined with respect to such Purchased
Receivable by the
3
<PAGE>
application of the provisions of SECTION 8 OR 11 hereof, and (iv) the last day
of the Purchase Period.
(w) "REPURCHASE PRICE" means, with respect to a Purchased Receivable,
the price at which such Purchased Receivable is to be transferred from Buyer to
Seller, which will equal the (x) the product of 0.98 and the aggregate
outstanding Principal Balance of such Purchased Receivable as of the date of
such transfer, if such Purchased Receivable is a Premier Receivable or a Classic
Receivable that is not a Financed Repossession or (y) the product of 0.85 and
the aggregate outstanding Principal Balance of such Purchased Receivable as of
the date of such transfer, if such Purchased Receivable is a Classic Receivable
that is a Financed Repossession, plus, in each case, interest on 98% of the
Principal Balance of such Purchased Receivable (if such Receivable is a Premier
Receivable or a Classic Receivable that is not a Financed Repossession) or on
85% of the Principal Balance of such Purchased Receivable (if such Receivable is
a Classic Receivable that is a Financed Repossession) at the sum of the Advance
Interest Rate plus the Total Expense Percent, PLUS any Breakage Fee payable upon
the simultaneous repayment of the related Advance (if such Advance is being
repaid), in each case as of the date of such transfer.
(x) "SCHEDULE OF REPRESENTATIONS" means the Schedule of
Representations and Warranties attached hereto as SCHEDULE A.
(y) "SECURED PARTIES" has the meaning set forth in the Security
Agreement.
(z) "SELLER" means Olympic Receivables Finance Corp., a Delaware
corporation.
(aa) "SELLER CONVEYED PROPERTY" has the meaning set forth in SECTION
6(b) hereof.
(bb) "SERVICING AGREEMENT" means the Servicing Agreement dated as of
December 3, 1996 among the Seller, the Buyer, Olympic Financial Ltd., in its
individual capacity and as Servicer, Bank of America National Trust and Savings
Association, as Agent, and Norwest Bank Minnesota, National Association, as
Backup Servicer, Collateral Agent and Indenture Trustee, providing for the
servicing of the Receivables.
(cc) "SUBSIDIARY" of a Person means any corporation, association,
partnership, limited liability company, joint venture or other business entity
of which more than 50% of the voting stock, membership interests or other equity
interests (in the case of Persons other than corporations), is owned or
controlled directly or indirectly by such Person, or one or more of the
Subsidiaries of such Person, or a combination thereof. Without limiting the
generality of the foregoing, the term "Subsidiary" specifically includes any
special purpose vehicle or conduit formed by a Person that is otherwise within
the ambit of the immediately preceding sentence. Unless the context otherwise
4
<PAGE>
clearly requires, references herein to a "Subsidiary" refer to a Subsidiary of
Olympic.
(dd) "TRADE ACCOUNTS PAYABLE" means, as to any Person, the trade
accounts payable to such Person with a maturity of not greater than 90 days
incurred in the ordinary course of such Person's business.
3. COMMITMENT.
(a) The Buyer agrees, on the terms of this Agreement, to make
Advances for the account of the Seller by depositing the balance of the proceeds
of such Advance in the Collection Account during the period from and including
the Closing Date to but not including the earliest to occur of (x) the Insurer
Notice Date, (y) the termination of the commitment pursuant to SECTION 9 hereof
and (z) the first day of the Amortization Period, in an amount at any one time
outstanding not to exceed the Commitment Amount. Subject to the terms of this
Agreement, during such period the Seller may request Advances and prepay
Advances without limitation, except that (i) each Advance and prepayment shall
be in amounts of $5,000,000 or any amount in excess thereof, (ii) each request
for an Advance shall comply with CLAUSE (c) below and each prepayment of an
Advance shall comply with CLAUSE (e) below, and (iii) the Seller shall not be
permitted to request an Advance if the difference between the aggregate
outstanding principal balance of the Advances and the aggregate outstanding
Principal Balance of the Receivables is greater than $5,000,000 (excluding any
WAC Deficiency Deposits) (or such other amount as shall be agreed to in writing
from time to time by the Seller, the Buyer, the Agent and the Security Insurer).
The Buyer agrees, subject to the terms and conditions of this Agreement, to the
extent and only to the extent of funds available for release to the Seller for
such purpose on deposit in the Collection Account, to purchase Receivables from
the Seller from time to time during the period from and including the Closing
Date to but excluding the earliest to occur of (q) the Insurer Notice Date,
(r) the termination of the commitment pursuant to SECTION 9 hereof, and (s) the
first day of the Amortization Period.
(b) On each Purchase Date, the Purchased Receivables shall be
transferred to the Buyer or its agent against the release of the Purchase Price
from the Collection Account for deposit to the Spread Account and payment to the
Seller in accordance with and subject to the provisions of Section 3.10 of the
Servicing Agreement and the Security Agreement. On the Purchase Date for a
Transaction hereunder, Seller shall promptly deliver to the Agent and to the
Indenture Trustee a written confirmation, in the form set forth in EXHIBIT C, of
such Transaction (a "CONFIRMATION"). The Confirmation shall describe the
Purchased Receivables, identify Buyer and Seller, have the updated Receivables
Schedule attached thereto and set forth (i) the Purchase Date, (ii) the Purchase
Price, (iii) the Cut-Off Date, and (iv) any additional terms or conditions of
the
5
<PAGE>
Transaction not inconsistent with this Agreement. The Confirmation,
together with this Agreement, shall constitute conclusive evidence of the terms
agreed between Buyer and Seller with respect to the transfer to which the
Confirmation relates, unless with respect to the Confirmation specific objection
is made promptly after receipt thereof. In the event of any conflict between
the terms of such Confirmation and this Agreement, this Agreement shall prevail.
The Purchased Receivables shall be identified on a detailed list provided by
Seller to Buyer on each Purchase Date and Repurchase Date (the "RECEIVABLES
SCHEDULE") and may be identified in the related Confirmation by reference to
such list. Any release of funds from the Collection Account in connection with
a purchase of Receivables shall not affect the outstanding principal balance of
Advances.
(c) The Seller shall give the Buyer, the Agent and the Indenture
Trustee notice of each request for an Advance by 12:00 noon, New York City time,
at least one Business Day prior to the date requested for such Advance (or if
such request is for an Advance of $15,000,000 or less, by 11:00 a.m., New York
City time, on the date requested for such Advance), which notice shall be
substantially in the form of EXHIBIT F attached hereto and which shall include
the Seller's requested Tranche Periods in connection with such Advance. Each
such notice shall be in the form of EXHIBIT F and shall be irrevocable unless a
written revocation signed by a Responsible Officer of the Seller is received by
the Buyer by the end of the day immediately preceding the day such Advance will
be made and shall be effective only if received by the Buyer not later than
12:00 noon New York time on the date specified in the preceding sentence (or if
such notice is for a same-day Advance, 11:00 a.m. New York City time on the date
of the requested Advance). Not later than 1:00 p.m., New York City time, on the
date specified for each Advance hereunder, the Buyer shall deposit the amount of
such Advance in the Collection Account.
(d) On the Repurchase Date for any Purchased Receivables, such
repurchase shall be effected by transfer to Seller or its agent of such
Purchased Receivables against the transfer of the Repurchase Price therefor on
behalf of the Buyer to the Collection Account. On such Repurchase Date , the
Buyer shall execute a written reconveyance substantially in the form of EXHIBIT
E pursuant to which it shall reconvey to the Seller (without recourse,
representation or warranty other than as to Liens created by the Buyer) all
right, title and interest of the Buyer in such Purchased Receivables. On any
Business Day during the Revolving Period on which there has been since the
preceding Business Day an amount greater than $5,000,000 on deposit in the
Collection Account in excess of the WAC Deficiency Deposit, Seller shall effect
a prepayment of Advances pursuant to Section 3(e) hereof in an amount equal to
the lesser of (x) the amount specified by Seller equal to or greater than
$5,000,000 and (y) the amount permitted to be prepaid pursuant to Section 3(e)
hereof. On a Repurchase Date specified in CLAUSE (iv) of the
6
<PAGE>
definition of Repurchase Date herein, the Seller shall effect a repayment of
Advances pursuant to SECTION 3(e) hereof, up to the outstanding principal
balance of the Notes.
(e) Subject to the terms of this Agreement and the Servicing
Agreement, the Seller shall have the right to prepay Advances on any Business
Day during the Revolving Period in an amount equal to $5,000,000 or any amount
in excess thereof. Any such prepayment shall include accrued and unpaid
interest on the Advance at the Advance Interest Rate being prepaid through but
excluding the date such Advance is prepaid. By 12:00 noon, New York City time,
on the Business Day preceding the date on which the Seller proposes to prepay
Advances, the Seller shall notify the Buyer, the Agent, the Servicer, the Backup
Servicer, the Collateral Agent, the Indenture Trustee and the Security Insurer
of the amount of such prepayment, which amount shall be set forth in a
certificate executed by a Responsible Officer of the Seller on such date of
notice. The Seller shall pay the Breakage Fee, if any, on such date of
prepayment by paying to the Trustee for deposit into the Note Distribution
Account an amount equal to such Breakage Fee (which amount may come from amounts
otherwise distributable to the Seller on such date). Any such prepayment
(including interest in connection therewith but excluding the aforementioned
Breakage Fee) shall be payable solely out of funds on deposit in the Collection
Account and the Spread Account and shall not exceed an amount equal to the
lesser of (i) on any date occurring during the period from but excluding a
Determination Date through and including the related Distribution Date, an
amount equal to the excess of the total amount on deposit in the Collection
Account and the Spread Account on such date over the sum of (A) the amounts to
be distributed on such Distribution Date pursuant to CLAUSES (i) THROUGH (ix) of
SECTION 3.6(a) of the Servicing Agreement as set forth in a Servicer's
Certificate delivered on such Determination Date, and (B) any increase in the
WAC Deficiency Amount on such date, if any, above the WAC Deficiency Amount on
such Determination Date, and (ii) an amount equal to the excess of the total
amount on deposit in the Collection Account on such date over the WAC Deficiency
Amounts, if any, on deposit in the Collection Account on such date.
Notwithstanding anything contained in this SECTION 3(e) to the contrary, if the
Breakage Fee is not paid in full on or before the date of any proposed
prepayment, no such prepayment may occur.
(f) All outstanding Advances shall be due and payable by the Seller
on the first day of the Amortization Period. Unless otherwise paid by the
Seller, such Advances shall be repaid by the Seller to the Buyer on each
Distribution Date in the amounts specified for such repayment in SECTION 3.6 of
the Servicing Agreement.
4. PAYMENTS. All payments of principal and interest and principal prepayments
payable to the holder of the Purchased Receivables, including Liquidation
Proceeds collected in respect of such Purchased Receivables, shall be collected
and applied as
7
<PAGE>
set forth in the Servicing Agreement. All such payments in excess of the
amounts required to be distributed pursuant to clauses (i) through (ix) of
Section 3.6(a) AND CLAUSES (i) THROUGH (ix) OF SECTION 3.6(b) of the
Servicing Agreement shall be the property of the Seller.
5. SECURITY INTEREST.
(a) In the event, for any reason, any Transaction is construed by any
court as a secured loan rather than a purchase and sale, the parties intend that
Seller shall have granted to Buyer a perfected first priority security interest
in all of the Purchased Receivables.
(b) Seller shall pay all fees and expenses associated with perfecting
such security interest including, without limitation, the cost of filing
financing statements under the Uniform Commercial Code as and when required by
Buyer (including, without limitation, as required under the Servicing
Agreement).
6. PAYMENT, TRANSFER AND CUSTODY.
(a) Unless otherwise mutually agreed in writing, all transfers of
funds hereunder shall be in immediately available funds.
(b) On the Purchase Date for a Transaction, ownership of the
Receivables and the related other Seller Conveyed Property shall be transferred
to the Buyer against the simultaneous withdrawal of the Purchase Price from the
Collection Account for payment to the Seller in accordance with and subject to
the provisions of the Servicing Agreement. On each Purchase Date, the Seller
hereby sells, transfers, assigns, and otherwise conveys to the Buyer, all of the
right, title and interest, whether now or hereafter acquired, of the Seller in
and to all accounts, contract rights, general intangibles, chattel paper,
instruments, documents, money, deposit accounts, certificates of deposit, goods,
letters of credit, advices of credit and uncertificated securities consisting
of, arising from or relating to any of the following property: (i) the
Receivables listed on the Receivables Schedule from time to time, (ii) the Other
Conveyed Property related thereto, (iii) the rights of the Seller under the
Purchase Agreement and each Assignment Agreement related thereto, (iv) all
amounts required to be deposited, or deposited, or delivered to the Collateral
Agent for deposit, to the Collection Account by the Seller in respect of the WAC
Deficiency Amount or the Collateral Test, (v) all of Seller's right, title and
interest in and to funds on deposit from time to time in the Secured Accounts
and all investments therein and proceeds thereof, and (vi) all present and
future claims, demands, causes and choses in action in respect of any or all of
the foregoing and all payments on or under and all proceeds of every kind and
nature whatsoever in respect of any and all of the foregoing, including all
proceeds of the conversion, voluntary or involuntary, into cash or other liquid
property, all cash
8
<PAGE>
proceeds, accounts, accounts receivable, notes, drafts, acceptances, chattel
paper, checks, deposit accounts, insurance proceeds, condemnation awards,
rights to payment of any and every kind and other forms of obligations and
receivables, instruments and other property which at any time constitute all
or part of or are included in the proceeds of any of the foregoing (all of
the foregoing referred to collectively as the "SELLER CONVEYED PROPERTY").
It is the intention of the Seller that the transfer and assignment
contemplated by this Agreement shall constitute a sale of the Receivables and
other Seller Conveyed Property from the Seller to the Buyer.
(c) Simultaneously with the execution and delivery of this Agreement,
the Seller, the Buyer and the other Secured Parties shall enter into the
Custodian Agreement with the Custodian, dated as of the Closing Date, pursuant
to which the Buyer and the other Secured Parties shall revocably appoint the
Custodian, and the Custodian shall accept such appointment, to act as the agent
of the Buyer and the other Secured Parties as Custodian of the following
documents or instruments in its possession which the Seller shall deliver to the
Custodian as agent of the Buyer and the other Secured Parties on or prior to the
related Purchase Date:
(i) The fully executed original of the Receivable (together with the
original of any agreements modifying the Receivable, including without
limitation any extension agreements);
(ii) A certificate of insurance, application form for insurance signed
by the Obligor or a signed representation letter from the Obligor named in
the Receivable pursuant to which the Obligor has agreed to obtain physical
damage insurance for the related Financed Vehicle, or a documented verbal
confirmation by the insurance agent for the Obligor of a policy number for
an insurance policy for the Financed Vehicle;
(iii) The original credit application, or a copy thereof, of each
Obligor, on Olympic's customary form, or on a form approved by Olympic, for
such application; and
(iv) The original certificate of title (when received) and otherwise
such documents, if any, that Olympic keeps on file in accordance with its
customary procedures indicating that the Financed Vehicle is owned by the
Obligor and subject to the interest of Olympic as first lienholder or
secured party (including any Lien Certificate received by Olympic), or if
such original certificate of title has not yet been received, a copy of the
application therefor, showing Olympic as secured party, or a letter from
the applicable Dealer agreeing unconditionally to repurchase the related
Receivable if the certificate of title is not received by Olympic within
180 days.
9
<PAGE>
7. REPRESENTATIONS.
(a) Each party represents and warrants, and shall on and as of the
Purchase Date of any Transaction be deemed to represent and warrant, as follows:
(i) The execution, delivery and performance of this Agreement and the
performance of each Transaction do not and will not result in or require
the creation of any lien, security interest or other charge or encumbrance
(other than pursuant hereto and pursuant to the other Related Documents)
upon or with respect to any of its properties;
(ii) This Agreement is, and each Transaction when entered into under
this Agreement will be, a legal, valid and binding obligation of it
enforceable against it in accordance with the terms of this Agreement.
(b) Seller represents and warrants to Buyer and to the Security
Insurer, and on and as of the Purchase Date of any Transaction shall be deemed
to represent and warrant to each of such Persons, as follows:
(i) The representations and warranties set forth on the Schedule of
Representations are true and correct with respect to the Receivable(s)
transferred in such Transaction.
(ii) The Seller has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of Delaware, with
power and authority to own its properties and to conduct its business as
such properties are currently owned and such business is currently
conducted, and had at all relevant times, and now has, power, authority and
legal right to acquire, own and sell the Receivables and the other Seller
Conveyed Property transferred to the Buyer.
(iii) The Seller is duly qualified to do business as a foreign
corporation in good standing, and has obtained all necessary licenses and
approvals, in all jurisdictions in which the ownership or lease of its
property or the conduct of its business requires such qualification.
(iv) The Seller has the power and authority to execute and deliver
this Agreement, the Servicing Agreement and its Related Documents and to
carry out its terms and their terms, respectively; the Seller has full
power and authority to sell and assign the Receivables and other Seller
Conveyed Property to be sold and assigned to the Buyer and has duly
authorized such sale and assignment to the Buyer by all necessary corporate
action; and the execution, delivery and performance of this Agreement and
the Servicing Agreement and the Seller's Related Documents have been duly
authorized by the Seller by all necessary corporate action.
10
<PAGE>
(v) This Agreement and the related Confirmation effects a valid sale,
transfer and assignment of the Receivables and the other Seller Conveyed
Property, enforceable against the Seller and creditors of and purchasers
from the Seller; and this Agreement and the related Confirmation and the
Servicing Agreement and the Seller's Related Documents, when duly executed
and delivered, shall constitute legal, valid and binding obligations of the
Seller enforceable in accordance with their respective terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization or
other similar laws affecting the enforcement of creditors' rights generally
and by general principles of equity, regardless of whether such
enforceability is considered in a proceeding in equity or at law.
(vi) The consummation of the transactions contemplated by this
Agreement and the related Confirmations and the Servicing Agreement and the
Related Documents and the fulfillment of the terms of this Agreement and
the related Confirmations and the Servicing Agreement and the Related
Documents shall not conflict with, result in any breach of any of the terms
and provisions of or constitute (with or without notice, lapse of time or
both) a default under the certificate of incorporation or by-laws of the
Seller, or any indenture, agreement, mortgage, deed of trust or other
instrument to which the Seller is a party or by which it is bound, or
result in the creation or imposition of any Lien upon any of its properties
pursuant to the terms of any such indenture, agreement, mortgage, deed of
trust or other instrument, other than this Agreement and the Related
Documents, or violate in any material respect any law, order, rule or
regulation applicable to the Seller of any court or of any federal or state
regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Seller or any of its
properties. Notwithstanding the foregoing, it is understood that no
representation or warranty is expressed herein with respect to the legality
of the use of the word "Olympic" by the Seller or its Affiliates.
(vii) There are no proceedings or investigations pending or, to
the Seller's knowledge, threatened against the Seller or Olympic, before
any court, regulatory body, administrative agency or other tribunal or
governmental instrumentality having jurisdiction over the Seller or its
properties (A) asserting the invalidity of this Agreement, the Servicing
Agreement or any of the Related Documents, (B) seeking to prevent the
issuance of the Notes or the consummation of any of the transactions
contemplated by this Agreement, the Servicing Agreement or any of the
Related Documents, or (C) seeking any determination or ruling that might
materially and adversely affect the performance by the Seller of its
obligations under, or the validity or
11
<PAGE>
enforceability of, this Agreement, the Servicing Agreement or any of the
Related Documents.
(viii) The chief executive office of the Seller is located at 7825
Washington Avenue South, Suite 410, Minneapolis, MN 55439-2435.
(ix) All the issued common stock of Seller is owned by Olympic and
such common stock is the only capital stock issued by Seller. Pursuant to
its certificate of incorporation, Seller's business is limited to certain
financing activities set forth in such certificate.
(x) Seller does not commingle its assets or business functions with
the assets or business functions of Olympic or any other Person. The bank
accounts and funds of Seller are maintained separately from those of
Olympic and all other Affiliates of Olympic. The board of directors of
Seller duly authorizes all the corporate actions of Seller, to the extent
required by the laws of its state of incorporation. Seller maintains its
own separate minutes of such actions. Seller maintains separate and full
corporate records and financial records for itself only and has at least
one director who is not an Affiliate or director of or employed by Olympic
or any other Affiliate of Olympic. As of the date hereof, Seller does not
have employees and, in the event that it hires employees in the future,
Seller will not employ any person employed by Olympic or by any Olympic
Affiliate.
(xi) The financial records and accounts of Seller are prepared and
maintained in accordance with generally accepted accounting principles and
are susceptible to audit.
(xii) Seller conducts its business solely in its own name. In
that regard, all written and oral communications, including, without
limitation, letters, invoices, purchase orders and contracts, are made
solely in the name of Seller. Seller has its own telephone number,
stationery and business forms, separate from those of Olympic and any other
Olympic Affiliate.
(xiii) Seller pays its own expenses and liabilities from its own
funds, except that certain of the organization expenses of Seller have been
paid by Olympic. That payment serves a valid business purpose and will not
affect the commitment of Olympic and Seller to maintain separate books of
account and other indicia of separate corporate existence. The
capitalization of Seller is adequate in light of its proposed business and
purpose.
(xiv) Seller is not liable for the payment of any liability of
Olympic. The assets and the creditworthiness of Seller are never held out
as being available for the payment of any liability of Olympic. Seller
always
12
<PAGE>
describes Olympic as a separate legal entity. Each of Olympic and
Seller maintains an arm's length relationship with the other. No
transaction between Seller and any Olympic Affiliate is on terms more
favorable than in similar transactions involving an unrelated third party.
Assets are not transferred from Olympic or Seller to the other without
reasonably equivalent value or with the intent to hinder, delay or defraud
the creditors of Olympic or Seller. Seller's existence is not dependent on
its being a subsidiary of Olympic or any other Olympic Affiliate.
(xv) Seller has not transferred any Receivables with the intent to
hinder, delay or defraud any Person. Olympic receives reasonably
equivalent value in exchange for its transfer of Receivables to Seller.
Neither Olympic nor Seller is insolvent nor does Olympic or Seller expect
to become insolvent as a result of any transfer of Receivables. Neither
Olympic nor Seller engages in nor does it expect to engage in a business
for which its remaining property represents an unreasonably small
capitalization. Neither Olympic nor Seller intends to incur nor does it
believe that it will incur indebtedness that it will not be able to repay
at its maturity.
(xvi) Seller does not intend to file a voluntary petition for
relief under the Bankruptcy Code or any similar law.
(xvii) Seller is not obligated in any way on the Receivables.
(xviii) Seller has not taken any action that might cause any
Transaction to violate any regulation of the Federal Reserve Board.
8. EVENT OF DEFAULT. In the event that:
(i) Seller fails to repurchase or Buyer fails to transfer Purchased
Receivables upon the applicable Repurchase Date or Buyer fails to make an
Advance in accordance with the provisions hereof, and in each case such
failure continues for two Business Days;
(ii) an Act of Insolvency occurs with respect to Seller, Olympic or
Buyer;
(iii) any representation or warranty made by Seller or Olympic in
this Agreement, the Purchase Agreement (excluding, however, any
representation or warranty set forth in SECTION 7(b)(i) hereof or SECTION
3.1(a) of the Purchase Agreement), the Custodian Agreement, the Insurance
Agreement, the Spread Account Agreement, the Note Purchase Agreement, the
Security Agreement or the Servicing Agreement shall have been incorrect or
untrue in any material respect when made or repeated or when deemed to have
been made or
13
<PAGE>
repeated; or either the Seller or Olympic shall fail to comply in any
material respect with any of their other agreements contained in this
Agreement, the Purchase Agreement, the Insurance Agreement, the Spread
Account Agreement, the Note Purchase Agreement, the Security Agreement or
the Servicing Agreement not defined elsewhere in this SECTION 8 as an
"Event of Default" and such failure to comply shall continue unremedied for
a period of 10 days after written notice thereof to the Seller by the Buyer
or the Agent;
(iv) Seller or Buyer shall admit to the other its inability to, or its
intention not to, perform any of its obligations hereunder;
(v) any governmental or self-regulatory authority shall take
possession of Buyer, Seller or Olympic or their property or appoint any
receiver, conservator or other official or, with respect to Seller or
Olympic, shall take any action to remove, limit, restrict, suspend or
terminate their rights or privileges, including suspension as an issuer,
lender or seller/servicer of automobile loans, which suspension has a
material adverse effect on the ordinary business operations of Seller or
Olympic, and which continues for more than 24 hours; or any such party
shall take any action to authorize any of the actions set forth in this
CLAUSE (v);
(vi) this Agreement shall for any reason cease to create a valid,
first priority security interest in any of the Purchased Receivables
purported to be covered thereby;
(vii) a final judgment by any competent court in the United States
of America for the payment of money in an amount of at least $50,000 is
rendered against Seller or such a judgment in an amount of at least
$5,000,000 is rendered against Olympic, and the same remains undischarged
for a period of 60 days unless execution of such judgment is effectively
stayed;
(viii) Seller or Olympic dissolves, merges or consolidates with
another entity unless it is the surviving party, or sells, transfers, or
otherwise disposes of a material portion of its business or assets
(excluding the sale, transfer or other disposition of Receivables in the
ordinary course of business) and the surviving party or the party that
succeeds to a material portion of the Seller's or Olympic's business or
assets shall cause BofA or any Affiliate of BofA or any Permitted Assignee
(as defined in the Indenture) to exceed its legal lending limit with
respect to such party or any of its Affiliates;
(ix) any of the documents or opinions required to be delivered by the
Seller to the Buyer pursuant to SECTION 17 hereof shall not have been
delivered within ten Business
14
<PAGE>
Days after notice shall have been given to the Seller by the Buyer that
such documents or opinions were not delivered when so required;
(x) the maturity of any Indebtedness in an amount in excess of
$5,000,000 of Olympic or a Subsidiary shall be accelerated, or Olympic or a
Subsidiary shall fail to pay any such Indebtedness when due, or, in the
case of such Indebtedness payable on demand, when demanded, or there shall
occur any default or event or condition permitting the replacement of
Olympic or any Subsidiary as Servicer under any Auto Loan Securitization of
Olympic or any Subsidiary;
(xi) it shall be determined on any Determination Date that the
Collateral Test shall fail to have been satisfied as of the immediately
preceding Accounting Date, after taking into account any deposit made by
the Seller to the Collection Account on such Determination Date, and such
failure shall continue for one Business Day;
(xii) an Insurance Agreement Event of Default shall occur;
(xiii) a Servicer Termination Event shall occur; or
(xiv) the Seller shall fail to make a deposit with respect to any
WAC Deficiency Amount in accordance with the provisions of SECTION 3.1(f)
of the Servicing Agreement, and such failure shall continue for one
Business Day.
(each an "EVENT OF DEFAULT"):
(a) At the option of the nondefaulting party (it being understood
that with respect to the Seller, the Seller shall be deemed to be the
nondefaulting party only upon the occurrence of an Event of Default specified in
SECTION 8(i), (ii), (iv) or (v) with respect to the Buyer), or if the Seller is
the defaulting party, the Agent, exercised by written notice to the defaulting
party (which option shall be deemed to have been exercised, even if no notice is
given, immediately upon the occurrence of an Act of Insolvency or the occurrence
of an Insurance Agreement Event of Default which the Security Insurer specifies
in writing shall have such effect), the Repurchase Date for each Transaction
hereunder shall be deemed immediately to occur and, if the Seller is the
defaulting party, all outstanding Advances shall be and become immediately due
and payable hereunder without notice or any further action.
(b) If the defaulting party is the Seller and if the Buyer or the
Agent exercises or is deemed to have exercised the option referred to in
SUBPARAGRAPH (a) of this Section, (i) the Seller's obligations hereunder to
repurchase all Purchased Receivables shall thereupon become immediately due and
payable, and (ii) the Seller shall immediately deliver to the Buyer any
15
<PAGE>
Purchased Receivables subject to such Transactions then in the Seller's custody
or possession.
(c) If the defaulting party is the Buyer, the Seller may, against
transfer to the Seller of the Purchased Receivables, tender payment of the
aggregate Repurchase Price for all of the Purchased Receivables, whereupon the
Buyer's right, title and interest in all of the Purchased Receivables shall be
deemed transferred to the Seller.
(d) If the defaulting party is the Seller, after one Business Day's
notice to the Seller (which notice need not be given if an Act of Insolvency
shall have occurred and which may be the notice given under SUBPARAGRAPH (a) of
this Section), the Controlling Party, as agent of the Buyer, may exercise any or
all of the remedies provided for in SECTIONS 5.2 and 6.1 of the Security
Agreement.
(e) For purposes of this SECTION 8 the Repurchase Price for each
transaction hereunder in respect of which the defaulting party is the Buyer
shall not increase above the amount of such Repurchase Price for such
Transaction determined as of the date of the exercise or deemed exercise by the
Seller of its option under SUBPARAGRAPH (a) of this Section.
(f) The defaulting party shall be liable to the nondefaulting party
for the amount of all reasonable legal or other expenses incurred by the
nondefaulting party in connection with or as a consequence of an Event of
Default, together with interest thereon at a rate equal to the Reference Rate.
(g) Each of the Buyer and the Seller agree to provide the Rating
Agencies with written notice of any Event of Default of which they have actual
acknowledge.
9. TERM OF COMMITMENT. Unless terminated earlier by mutual agreement of the
Buyer and the Seller with prior written notice to each Rating Agency and subject
to earlier termination as otherwise set forth herein, the commitment of the
Buyer hereunder to make Advances and purchase Receivables shall remain in effect
for a period of three years and such commitment shall terminate automatically
without any requirement for notice on the date occurring three years from the
date hereof; provided, however, that such commitment may be extended by mutual
agreement of Buyer and Seller; and provided further, however, that no such party
shall be obligated to agree to such an extension.
10. REPURCHASE OF RECEIVABLES UPON BREACH OF WARRANTY.
Concurrently with the execution and delivery of this Agreement and
each Confirmation, as appropriate, Olympic and the Seller have entered into the
Purchase Agreement and an Assignment Agreement, as applicable, the rights of the
Seller under which have been assigned by the Seller to the Buyer. Under the
Purchase Agreement and each Assignment Agreement, Olympic has
16
<PAGE>
made the same representations and warranties to the Seller with respect to
the Receivables as those made by the Seller pursuant to the Schedule of
Representations, upon which the Buyer has relied in accepting the Receivables
and the other Seller Conveyed Property and issuing the Notes and upon which
the Security Insurer has relied in issuing the Note Policy and upon which the
Indenture Trustee has relied in authenticating the Notes. Upon discovery by
any of Olympic, the Seller, the Servicer, the Security Insurer, the Indenture
Trustee or the Buyer of a breach of any of the representations and warranties
contained in SECTION 7(b)(i) that materially and adversely affects the
interests of the Buyer, the Security Insurer or the Noteholders in any
Receivable (including any Liquidated Receivable), the party discovering such
breach shall give prompt written notice to the others; PROVIDED, HOWEVER,
that the failure to give any such notice shall not affect any obligation of
Olympic or the Seller. On the 15th day following the Seller's discovery or
the Seller's receipt of notice of any breach of the representations and
warranties set forth on the Schedule of Representations that materially and
adversely affects the interests of the Buyer, the Security Insurer or the
Noteholders in any Receivable (including any Liquidated Receivable), the
Repurchase Date with respect to such Receivable shall be deemed to occur
immediately; PROVIDED, that any breach of a representation and warranty
contained in PARAGRAPH 14, 17 OR 27 of the Schedule of Representations with
respect to any Receivable shall be deemed to materially and adversely affect
the interest of the Buyer in such Receivable and the Repurchase Date with
respect to such Receivable shall be deemed to occur on, with respect to a
breach of a representation or warranty contained in PARAGRAPH 14, the
Business Day immediately succeeding the day and, with respect to a breach of
a representation or warranty contained in PARAGRAPH 17 OR 27, on the fifth
Business Day immediately succeeding the day upon which, in either case,
discovery or receipt of notice of any breach of such representation and
warranty shall occur. The obligations of the Seller with respect to any such
breach of representations and warranties shall include taking any and all
actions necessary to enable the Buyer to enforce directly the obligations of
Olympic under the Purchase Agreement or any Assignment Agreement, as
applicable. In addition to the foregoing and notwithstanding whether the
related Purchased Receivables shall have been repurchased by the Seller, the
Seller shall indemnify the Buyer, the Security Insurer, the Noteholders and
the Indenture Trustee against all costs, expenses, losses, damages, claims
and liabilities, including reasonable fees and expenses of counsel, which may
be asserted against or incurred by any of them as a result of third party
claims arising out of the events or facts giving rise to such breach.
11. NOTICES AND OTHER COMMUNICATIONS.
Unless another address is specified in writing by the party to whom
any notice or other communication is to be given hereunder, all such notices or
communications shall be in writing
17
<PAGE>
or confirmed in writing and delivered at the respective addresses set forth
in EXHIBIT B attached hereto.
12. ENTIRE AGREEMENT; SEVERABILITY.
This Agreement shall supersede any existing agreements between the
parties containing general terms and conditions for repurchase transactions.
Each provision and agreement herein shall be treated as separate and independent
from any other provision or agreement herein and shall be enforceable
notwithstanding the unenforceability of any such other provision or agreement.
13. NON-ASSIGNABILITY; THIRD PARTY BENEFICIARIES.
Except for the assignment of the Buyer's rights hereunder pursuant to
any of its Related Documents, the rights and obligations of the parties under
this Agreement and under any Transaction shall not be assigned by either party
without the prior written consent of the other party and, so long as no Insurer
Default shall have occurred and be continuing, the Security Insurer. Subject to
the foregoing, this Agreement and each Transaction shall be binding upon and
shall inure to the benefit of the parties and their respective successors and
permitted assigns. The Security Insurer, the Agent and the Noteholders and
their successors and assigns shall be third-party beneficiaries to the
provisions of this Agreement, and shall be entitled to rely upon and to enforce
directly such provisions as long as, with respect to the Security Insurer, no
Insurer Default shall have occurred and be continuing. Except as set forth in
this SECTION 13, nothing in this Agreement, express or implied, shall give to
any Person, other than the parties hereto and their successors and permitted
assigns hereunder, any benefit or any legal or equitable right, remedy or claim
under this Agreement.
14. GOVERNING LAW.
THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK
WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES THEREOF.
15. NO WAIVERS, ETC.
No express or implied waiver of any Event of Default by either party
shall constitute a waiver of any other Event of Default and no exercise of any
remedy hereunder by any party shall constitute a waiver of its right to exercise
any other remedy hereunder. Except as set forth in the next sentence, no
modification or waiver of any provision of this Agreement and no consent by any
party to a departure herefrom shall be effective unless and until such shall be
in writing and duly executed by both of the parties hereto, and if such
modification or waiver would have a material adverse effect on the Noteholders,
the Agent, and, so long as no Insurer Default shall have occurred and be
continuing, the Security Insurer. The parties hereto
18
<PAGE>
acknowledge the provisions of that certain Fee and Commitment Letter dated as
of the date hereof between the Buyer and the Seller and agree that the
provisions of such Letter shall be binding between them as if set forth
herein in full.
16. OPINIONS OF COUNSEL.
Seller shall, on the date hereof and, upon the request of Buyer or
the Agent, no more than once each calendar year, cause to be delivered to
Buyer, the Agent and the Security Insurer, with reliance thereon permitted as
to any person or entity that is granted a pledge of the Receivables and the
other Seller Conveyed Property, a favorable opinion or opinions of counsel
with respect to the matters set forth in EXHIBIT A hereto, in form and
substance acceptable to Buyer.
17. ADDITIONAL CONDITIONS.
(a) Prior to entering into the initial Transaction under this
Agreement, each of the Servicing Agreement, the Purchase Agreement, the
Security Agreement, the Spread Account Agreement, the Insurance Agreement,
the Indenture and the Custodian Agreement, in a form satisfactory to Buyer
shall have been executed and delivered by the parties thereto.
(b) On or before the date of delivery of this Agreement, Seller
shall, at Seller's own cost and expense, deliver to Buyer:
(i) a favorable opinion or opinions of counsel with respect to the
matters set forth in EXHIBIT A hereto, in form and substance acceptable to
Buyer and its counsel;
(ii) a certificate of the Secretary of State of the State of
Minnesota, dated reasonably near the date hereof, listing all charter
documents with respect to Olympic on file in his office and stating that
Olympic is duly organized and existing, has filed all annual reports and
has paid all franchise taxes and is in good standing in the State of
Minnesota;
(iii) a certificate, dated the date of delivery thereof, of
Olympic's Secretary as to (a) the charter documents of Olympic (with a copy
of Olympic's By-laws attached); (b) the attached resolutions of the Board
of Directors of Olympic authorizing Olympic to enter into the transactions
contemplated hereby; and (c) the good standing of Olympic;
(iv) evidence of filing with the appropriate filing offices in the
State of Minnesota a UCC-1 Financing Statement against Olympic in favor of
Seller;
(v) a certificate of the Secretary of the State of Delaware, dated
reasonably near the date hereof, listing all
19
<PAGE>
charter documents with respect to Seller on file in his office and
stating that Seller is duly organized and existing, has filed all annual
reports and has paid all franchise taxes and is in good standing in the
State of Delaware;
(vi) a certificate, dated the date of delivery thereof, of Seller's
Secretary as to (a) the charter documents of Seller (with a copy of
Seller's By-laws attached); (b) the attached resolutions of the Board of
Directors of Seller authorizing Seller to enter into the transactions
contemplated hereby; and (c) the good standing of Seller and that the
Seller is qualified to do business in Minnesota;
(vii) evidence of filing with the appropriate filing offices in
the State of Minnesota a UCC-1 Financing Statement against Seller; and
(viii) such other information and certificates as Buyer shall
reasonably request.
(c) Seller shall enter into any Transaction under this Agreement only
upon the satisfaction of each of the following conditions on or prior to the
related Purchase Date:
(i) Buyer shall have received a Confirmation with the updated
Receivables Schedule attached thereto with respect to the Purchased
Receivables being transferred on the related Purchase Date;
(ii) As of such Purchase Date, Seller shall not have been insolvent
nor shall Seller have been rendered insolvent by such Transaction nor shall
Seller be aware of any pending insolvency;
(iii) Seller shall have taken any action requested by Buyer to
maintain the first perfected security interest of Buyer in the Purchased
Receivables and the other Seller Conveyed Property;
(iv) No selection procedures believed by Seller to be adverse to the
interests of Buyer or the Noteholders shall have been utilized by Olympic
or Seller in selecting such Purchased Receivables;
(v) No material change shall have occurred in the underwriting
standards of Olympic in effect on the Closing Date (INTER ALIA, not enter
the subprime market) without the prior written consent of the Agent;
20
<PAGE>
(vi) The Insurer Notice Date shall not have occurred;
(vii) The provisions of SECTION 3.10(A) of the Servicing Agreement
shall be complied with in connection with such Transaction.
18. FURTHER ASSURANCE. Seller shall promptly provide such further assurance or
agreements as Buyer may request in order to effect the purposes of this
Agreement.
19. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which counterparts shall be deemed to be an original, and
such counterparts shall constitute but one and the same instrument.
20. BINDING TERMS. All of the covenants, stipulations, promises and agreements
in the Agreement shall bind the successors and permitted assigns of the parties
hereto, whether expressed or not.
21. COVENANT OF THE SELLER. Seller hereby agrees that it shall not (i) take
any action prohibited or not authorized by its certificate of incorporation or
(ii) without the prior written consent of the Agent and (so long as no Insurer
Default shall have occurred and be continuing) the Security Insurer and without
giving prior written notice to the Rating Agencies, amend its certificate of
incorporation.
22. LIMITED RECOURSE. Notwithstanding anything to the contrary contained
herein, the obligations of the Buyer and the Seller hereunder shall not be
recourse to the Buyer or the Seller, respectively (or any person or organization
acting on behalf of the Buyer or the Seller or any affiliate, employee,
incorporator, stockholder, officer or director of the Buyer or the Seller),
other than to the Receivables and the other Seller Conveyed Property and the
proceeds thereof as provided in this Agreement, the Security Agreement and the
Servicing Agreement. Each of the Buyer and the Seller hereby agree that to the
extent such funds are insufficient or assets are unavailable to pay any amounts
owing to it from the other party pursuant to this Agreement, it shall not
constitute a claim against the other party.
23. NONPETITION COVENANT. Notwithstanding any prior termination of this
Agreement, each of the Seller and the Buyer agrees that it shall not, prior to
one year and one day after the Final Distribution Date, acquiesce, petition or
otherwise 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 other 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 other or all or any part of its property or assets or
ordering the winding up or liquidation of
21
<PAGE>
the affairs of the other. The Buyer and the Seller agree that damages will
be an inadequate remedy for breach of this covenant and that this covenant
may be specifically enforced.
22
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Repurchase
Agreement to be executed by their duly authorized officers as of the date
first set forth above.
ARCADIA RECEIVABLES CONDUIT CORP.
By: /s/ illegible
--------------------------------
Authorized Signature
OLYMPIC RECEIVABLES FINANCE CORP.
By: /s/ illegible
---------------------------------
Authorized Signature
[Signature Page to Repurchase Agreement]
<PAGE>
EXHIBIT A
OPINIONS OF COUNSEL TO SELLER AND OLYMPIC
[Opinions of Counsel to Seller]
(i) Olympic Receivables Finance Corp. (the "Seller") has been duly
incorporated and is validly existing under the laws of the State of Delaware,
with corporate power and authority to own its properties and to transact the
business in which it is now engaged, and the Seller is duly qualified to do
business and is in good standing as a foreign corporation in the State of
Minnesota.
(ii) The Seller has full corporate power and authority to execute
and deliver the Purchase Agreement, the Repurchase Agreement, the Servicing
Agreement, the Security Agreement, the Insurance Agreement and the Spread
Account Agreement and to perform its obligations thereunder and has all
necessary licenses and approvals under federal and state law to transact the
business in which it is now engaged.
(iii) Each of the Purchase Agreement, the Repurchase Agreement, the
Servicing Agreement, the Security Agreement, the Insurance Agreement and the
Spread Account Agreement has been duly authorized, executed and delivered by
the Seller and, as to the Seller, is a legal, valid and binding obligation,
enforceable against the Seller in accordance with its terms (except as may be
limited by bankruptcy and insolvency laws and general principles of equity).
(iv) The compliance by the Seller with all of the provisions of the
Purchase Agreement, the Repurchase Agreement, the Servicing Agreement, the
Security Agreement, the Insurance Agreement and the Spread Account Agreement
will not (1) conflict with or result in any breach which would constitute a
default under, or except as contemplated by the Repurchase Agreement, result
in the creation or imposition of any Lien, charge or encumbrance upon any of
the property or assets of the Seller pursuant to any material terms of, any
indenture, loan agreement or other agreement or instrument for borrowed money
to which the Seller is a party or by which the Seller may be bound or to
which any of the property or assets of the Seller is subject, (2) violate any
provisions of the Certificate of Incorporation or the By-Laws of the Seller,
or (3) violate or conflict with any order, judgment, decree, writ,
injunction, rule or regulation applicable to the Seller of any court or any
federal, state or other regulatory authority or other governmental body
having jurisdiction over the Seller.
(v) No consent, approval, authorization or other order of, or
filing with, any court or any federal, state or other regulatory authority or
other governmental body having jurisdiction over the Seller, which has not
already been made or obtained, is required for the execution, delivery, or
performance
<PAGE>
of the Purchase Agreement, the Repurchase Agreement, the Servicing Agreement,
the Security Agreement, the Insurance Agreement and the Spread Account
Agreement except for the filing of any financing statements required to
perfect the Buyer's and the Seller's respective interests in the Receivables.
(vi) The Seller is not an "investment company" nor is it controlled
by an "investment company" within the meaning of the Investment Company Act
of 1940, as amended.
(vii) There is no action, suit, investigation, litigation or
proceeding pending or, to the best of our knowledge, threatened before any
court, governmental agency or arbitrator (1) against the Seller or any of its
properties, (2) asserting the invalidity of the Purchase Agreement, the
Repurchase Agreement, the Servicing Agreement, the Security Agreement, the
Insurance Agreement or the Spread Account Agreement, (3) seeking to prevent
the consummation of any of the transactions contemplated by the Purchase
Agreement, the Repurchase Agreement, the Servicing Agreement, the Security
Agreement, the Insurance Agreement or the Spread Account Agreement or (4)
challenging the enforceability of the Purchase Agreement, the Repurchase
Agreement, the Servicing Agreement, the Security Agreement, the Insurance
Agreement and the Spread Account Agreement.
(viii) If the transfer of the Receivables from the Seller to the
Buyer does not constitute an absolute sale, the Repurchase Agreement grants
to the Buyer a security interest in the Seller's rights in the Receivables
and the proceeds thereof, which security interest is a first priority
perfected security interest.
ADDRESSEES:
Moody's Investors Service, Inc.
Standard & Poor's Ratings Group
Arcadia Receivables Conduit Corp.
Bank of America National Trust and Savings Association
Financial Security Assurance Inc.
Norwest Bank Minnesota, National Association
A-2
<PAGE>
[Opinions of Counsel to Olympic]
(i) Olympic Financial Ltd. ("Olympic") has been duly incorporated
and is validly existing as a corporation under the laws of the State of
Minnesota, with corporate power and authority to own its properties and to
transact the business in which it is now engaged, and Olympic is duly
qualified to do business and is in good standing in each State of the United
States where the nature of its business requires it to be so qualified.
(ii) Olympic has full corporate power and authority to execute and
deliver the Purchase Agreement, the Servicing Agreement, the Security
Agreement, the Insurance Agreement, the Spread Account Agreement and the
Custodian Agreement and to perform its obligations thereunder.
(iii) Each of the Purchase Agreement, the Servicing Agreement, the
Security Agreement, the Insurance Agreement, the Spread Account Agreement and
the Custodian Agreement has been duly authorized, executed and delivered by
Olympic and, as to Olympic, is a legal, valid and binding obligation
enforceable in accordance with its terms (except as may be limited by
bankruptcy and insolvency laws and general principles of equity).
(iv) The execution and delivery by Olympic of, and the performance
by Olympic of the provisions of each of the Purchase Agreement, the Servicing
Agreement, the Security Agreement, the Insurance Agreement, the Spread
Account Agreement and the Custodian Agreement will not (1) conflict with or
result in any breach which would constitute a default under, or result in the
creation or imposition of any Lien, charge or encumbrance upon any of the
property or assets of Olympic pursuant to any material terms of, any
indenture, loan agreement or other agreement or instrument for borrowed money
to which Olympic is a party or by which Olympic may be bound or to which any
of the property or assets of Olympic is subject, (2) violate any provisions
of the Articles of Incorporation or the By-Laws of Olympic or (3) violate or
conflict with any order, judgment, decree, writ, injunction of any court or
any federal, state or other regulatory authority or other governmental body
having jurisdiction over Olympic or any rule or regulation applicable to
Olympic.
(v) No consent, approval, authorization or other order of, or
filing with, any court or any federal, state or other regulatory authority or
other governmental body having jurisdiction over Olympic, which has not
already been made or obtained, is required in connection with the execution,
delivery or performance of the transactions contemplated by the Purchase
Agreement, the Servicing Agreement, the Security Agreement, the Insurance
Agreement, the Spread Account Agreement and the Custodian Agreement.
A-3
<PAGE>
(vi) There is no action, suit, investigation, litigation or
proceeding pending or, to the best of our knowledge, threatened before any
court, governmental agency or arbitrator (1) against Olympic or any of its
properties, (2) asserting the invalidity of the Purchase Agreement, the
Servicing Agreement, the Security Agreement, the Insurance Agreement, the
Spread Account Agreement and the Custodian Agreement, (3) seeking to prevent
the consummation of any of the transactions contemplated by the Purchase
Agreement, the Servicing Agreement, the Security Agreement, the Insurance
Agreement, the Spread Account Agreement and the Custodian Agreement, or (4)
challenging the enforceability of the Purchase Agreement, the Servicing
Agreement, the Security Agreement, the Insurance Agreement, the Spread
Account Agreement and the Custodian Agreement.
(vii) The Receivables constitute "chattel paper" as such term
is defined in Article 9 of the Uniform Commercial Code in effect in Minnesota.
(viii) Should Olympic become the debtor in a case under the
Bankruptcy Code, if the matter were properly briefed and presented to a
court, the court would hold that (1) the transfer of the Receivables (and the
collections thereon) by Olympic to the Seller in the manner set forth in the
Purchase Agreement would constitute an absolute sale of the Receivables (and
the collections thereon), rather than a borrowing by Olympic secured by the
Receivables (and the collections thereon), so that the Receivables would not
be the property of the estate of Olympic under Section 541(a) of the
Bankruptcy Code, and thus (2) the Seller's rights to the Receivables (and the
collections thereon) would not be impaired by the operation of Section 362(a)
of the Bankruptcy Code.
(ix) Under present reported decisional authority and statutes
applicable to bankruptcy cases, should Olympic become the debtor in a case
under the Bankruptcy Code, and the Seller would not otherwise properly be a
debtor in a case under the Bankruptcy Code, and if the matter were properly
briefed and presented to a court exercising bankruptcy jurisdiction, the
court, exercising reasonable judgment after full consideration of all
relevant factors, should not order, over the objection of the Buyer, the
Indenture Trustee on behalf of the Noteholders or the Security Insurer, the
substantive consolidation of the assets and liabilities of the Seller with
those of Olympic.
ADDRESSEES:
Moody's Investors Service, Inc.
Standard & Poor's Ratings Group
Arcadia Receivables Conduit Corp.
Bank of America National Trust and Savings Association
Financial Security Assurance Inc.
Norwest Minnesota, National Association
A-4
<PAGE>
EXHIBIT B
ADDRESSES FOR NOTICES AND
OTHER COMMUNICATIONS
Olympic Receivables Finance Corp.
7825 Washington Avenue South
Suite 410
Minneapolis, Minnesota 55439-2435
Attention: Treasurer
Telecopier No.: (612) 942-0015
Arcadia Receivables Conduit Corp.
7825 Washington Avenue South
Suite 900
Minneapolis, Minnesota 55439-2435
Attention: Treasurer
Telecopier No.: (612) 942-0015<PAGE>
<PAGE>
EXHIBIT C
FORM OF CONFIRMATION LETTER
[date]
Arcadia Receivables Conduit Corp.
7825 Washington Avenue South
Suite 900
Minneapolis, Minnesota 55439-2435
Attention: Treasurer
Confirmation No.:
Ladies and Gentlemen:
This letter confirms our agreement to sell to you the Purchased Receivables
listed in SCHEDULE A hereto, pursuant to the Repurchase Agreement between us,
dated as of December 3, 1996 (as amended from time to time, the "Agreement"),
as follows:
Purchase Date:
Cut-Off Date:
Purchased Receivables: See SCHEDULE A hereto
1) Product of 0.98 and the Aggregate
Outstanding Principal Balance of
Purchased Receivables that are Premier
Receivables or Classic Receivables that
are not Financed Repossessions being
transferred: $_______
2) Product of 0.85 and the Aggregate
Outstanding Principal Balance of
Purchased Receivables that are Classic
Receivables that are Financed
Repossessions: $_______
3) Purchase Price (sum of 1) and 2)) $_______
Calculation of Amount to be released from the
Collection Account:
The least of
1) Purchase Price: $_______
2) On each such date occurring during the
period from but excluding a
Determination Date through and including
the related Distribution Date:
<PAGE>
a) Amount on deposit in Collection $ -
Account
b) minus amount of distributions or $ -
retentions to be made pursuant to
SECTIONS 3.6(a)(i) THROUGH (ix) of
the Servicing Agreement
c) minus any increase in the WAC $ -
Deficiency Amount above the WAC
Deficiency Amount on such
Determination Date
3) a) Amount on deposit in Collection $ -
Account
b) minus WAC Deficiency Amount on $ -
deposit in Collection Account --------
$ -
--------
--------
The least of 1), 2), and 3): $ -
OLYMPIC RECEIVABLES FINANCE CORP.
By:_____________________________
Responsible Officer
OLYMPIC FINANCIAL LTD.,
as Servicer
By:_____________________________
Responsible Officer
C-2
<PAGE>
EXHIBIT D
FORM OF NOTICE OF REPURCHASE DATE
_________ __, 19__
Arcadia Receivables Conduit Corp.
7825 Washington Avenue South
Suite 900
Minneapolis, Minnesota 55439-2435
Attention: Treasurer
Norwest Bank Minnesota, National Association
Sixth Street and Marquette Avenue
Minneapolis, Minnesota 55479-0070
Attention: Corporate Trust Department
Financial Security Assurance Inc.
350 Park Avenue
New York, New York 10022
Attention: Surveillance Department
Ladies and Gentlemen:
Reference is made to the Repurchase Agreement between Arcadia
Receivables Conduit Corp., as Buyer, and Olympic Receivables Finance Corp.,
as Seller, dated as of December 3, 1996 (the "Repurchase Agreement").
Capitalized terms used herein shall have the meanings given to them in the
Repurchase Agreement.
Notice is hereby given that on __________ __, 19__ (the "Repurchase
Date") [Note: Date specified must be at least one Business Days after the
letter is delivered] we will repurchase the Receivables listed on SCHEDULE 1
hereto with an aggregate outstanding Principal Balance of $__________ and an
aggregate Repurchase Price of $_________.
The Seller hereby represents and warrants that the Receivables
selected by the Seller to be repurchased on the Repurchase Date, if less than
all of the Receivables transferred to the Buyer under the Repurchase
Agreement that have not been repurchased as of the date hereof, were selected
for repurchase randomly and that no selection procedures adverse to the
Buyers or the Noteholders were utilized in selecting the Receivables for
repurchase.
OLYMPIC RECEIVABLES FINANCE CORP.
By:______________________
Responsible Officer
<PAGE>
EXHIBIT E
FORM OF RECONVEYANCE OF RECEIVABLES
RECONVEYANCE OF RECEIVABLES dated as of _________ __, 19__ by and
between Arcadia Receivables Conduit Corp., a Delaware Corporation (the
"Buyer"), and OLYMPIC RECEIVABLES FINANCE CORP., a Delaware corporation (the
"Seller").
WHEREAS, the Buyer and the Seller are parties to a Repurchase
Agreement dated as of December 3, 1996 (hereinafter as such agreement may
have been, or may from time to time be, amended, supplemented or otherwise
modified, the "Repurchase Agreement");
WHEREAS, pursuant to the Repurchase Agreement the Buyer is required
to reconvey and the Seller is required to repurchase the Purchased
Receivables (as such term is defined in the Repurchase Agreement) listed on
SCHEDULE 1 hereto;
NOW THEREFORE, the Buyer and the Seller hereby agree as follows:
1. DEFINED TERMS. All terms defined in the Repurchase Agreement
and used herein shall have such defined meanings when used herein, unless
otherwise defined herein.
"REPURCHASE DATE" shall mean ________ __, 19__.
2. RECONVEYANCE OF RECEIVABLES.
(a) Upon deposit of the Repurchase Price in respect thereof by the
Seller, the Buyer does hereby reconvey to the Seller, without recourse, on
the Repurchase Date, all right, title and interest of the Buyer in and to
each Purchased Receivable listed on SCHEDULE 1 hereto.
(b) In connection with such reconveyance, the Buyer agrees to
execute and deliver, at the Seller's expense, to the Seller on or prior to
the Repurchase Date, such UCC termination statements prepared by the Seller
as the Seller may reasonably request, evidencing the release by the Buyer of
its lien on the Receivables.
3. COUNTERPARTS. The Reconveyance may be executed in two or more
counterparts (and by different parties on separate counterparts), each of
which shall be an original, but all of which together shall constitute one
and the same instrument.
4. GOVERNING LAW. This Reconveyance shall be construed in
accordance with the laws of the State of New York, without reference to its
conflict of law provisions.
IN WITNESS WHEREOF, the undersigned have caused this Reconveyance
of Receivables to be duly executed and delivered by
<PAGE>
their respective duly authorized officers on the day and year first above
written.
ARCADIA RECEIVABLES CONDUIT CORP.,
Buyer
By:___________________________
Responsible Officer
OLYMPIC RECEIVABLES FINANCE CORP.,
Seller
By:__________________________
Responsible Officer
E-2
<PAGE>
EXHIBIT F
FORM OF NOTICE OF REQUEST FOR AN ADVANCE
_________ __, 19__
Arcadia Receivables Conduit Corp.
7825 Washington Avenue South
Suite 900
Minneapolis, Minnesota 55439-2435
Attention: Treasurer
Norwest Bank Minnesota, National Association
Sixth Street and Marquette Avenue
Minneapolis, Minnesota 55479-0070
Attention: Corporate Trust Department
Ladies and Gentlemen:
Reference is made to the Repurchase Agreement between Arcadia
Receivables Conduit Corp., as Buyer, and Olympic Receivables Finance Corp.,
as Seller, dated as of December 3, 1996 (the "Repurchase Agreement").
Capitalized terms used herein shall have the meanings given to them in the
Repurchase Agreement.
Notice is hereby given of our request for an Advance in the amount
of $_________ (Note: such amount shall be at least $5 million) to be made on
_________ __, 19__ [Note: Date specified must be at least one Business Day
after letter is delivered unless request is for $15,000,000 or less] to be
deposited into the Collection Account. The difference between the aggregate
outstanding principal amount of Advances, including the Advance being
requested hereby ($___________) and the aggregate outstanding Principal
Balance of Receivables ($__________) is less than $5,000,000.
Requested Tranche Periods:
OLYMPIC RECEIVABLES FINANCE CORP.
By:___________________________
Responsible Officer
<PAGE>
SCHEDULE A
REPRESENTATIONS AND WARRANTIES OF SELLER
1. CHARACTERISTICS OF RECEIVABLES. Each Receivable (A)
was originated by a Dealer for the retail sale of a Financed Vehicle in the
ordinary course of such Dealer's business and such Dealer had all necessary
licenses and permits to originate Receivables in the state where such Dealer
was located, was fully and properly executed by the parties thereto, was
purchased by Olympic from such Dealer under an existing Dealer Agreement with
Olympic and was validly assigned by such Dealer to Olympic, (B) contains
customary and enforceable provisions such as to render the rights and
remedies of the holder thereof adequate for realization against the
collateral security, and (C) is a fully amortizing Receivable which provides
for level monthly payments (provided that the payment in the first Monthly
Period and the final Monthly Period of the life of the Receivable may be
minimally different from the level payment) which, if made when due, shall
fully amortize the Amount Financed over the original term.
2. NO FRAUD OR MISREPRESENTATION. Each Receivable was originated
by a Dealer and was sold by the Dealer to Olympic without any fraud or
misrepresentation on the part of such Dealer in either case.
3. COMPLIANCE WITH LAW. All requirements of applicable federal,
state and local laws, and regulations thereunder (including, without
limitation, usury laws, the Federal Truth-in-Lending Act, the Equal Credit
Opportunity Act, the Fair Credit Billing Act, the Fair Credit Reporting Act,
the Fair Debt Collection Practices Act, the Federal Trade Commission Act, the
Magnuson-Moss Warranty Act, the Federal Reserve Board's Regulations "B" and
"Z," the Soldiers' and Sailors' Civil Relief Act of 1940, the Minnesota Motor
Vehicle Retail Installment Sales Act, and state adaptations of the National
Consumer Act and of the Uniform Consumer Credit Code and other consumer
credit laws and equal credit opportunity and disclosure laws) in respect of
all of the Receivables and each and every sale of Financed Vehicles, have
been complied with in all material respects, and each Receivable and the sale
of the Financed Vehicle evidenced by each Receivable complied at the time it
was originated or made and now complies in all material respects with all
applicable legal requirements.
4. ORIGINATION. Each Receivable was originated in the United States.
5. BINDING OBLIGATION. Each Receivable represents the genuine,
legal, valid and binding payment obligation of the Obligor thereon,
enforceable by the holder thereof in accordance with its terms, except (A) as
enforceability may be limited by bankruptcy, insolvency, reorganization or
similar laws affecting the enforcement of creditors' rights generally and by
general principles of equity, regardless of whether such enforceability
<PAGE>
is considered in a proceeding in equity or at law and (B) as such Receivable
may be modified by the application after its Cut-Off Date of the Soldiers'
and Sailors' Civil Relief Act of 1940, as amended; and all parties to each
Receivable had full legal capacity to execute and deliver such Receivable and
all other documents related thereto and to grant the security interest
purported to be granted thereby.
6. NO GOVERNMENT OBLIGOR. No Obligor is the United States of
America or any State or any agency, department, subdivision or
instrumentality thereof.
7. OBLIGOR BANKRUPTCY. At the applicable Cut-Off Date, no Obligor
had been identified on the records of Olympic as being the subject of a
current bankruptcy proceeding.
8. RECEIVABLES SCHEDULE. The information set forth in the most
recent Receivables Schedule delivered to the Buyer or the Agent was true and
correct in all material respects as of the close of business on the
applicable Cut-Off Date.
9. MARKING RECORDS. On each Purchase Date, the portions of the
Electronic Ledger relating to the Receivables will be clearly and
unambiguously marked to show that the Receivables constitute part of the
Seller Conveyed Property and are owned by the Buyer in accordance with the
terms of the Agreement.
10. COMPUTER TAPE. The Computer Tape, computer diskette or other
electronic transmission made available by the Seller to the Buyer on each
Purchase Date was complete and accurate as of the applicable Cut-Off Date,
and includes a description of the same Receivables that are described in the
Receivables Schedule.
11. ADVERSE SELECTION. No selection procedures adverse to the
Buyer or the Noteholders were utilized in selecting the Receivables from
those receivables owned by Olympic which met the selection criteria contained
in the Agreement.
12. CHATTEL PAPER. The Receivables constitute chattel paper within
the meaning of the UCC as in effect in the States of Minnesota and New York.
13. ONE ORIGINAL. There is only one original executed copy of each
Receivable.
14. RECEIVABLE FILES COMPLETE. On the applicable Purchase Date
there exists a complete Receivable File for each Receivable transferred on
such date, and such receivable File is in the possession of the Custodian on
such Purchase Date. A Receivable File pertaining to each Receivable will
contain on the related Purchase Date (a) a fully executed original of the
Receivable, (b) a certificate of insurance, application form for insurance
signed by the Obligor, or a signed representation letter from the Obligor
named in the Receivable pursuant to which the Obligor has agreed to obtain
physical damage insurance for
A-2
<PAGE>
the related Financed Vehicle, or a documented verbal confirmation by an
insurance agent for the Obligor of a policy number for an insurance policy
for the Financed Vehicle, (c) the original Lien Certificate or application
therefor or a letter from the applicable Dealer agreeing unconditionally to
repurchase the related Receivable if the Lien Certificate is not received by
Olympic within 180 days, and (d) a credit application signed by the Obligor
or a copy thereof. Each of such documents which is required to be signed by
the Obligor will have been signed by the Obligor in the appropriate spaces.
All blanks on any form will have been properly filled in and each form will
otherwise have been correctly prepared.
15. RECEIVABLES IN FORCE. No Receivable has been satisfied,
subordinated or rescinded, and the Financed Vehicle securing each such
Receivable has not been released from the lien of the related Receivable in
whole or in part. No provisions of any Receivable have been waived, altered
or modified in any respect since its origination, except by instruments or
documents identified in the Receivable File. No Receivable has been modified
as a result of application of the Soldiers' and Sailors' Civil Relief Act of
1940, as amended.
16. LAWFUL ASSIGNMENT. No Receivable was originated in, or is
subject to the laws of, any jurisdiction, the laws of which would make
unlawful, void or voidable the sale, transfer and assignment of such
Receivable under this Agreement or any Assignment Agreement or pursuant to
transfers of the Notes.
17. GOOD TITLE. No Receivable has been sold, transferred, assigned
or pledged by Olympic to any Person other than the Seller unless the same was
released prior to the transfer of such Receivable to the Seller or by the
Seller to any Person other than the Buyer; immediately prior to the
conveyance of the Receivables pursuant to the Purchase Agreement, Olympic was
the sole owner of and had good and indefeasible title thereto, free and clear
of any Lien other than Liens created pursuant to its Related Documents.
Immediately prior to the conveyance of the Receivables to the Buyer pursuant
to this Agreement and any Transaction, the Seller was the sole owner thereof
and had good and indefeasible title thereto, free of any Lien; and, upon
execution and delivery of this Agreement and any Confirmation by the Seller,
the Buyer shall have good and indefeasible title to and will be the sole
owner of such Receivables, free of any Lien. No Dealer has a participation
in, or other right to receive, proceeds of any Receivable. Neither Olympic
nor the Seller has taken any action to convey any right to any Person that
would result in such Person having a right to payments received under the
related Insurance Policies or the related Dealer Agreements or Dealer
Assignments or to payments due under such Receivables.
18. SECURITY INTEREST IN FINANCED VEHICLE. Each Receivable creates
a valid, binding and enforceable first priority security interest in favor of
Olympic in the Financed
A-3
<PAGE>
Vehicle. The Lien Certificate and original certificate of title for each
Financed Vehicle show, or if a new or replacement Lien Certificate is being
applied for with respect to such Financed Vehicle the Lien Certificate will
be received within 180 days of the related Purchase Date and will show,
Olympic named as the original secured party under each Receivable as the
holder of a first priority security interest in such Financed Vehicle. With
respect to each Receivable for which the Lien Certificate has not yet been
returned from the Registrar of Titles, Olympic has received written evidence
from the related Dealer that such Lien Certificate showing Olympic as first
lienholder has been applied for, or a letter from the applicable Dealer
agreeing unconditionally to repurchase the related Receivable if the
Certificate of title is not received within 180 days. Olympic's security
interest has been validly assigned by Olympic to the Seller pursuant to the
Purchase Agreement and by the Seller to the Buyer pursuant to this Agreement.
Immediately after the sale, transfer and assignment thereof to the Buyer,
each Receivable will be secured by an enforceable and perfected first
priority security interest in the Financed Vehicle in favor of the Buyer as
secured party, which security interest is prior to all other liens upon and
security interests in such Financed Vehicle which now exist or may hereafter
arise or be created (except, as to priority, for any lien for taxes, labor or
materials affecting a Financed Vehicle). As of the applicable Cut-Off Date,
there were no Liens or claims for taxes, work, labor or materials affecting a
Financed Vehicle which are or may be Liens prior or equal to the lien of the
related Receivable.
19. ALL FILINGS MADE. All filings (including, without limitation,
UCC filings) required to be made by any Person and actions required to be
taken or performed by any Person in any jurisdiction to give the Buyer a
first priority perfected lien on, or ownership interest in, the Receivables
and the proceeds thereof and the other Seller Conveyed Property have been
made, taken or performed.
20. NO IMPAIRMENT. Neither Olympic nor the Seller has done
anything to convey any right to any Person that would result in such Person
having a right to payments due under a Receivable or otherwise to impair the
rights of the Buyer and the Indenture Trustee on behalf of the Noteholders in
any Receivable or the proceeds thereof.
21. RECEIVABLE NOT ASSUMABLE. No Receivable is assumable by
another Person in a manner which would release the Obligor thereof from such
Obligor's obligations to the Seller with respect to such Receivable.
22. NO DEFENSES. No Receivable is subject to any right of
rescission, setoff, counterclaim or defense and no such right has been
asserted or threatened with respect to any Receivable.
23. NO DEFAULT. There has been no default, breach, violation or
event permitting acceleration under the terms of any
A-4
<PAGE>
Receivable (other than payment delinquencies of not more than 30 days), and
no condition exists or event has occurred and is continuing, that with
notice, the lapse of time or both would constitute a default, breach,
violation or event permitting acceleration under the terms of any Receivable,
and there has been no waiver of any of the foregoing. As of the applicable
Cut-Off Date, no Financed Vehicle had been repossessed.
24. INSURANCE. As of the Purchase Date for the related Receivable,
each Financed Vehicle is covered by a comprehensive and collision insurance
policy (i) in an amount at least equal to the lesser of (a) its maximum
insurable value or (b) the principal amount due from the Obligor under the
related Receivable, (ii) naming Olympic as loss payee and (iii) insuring
against loss and damage due to fire, theft, transportation, collision and
other risks generally covered by comprehensive and collision coverage. Each
Receivable requires the Obligor to maintain physical loss and damage
insurance, naming Olympic and its successors and assigns as additional
insured parties, and each Receivable permits the holder thereof to obtain
physical loss and damage insurance at the expense of the Obligor if the
Obligor fails to do so. No Financed Vehicle was or had previously been
insured under a policy of Force-Placed Insurance on the related Cut-Off Date.
25. PAST DUE. As of the applicable Cut-Off Date, no Receivable
being transferred on the related Purchase Date was more than 30 days past due
and no funds have been advanced by the Seller, the Servicer, and Dealer, or
anyone acting on behalf of any of them in order to cause any Receivable to
satisfy such requirement.
26. REMAINING PRINCIPAL BALANCE. As of the applicable Cut-Off
Date, each Receivable had a remaining principal balance equal to or greater
than $500.00 and the Principal Balance of each Receivable set forth in the
most recent Receivables Schedule delivered to the Buyer or the Agent is true
and accurate in all material respects.
27. ORIGINAL MATURITY. Each Receivable had an original maturity of
at least 12 months but not more than 84 months and no more than 10% of the
Receivables had an original maturity of greater than 72 months. Each
Receivable with an original maturity of greater than 72 months is secured by
a Financed Vehicle that is a new automobile or an automobile that is less
than one year old. No more than 5% of the aggregate outstanding Principal
Balance of the Receivables are Classic Receivables secured by Financed
Vehicles that are financed repossessions. No more than 65% of the aggregate
outstanding Principal Balance of the Receivables are Classic Receivables.
28. COMPLIANCE WITH UNDERWRITING GUIDELINES. Each Receivable was
originated pursuant to Olympic's underwriting standards in effect on the
Closing Date which have not, without the prior written consent of the Agent,
been materially changed
A-5
<PAGE>
since the Closing Date.
A-6
<PAGE>
<PAGE>
EXECUTION COPY
- ------------------------------------------------------------------------------
SERVICING AGREEMENT
Dated as of December 3, 1996
among
ARCADIA RECEIVABLES CONDUIT CORP.
Issuer
OLYMPIC RECEIVABLES FINANCE CORP.
Seller
OLYMPIC FINANCIAL LTD.
In its individual capacity and as Servicer
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION
Agent
and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
Backup Servicer, Collateral Agent and Indenture Trustee
- ------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
----
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE I
DEFINITIONS
Section 1.1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.2. Usage of Terms . . . . . . . . . . . . . . . . . . . . . . . 23
Section 1.3. Calculations . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 1.4. Section References . . . . . . . . . . . . . . . . . . . . . 23
Section 1.5. No Recourse . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 1.6. Material Adverse Effect . . . . . . . . . . . . . . . . . . 24
ARTICLE II
ADMINISTRATION AND SERVICING OF RECEIVABLES
Section 2.1. Duties of the Servicer . . . . . . . . . . . . . . . . . . . 24
Section 2.2. Collection of Receivable Payments; Modifications of
Receivables; Lockbox Agreements. . . . . . . . . . . . . . . 25
Section 2.3. Realization Upon Receivables . . . . . . . . . . . . . . . . 28
Section 2.4. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 2.5. Maintenance of Security Interests in Vehicles . . . . . . . 31
Section 2.6. Covenants, Representations, and Warranties of Servicer . . . 32
Section 2.7. Purchase of Receivables Upon Breach of Covenant . . . . . . 34
Section 2.8. Total Servicing Fee; Payment of Certain Expenses by
Servicer . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 2.9. Servicer's Certificate . . . . . . . . . . . . . . . . . . . 35
Section 2.10. Annual Statement as to Compliance; Notice of Servicer
Termination Event. . . . . . . . . . . . . . . . . . . . . . 35
Section 2.11. Annual Independent Accountants' Report . . . . . . . . . . . 36
Section 2.12. Access to Certain Documentation and Information Regarding
Receivables . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 2.13. Monthly Tape . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 2.14. Retention and Termination of Servicer . . . . . . . . . . . 38
Section 2.15. Fidelity Bond . . . . . . . . . . . . . . . . . . . . . . . 39
Section 2.16. Duties of the Servicer under the Indenture . . . . . . . . . 39
Section 2.17. Collecting Lien Certificates Not Delivered on the
Purchase Date . . . . . . . . . . . . . . . . . . . . . . . 39
Section 2.18. Accountants' Review of Receivable Files . . . . . . . . . . 39
<PAGE>
ARTICLE III
DISTRIBUTIONS; STATEMENTS TO NOTEHOLDERS
Section 3.1. Secured Accounts . . . . . . . . . . . . . . . . . . . . . . 40
Section 3.2. Collections . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 3.3. Application of Collections . . . . . . . . . . . . . . . . . 42
Section 3.4. Monthly Advances . . . . . . . . . . . . . . . . . . . . . . 43
Section 3.5. Additional Deposits . . . . . . . . . . . . . . . . . . . . 44
Section 3.6. Distributions . . . . . . . . . . . . . . . . . . . . . . . 45
Section 3.7. Statements to Noteholders . . . . . . . . . . . . . . . . . 48
Section 3.8. Indenture Trustee as Agent; Calculation of Weighted Average
APR, WAC Deficiency Amounts, Basis Fee Percent and Advance
Interest Rate . . . . . . . . . . . . . . . . . . . . . . . 48
Section 3.9. Eligible Accounts . . . . . . . . . . . . . . . . . . . . . 49
Section 3.10. Additional Withdrawals from the Collection Account . . . . . 49
Section 3.11. Cross-Collateralization with the Spread
Account Agreement. . . . . . . . . . . . . . . . . . . . . . 50
ARTICLE IV
THE SERVICER
Section 4.1. Liability of Servicer; Indemnities . . . . . . . . . . . . . 50
Section 4.2. Merger or Consolidation of, or Assumption of the Obligations
of, the Servicer or Backup Servicer. . . . . . . . . . . . . 52
Section 4.3. Limitation on Liability of Servicer, Backup Servicer and
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 4.4. Delegation of Duties . . . . . . . . . . . . . . . . . . . . 54
Section 4.5. Servicer and Backup Servicer Not to Resign . . . . . . . . . 54
ARTICLE V
SERVICER TERMINATION EVENTS
Section 5.1. Servicer Termination Event . . . . . . . . . . . . . . . . . 55
Section 5.2. Consequences of a Servicer Termination Event . . . . . . . 57
Section 5.3. Appointment of Successor . . . . . . . . . . . . . . . . . . 58
Section 5.4. Notification to Noteholders . . . . . . . . . . . . . . . . 60
Section 5.5. Waiver of Past Defaults . . . . . . . . . . . . . . . . . . 60
ARTICLE VI
MISCELLANEOUS PROVISIONS
Section 6.1. Amendment . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 6.2. Protection of Title to Seller Conveyed Property . . . . . . 61
Section 6.3. Governing Law . . . . . . . . . . . . . . . . . . . . . . . 64
ii
<PAGE>
Section 6.4. Severability of Provisions . . . . . . . . . . . . . . . . . 64
Section 6.5. Assignment . . . . . . . . . . . . . . . . . . . . . . . . . 64
Section 6.6. Third-Party Beneficiaries . . . . . . . . . . . . . . . . . 64
Section 6.7. Disclaimer by Security Insurer . . . . . . . . . . . . . . . 64
Section 6.8. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . 65
Section 6.9. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Section 6.10. Interest Rate Protection . . . . . . . . . . . . . . . . . . 65
EXHIBITS
Exhibit A - Servicing Policies and Procedures
Exhibit B - Form of Servicer's Certificate
Exhibit C - Form of Note for Intercompany Indebtedness
iii
<PAGE>
THIS SERVICING AGREEMENT, dated as of December 3, 1996, is made among
ARCADIA RECEIVABLES CONDUIT CORP., a Delaware corporation (the "Issuer"),
OLYMPIC RECEIVABLES FINANCE CORP., a Delaware corporation, as Seller (the
"Seller"), OLYMPIC FINANCIAL LTD., a Minnesota corporation, in its individual
capacity and as Servicer (in its individual capacity, "OFL"; in its capacity as
Servicer, the "Servicer"), BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, a national banking association, in its capacity as Agent (in such
capacity as administrator for Receivables Capital Corporation and as agent for
certain liquidity purchasers, the "Agent"), and NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, a national banking association, as Backup Servicer (in such
capacity the "Backup Servicer"), as Collateral Agent (in such capacity the
"Collateral Agent") and as Indenture Trustee (in such capacity the "Indenture
Trustee").
In consideration of the mutual agreements herein contained, and of
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1. DEFINITIONS. All terms defined in the Spread Account
Agreement, the Security Agreement, the Repurchase Agreement, the Purchase
Agreement, the Note Purchase Agreement or the Indenture (as defined below) shall
have the same meaning in this Agreement. Whenever capitalized and used in this
Agreement, the following words and phrases, unless the context otherwise
requires, shall have the following meanings:
ACCOUNTANTS' REPORT: The report of a firm of nationally recognized
independent accountants described in Section 2.11.
ACCOUNTING DATE: With respect to a Distribution Date, the last day of
the Monthly Period immediately preceding such Distribution Date.
ADMINISTRATIVE RECEIVABLE: With respect to any Monthly Period, a
Receivable which the Servicer is required to purchase pursuant to Section 2.7 or
which OFL has elected to purchase pursuant to Section 2.4(c).
ADVANCE INTEREST CARRYOVER SHORTFALL: With respect to any
Distribution Date, the excess of the Advance Monthly Interest Distributable
Amount for the preceding Distribution Date and any outstanding Advance Interest
Carryover Shortfall on such preceding Distribution Date, over the amount in
respect of interest that is actually deposited in the Note Distribution Account
on such preceding Distribution Date, plus interest on the amount of interest due
but not paid with respect to the Advances
<PAGE>
on the preceding Distribution Date, to the extent permitted by law, at the
Advance Interest Rate from such preceding Distribution Date through the
current Distribution Date.
ADVANCE INTEREST DISTRIBUTABLE AMOUNT: With respect to any
Distribution Date, the sum of the Advance Monthly Interest Distributable Amount
for such Distribution Date and the Advance Interest Carryover Shortfall for such
Distribution Date.
ADVANCE INTEREST RATE: With respect to each Interest Period or any
shorter period for which interest accrues, a per annum rate determined in
arrears of the daily weighted average cost of funding of the Noteholders'
purchase or carrying of the Notes during such Interest Period or any shorter
period for which interest accrues, which shall be: (A) prior to the occurrence
of an Amortization Event, (i) the CP Rate plus 0.20%, to the extent the purchase
or carrying of Notes issued pursuant to the Indenture is funded by the
Noteholders by issuing Commercial Paper Notes, or (ii) the Offshore Rate plus
the Applicable Margin, to the extent the purchase or carrying of Notes issued
pursuant to the Indenture is not so funded by the Noteholders and (B) after the
occurrence of an Amortization Event, the Reference Rate; PROVIDED, that, from
and after the occurrence of an Amortization Event, the Advance Interest Rate
shall not exceed the Maximum Interest Rate, and the Agent may, on any Business
Day, by prior written notice to the Issuer, the Indenture Trustee, the Seller,
the Servicer and the Security Insurer, convert the Advance Interest Rate to a
fixed interest rate not to exceed the Maximum Interest Rate as of the close of
business on the date such Amortization Event occurs, such fixed interest rate
not to exceed the Two Year Treasury Yield (as of the close of business on the
date such Amortization Event occurs) plus 0.60% PLUS the Basis Fee Percent.
ADVANCE MONTHLY INTEREST DISTRIBUTABLE AMOUNT: With respect to any
Distribution Date, the sum of the interest accrued on each day during the
immediately preceding Interest Period at the Advance Interest Rate(s) in effect
from time to time with respect to such Interest Period on the outstanding
principal balance of the Advances on each day; PROVIDED that the amount of the
Advance Monthly Interest Distributable Amount distributed pursuant to Sections
3.6(a)(i) or (b)(ii) shall not be duplicative of the amount of any interest that
accrued during such immediately preceding Interest Period on any Advance that
was prepaid during such Interest Period pursuant to Section 3(e) of the
Repurchase Agreement and which was deposited into the Note Distribution Account
pursuant to Section 3.10(b).
ADVANCE PRINCIPAL CARRYOVER SHORTFALL: As of the close of business on
any Distribution Date after the occurrence of an Amortization Event, the excess
of the sum of the Principal Distribution Amount and any outstanding Advance
Principal Carryover Shortfall from the preceding Distribution Date over the
amount in respect of Advances that is actually deposited in the Note
Distribution Account on such Distribution Date.
2
<PAGE>
ADVANCE PRINCIPAL DISTRIBUTABLE AMOUNT: With respect to any
Distribution Date (other than the Final Distribution Date) during the
Amortization Period, the sum of the Principal Distribution Amount for such
Distribution Date and any outstanding Advance Principal Carryover Shortfall as
of the close of the preceding Distribution Date; PROVIDED, HOWEVER, the Advance
Principal Distributable Amount shall not exceed the outstanding principal
balance of the Advances. The "Advance Principal Distributable Amount" on the
Final Distribution Date will equal the outstanding principal balance of the
Advances on the Final Distribution Date.
AFFILIATE: With respect to any Person, any other Person directly or
indirectly controlling, controlled by, or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person, means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
AGENT: Bank of America National Trust and Savings Association, as
administrator of RCC and as agent for certain liquidity purchasers under the
Liquidity Asset Purchase Agreement, and its successors in such capacity.
AGGREGATE PRINCIPAL BALANCE: With respect to any Determination Date,
the sum of the Principal Balances (computed as of the related Accounting Date)
for all Receivables (other than (i) any Receivable that became a Liquidated
Receivable during the related Monthly Period, (ii) any Purchased Receivable with
respect to the related Monthly Period and (iii) any Receivable that became a
Repurchased Receivable during the related Monthly Period).
AGREEMENT OR THIS AGREEMENT: This Servicing Agreement, all amendments
and supplements thereto and all exhibits and schedules to any of the foregoing.
AMORTIZATION EVENT: Any of (i) an Event of Default shall have
occurred and either the Repurchase Date shall be deemed to occur automatically
or the Issuer or the Agent shall exercise its option to have the Repurchase Date
with respect to all Transactions occur automatically, (ii) an Insurance
Agreement Event of Default shall have occurred and the Security Insurer shall
have delivered notice to the Issuer and the Seller that such Insurance Agreement
Event of Default shall constitute an Amortization Event,(iii) an Insurer Default
shall have occurred and be continuing or (iv) the succession of the Backup
Servicer as Servicer hereunder.
AMORTIZATION PERIOD: The period commencing on the earliest to occur
of (i) December 2, 1999, and (ii) the date on
3
<PAGE>
which an Insurer Notice Date has occurred and ending on the Final
Distribution Date.
AMOUNT FINANCED: With respect to a Receivable, the aggregate amount
advanced under such Receivable toward the purchase price of the Financed Vehicle
and related costs, including amounts advanced in respect of accessories,
insurance premiums, service and warranty contracts, other items customarily
financed as part of retail automobile installment sale contracts or promissory
notes, and related costs. The term "Amount Financed" shall not include any
Insurance Add-On Amounts.
ANNUAL PERCENTAGE RATE OR APR: With respect to a Receivable, the rate
per annum of finance charges stated in such Receivable as the "annual percentage
rate" (within the meaning of the Federal Truth-in-Lending Act). If after the
applicable Cut-Off Date with respect to a Receivable, the rate per annum with
respect to such Receivable as of such Cut-Off Date is reduced as a result of (i)
an insolvency proceeding involving the Obligor or (ii) pursuant to the Soldiers'
and Sailors' Civil Relief Act of 1940, Annual Percentage Rate or APR from and
after such date shall refer to such reduced rate.
APPLICABLE MARGIN: 0.375%.
AVAILABLE FUNDS: With respect to any Determination Date, the amount
on deposit in the Collection Account as of the immediately preceding Accounting
Date plus any amounts deposited in the Collection Account on such Determination
Date pursuant to Section 3.1(e) to satisfy the Collateral Test.
BACKUP SERVICER: Norwest Bank Minnesota, National Association, or its
successor in interest pursuant to Section 5.2, or such Person as shall have been
appointed as Backup Servicer or successor Servicer pursuant to Section 5.3.
BASIC SERVICING FEE: With respect to any Monthly Period, the fee
payable to the Servicer for services rendered during such Monthly Period, which
shall be equal to one-twelfth of the Basic Servicing Fee Rate multiplied by the
daily average aggregate Principal Balance of the Receivables during such Monthly
Period; PROVIDED, HOWEVER, with respect to the first Monthly Period, the Basic
Servicing Fee shall accrue from the Closing Date until December 31, 1996 on the
basis of a 360-day year consisting of twelve 30-day months.
BASIC SERVICING FEE RATE: 1.00% per annum, payable monthly at
one-twelfth of the annual rate.
BASIS FEE PERCENT: As of any date of determination, the positive
difference, if any, as determined by the Agent, as calculation agent, between
(A) the comparable spread over the Two Year Treasury Yield of the yield on OFL's
most recent two year weighted average life AAA/Aaa rated, publicly issued
automobile
4
<PAGE>
asset-backed securities; or, if such a spread is not available, the average
price offered for such AAA/Aaa rated automobile asset-backed securities by
the asset-backed trading desk from time to time of two nationally recognized
underwriters or dealers that last underwrote OFL's most recent AAA/Aaa rated,
publicly issued automobile asset-backed securities, and (B) 0.45%.
BofA: Bank of America National Trust and Savings Association, a
national banking association, and its successors in interest.
BREAKAGE FEE: An amount payable by the Seller pursuant to Section
3(e) of the Repurchase Agreement in connection with a prepayment of an Advance
(and the concurrent prepayment of Notes pursuant to the Indenture) if the Seller
shall have requested a prepayment of an Advance on a date other than the last
day of a Tranche Period or in an amount in excess of the Tranches maturing on
such date, which shall be equal to the amount as may be necessary to compensate
the Noteholders for any resulting losses or costs, including those resulting
from any liquidation or reemployment of deposits or other funds or other funding
arrangements (such losses to be calculated on a net basis assuming reinvestment
(for the period with respect to which breakage is being paid) equal to the rate
quoted by the Agent for a time deposit equal to the principal so prepaid for a
period equal to the breakage period).
BUSINESS DAY: Any day other than a Saturday, Sunday, legal holiday or
other day on which commercial banking institutions in Minneapolis, Minnesota,
Chicago, Illinois, New York, New York, or any other location of any successor
Servicer, successor Indenture Trustee or successor Collateral Agent are
authorized or obligated by law, executive order or governmental decree to be
closed and, if the applicable Business Day relates to any calculation of the
Offshore Rate, such a day on which dealings are carried on in the applicable
offshore dollar interbank market.
CLASSIC RECEIVABLES: Receivables originated under OFL's "Classic"
program.
CLOSING DATE: December 3, 1996.
COLLATERAL AGENT: The Collateral Agent named in the Security
Agreement, and any successor thereto pursuant to the terms of the Security
Agreement.
COLLATERAL TEST: On any Determination Date, a test that will be
satisfied if, as of the immediately preceding Accounting Date, the aggregate
outstanding amount of all Advances under the Repurchase Agreement is less than
or equal to the sum of the following amounts, each determined as of such
Accounting Date: (i) the amount on deposit in the Collection Account less the
WAC Deficiency Deposit, if any, (ii) the product of (I) 0.98 and (II) the sum of
the aggregate outstanding Principal Balance
5
<PAGE>
of Premier Receivables that are Qualifying Receivables and the aggregate
outstanding Principal Balance of Classic Receivables that are not Financed
Repossessions and that are Qualifying Receivables and (iii) the product of
the aggregate outstanding Principal Balance of Classic Receivables that are
Financed Repossessions and that are Qualifying Receivables and 0.85;
PROVIDED, that any deposit into the Collection Account that the Seller may
make on such Determination Date pursuant to Section 3.1(e) shall be included
as amounts on deposit in the Collection Account as of the immediately
preceding Accounting Date in clause (i) above.
COLLECTED FUNDS: With respect to any Determination Date, the amount
of funds in the Collection Account representing collections on the Receivables
during the related Monthly Period, including all Liquidation Proceeds collected
during the related Monthly Period (but excluding any Monthly Advances and any
Purchase Amounts and the Repurchase Price of any Repurchased Receivables).
COLLECTION ACCOUNT: The account designated as the Collection Account
in, and which is established and maintained pursuant to, Section 3.1(a).
COLLECTION RECORDS: All manually prepared or computer generated
records relating to collection efforts or payment histories with respect to the
Receivables.
COMMERCIAL PAPER NOTES: The short-term promissory notes issued or to
be issued in the United States commercial paper market to fund the purchase of
the Notes, which, unless otherwise agreed to in writing by the Seller, the Agent
and the Security Insurer, shall mature within 120 days from the date of issuance
of such notes.
CORPORATE TRUST OFFICE: The principal office of the Indenture Trustee
at which at any particular time its corporate trust business shall be
administered, which office is located at Sixth Street and Marquette Avenue,
Minneapolis, Minnesota 55479-0070, Attention: Corporate Trust Services - Asset-
Backed Administration; the telecopy number for the Corporate Trust Office of the
Indenture Trustee on the date of execution of this Agreement is (612) 667-3539.
CP COMPOSITE RATE: For any date of determination, the Money Market
Yield of the rate set forth in the weekly statistical release designated as
H.15(519), or any successor publication, published by the Board of Governors of
the Federal Reserve System ("H.15(519)") for the 30 day maturity under the
caption "Commercial Paper." If such rate cannot be determined, the Offshore
Rate.
CP RATE: For any Interest Period or any shorter period for which
interest accrues, and with respect to any portion of the principal amount of the
Notes as to which the Noteholders'
6
<PAGE>
funding of their purchase or carrying thereof is provided by Commercial Paper
Notes, the rate of interest per annum determined in arrears in good faith by
the Agent equal to the Noteholders' cost of funding the purchase or carrying
of such portion of the Notes, which shall be equal to the weighted daily
average interest rate payable in respect of such Commercial Paper Notes
during such period (determined in the case of discount Commercial Paper Notes
by converting the discount to an interest bearing equivalent rate per annum),
plus applicable placement fees and commissions, but excluding any other fees
related to such funding.
CP TRANCHE PERIOD: If the funding of the purchase or carrying of the
Notes is funded in whole or in part by Commercial Paper Notes, a period of up to
120 days from and including the date any amount of such Commercial Paper Notes
are issued to and including the date such Commercial Paper Notes mature.
CRAM DOWN LOSS: With respect to a Receivable, if a court of
appropriate jurisdiction in an insolvency proceeding shall have issued an order
reducing the Principal Balance of such Receivable, the amount of such reduction.
A "Cram Down Loss" shall be deemed to have occurred on the date of issuance of
such order.
CUSTODIAN: Olympic Financial Ltd., a Minnesota corporation, and any
successor thereto pursuant to the terms of the Custodian Agreement.
CUSTODIAN AGREEMENT: Any Custodian Agreement from time to time in
effect among the Custodian named therein, the Issuer, the Seller and the Agent
relating to custody of the Receivable Files, as the same may be amended,
supplemented or otherwise modified from time to time in accordance with the
terms thereof, which Custodian Agreement and any amendments, supplements or
modifications thereto shall (so long as an Insurer Default shall not have
occurred and be continuing) be acceptable to the Security Insurer (the Custodian
Agreement which is effective on the Closing Date is acceptable to the Security
Insurer).
CUT-OFF DATE: With respect to any Receivables, the date specified in
the related Confirmation.
DEALER: A seller of new or used automobiles or light trucks that
originated one or more of the Receivables and sold the respective Receivable,
directly or indirectly, to OFL under an existing agreement between such seller
and OFL.
DEALER AGREEMENT: An agreement between OFL and a Dealer relating to
the sale of retail installment sale contracts and installment notes to OFL and
all documents and instruments relating thereto.
7
<PAGE>
DEALER ASSIGNMENT: With respect to a Receivable, the executed
assignment executed by a Dealer conveying such Receivable to OFL.
DEFAULT AMOUNT: With respect to any Distribution Date, an amount, if
positive, equal to the sum of default interest for each day during the
immediately preceding Interest Period or portion thereof after the occurrence of
an Amortization Event that accrues at the applicable Default Rate on the
aggregate outstanding principal balance of the Notes on each such day,
calculated on the basis of the actual number of days elapsed and a 365-day year.
DEFAULT AMOUNT CARRYOVER SHORTFALL: With respect to any Distribution
Date, the excess of the Default Amount for the preceding Distribution Date and
any outstanding Default Amount Carryover Shortfall on such preceding
Distribution Date, over the amount in respect of such Default Amount and Default
Amount Carryover Shortfall that is actually deposited in the Note Distribution
Account on such preceding Distribution Date, PLUS interest on the Default Amount
Carryover Shortfall, to the extent permitted by law, at an annualized rate equal
to the Reference Rate from such preceding Distribution Date through the current
Distribution Date.
DEFAULT AMOUNT DISTRIBUTABLE AMOUNT: With respect to any Distribution
Date, the sum of the Default Amount for such Distribution Date and the Default
Amount Carryover Shortfall for such Distribution Date.
DEFAULT RATE: For each day during an Interest Period or any portion
thereof after the occurrence of an Amortization Event, a per annum rate equal to
the positive difference, if any, between (i) the Reference Rate for such
Interest Period, and (y) the Advance Interest Rate for such Interest Period;
PROVIDED, that if the Advance Interest Rate has been converted to a fixed
interest rate, the Default Rate shall be that rate set forth in the side letter
between the Issuer and the Agent and acknowledged by the Trustee.
DEFICIENCY CLAIM AMOUNT: As defined in Section 3.11(a).
DEFICIENCY CLAIM DATE: With respect to any Distribution Date, the
fourth Business Day immediately preceding such Distribution Date.
DEFICIENCY NOTICE: As defined in Section 3.11(a).
DEPOSIT DATE: With respect to any Monthly Period, the Business Day
immediately preceding the related Distribution Date.
DETERMINATION DATE: With respect to any Monthly Period, the sixth
Business Day prior to the related Distribution Date (or, if such day is not a
Business Day, the next succeeding
8
<PAGE>
Business Day); provided, however, that if the determination dates in all of
the other automobile loan securitizations of the Seller insured by the
Security Insurer are on the same date, the Determination Date shall be such
date provided the Seller provides the Indenture Trustee, the Security
Insurer, and the Agent 30 days prior written notice of such change.
DISTRIBUTION AMOUNT: With respect to a Distribution Date, the amount
of funds on deposit in the Collection Account on such Distribution Date.
DISTRIBUTION DATE: The 15th day of each calendar month, or if such
15th day is not a Business Day, the next succeeding Business Day, commencing
January 15, 1997 and including the Final Distribution Date.
ELECTRONIC LEDGER: The electronic master record of the retail
installment sales contracts or installment loans of OFL.
ELIGIBLE ACCOUNT: (i) A segregated trust account that is maintained
with the corporate trust department of a depository institution acceptable to
the Security Insurer (so long as an Insurer Default shall not have occurred and
be continuing), or (ii) a segregated direct deposit account maintained with a
depository institution or trust company organized under the laws of the United
States of America, or any of the States thereof, or the District of Columbia,
having a certificate of deposit, short term deposit or commercial paper rating
of at least "A-1+" by Standard & Poor's and "P-1" by Moody's and (so long as an
Insurer Default shall not have occurred and be continuing) acceptable to the
Security Insurer.
ELIGIBLE INVESTMENTS: Any one or more of the following types of
investments:
(a) (i) direct interest-bearing obligations of, and
interest-bearing obligations guaranteed as to timely payment of principal
and interest by, the United States or any agency or instrumentality of the
United States the obligations of which are backed by the full faith and
credit of the United States; and (ii) direct interest-bearing obligations
of, and interest-bearing obligations guaranteed as to timely payment of
principal and interest by, the Federal National Mortgage Association or the
Federal Home Loan Mortgage Corporation, but only if, at the time of
investment, such obligations are assigned the highest credit rating by each
Rating Agency;
(b) demand or time deposits in, certificates of deposit of, or
bankers' acceptances issued by any depository institution or trust company
organized under the laws of the United States or any State and subject to
supervision and examination by federal or state banking authorities
(including, if applicable, the Indenture Trustee or any agent of the
Indenture Trustee acting in its commercial
9
<PAGE>
capacity); provided that the short-term unsecured debt obligations of
such depository institution or trust company at the time of such
investment, or contractual commitment providing for such investment,
are assigned the highest credit rating by each Rating Agency;
(c) repurchase obligations pursuant to a written agreement (i)
with respect to any obligation described in clause (a) above, where the
Indenture Trustee has taken actual or constructive delivery of such
obligation in accordance with Section 3.1, and (ii) entered into with the
corporate trust department of a depository institution or trust company
organized under the laws of the United States or any state thereof, the
deposits of which are insured by the Federal Deposit Insurance Corporation
and the short-term unsecured debt obligations of which are rated "A-1+" by
Standard & Poor's and "P-1" by Moody's (including, if applicable, the
Indenture Trustee or any agent of the Indenture Trustee acting in its
commercial capacity);
(d) securities bearing interest or sold at a discount issued by
any corporation incorporated under the laws of the United States or any
state whose long-term unsecured debt obligations are assigned the highest
credit rating by each Rating Agency at the time of such investment or
contractual commitment providing for such investment; provided however that
securities issued by any particular corporation will not be Eligible
Investments to the extent that an investment therein will cause the then
outstanding principal amount of securities issued by such corporation and
held in the Secured Accounts to exceed 10% of the Eligible Investments held
in the Secured Accounts (with Eligible Investments held in the Secured
Accounts valued at par);
(e) commercial paper that (i) is payable in United States dollars
and (ii) is rated in the highest credit rating category by each Rating
Agency;
(f) with the prior written consent of the Security Insurer, money
market mutual funds registered under the Investment Company Act of 1940, as
amended, having a rating at the time of such investment from each of the
Rating Agencies in the highest credit rating category; or
(g) any other demand or time deposit, obligation, security or
investment as may be acceptable to the Security Insurer, as evidenced by
the prior written consent of the Security Insurer, as may from time to time
be confirmed in writing to the Indenture Trustee by the Security Insurer,
and with prior written notice to the Rating Agencies and the Agent.
Eligible Investments may be purchased by or through the Indenture Trustee or any
of its Affiliates.
10
<PAGE>
ELIGIBLE SERVICER: OFL, the Backup Servicer or another Person which
at the time of its appointment as Servicer (i) is servicing a portfolio of motor
vehicle retail installment sales contracts or motor vehicle installment loans,
(ii) is legally qualified and has the capacity to service the Receivables, (iii)
has demonstrated the ability professionally and competently to service a
portfolio of motor vehicle retail installment sales contracts or motor vehicle
installment loans similar to the Receivables with reasonable skill and care, and
(iv) is qualified and entitled to use, pursuant to a license or other written
agreement, and agrees to maintain the confidentiality of, the software which the
Servicer uses in connection with performing its duties and responsibilities
under this Agreement or otherwise has available software which is adequate to
perform its duties and responsibilities under this Agreement.
EVENT OF DEFAULT: An "Event of Default" (as defined in the Repurchase
Agreement) with respect to the Seller.
FINAL DISTRIBUTION DATE: The earlier to occur of (i) the Final
Scheduled Distribution Date, and (ii) if an Amortization Event shall have
occurred, the Distribution Date next succeeding the date on which the
Controlling Party shall have sold, securitized or otherwise liquidated the last
Receivable.
FINAL SCHEDULED DISTRIBUTION DATE: After the commencement of the
Amortization Period, the fourth Distribution Date after the Monthly Period in
which occurs the latest final scheduled payment on a Receivable (without giving
effect to any extensions granted by the Servicer pursuant to Section 2.2).
FINANCED REPOSSESSION: Classic Receivables that are secured by
Financed Vehicles that are financed repossessions.
FINANCED VEHICLE: A new or used automobile or light truck, together
with all accessories thereto, securing or purporting to secure an Obligor's
indebtedness under a Receivable.
FORCE-PLACED INSURANCE: The meaning set forth in Section 2.4(b).
FRB: The Board of Governors of the Federal Reserve System, and any
Governmental Authority succeeding to any of its principal functions.
INDENTURE: The Indenture, dated as of December 3, 1996, between the
Issuer and the Indenture Trustee, as the same may be amended and supplemented
from time to time.
INDENTURE TRUSTEE: The Person acting as Trustee under the Indenture,
its successors in interest and any successor Trustee under the Indenture.
11
<PAGE>
INDEPENDENT ACCOUNTANTS: As defined in Section 2.11(a).
INSURANCE ADD-ON AMOUNT: The premium charged to the Obligor in the
event that the Servicer obtains Force-Placed Insurance pursuant to Section 2.4.
INSURANCE AGREEMENT: The Insurance and Indemnity Agreement, dated as
of December 3, 1996, among the Security Insurer, the Issuer, the Seller and OFL.
INSURANCE AGREEMENT EVENT OF DEFAULT: An "Event of Default" as
defined in the Insurance Agreement.
INSURANCE POLICY: With respect to a Receivable, any insurance policy
benefiting the holder of the Receivable providing loss or physical damage,
credit life, credit disability, theft, mechanical breakdown or similar coverage
with respect to the Financed Vehicle or the Obligor.
INSURANCE PREMIUM: The amount of the premium payable to the Security
Insurer, as set forth in the Premium Letter, dated December 3, 1996, from the
Security Insurer to OFL, the Seller, the Issuer and the Indenture Trustee.
INSURER DEFAULT: The occurrence and continuance of any of the
following:
(a) the Security Insurer shall have failed to make a payment
required under the Note Policy;
(b) The Security Insurer 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 the Security Insurer 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 the Security
Insurer (or the taking of possession of all or any material portion of the
property of the Security Insurer).
12
<PAGE>
INTEREST PERIOD: With respect to any Distribution Date, the Monthly
Period immediately preceding such Distribution Date (or, in the case of the
first Distribution Date, the period from and including the Closing Date to and
excluding the first day of the succeeding calendar month); PROVIDED, that the
final Interest Period shall commence on the first day of the calendar month
immediately preceding the month in which the Final Distribution Date occurs and
shall end on, but shall exclude, the Final Distribution Date.
ISSUER: Arcadia Receivables Conduit Corp., a Delaware corporation.
LIEN: Any security interest, lien, charge, pledge, preference, equity
or encumbrance of any kind, including tax liens, mechanics' liens and any liens
that attach by operation of law.
LIEN CERTIFICATE: With respect to a Financed Vehicle, an original
certificate of title, certificate of lien or other notification issued by the
Registrar of Titles of the applicable state to a secured party which indicates
that the lien of the secured party on the Financed Vehicle is recorded on the
original certificate of title. In any jurisdiction in which the original
certificate of title is required to be given to the Obligor, the term "Lien
Certificate" shall mean only a certificate or notification issued to a secured
party.
LIQUIDATED RECEIVABLE: With respect to any Monthly Period, a
Receivable as to which (i) 91 days have elapsed since the Servicer repossessed
the 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 delinquent.
LIQUIDATION PROCEEDS: With respect to a Liquidated Receivable, all
amounts realized with respect to such Receivable (other than amounts withdrawn
from the Spread Account and drawings under the Note Policy) net of (i)
reasonable expenses incurred by the Servicer in connection with the collection
of such Receivable and the repossession and disposition of the Financed Vehicle
and (ii) amounts that are required to be refunded to the Obligor on such
Receivable; PROVIDED, HOWEVER, that the Liquidation Proceeds with respect to any
Receivable shall in no event be less than zero.
LOCKBOX ACCOUNT: The segregated account maintained on behalf of the
Issuer by the Lockbox Bank in accordance with Section 2.2(d).
LOCKBOX AGREEMENT: The Agency Agreement, dated as of November 13,
1992 by and among Harris Trust and Savings Bank, OFL, Shawmut Bank, N.A., as
trustee, Saturn Financial Services, Inc. and the Program Parties (as defined
therein), taken
13
<PAGE>
together with the Retail Lockbox Agreement, dated as of November 13, 1992,
among such parties, and the Counterpart to Agency Agreement and Retail
Lockbox Agreement, dated as of December 3, 1996, among Harris Trust and
Savings Bank, OFL, the Issuer, the Indenture Trustee and the Security
Insurer, as such agreements may be amended from time to time, unless the
Indenture Trustee and the Issuer shall cease to be a Program Party
thereunder, or such agreement shall be terminated in accordance with its
terms, in which event "Lockbox Agreement" shall mean such other agreement, in
form and substance acceptable to the Security Insurer, or if an Insurer
Default shall have occurred and be continuing, to the Agent, among the
Servicer, the Issuer, the Indenture Trustee and the Lockbox Bank.
LOCKBOX BANK: A depository institution named by the Servicer and, so
long as an Insurer Default shall not have occurred and be continuing, acceptable
to the Security Insurer, or, if an Insurer Default shall have occurred and be
continuing, to the Agent.
MAXIMUM INTEREST RATE: As of the date on which an Amortization Event
occurs, the greater of (I) the sum of (i) the Two Year Treasury Yield determined
as of such day by the Indenture Trustee pursuant to Section 403(b) of the
Indenture plus (ii) 0.60% plus (iii) the Basis Fee Percent and (II) the weighted
average APR (weighted based on the aggregate outstanding Principal Balance of
the relevant Receivables as of the immediately preceding Accounting Date PLUS
the aggregate outstanding Principal Balance of any Receivables transferred by
the Seller to the Issuer since such Accounting Date and LESS the aggregate
outstanding Principal Balance of any Receivables that became Purchased
Receivables or Repurchased Receivables since such Accounting Date) of Qualifying
Receivables, MINUS 6.50%, MINUS the Total Expense Percent.
MONTHLY ADVANCE: The amount that the Servicer is required to advance
on any Receivable pursuant to Section 3.4(a) or that the Servicer (or OFL if OFL
is not the Servicer) is required to advance on any Determination Date pursuant
to Section 3.4(b).
MONTHLY PERIOD: With respect to a Distribution Date, the calendar
month preceding the month in which such Distribution Date occurs (such calendar
month being referred to as the "related" Monthly Period with respect to such
Distribution Date). With respect to an Accounting Date, the calendar month in
which such Accounting Date occurs is referred to herein as the "related" Monthly
Period to such Accounting Date.
MONTHLY RECORDS: All records and data maintained by the Servicer with
respect to the Receivables, including the following with respect to each
Receivable: the account number; the identity of the originating Dealer; Obligor
name; Obligor address; Obligor home phone number; Obligor business phone number;
original Principal Balance; original term; Annual
14
<PAGE>
Percentage Rate; current Principal Balance; current remaining term;
origination date; first payment date; final scheduled payment date; next
payment due date; date of most recent payment; new/used classification;
collateral description; days currently delinquent; number of contract
extensions (months) to date; amount, if any, of Force-Placed Insurance
payable monthly; amount of the Scheduled Payment; and past due late charges,
if any.
MOODY'S: Moody's Investors Service, Inc., or any successor thereto.
NOTES: The Floating Rate Automobile Receivables-Backed Notes issued
by the Issuer pursuant to the Indenture.
NOTE DISTRIBUTION ACCOUNT: The account designated as such,
established and maintained pursuant to Section 3.1(b).
NOTE MAJORITY: Holders of Notes representing a majority of the
outstanding principal balance of the Notes.
NOTE POLICY: The financial guaranty insurance policy issued by the
Security Insurer to the Indenture Trustee on behalf of the Noteholders.
NOTE PURCHASE AGREEMENT: The Note Purchase Agreement, dated as of
December 3, 1996, among OFL, the Issuer, the Agent and Receivables Capital
Corporation.
OBLIGOR: 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: Olympic Financial Ltd., a Minnesota corporation.
OFFSHORE RATE: (i) For any Interest Period or any shorter period for
which interest accrues and (ii) for the purpose of determining the WAC
Deficiency Percentage, the rate of interest per annum (rounded upward, if
necessary, to the next 1/16th of 1%) determined by the Agent as follows:
Offshore Rate = IBOR
-------------------------------------
1.00 - Eurodollar Reserve Percentage.
Where,
EURODOLLAR RESERVE PERCENTAGE means for any day for any Interest
Period the maximum reserve percentage (expressed as a decimal, rounded
upward, if necessary, to the next 1/100th of 1%) in effect on such day and
applicable to any Noteholder under regulations issued from time to time by
the FRB for determining the maximum reserve requirement (including any
emergency supplemental or other marginal reserve requirement) with respect
to Eurocurrency funding (currently referred to as "Eurocurrency
liabilities"); and
15
<PAGE>
IBOR means the rate of interest per annum determined by the Agent as
the rate at which dollar deposits in the approximate amount of the
Noteholders' funding for the purchase or carrying of Notes that is not
being provided by Commercial Paper Notes are offered for such Interest
Period or any shorter period for which interest accrues based on
information presented on the Telerate Screen page 3750 at approximately
11:00 a.m. (Chicago time) two Business Days prior to such date of
determination; PROVIDED, that if at least two such offered rates appear on
the Telerate Screen in respect of such Interest Period or any shorter
period for which interest accrues, the arithmetic mean of all such rates
(as determined by the Agent) will be the rate used; PROVIDED, FURTHER, that
if Telerate ceases to provide LIBOR quotations, such rate shall be the rate
of interest determined by the Agent at which dollar deposits in the
approximate amount of the Noteholders' funding for the purchase or carrying
of Notes that is not being provided by Commercial Paper Notes for such
Interest Period or shorter period for which interest accrues would be
offered by BofA's Grand Cayman Branch, Grand Cayman, B.W.I. (or such other
office as may be designated for such purpose of BofA), to major banks in
the offshore dollar market at their request at approximately 11:00 a.m.
(New York City time) two Business Days prior to such date of determination.
The Offshore Rate shall be adjusted automatically as of the effective
date of any change in the Eurodollar Reserve Percentage.
OFFSHORE TRANCHE PERIOD: The period commencing on the date any
portion of the Notes is no longer funded by Commercial Paper Notes or the last
day of any previous Offshore Tranche Period and ending on the date seven,
fourteen or twenty-one days or one, two or three months thereafter as selected
by the Issuer; PROVIDED that:
(i) if any Offshore Tranche Period would otherwise end on a day that
is not a Business Day, such Offshore Tranche Period shall be extended to
the following Business Day unless, in the case of an Offshore Tranche
Period of one, two or three months, the result of such extension would be
to carry such Offshore Tranche Period into another calendar month, in which
event such Offshore Tranche Period shall end on the preceding Business Day;
(ii) any Offshore Tranche Period of one, two or three months that
begins on the last Business Day of a calendar month (or on a day for which
there is no numerically corresponding day in the calendar month at the end
of such Offshore Tranche Period) shall end on the last Business Day of the
calendar month at the end of such Offshore Tranche Period; and
16
<PAGE>
(iii) no Offshore Tranche Period for any Notes shall extend beyond the
end of the Purchase Period.
OPINION OF COUNSEL: A written opinion of counsel acceptable in form
and substance and from counsel acceptable to the Agent and, if such opinion or a
copy thereof is required to be delivered to the Indenture Trustee or the
Security Insurer, to the Indenture Trustee or the Security Insurer, as
applicable.
OTHER FEE PERCENT: 0.025% per annum.
OUTSTANDING MONTHLY ADVANCES: With respect to any Determination Date,
(A) the sum of all Monthly Advances made pursuant to Section 3.4(a) with respect
to a Receivable on any Determination Date prior to such Determination Date
relating to that Receivable which have not been reimbursed pursuant to Section
3.6(b)(i) or (B) the sum of all Monthly Advances made pursuant to Section 3.4(b)
on any Determination Date prior to such Determination Date which have not been
reimbursed pursuant to Section 3.6(a)(ii).
PERSON: Any legal person, including any individual, corporation,
partnership, joint venture, estate, association, joint stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof, or any other entity.
PREMIER RECEIVABLES: Receivables originated under OFL's "Premier"
program.
PRINCIPAL BALANCE: With respect to any Receivable, as of any date,
the Amount Financed minus (i) that portion of all amounts received on or prior
to such date and allocable to principal in accordance with the terms of the
Receivable, and (ii) any Cram Down Loss in respect of such Receivable.
PRINCIPAL DISTRIBUTION AMOUNT: With respect to any Distribution Date
during the Amortization Period, the amount equal to the sum of the following
amounts with respect to the immediately preceding Monthly Period, in each case
computed without duplication (including without duplication of amounts
distributed with respect to prior Distribution Dates): (i) that portion of all
collections on Receivables allocable to principal, including all full and
partial principal prepayments, (ii) the Principal Balance (as of the related
Accounting Date) of all Receivables that are Liquidated Receivables as of the
prior Accounting Date (other than Receivables that became Purchased Receivables
or Repurchased Receivables as of the immediately preceding Accounting Date),
(iii) the portion of the Purchase Amount allocable to principal of all
Receivables that became Purchased Receivables as of the immediately preceding
Accounting Date, (iv) the portion of the Repurchase Price allocable to principal
of all Receivables that became Repurchased Receivables during the preceding
Monthly Period, (v) the portion of the proceeds allocable to principal from the
sale or securitization
17
<PAGE>
of the Receivables pursuant to the Security Agreement, and (vi) the aggregate
amount of Cram Down Losses that shall have occurred during or prior to the
related Monthly Period.
PURCHASE AGREEMENT: The Receivables Purchase Agreement and
Assignment, dated as of December 3, 1996 between OFL and the Seller.
PURCHASE AMOUNT: With respect to a Receivable, the Principal Balance
and all accrued and unpaid interest on the Receivable (without regard to any
Monthly Advances that may have been made with respect to the Receivable) as of
the Accounting Date on which the obligation to purchase such Receivable arises.
PURCHASED RECEIVABLE: As of any Accounting Date, any Receivable
(including any Liquidated Receivable) that became an Administrative Receivable
as of such Accounting Date, and as to which the Purchase Amount has been
deposited in the Collection Account by the Seller, OFL or the Servicer, as
applicable, on or before the related Deposit Date.
QUALIFYING RECEIVABLE: With respect to any Monthly Period, a
Receivable as to which (i) no portion of a Scheduled Payment shall have become
more than 30 days delinquent, (ii) the Servicer in good faith has not determined
that the Obligor thereon is unlikely to continue making Scheduled Payments, and
(iii) all of the representations and warranties under the Purchase Agreement and
Repurchase Agreement are true and correct; PROVIDED, that the sum (without
duplication) of the aggregate Principal Balance of Classic Receivables that are
Financed Repossessions in excess of 5% of the aggregate outstanding Principal
Balance of Qualifying Receivables and the aggregate Principal Balance of Classic
Receivables in excess of 65% of the aggregate outstanding Principal Balance of
Qualifying Receivables shall be excluded from the Principal Balance of
Qualifying Receivables for all purposes hereunder, including the denominator of
the aforesaid calculations and the calculation of the Collateral Test.
RATING AGENCY: Each of Moody's and Standard & Poor's, so long as such
Persons determined a capital charge with respect to the issuance of the Note
Policy by the Security Insurer; and if either Moody's or Standard & Poor's no
longer determines such capital charge, such other nationally recognized
statistical rating organization selected by the Agent and (so long as an Insurer
Default shall not have occurred and be continuing) acceptable to the Security
Insurer.
RECEIVABLE: A retail installment sale contract or promissory note
(and related security agreement) for a new or used automobile or light truck
(and all accessories thereto) that is included in the Receivables Schedule, and
all rights and obligations under such a contract, but not including (i) any
Liquidated Receivable (other than for purposes of calculating the Advance
Interest Distributable Amounts, Advance Principal
18
<PAGE>
Distributable Amounts and the WAC Deficiency Amount hereunder and for the
purpose of determining the obligations pursuant to Section 2.7 to purchase
Receivables), (ii) any Purchased Receivable on or after the Accounting Date
immediately preceding the Deposit Date on which payment of the Purchase
Amount is made in connection therewith pursuant to Section 3.5 or (iii) any
Repurchased Receivable on or after the date on which payment of the
Repurchase Price is deposited in the Collection Account pursuant to Section
3(d) of the Repurchase Agreement.
RECEIVABLE FILES: The documents, electronic entries, instruments and
writings listed in Section 6(c) of the Repurchase Agreement.
REFERENCE RATE: For any day, a fluctuating interest rate per annum as
shall be in effect from time to time, which rate shall be at all times equal to
the rate of interest in effect for such day, as publicly announced from time to
time by BofA in San Francisco, California, as its "reference rate." It is a
rate set by BofA based upon various factors including BofA's costs and desired
return, general economic conditions and other factors, and is used as a
reference point for pricing some loans, which may be priced at, above or below
such announced rate.
REGISTRAR OF TITLES: With respect to any state, the governmental
agency or body responsible for the registration of, and the issuance of
certificates of title relating to, motor vehicles and liens thereon.
RELATED DOCUMENTS: The Repurchase Agreement, the Indenture, the
Notes, the Purchase Agreement, the Custodian Agreement, the Note Policy, the
Security Agreement, the Note Purchase Agreement, the Fee Letter, the Insurance
Agreement, the Spread Account Agreement and the Lockbox Agreement. The Related
Documents executed by any party are referred to herein as "such party's Related
Documents," "its Related Documents" or by a similar expression.
REPURCHASE AGREEMENT: The Repurchase Agreement dated as of December
3, 1996, between the Issuer, as Buyer, and Olympic Receivables Finance Corp., as
Seller.
REPURCHASED RECEIVABLES: Any Receivables that are required to be
repurchased by the Seller pursuant to Section 3(d) of the Repurchase Agreement.
RESPONSIBLE OFFICER: The President, any Vice President or Assistant
Vice President or the Controller of such Person, or any other officer or
employee having similar functions and, with respect to the Seller or the
Servicer, those employees of the Seller or the Servicer, as the case may be,
whose names appear on a list of people authorized to sign on behalf of the
Seller or Servicer, as applicable, furnished to the Indenture Trustee, the
19
<PAGE>
Security Insurer and the Agent, as such list may from time to time be amended.
REVOLVING PERIOD: The period from and including the Closing Date to
but excluding the date on which the Amortization Period commences.
SCHEDULE OF REPRESENTATIONS: The Schedule of Representations and
Warranties attached as Schedule A to the Repurchase Agreement.
SCHEDULED PAYMENT: With respect to any Monthly Period for any
Receivable, the amount set forth in such Receivable as required to be paid by
the Obligor in such Monthly Period. If after the applicable Cut-Off Date with
respect to a Receivable, the Obligor's obligation under such Receivable with
respect to a Monthly Period has been modified so as to differ from the amount
specified in such Receivable as a result of (i) the order of a court in an
insolvency proceeding involving the Obligor, (ii) pursuant to the Soldiers' and
Sailors' Civil Relief Act of 1940 or (iii) modifications or extensions of the
Receivable permitted by Section 2.2(b), the Scheduled Payment with respect to
such Monthly Period shall refer to the Obligor's payment obligation with respect
to such Monthly Period as so modified.
SECURED ACCOUNTS: The meaning specified in Section 3.1(c).
SECURITY AGREEMENT: The Security Agreement dated as of December 3,
1996, among OFL, the Seller, the Security Insurer, the Agent, the Issuer, the
Indenture Trustee and the Collateral Agent.
SECURITY INSURER: Financial Security Assurance Inc., a financial
guaranty insurance corporation incorporated under the laws of the State of New
York, or any successor thereto, as issuer of the Note Policy.
SECURITY INSURER OPTIONAL DEPOSIT: With respect to a Determination
Date, the amount, if any, delivered by the Security Insurer to the Indenture
Trustee pursuant to Section 3.5(b) with respect to such Determination Date.
SELLER: Olympic Receivables Finance Corp., a Delaware corporation.
SERVICER: Olympic Financial Ltd., its successor in interest pursuant
to Section 5.2 or, after any termination of the Servicer upon a Servicer
Termination Event, the Backup Servicer or any other successor Servicer.
SERVICER EXTENSION NOTICE: The notice delivered pursuant to Section
2.14.
20
<PAGE>
SERVICER TERMINATION EVENT: An event described in Section 5.1.
SERVICER'S CERTIFICATE: With respect to each Determination Date, a
certificate, completed by and executed on behalf of the Servicer, in accordance
with Section 2.9, substantially in the form attached hereto as Exhibit B.
SPREAD ACCOUNT: The Spread Account maintained pursuant to the Spread
Account Agreement.
SPREAD ACCOUNT AGREEMENT: The Spread Account Agreement dated as of
March 25, 1993, as amended and restated as of December 3, 1996, among the
Seller, OFL, the Spread Account Collateral Agent, the Security Insurer and the
trustees specified therein, together with the Warehousing Series Supplement
thereto dated as of December 3, 1996, as the same may be amended, supplemented
or otherwise modified in accordance with the terms thereof.
SPREAD ACCOUNT AVAILABLE FUNDS: With respect to any Deficiency Claim
Date, the amount on deposit in the Collection Account as of such date, without
taking into account any amounts deposited into the Collection Account with
respect to amounts withdrawn from the Spread Account pursuant to Section 3.11.
SPREAD ACCOUNT COLLATERAL AGENT: The Collateral Agent named in the
Spread Account Agreement, and any successor thereto pursuant to the terms of the
Spread Account Agreement.
STANDARD & POOR'S: Standard & Poor's Ratings Group, a division of
McGraw Hill, Inc., or any successor thereto.
SUPPLEMENTAL SERVICING FEE: With respect to any Monthly Period, all
administrative fees, expenses and charges paid by or on behalf of Obligors,
including late fees, collected on the Receivables during such Monthly Period.
TOTAL EXPENSE PERCENT: The sum of (i) the Basic Servicing Fee Rate,
(ii) the Insurance Premium and (iii) the Other Fee Percent.
TOTAL SERVICING FEE: The sum of the Basic Servicing Fee and the
Supplemental Servicing Fee.
TRANCHE: A portion of the Advances funded by Notes funded by the
Noteholders' sale of Commercial Paper Notes maturing at the end of a CP Tranche
Period, or funded at the Offshore Rate for an Offshore Tranche Period as
selected by the Issuer as provided in the definition thereof.
TRANCHE PERIOD: A CP Tranche Period or an Offshore Tranche Period.
21
<PAGE>
TWO YEAR TREASURY YIELD: As of any date of determination, the per
annum rate equal to the yield for two year United States Treasury notes that
appears on the Telerate Page 5 (or such replacement system or page as is then
customarily used to quote yields on United States Treasury notes) as of 10:00
a.m., New York City time, on such date of determination; PROVIDED, HOWEVER,
following the occurrence of an Amortization Event, the Two Year Treasury Yield
shall be the yield for two year United States Treasury notes appearing on the
Telerate Page 5 (or such replacement system or pages as is then customarily used
to quote yields on United States Treasury notes) at the close of business, New
York City time, on the date of the occurrence of such Amortization Event.
UCC: The Uniform Commercial Code as in effect in the relevant
jurisdiction.
WAC DEFICIENCY AMOUNT: As of any date of determination on which the
WAC Deficiency Percentage is greater than zero, an amount equal to the product
of (x) 1.7 times (y) the WAC Deficiency Percentage times (z) the result of (i)
the aggregate outstanding Principal Balance of the Receivables as of the
immediately preceding Accounting Date PLUS (ii) the aggregate outstanding
Principal Balance of any Receivables transferred by the Seller to the Issuer
since such Accounting Date and LESS (iii) the aggregate outstanding Principal
Balance of any Receivables that become Purchased Receivables or Repurchased
Receivables since such Accounting Date.
WAC DEFICIENCY DEPOSIT: As of any date of determination, the amount
on deposit in the Collection Account in respect of the WAC Deficiency Amount,
which shall equal the amount withheld in the Collection Account in respect of
the WAC Deficiency Amount on the Distribution Date coinciding with or next
preceding such date of determination pursuant to Section 3.6(a)(vii) plus
amounts, if any, deposited into the Collection Account in respect of the WAC
Deficiency Amount from such Distribution Date to and including the date of
determination.
WAC DEFICIENCY PERCENTAGE: As of any date of determination, an amount
expressed as a percentage equal to the excess, if any, of (A) 6.50% PLUS the
greatest of (I) the sum of (i) the Two Year Treasury Yield, determined as of
such date, (ii) 0.60%, (iii) the Basis Fee Percent and (iv) the Total Expense
Percent; (II) the sum of (i) the product of (1) the CP Composite Rate, if the
purchase or carrying of any of the Notes by the Noteholder is funded by
Commercial Paper Notes, and (2) 1.2 PLUS (ii) 0.25% and (iii) the Total Expense
Percent; and (III) the sum of (i) the product of (1) the Offshore Rate, if the
purchase or carrying of any of the Notes by the Noteholders is not funded by
Commercial Paper Notes, and (2) 1.2, (ii) 0.375% and (iii) the Total Expense
Percent over (B) the weighted average APR (weighted based on the aggregate
outstanding Principal Balance of the relevant Receivables as of the immediately
preceding Accounting Date PLUS the aggregate outstanding Principal Balance of
any
22
<PAGE>
Receivables transferred by the Seller to the Issuer since such Accounting
Date and LESS the aggregate outstanding Principal Balance of any Receivables
that became Purchased Receivables or Repurchased Receivables since such
Accounting Date) of Qualifying Receivables.
WAREHOUSING SHORTFALL AVAILABLE FUNDS: With respect to any Deficiency
Claim Date, means the amount on deposit in the Collection Account as of such
date, taking into account amounts deposited into the Collection Account in
respect of a Collection Account Shortfall but without taking into account
amounts deposited into the Collection Account in respect of a Warehousing
Shortfall.
WARRANTY RECEIVABLE: With respect to any Monthly Period, a Receivable
that the Seller or OFL has become obligated to repurchase pursuant to Section 10
of the Repurchase Agreement.
Section 1.2. USAGE OF TERMS. With respect to all terms used in this
Agreement, the singular includes the plural and the plural the singular; words
importing any gender include the other gender; references to "writing" include
printing, typing, lithography, and other means of reproducing words in a visible
form; references to agreements and other contractual instruments include all
subsequent amendments thereto or changes therein entered into in accordance with
their respective terms and not prohibited by this Agreement; references to
Persons include their permitted successors and assigns; and the terms "include"
or "including" mean "include without limitation" or "including without
limitation."
Section 1.3. CALCULATIONS. All calculations of the amount of
interest accrued on the Notes shall be made on the basis of a 360-day year and
actual days elapsed and all calculations of the amount of the Basic Servicing
Fee shall be made on the basis of a 360-day year consisting of twelve 30-day
months. All references to the Principal Balance of a Receivable as of an
Accounting Date shall refer to the close of business on such day.
Section 1.4. SECTION REFERENCES. All references to Articles,
Sections, paragraphs, subsections, exhibits and schedules shall be to such
portions of this Agreement unless otherwise specified.
Section 1.5. NO RECOURSE. No recourse may be taken, directly or
indirectly, under this Agreement or any certificate or other writing delivered
in connection herewith or therewith, against any stockholder, employee,
incorporator, officer, or director, as such, of the Seller, the Agent, OFL, the
Servicer, the Indenture Trustee, the Collateral Agent, the Backup Servicer or
the Issuer or of any predecessor or successor of the Seller, the Agent, OFL, the
Servicer, the Indenture Trustee, the Collateral Agent, the Backup Servicer or
the Issuer.
23
<PAGE>
Section 1.6. MATERIAL ADVERSE EFFECT. Whenever a determination is to
be made under this Agreement as to whether a given event, action, course of
conduct or set of facts or circumstances could or would have a material adverse
effect on the Issuer or the Noteholders (or any similar or analogous
determination), such determination shall be made without taking into account the
insurance provided by the Note Policy.
ARTICLE II
ADMINISTRATION AND SERVICING OF RECEIVABLES
Section 2.1. DUTIES OF THE SERVICER. The Servicer is hereby
authorized to act as agent for the Issuer and the Seller and in such capacity
shall manage, service, administer and make collections on the Receivables, and
perform the other actions required by the Servicer under this Agreement. The
Servicer agrees that its servicing of the Receivables shall be carried out in
accordance with customary and usual procedures of institutions which service
motor vehicle retail installment sales contracts and, to the extent more
exacting, the degree of skill and attention that the Servicer exercises from
time to time with respect to all comparable motor vehicle receivables that it
services for itself or others. In performing such duties, so long as OFL is the
Servicer, it shall comply with the policies and procedures attached hereto as
Exhibit A. The Servicer's duties shall include, without limitation, collection
and posting of all payments, responding to inquiries of Obligors on the
Receivables, investigating delinquencies, sending payment coupons to Obligors,
reporting any required tax information to Obligors, policing the collateral,
complying with the terms of the Lockbox Agreement, accounting for collections
and furnishing monthly and annual statements to the Issuer, the Agent, the
Indenture Trustee and the Security Insurer with respect to distributions,
monitoring the status of Insurance Policies with respect to the Financed
Vehicles and performing the other duties specified herein. The Servicer shall
also administer and enforce all rights and responsibilities of the holder of the
Receivables provided for in the Dealer Agreements (and shall maintain possession
of the Dealer Agreements, to the extent it is necessary to do so), the Dealer
Assignments and the Insurance Policies, to the extent that such Dealer
Agreements, Dealer Assignments and Insurance Policies relate to the Receivables,
the Financed Vehicles or the Obligors. To the extent consistent with the
standards, policies and procedures otherwise required hereby, the Servicer shall
follow its customary standards, policies, and procedures and shall have full
power and authority, acting alone, to do any and all things in connection with
such managing, servicing, administration and collection that it may deem
necessary or desirable. Without limiting the generality of the foregoing, the
Servicer is hereby authorized and empowered by the Issuer to execute and
deliver, on behalf of the Issuer, any and all instruments of satisfaction or
cancellation, or of partial or full release or discharge, and all other
comparable instruments,
24
<PAGE>
with respect to the Receivables and with respect to the Financed Vehicles;
PROVIDED, HOWEVER, that notwithstanding the foregoing, the Servicer shall
not, except pursuant to an order from a court of competent jurisdiction,
release an Obligor from payment of any unpaid amount under any Receivable or
waive the right to collect the unpaid balance of any Receivable from the
Obligor, except that the Servicer may forego collection efforts if the amount
subject to collection is DE MINIMIS and if it would forego collection in
accordance with its customary procedures. The Servicer is hereby authorized
to commence, in its own name or in the name of the Issuer (provided the
Servicer has obtained the Issuer's consent, which consent shall not be
unreasonably withheld), a legal proceeding to enforce a Receivable pursuant
to Section 2.3 or to commence or participate in any other legal proceeding
(including, without limitation, a bankruptcy proceeding) relating to or
involving a Receivable, an Obligor or a Financed Vehicle. If the Servicer
commences or participates in such a legal proceeding in its own name, the
Issuer shall thereupon be deemed to have automatically assigned such
Receivable to the Servicer solely for purposes of commencing or participating
in any such proceeding as a party or claimant, and the Servicer is authorized
and empowered by the Issuer to execute and deliver in the Servicer's name any
notices, demands, claims, complaints, responses, affidavits or other
documents or instruments in connection with any such proceeding. The Issuer
shall furnish the Servicer with any powers of attorney and other documents
which the Servicer may reasonably request and which the Servicer deems
necessary or appropriate and take any other steps which the Servicer may deem
necessary or appropriate to enable the Servicer to carry out its servicing
and administrative duties under this Agreement.
Section 2.2. COLLECTION OF RECEIVABLE PAYMENTS; MODIFICATIONS OF
RECEIVABLES; LOCKBOX AGREEMENTS.
(a) Consistent with the standards, policies and procedures required by
this Agreement, the Servicer shall make reasonable efforts to collect all
payments called for under the terms and provisions of the Receivables as and
when the same shall become due, and shall follow such collection procedures as
it follows with respect to all comparable automobile receivables that it
services for itself or others and otherwise act with respect to the Receivables,
the Dealer Agreements, the Dealer Assignments, the Insurance Policies and the
other Seller Conveyed Property in such manner as will, in the reasonable
judgment of the Servicer, maximize the amount to be received by the Issuer with
respect thereto. The Servicer is authorized in its discretion to waive any
prepayment charge, late payment charge or any other similar fees that may be
collected in the ordinary course of servicing any Receivable.
(b) The Servicer may at any time agree to a modification or amendment
of a Receivable in order to (i) change the Obligor's regular due date to another
date within the Monthly Period in which such due date occurs, (ii) re-amortize
the
25
<PAGE>
scheduled payments on the Receivable following a partial prepayment of
principal or (iii) grant extensions on a Receivable, provided that the
aggregate period of all extensions on a Receivable shall not exceed three
months. The aggregate Principal Balance of Receivables which have been
extended during any calendar quarter shall not exceed the greater of (A)
$500,000 and (B) 1.5% of the Aggregate Principal Balance as of the Accounting
Date immediately prior to the first day of such calendar quarter.
(c) The Servicer may grant payment extensions on, or other
modifications or amendments to, a Receivable (in addition to those modifications
permitted by Section 2.2(b)) in accordance with its customary procedures if the
Servicer believes in good faith that such extension, modification or amendment
is necessary to avoid a default on such Receivable, will maximize the amount to
be received by the Issuer with respect to such Receivable, and is otherwise in
the best interests of the Issuer; PROVIDED, HOWEVER, that:
(i) In no event may a Receivable be extended beyond the Monthly Period
immediately preceding the Final Scheduled Distribution Date;
(ii) So long as an Insurer Default shall not have occurred and be
continuing, the Servicer shall not amend or modify a Receivable (except as
provided in Section 2.2(b)) without the consent of the Security Insurer;
and
(iii) If an Insurer Default shall have occurred and be continuing, the
Servicer may not extend or modify any Receivable (other than as permitted
by Section 2.2(b)).
(d) The Servicer shall use its best efforts to cause Obligors to make
all payments on the Receivables, whether by check or by direct debit of the
Obligor's bank account, to be made directly to one or more Lockbox Banks, acting
as agent for the Collateral Agent pursuant to a Lockbox Agreement. Amounts
received by a Lockbox Bank in respect of the Receivables may initially be
deposited into a demand deposit account maintained by the Lockbox Bank as agent
for the Collateral Agent and for other owners of automobile receivables serviced
by the Servicer. The Servicer shall use its best efforts to cause any Lockbox
Bank to deposit all payments on the Receivables in the Lockbox Account no later
than the Business Day after receipt, and to cause all amounts credited to the
Lockbox Account on account of such payments to be transferred to the Collection
Account no later than the second Business Day after receipt of such payments.
The Lockbox Account shall be a demand deposit account held by the Lockbox Bank,
or at the request of the Agent or the Security Insurer (unless an Insurer
Default shall have occurred and be continuing) an Eligible Account satisfying
clause (i) of the definition thereof. The Collateral Agent shall not be liable
for any actions or omissions of the Lockbox Bank.
26
<PAGE>
Prior to each Purchase Date, the Servicer shall have notified each
Obligor that makes its payments on the Receivables being transferred to the
Issuer on such date by check to make such payments thereafter directly to the
Lockbox Bank (except in the case of Obligors that have already been making such
payments to the Lockbox Bank), and shall have provided each such Obligor with
respect to the Premier Receivables with a supply of mailing address labels and
shall provide each such Obligor with respect to the Classic Receivables with
monthly invoices, in each case in order to enable such Obligors to make such
payments directly to the Lockbox Bank for deposit into the Lockbox Account, and
the Servicer will continue, not less often than every three months, to so notify
those Obligors who have failed to make payments to the Lockbox Bank. If and to
the extent requested by the Agent or the Security Insurer (unless an Insurer
Default shall have occurred and be continuing), the Servicer shall request each
Obligor that makes payment on the Receivables by direct debit of such Obligor's
bank account to execute an authorization for automatic payment which in the
judgment of the Security Insurer is sufficient to authorize direct debit by the
Lockbox Bank on behalf of the Issuer. If at any time the Lockbox Bank is unable
to directly debit an Obligor's bank account that makes payment on the
Receivables by direct debit and if such inability is not cured within 15 days or
cannot be cured by execution by the Obligor of a new authorization for automatic
payment, the Servicer shall notify such Obligor that it cannot make payment by
direct debit and must thereafter make payment by check.
Notwithstanding any Lockbox Agreement, or any of the provisions of
this Agreement relating to the Lockbox Agreement, the Servicer shall remain
obligated and liable to the Issuer, Indenture Trustee and Noteholders for
servicing and administering the Receivables and the other Seller Conveyed
Property in accordance with the provisions of this Agreement without diminution
of such obligation or liability by virtue thereof.
In the event the Servicer shall for any reason no longer be acting as
such, the successor Servicer shall thereupon assume all of the rights and
obligations of the outgoing Servicer under the Lockbox Agreement. In such
event, the successor Servicer shall be deemed to have assumed all of the
outgoing Servicer's interest therein and to have replaced the outgoing Servicer
as a party to each such Lockbox Agreement to the same extent as if such Lockbox
Agreement had been assigned to the successor Servicer, except that the outgoing
Servicer shall not thereby be relieved of any liability or obligations on the
part of the outgoing Servicer to the Lockbox Bank under such Lockbox Agreement.
The outgoing Servicer shall, upon request of the Agent, but at the expense of
the outgoing Servicer, deliver to the successor Servicer all documents and
records relating to each such Lockbox Agreement and an accounting of amounts
collected and held by the Lockbox Bank and otherwise use its best efforts to
effect the orderly and efficient transfer of any Lockbox Agreement to the
successor Servicer. In the event that the Security Insurer (so long as an
Insurer Default shall not have
27
<PAGE>
occurred and be continuing) or the Agent (if an Insurer Default shall have
occurred and be continuing) elects to change the identity of the Lockbox
Bank, the outgoing Servicer, at its expense, shall cause the Lockbox Bank to
deliver, at the direction of the Security Insurer (so long as an Insurer
Default shall not have occurred and be continuing) or the Agent (if an
Insurer Default shall have occurred and be continuing) to the Agent or a
successor Lockbox Bank, all documents and records relating to the Receivables
and all amounts held (or thereafter received) by the Lockbox Bank (together
with an accounting of such amounts) and shall otherwise use its best efforts
to effect the orderly and efficient transfer of the lockbox arrangements and
the Servicer shall notify the Obligors to make payments to the Lockbox
Account established by the successor.
(e) The Servicer shall remit all payments by or on behalf of the
Obligors received directly by the Servicer to the Collection Account or the
Lockbox Account for deposit into the Collection Account as soon as practicable,
but in no event later than the Business Day after receipt thereof.
Section 2.3. REALIZATION UPON RECEIVABLES.
(a) Consistent with the standards, policies and procedures required by
this Agreement, the Servicer shall use its best efforts to repossess (or
otherwise comparably convert the ownership of) and liquidate any Financed
Vehicle securing a Receivable with respect to which the Servicer has determined
that payments thereunder are not likely to be resumed, as soon as is practicable
after default on such Receivable but in no event later than the date on which
all or any portion of a Scheduled Payment has become 91 days delinquent. The
Servicer is authorized to follow such customary practices and procedures as it
shall deem necessary or advisable, consistent with the standard of care required
by Section 2.1, which practices and procedures may include reasonable efforts to
realize upon any recourse to Dealers, the sale of the related Financed Vehicle
at public or private sale, the submission of claims under an Insurance Policy
and other actions by the Servicer in order to realize upon such a Receivable.
The foregoing is subject to the provision that, in any case in which the
Financed Vehicle shall have suffered damage, the Servicer shall not expend funds
in connection with any repair or towards the repossession of such Financed
Vehicle unless it shall determine in its discretion that such repair or
repossession shall increase the proceeds of liquidation of the related
Receivable by an amount greater than the amount of such expenses. All amounts
received upon liquidation of a Financed Vehicle shall be remitted directly by
the Servicer to the Collection Account or the Lockbox Account for deposit into
the Collection Account without deposit into any intervening account as soon as
practicable, but in no event later than the Business Day after receipt thereof.
The Servicer shall be entitled to recover all reasonable expenses incurred by it
in the course of repossessing and liquidating a Financed Vehicle into cash
proceeds, but only out of the cash proceeds of such
28
<PAGE>
Financed Vehicle, any deficiency obtained from the Obligor or any amounts
received from the related Dealer, which amounts may be retained by the
Servicer (and shall not be required to be deposited as provided in Section
2.2(e)) to the extent of such expenses. The Servicer shall pay on behalf of
the Issuer any personal property taxes assessed on repossessed Financed
Vehicles; the Servicer shall be entitled to reimbursement of any such tax
from Liquidation Proceeds with respect to such Receivable.
(b) If the Servicer elects to commence a legal proceeding to enforce a
Dealer Agreement or Dealer Assignment, the act of commencement shall be deemed
to be an automatic assignment from the Issuer to the Servicer of the rights
under such Dealer Agreement and Dealer Assignment for purposes of collection
only. If, however, in any enforcement suit or legal proceeding, it is held that
the Servicer may not enforce a Dealer Agreement or Dealer Assignment on the
grounds that it is not a real party in interest or a Person entitled to enforce
the Dealer Agreement or Dealer Assignment, the Issuer, at the Servicer's
expense, or the Seller, at the Seller's expense, shall take such steps as the
Servicer deems necessary to enforce the Dealer Agreement or Dealer Assignment,
including bringing suit in its name or the name of the Seller or of the Issuer
and the Collateral Agent for the benefit of the Secured Parties. All amounts
recovered shall be remitted directly by the Servicer as provided in Section
2.2(e).
Section 2.4. INSURANCE.
(a) The Servicer shall require that each Financed Vehicle be insured
by the Insurance Policies referred to in Paragraph 24 of the Schedule of
Representations and shall monitor the status of such comprehensive and collision
insurance coverage thereafter, in accordance with its customary servicing
procedures. Each Receivable requires the Obligor to maintain such comprehensive
and collision insurance, naming OFL and its successors and assigns as additional
insureds, and permits the holder of such Receivable to obtain comprehensive and
collision insurance at the expense of the Obligor if the Obligor fails to
maintain such insurance. If the Servicer shall determine that an Obligor has
failed to obtain or maintain a comprehensive and collision Insurance Policy
covering the related Financed Vehicle which satisfies the conditions set forth
in such Paragraph 24 (including, without limitation, during the repossession of
such Financed Vehicle) the Servicer shall enforce the rights of the holder of
the Receivable under the Receivable to require the Obligor to obtain such
comprehensive and collision insurance.
(b) The Servicer may, if an Obligor fails to obtain or maintain a
comprehensive and collision Insurance Policy, obtain insurance with respect to
the related Financed Vehicle and advance on behalf of such Obligor, as required
under the terms of the insurance policy, the premiums for such insurance (such
insurance being referred to herein as "Force-Placed Insurance").
29
<PAGE>
All policies of Force-Placed Insurance shall be endorsed with clauses
providing for loss payable to the Issuer. Any cost incurred by the Servicer
in maintaining such Force-Placed Insurance shall only be recoverable out of
premiums paid by the Obligors or Liquidation Proceeds with respect to the
Receivable, as provided in Section 2.4(c).
(c) In connection with any Force-Placed Insurance obtained hereunder,
OFL may, in the manner and to the extent permitted by applicable law, require
the Obligors to repay the entire premium to OFL. In no event shall OFL include
the amount of the premium in the Amount Financed under the Receivable. For all
purposes of this Agreement, the Insurance Add-on Amount with respect to any
Receivable having Force-Placed Insurance will be treated as a separate
obligation of the Obligor and will not be added to the Principal Balance of such
Receivable, and amounts allocable thereto will not be available for distribution
on the Notes. OFL shall retain and separately administer the right to receive
payments from Obligors with respect to Insurance Add-on Amounts or rebates of
Forced-Placed Insurance premiums. If an Obligor makes a payment with respect to
a Receivable having Force-Placed Insurance, but OFL is unable to determine
whether the payment is allocable to the Receivable or to the Insurance Add-on
Amount, the payment shall be applied first to any unpaid Scheduled Payments and
then to the Insurance Add-on Amount. Liquidation Proceeds on any Receivable
will be used first to pay the Principal Balance and accrued interest on such
Receivable and then to pay the related Insurance Add-on Amount. If an Obligor
under a Receivable with respect to which OFL has placed Force-Placed Insurance
fails to make scheduled payments of such Insurance Add-on Amount as due, and OFL
has determined that eventual payment of the Insurance Add-on Amount is unlikely,
OFL may, but shall not be required to, purchase such Receivable from the Issuer
for the Purchase Amount on any subsequent Deposit Date. Any such Receivable,
and any Receivable with respect to which OFL has placed Force-Placed Insurance
which has been paid in full (excluding any Insurance Add-on Amounts) will be
assigned to OFL.
(d) The Servicer may sue to enforce or collect upon the Insurance
Policies, in its own name, if possible, or as agent of the Issuer. If the
Servicer elects to commence a legal proceeding to enforce an Insurance Policy,
the act of commencement shall be deemed to be an automatic assignment of the
rights of the Issuer under such Insurance Policy to the Servicer for purposes of
collection only. If, however, in any enforcement suit or legal proceeding it is
held that the Servicer may not enforce an Insurance Policy on the grounds that
it is not a real party in interest or a holder entitled to enforce the Insurance
Policy, the Issuer, on behalf of the Collateral Agent and the Secured Parties,
at the Servicer's expense, or the Seller, at the Seller's expense, shall take
such steps as the Servicer deems necessary to enforce such Insurance Policy,
including bringing suit in its name or the name of the Issuer and the Collateral
Agent for the benefit of the Secured Parties.
30
<PAGE>
Section 2.5. MAINTENANCE OF SECURITY INTERESTS IN VEHICLES.
(a) Consistent with the policies and procedures required by this
Agreement, the Servicer shall take such steps as are necessary to maintain
perfection of the security interest created by each Receivable in the related
Financed Vehicle on behalf of the Issuer, including but not limited to obtaining
the execution by the Obligors and the recording, registering, filing,
re-recording, re-filing, and re-registering of all security agreements,
financing statements and continuation statements as are necessary to maintain
the security interest granted by the Obligors under the respective Receivables.
The Issuer hereby authorizes the Servicer, and the Servicer agrees, to take any
and all steps necessary to re-perfect such security interest on behalf of the
Issuer as necessary because of the relocation of a Financed Vehicle or for any
other reason. In the event that the assignment of a Receivable to the Issuer is
insufficient, without a notation on the related Financed Vehicle's certificate
of title, or without fulfilling any additional administrative requirements under
the laws of the state in which the Financed Vehicle is located, to perfect a
security interest in the related Financed Vehicle in favor of the Issuer, the
Servicer hereby agrees that the Servicer's designation as the secured party on
the certificate of title is in its capacity as agent of the Issuer.
(b) Upon the occurrence of an Insurance Agreement Event of Default,
the Security Insurer may (so long as an Insurer Default shall not have occurred
and be continuing) instruct the Issuer and the Servicer to take or cause to be
taken, or, if an Insurer Default shall have occurred, upon the occurrence of a
Servicer Termination Event, the Issuer and the Servicer shall take or cause to
be taken such action as may, in the opinion of counsel to the Security Insurer
(or, if an Insurer Default shall have occurred and be continuing, counsel to the
Agent), be necessary to perfect or reperfect the security interests in the
Financed Vehicles securing the Receivables in the name of the Issuer by amending
the title documents of such Financed Vehicles or by such other reasonable means
as may, in the opinion of counsel to the Security Insurer or the Agent (as
applicable), be necessary or prudent. OFL hereby agrees to pay all expenses
related to such perfection or reperfection and to take all action necessary
therefor. In addition, prior to the occurrence of an Insurance Agreement Event
of Default, the Security Insurer may (unless an Insurer Default shall have
occurred and be continuing) instruct the Issuer and the Servicer to take or
cause to be taken such action as may, in the opinion of counsel to the Security
Insurer, be necessary to perfect or re-perfect the security interest in the
Financed Vehicles underlying the Receivables in the name of the Issuer,
including by amending the title documents of such Financed Vehicles or by such
other reasonable means as may, in the opinion of counsel to the Security
Insurer, be necessary or prudent; PROVIDED, HOWEVER, that (unless an Insurer
Default shall have occurred and be continuing) if the Security
31
<PAGE>
Insurer requests that the title documents be amended prior to the occurrence
of an Insurance Agreement Event of Default, the out-of-pocket expenses of the
Servicer or the Issuer in connection with such action shall be reimbursed to
the Servicer or the Issuer, as applicable, by the Security Insurer.
Section 2.6. COVENANTS, REPRESENTATIONS, AND WARRANTIES OF SERVICER.
By its execution and delivery of this Agreement, the Servicer makes the
following representations, warranties and covenants on which the Issuer relies
in purchasing the Receivables and issuing the Notes, on which the Indenture
Trustee relies in authenticating the Notes and on which the Security Insurer
relies in issuing the Note Policy.
(a) The Servicer covenants as follows:
(i) LIENS IN FORCE. The Financed Vehicle securing each Receivable
shall not be released in whole or in part from the security interest
granted by the related Obligor, except upon payment in full of the
Receivable or as otherwise contemplated herein;
(ii) NO IMPAIRMENT. The Servicer shall do nothing to impair the
rights of the Issuer or the Noteholders in the Receivables, the Dealer
Agreements, the Dealer Assignments, the Insurance Policies or the other
Seller Conveyed Property; and
(iii) NO AMENDMENTS. The Servicer shall not extend or otherwise amend
the terms of any Receivable, except in accordance with Section 2.2.
(b) The Servicer represents, warrants and covenants as of the Closing
Date as to itself:
(i) ORGANIZATION AND GOOD STANDING. The Servicer has been duly
organized and is validly existing and in good standing under the laws of
its jurisdiction of organization, with power, authority and legal right to
own its properties and to conduct its business as such properties are
currently owned and such business is currently conducted, and had at all
relevant times, and now has, power, authority and legal right to enter into
and perform its obligations under this Agreement;
(ii) DUE QUALIFICATION. The Servicer is duly qualified to do business
as a foreign corporation in good standing, and has obtained all necessary
licenses and approvals, in all jurisdictions in which the ownership or
lease of property or the conduct of its business (including the servicing
of the Receivables as required by this Agreement) requires or shall require
such qualification, if the failure to be so qualified would have a material
adverse effect on the ability of the Servicer to perform its obligations
hereunder or on the enforceability of any Receivable.
32
<PAGE>
(iii) POWER AND AUTHORITY. The Servicer has the power and authority
to execute and deliver this Agreement and its Related Documents and to
carry out its terms and their terms, respectively, and the execution,
delivery and performance of this Agreement and the Servicer's Related
Documents have been duly authorized by the Servicer by all necessary
corporate action;
(iv) BINDING OBLIGATION. This Agreement and the Servicer's Related
Documents shall constitute legal, valid and binding obligations of the
Servicer enforceable in accordance with their respective terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization, or
other similar laws affecting the enforcement of creditors' rights generally
and by equitable limitations on the availability of specific remedies,
regardless of whether such enforceability is considered in a proceeding in
equity or at law;
(v) NO VIOLATION. The consummation of the transactions contemplated
by this Agreement and the Servicer's Related Documents, and the fulfillment
of the terms of this Agreement and the Servicer's Related Documents, shall
not conflict with, result in any breach of any of the terms and provisions
of, or constitute (with or without notice or lapse of time) a default
under, the articles of incorporation or bylaws of the Servicer, or any
indenture, agreement, mortgage, deed of trust or other instrument to which
the Servicer is a party or by which it is bound, or result in the creation
or imposition of any Lien upon any of its properties pursuant to the terms
of any such indenture, agreement, mortgage, deed of trust or other
instrument, other than this Agreement, or violate any law, order, rule or
regulation applicable to the Servicer of any court or of any federal or
state regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Servicer or any of its
properties;
(vi) NO PROCEEDINGS. There are no proceedings or investigations
pending or, to the Servicer's knowledge, threatened against the Servicer,
before any court, regulatory body, administrative agency or other tribunal
or governmental instrumentality having jurisdiction over the Servicer or
its properties (A) asserting the invalidity of this Agreement or any of the
Related Documents, (B) seeking to prevent the issuance of the Notes or the
consummation of any of the transactions contemplated by this Agreement or
any of the Related Documents, or (C) seeking any determination or ruling
that might materially and adversely affect the performance by the Servicer
of its obligations under, or the validity or enforceability of, this
Agreement or any of the Related Documents or (D) seeking to adversely
affect the federal income tax or other federal, state or local tax
attributes of the Notes; and
33
<PAGE>
(vii) NO CONSENTS. The Servicer is not required to obtain the consent
of any other party or any consent, license, approval or authorization, or
registration or declaration with, any governmental authority, bureau or
agency in connection with the execution, delivery, performance, validity or
enforceability of this Agreement.
Section 2.7. PURCHASE OF RECEIVABLES UPON BREACH OF COVENANT. Upon
discovery by any of the Servicer, the Security Insurer, the Issuer or the
Indenture Trustee of a breach of any of the covenants set forth in Sections
2.5(a) or 2.6(a), the party discovering such breach shall give prompt written
notice to the others; PROVIDED, HOWEVER, that the failure to give any such
notice shall not affect any obligation of the Servicer. As of the second
Accounting Date following its discovery or receipt of notice of any breach of
any covenant set forth in Sections 2.5(a) or 2.6(a) which materially and
adversely affects the interests of the Noteholders, the Issuer or the Security
Insurer in any Receivable (including any Liquidated Receivable) (or, at the
Servicer's election, the first Accounting Date so following), the Servicer
shall, unless it shall have cured such breach in all material respects, purchase
from the Issuer the Receivable affected by such breach and, on the related
Deposit Date, the Servicer shall pay the related Purchase Amount. It is
understood and agreed that the obligation of the Servicer to purchase any
Receivable (including any Liquidated Receivable) with respect to which such a
breach has occurred and is continuing shall, if such obligation is fulfilled,
constitute the sole remedy against the Servicer for such breach available to the
Security Insurer, the Noteholders, the Issuer or the Indenture Trustee on behalf
of Noteholders; PROVIDED, HOWEVER, that the Servicer shall indemnify the Issuer,
the Backup Servicer, the Collateral Agent, the Security Insurer, the Indenture
Trustee, the Agent and the Noteholders against all costs, expenses, losses,
damages, claims and liabilities, including reasonable fees and expenses of
counsel, which may be asserted against or incurred by any of them as a result of
third party claims arising out of the events or facts giving rise to such
breach.
Section 2.8. TOTAL SERVICING FEE; PAYMENT OF CERTAIN EXPENSES BY
SERVICER. On each Distribution Date, the Servicer shall be entitled to receive
out of the Collection Account the Basic Servicing Fee and any Supplemental
Servicing Fee for the related Monthly Period pursuant to Section 3.6. The
Servicer shall be required to pay all expenses incurred by it in connection with
its activities under this Agreement (including taxes imposed on the Servicer,
expenses incurred in connection with distributions and reports to Noteholders
and the Security Insurer and all other fees and expenses of the Issuer,
including claims against the Issuer in respect of indemnification, unless such
fees, expenses or claims in respect of indemnification are expressly stated to
be for the account of OFL or not to be for the account of the Servicer). The
Servicer shall be liable for the fees and expenses of the Indenture Trustee, the
Custodian, the Backup Servicer, the Collateral Agent, the Lockbox Bank (and
34
<PAGE>
any fees under the Lockbox Agreement) and the Independent Accountants.
Notwithstanding the foregoing, if the Servicer shall not be OFL, a successor
to OFL as Servicer permitted by Section 4.2 or an Affiliate of any of the
foregoing, such Servicer shall not be liable for claims against the Issuer in
respect of indemnification.
Section 2.9. SERVICER'S CERTIFICATE. No later than 5:00 p.m. New
York City time on each Determination Date, the Servicer shall deliver to the
Issuer, the Agent, the Indenture Trustee, the Backup Servicer, the Security
Insurer and the Collateral Agent, a Servicer's Certificate executed by a
Responsible Officer of the Servicer containing, among other things, (i) all
information available as of such date necessary to enable the Indenture Trustee
to make the distributions required by Section 3.6 and to determine the amount to
which the Servicer is entitled to be reimbursed or has been reimbursed during
the related Monthly Period for Monthly Advances, (ii) all information available
as of such date necessary to enable the Indenture Trustee to send the statements
to Noteholders and the Security Insurer required by Section 3.7, (iii) a listing
of all Warranty Receivables and Administrative Receivables purchased or
repurchased as of the related Deposit Date, identifying the Receivables so
purchased or repurchased and (iv) all information available as of such date
necessary to enable the Indenture Trustee to reconcile all deposits to, and
withdrawals from, the Collection Account for the related Monthly Period and
Distribution Date, including the accounting required by compliance with the
Collateral Test. Receivables purchased by the Servicer or by the Seller or OFL
on the related Deposit Date and each Receivable which became a Liquidated
Receivable or which was paid in full during the related Monthly Period shall be
identified by account number (as set forth in the Receivables Schedule).
Section 2.10. ANNUAL STATEMENT AS TO COMPLIANCE; NOTICE OF SERVICER
TERMINATION EVENT.
(a) The Servicer shall deliver to the Issuer, the Agent, the Indenture
Trustee, the Backup Servicer, the Security Insurer, the Collateral Agent and
each Rating Agency, on or before March 31, (or 90 days after the end of the
Servicer's fiscal year, if other than December 31) of each year, beginning on
March 31, 1997, an officer's certificate signed by any Responsible Officer of
the Servicer, dated as of December 31, (or other applicable date) of such year,
stating that (i) a review of the activities of the Servicer during the preceding
12-month period (or such other period as shall have elapsed from the Closing
Date to the date of the first such certificate) and of its performance under
this Agreement has been made under such officer's supervision, and (ii) to such
officer's knowledge, based on such review, the Servicer has fulfilled all its
obligations under this Agreement throughout such period, or, if there has been a
default in the fulfillment of any such
35
<PAGE>
obligation, specifying each such default known to such officer and the nature
and status thereof.
(b) The Servicer shall deliver to the Issuer, the Agent, the Indenture
Trustee, the Backup Servicer, the Security Insurer and the Collateral Agent,
promptly after having obtained knowledge thereof, but in no event later than two
Business Days thereafter, written notice in an officer's certificate of any
event which with the giving of notice or lapse of time, or both, would become a
Servicer Termination Event under Section 5.1(a). The Seller or the Servicer
shall deliver to the Issuer, the Agent, the Indenture Trustee, the Backup
Servicer, the Security Insurer, the Collateral Agent and the Servicer or the
Seller (as applicable) promptly after having obtained knowledge thereof, but in
no event later than two Business Days thereafter, written notice in an officer's
certificate of any event which with the giving of notice or lapse of time, or
both, would become a Servicer Termination Event under any other clause of
Section 5.1.
Section 2.11. ANNUAL INDEPENDENT ACCOUNTANTS' REPORT.
(a) The Servicer shall cause a firm of nationally recognized
independent certified public accountants (the "Independent Accountants"), who
may also render other services to the Servicer or to the Seller, to deliver to
the Issuer, the Indenture Trustee, the Agent, the Backup Servicer, the Security
Insurer, the Collateral Agent and each Rating Agency, on or before March 31 (or
90 days after the end of the Servicer's fiscal year, if other than December 31)
of each year, beginning on March 31, 1997, with respect to the twelve months
ended the immediately preceding December 31 (or other applicable date) (or such
other period as shall have elapsed from the Closing Date to the date of such
certificate), a statement (the "Accountant's Report") addressed to the Board of
Directors of the Servicer, to the Agent, the Indenture Trustee, the Backup
Servicer, the Collateral Agent and the Security Insurer, to the effect that such
firm has audited the financial statements of the Servicer and issued its report
thereon and that such audit (1) was made in accordance with generally accepted
auditing standards, and accordingly included such tests of the accounting
records and such other auditing procedures as such firm considered necessary in
the circumstances; (2) included an examination of documents and records relating
to the servicing of automobile installment sales contracts under pooling and
servicing agreements, sale and servicing agreements and warehousing agreements
substantially similar one to another (such statement to have attached thereto a
schedule setting forth the pooling and servicing agreements and sale and
servicing agreements covered thereby, including this Agreement); (3) included an
examination of the delinquency and loss statistics relating to the Servicer's
portfolio of automobile installment sales contracts; and (4) except as described
in the statement, disclosed no exceptions or errors in the records relating to
automobile and light truck loans serviced for others that, in the firm's
opinion, generally accepted auditing standards requires such firm to report.
The
36
<PAGE>
Accountants' Report shall further state that (1) a review in accordance with
agreed upon procedures was made of three randomly selected Servicer's
Certificates for each such pooling and servicing agreement, sale and servicing
agreement or warehousing agreements and (2) except as disclosed in the
Accountant's Report, no exceptions or errors in the Servicer's Certificates so
examined were found.
(b) The Accountants' Report shall also indicate that the firm is
independent of the Seller and the Servicer within the meaning of the Code of
Professional Ethics of the American Institute of Certified Public Accountants.
(c) A copy of the Accountants' Report may be obtained by any
Noteholder by a request in writing to the Indenture Trustee addressed to the
Corporate Trust Office.
Section 2.12. ACCESS TO CERTAIN DOCUMENTATION AND INFORMATION
REGARDING RECEIVABLES. The Servicer shall provide to representatives of the
Issuer, Indenture Trustee, the Agent, the Backup Servicer and the Security
Insurer reasonable access to the documentation and its operations regarding the
Receivables. In each case, such access shall be afforded without charge but
only upon reasonable request and during normal business hours and on a date not
more than two Business Days after the date of such request. Nothing in this
Section shall derogate from the obligation of the Servicer to observe any
applicable law prohibiting disclosure of information regarding the Obligors, and
the failure of the Servicer to provide access as provided in this Section as a
result of such obligation shall not constitute a breach of this Section.
Section 2.13. MONTHLY TAPE.
(a) On or before the third Business Day, but in no event later than
the fifth calendar day, of each month, the Servicer will deliver to the
Indenture Trustee and the Backup Servicer a computer tape or a diskette (or any
other electronic transmission acceptable to the Indenture Trustee and the Backup
Servicer) in a format acceptable to the Indenture Trustee and the Backup
Servicer containing the information with respect to the Receivables as of the
preceding Accounting Date necessary for preparation of the Servicer's
Certificate relating to the immediately succeeding Determination Date and
necessary to determine the application of collections as provided in Section
3.3. The Backup Servicer shall use such tape or diskette (or other electronic
transmission acceptable to the Indenture Trustee and the Backup Servicer) to
verify the Servicer's Certificate delivered by the Servicer, and the Backup
Servicer shall certify to the Security Insurer and the Agent that it has
verified the Servicer's Certificate in accordance with this Section 2.13 and
shall notify the Servicer, the Security Insurer and the Agent of any
discrepancies, in each case, on or before the second Business Day following the
Determination Date. In the event that the Backup Servicer reports any
discrepancies, the Servicer and the
37
<PAGE>
Backup Servicer shall attempt to reconcile such discrepancies prior to the
related Deficiency Claim Date, but in the absence of a reconciliation, the
Servicer's Certificate shall control for the purpose of calculations and
distributions with respect to the related Distribution Date. In the event
that the Backup Servicer and the Servicer are unable to reconcile
discrepancies with respect to a Servicer's Certificate by the related
Distribution Date, the Servicer shall cause the Independent Accountants, at
the Servicer's expense, to audit the Servicer's Certificate and, prior to the
third Business Day, but in no event later than the fifth calendar day, of the
following month, reconcile the discrepancies. The effect, if any, of such
reconciliation shall be reflected in the Servicer's Certificate for such next
succeeding Determination Date. In addition, the Servicer shall, if so
requested by the Agent or the Security Insurer (unless an Insurer Default
shall have occurred and be continuing) deliver to the Backup Servicer its
Collection Records and its Monthly Records within one Business Day of demand
therefor and a computer tape containing as of the close of business on the
date of demand all of the data maintained by the Servicer in computer format
in connection with servicing the Receivables. Other than the duties
specifically set forth in this Agreement, the Backup Servicer shall have no
obligations hereunder, including, without limitation, to supervise, verify,
monitor or administer the performance of the Servicer. The Backup Servicer
shall have no liability for any actions taken or omitted by the Servicer.
The duties and obligations of the Backup Servicer shall be determined solely
by the express provisions of this Agreement and no implied covenants or
obligations shall be read into this Agreement against the Backup Servicer.
Section 2.14. RETENTION AND TERMINATION OF SERVICER. The Servicer
hereby covenants and agrees to act as such under this Agreement for an initial
term, commencing on the Closing Date and ending on March 31, 1997 which term may
be extended by the Security Insurer for successive quarterly terms ending on
each successive June 30, September 30, December 31, and March 31, (or, pursuant
to revocable written standing instructions from time to time to the Servicer,
the Indenture Trustee and the Agent, for any specified number of terms greater
than one), until the termination of this Agreement. Each such notice (including
each notice pursuant to standing instructions, which shall be deemed delivered
at the end of successive quarterly terms for so long as such instructions are in
effect) (a "Servicer Extension Notice") shall be delivered by the Security
Insurer to the Agent, the Indenture Trustee and the Servicer. The Servicer
hereby agrees that, as of the date hereof and upon its receipt of any such
Servicer Extension Notice, the Servicer shall become bound, for the initial term
beginning on the Closing Date and for the duration of the term covered by such
Servicer Extension Notice, to continue as the Servicer subject to and in
accordance with the other provisions of this Agreement. Until such time as an
Insurer Default shall have occurred and be continuing, the Indenture Trustee
agrees that if as of the fifteenth day prior to the last day of any term of the
Servicer the Indenture Trustee
38
<PAGE>
shall not have received any Servicer Extension Notice from the Security
Insurer, the Indenture Trustee will, within five days thereafter, give
written notice of such non-receipt to the Agent, the Security Insurer and the
Servicer.
Section 2.15. FIDELITY BOND. The Servicer shall maintain a fidelity
bond in such form and amount as is customary for entities acting as custodian of
funds and documents in respect of consumer contracts on behalf of institutional
investors.
Section 2.16. DUTIES OF THE SERVICER UNDER THE INDENTURE. The
Servicer shall, and hereby agrees that it will, perform on behalf of the Issuer
the following duties of the Issuer under the Indenture (references are to the
applicable Sections in the Indenture):
(a) the direction to the Paying Agent, if any, to deposit moneys with
the Indenture Trustee (Section 1011);
(b) the preparation of all supplements, amendments, financing
statements, continuation statements, instruments of further assurance and other
instruments, in accordance with Section 1016 of the Indenture, necessary to
protect the Trust Estate (Section 1016); and
(c) the preparation of any written instruments required to confirm
more fully the authority of any co-trustee or separate trustee and any written
instruments necessary in connection with the resignation or removal of any
co-trustee or separate trustee (Sections 710 and 716).
Section 2.17. COLLECTING LIEN CERTIFICATES NOT DELIVERED ON THE
PURCHASE DATE. In the case of any Receivable in respect of which written
evidence from the Dealer selling the related Financed Vehicle that the Lien
Certificate for such Financed Vehicle showing OFL as first lienholder has been
applied for from the Registrar of Titles was delivered to the Custodian on the
applicable Purchase Date in lieu of a Lien Certificate, the Servicer shall use
its best efforts to collect such Lien Certificate from the Registrar of Titles
as promptly as practicable. If such Lien Certificate showing OFL as first
lienholder is not received by the Custodian within 180 days after the applicable
Purchase Date, then the representation and warranty in paragraph 5 of the
Schedule of Representations shall be deemed to have been incorrect in a manner
that materially and adversely affects the Security Insurer and the Issuer.
Section 2.18. ACCOUNTANTS' REVIEW OF RECEIVABLE FILES. The Servicer
(or OFL, if OFL is not the Servicer) shall at its own expense cause Independent
Accountants acceptable to the Security Insurer to conduct a review of Receivable
Files upon the terms and subject to the conditions of a letter agreement dated
December 3, 1996 between OFL and the Security Insurer.
39
<PAGE>
ARTICLE III
DISTRIBUTIONS; STATEMENTS TO NOTEHOLDERS
Section 3.1. SECURED ACCOUNTS.
(a) The Servicer shall establish the Collection Account in the name of
the Collateral Agent for the benefit of the Secured Parties (as defined in the
Security Agreement). The Collection Account shall be an Eligible Account and
shall be a segregated trust account established with the Collateral Agent and
maintained with the Collateral Agent. The Issuer and the Collateral Agent agree
that the Indenture Trustee shall have full power and authority to withdraw, or
cause to be withdrawn, funds held in the Collection Account in accordance with
the provisions of this Agreement and the Indenture.
(b) The Issuer shall establish the Note Distribution Account in the
name of the Collateral Agent for the benefit of the Secured Parties. The Note
Distribution Account shall be an Eligible Account and shall be a segregated
trust account established with the Collateral Agent and maintained with the
Collateral Agent. The Issuer and the Collateral Agent agree that the Indenture
Trustee shall have full power and authority to withdraw, or cause to be
withdrawn, funds held in the Note Distribution Account in accordance with the
provisions of this Agreement and the Indenture.
(c) All amounts held in the Collection Account and the Note
Distribution Account (collectively, the "Secured Accounts") shall, to the extent
permitted by applicable laws, rules and regulations, be invested over night, as
directed by the Servicer, in Eligible Investments. Any such written direction
shall certify that any such investment is authorized by this Section 3.1.
Investments in Eligible Investments shall be made in the name of the Collateral
Agent on behalf of the Secured Parties, and such investments shall not be sold
or disposed of prior to their maturity. Any investment of funds in the Secured
Accounts 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.
UCC 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
40
<PAGE>
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 shall be held in a manner acceptable to the Controlling Party.
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 this Section 3.1. All
interest, dividends, gains upon sale and other income from, or earnings on,
investments of funds in the Secured Accounts shall be deposited in the
Collection Account and distributed on the next Distribution Date pursuant to
Section 3.6. The Servicer shall deposit in the applicable Secured Account an
amount equal to any net loss on such investments immediately as realized.
(d) On each Purchase Date, the Servicer shall deposit in the
Collection Account (x) all Scheduled Payments and prepayments of the Receivables
transferred to the Issuer on such date that are received by the Servicer after
the related Cut-Off Date and on or prior to the Business Day immediately
preceding such Purchase Date or received by the Lockbox Bank after the related
Cut-Off Date and on or prior to the second Business Day immediately preceding
such Purchase Date and (y) all Liquidation Proceeds and proceeds of Insurance
Policies in respect of a Financed Vehicle and applied by the Servicer after the
related Cut-Off Date.
(e) The Seller shall have the right (but not the obligation) to make
deposits into the Collection Account in order to satisfy the Collateral Test.
OFL represents and warrants and agrees that it will not make a capital
contribution to the Seller to enable the Seller to make such a deposit and that
it will have the option (but not the obligation) to make loans to the Seller to
enable the Seller to make such a deposit, but only if (i) such loans are made on
an arms-length basis, (ii) OFL reasonably believes that at the time it shall
make such loan it will be repaid by the Seller and (iii) if OFL shall make any
such loan to the Seller, OFL shall enter into a Note for Intercompany
Discretionary Advance and Subordination Agreement and a
41
<PAGE>
Subordinated Revolving Credit Promissory Note in substantially the form of
Exhibit C hereto. The Seller shall provide the Rating Agencies prior written
notice of any loans it shall receive from OFL in order to satisfy the
Collateral Test.
(f) On any Business Day on which there is a WAC Deficiency Amount,
the Seller shall deposit into the Collection Account the positive difference, if
any, between the WAC Deficiency Amount on such Business Day and the WAC
Deficiency Deposit. The Seller shall provide the Rating Agencies prior written
notice of any loans it shall receive from OFL in order to make a deposit in
respect of the WAC Deficiency Amount.
(g) The Issuer shall deposit into the Collection Account the amount
of all Advances made by the Issuer to the Seller pursuant to Section 3 of the
Repurchase Agreement.
Section 3.2. COLLECTIONS. The Servicer will be entitled to be
reimbursed from amounts on deposit in the Collection Account with respect to a
Monthly Period for amounts previously deposited in the Collection Account but
later determined by the Servicer or the Lockbox Bank to have resulted from
mistaken deposits or postings or checks returned for insufficient funds. The
amount to be reimbursed hereunder shall be paid to the Servicer on the related
Distribution Date pursuant to Sections 3.6(a)(iv) and 3.6(b)(iv) upon
certification by the Servicer of such amounts and the provision of such
information to the Indenture Trustee, the Agent and the Security Insurer as may
be necessary in the opinion of the Agent or the Security Insurer to verify the
accuracy of such certification. In the event that the Security Insurer or the
Agent has not received evidence satisfactory to it of the Servicer's entitlement
to reimbursement pursuant to this Section 3.2, the Agent or the Security
Insurer, as the case may be, shall (unless an Insurer Default shall have
occurred and be continuing) give the Indenture Trustee notice to such effect,
following receipt of which the Indenture Trustee shall not make a distribution
to the Servicer in respect of such amount pursuant to Section 3.6, or if the
Servicer prior thereto has been reimbursed pursuant to Section 3.6, the
Indenture Trustee shall withhold such amounts from amounts otherwise
distributable to the Servicer on the next succeeding Distribution Date.
Section 3.3. APPLICATION OF COLLECTIONS. For the purposes of this
Agreement, all collections for a Monthly Period shall be applied by the Servicer
as follows:
(a) With respect to each Receivable, payments by or on behalf of the
Obligor thereof (other than of Supplemental Servicing Fees with respect to such
Receivable, to the extent collected) shall be applied to interest and principal
with respect to such Receivable in accordance with the terms of such Receivable.
With respect to each Liquidated Receivable, Liquidation Proceeds shall be
applied to interest and principal with respect to such Receivable in accordance
with the terms of
42
<PAGE>
such Receivable, and then to any Insurance Add-On Amount due and payable with
respect to such Receivable. The Servicer shall not be entitled to any
Supplemental Servicing Fees with respect to a Liquidated Receivable.
(b) With respect to each Receivable that has become a Purchased
Receivable on any Deposit Date, the Purchase Amount shall be applied, for
purposes of this Agreement only, to interest and principal on the Receivable in
accordance with the terms of the Receivable as if the Purchase Amount had been
paid by the Obligor on the Accounting Date next preceding such Deposit Date.
The Servicer shall not be entitled to any Supplemental Servicing Fees with
respect to such a Receivable. Nothing contained herein shall relieve any
Obligor of any obligation relating to any Receivable.
(c) With respect to each Receivable that has become a Repurchased
Receivable on any date, the Repurchase Price shall be applied, for purposes of
this Agreement only, to interest and principal on the Receivable in accordance
with the terms of the Receivable as if the Repurchase Price had been paid by the
Obligor on such date. The Servicer shall not be entitled to any Supplemental
Servicing Fees with respect to such a Receivable. Nothing contained herein
shall relieve any Obligor of any obligation relating to any Receivable.
(d) All amounts collected that are payable to the Servicer as
Supplemental Servicing Fees hereunder shall be deposited in the Collection
Account and paid to the Servicer in accordance with Sections 3.6(a)(iv) and
3.6(b)(iv).
(e) All payments by or on behalf of an Obligor received with respect
to any Purchased Receivable after the Accounting Date immediately preceding the
Deposit Date on which the Purchase Amount was paid by the Seller, OFL or the
Servicer shall be paid to the Seller, OFL or the Servicer, respectively, and
shall not be included in the Available Funds, the Distribution Amount or the
Spread Account Available Funds.
Section 3.4. MONTHLY ADVANCES.
(a) After the occurrence of an Amortization Event, if with respect to
a Receivable the amount deposited into the Collection Account during a Monthly
Period in respect of such Receivable and allocable to interest (determined in
accordance with Section 3.3) is less than the amount of interest accrued on such
Receivable (for the number of calendar days in such Monthly Period), the
Servicer shall make a Monthly Advance equal to the amount of such shortfall;
PROVIDED, HOWEVER, that the Servicer shall not be required to make a Monthly
Advance with respect to a Receivable extended pursuant to Section 2.2(b) for any
Monthly Period during which no Scheduled Payment is due according to the terms
of such extension.
43
<PAGE>
(b) If with respect to any Determination Date so long as an
Amortization Event has not occurred, the amount of Available Funds is less than
the sum of the amounts payable on the related Distribution Date pursuant to
clause (i) of Section 3.6(a), then on such Determination Date the Servicer, or
OFL if OFL is no longer the Servicer, shall make a Monthly Advance equal to the
amount of such shortfall.
(c) On or before each Determination Date and prior to the delivery of
the Servicer's Certificate for such Determination Date pursuant to Section 2.9,
the Servicer (or OFL if OFL is not the Servicer and OFL is required to make a
Monthly Advance pursuant to Section 3.4(b)) shall deposit in the Collection
Account the aggregate amount of Monthly Advances required for the related
Monthly Period in immediately available funds.
(d) The Servicer shall be entitled to be reimbursed for Outstanding
Monthly Advances pursuant to Section 3.6(b)(i) from the following sources on any
day subsequent to the Distribution Date in respect of which such Monthly Advance
was made: (i) subsequent payments by or on behalf of any Obligor with respect
to such Receivable, (ii) collections of Liquidation Proceeds with respect to any
Receivable if such Receivable becomes a Liquidated Receivable, (iii) payment of
any Purchase Amount with respect to any Receivable if such Receivable becomes a
Purchased Receivable and (iv) payment of any Repurchase Price with respect to
any Receivable if such Receivable becomes a Repurchased Receivable. If any
Receivable shall become a Liquidated Receivable and the Servicer shall not have
been fully reimbursed for Outstanding Monthly Advances with respect to such
Receivable from the sources of funds previously described in this paragraph, the
Servicer shall be entitled to reimbursement from collections on Receivables
other than the Receivable in respect of which such Outstanding Monthly Advance
shall have been made.
Section 3.5. ADDITIONAL DEPOSITS.
(a) On or before each Deposit Date, the Servicer or OFL shall deposit
in the Collection Account the aggregate Purchase Amounts with respect to
Administrative Receivables. The Seller shall deposit in the Collection Account
the Repurchase Price with respect to Repurchased Receivables. All such deposits
of Purchase Amounts and Repurchase Prices shall be made in immediately available
funds. On each Deficiency Claim Date, the Indenture Trustee shall deposit in
the Collection Account any amounts delivered to the Indenture Trustee by the
Spread Account Collateral Agent.
(b) The Security Insurer shall at any time, and from time to time,
have the option but not the obligation to deliver amounts to the Indenture
Trustee for deposit into the Collection Account, for distribution as a component
of the Distribution Amount with respect to the Deficiency Claim Date coinciding
with or next succeeding the date of such deposit to the extent that without such
distribution a draw would be required to be made on
44
<PAGE>
the Note Policy, in order to provide for the compensation of a Successor
Servicer as provided in Section 5.3(c), or otherwise to provide for expenses
of the Issuer, including amounts due to providers of services to the Issuer.
Section 3.6. DISTRIBUTIONS.
(a) On each Distribution Date prior to the occurrence of an
Amortization Event, the Indenture Trustee shall (based on the information
contained in the Servicer's Certificate delivered on the related Determination
Date) distribute the following amounts in the following order of priority:
(i) first, from the Distribution Amount, to the Note Distribution
Account, an amount equal to the Advance Interest Distributable Amount for
such Distribution Date;
(ii) second, from the Distribution Amount, to the Servicer (or to OFL
if OFL is not the Servicer and OFL has made a Monthly Advance pursuant to
Section 3.4(b)), the amount of Outstanding Monthly Advances for which the
Servicer (or OFL) is entitled to be reimbursed and for which the Servicer
(or OFL) has not previously been reimbursed;
(iii) third, from the Distribution Amount, PRO RATA, to the Indenture
Trustee, any accrued and unpaid fees of the Indenture Trustee in accordance
with the Indenture; to any Lockbox Bank, Custodian, Backup Servicer or
Collateral Agent (including the Indenture Trustee if acting in any such
additional capacity), any accrued and unpaid fees (in each case, to the
extent such Person has not previously received such amount from the
Servicer or OFL); to any successor Servicer, to the extent not previously
paid by the predecessor Servicer pursuant to Section 5.2, reasonable
transition expenses incurred in acting as successor Servicer in an amount
not to exceed $50,000 in total;
(iv) fourth, from the Distribution Amount, to the Servicer, the Basic
Servicing Fee for the related Monthly Period, any Supplemental Servicing
Fees for the related Monthly Period, and any amounts permitted to be paid
to the Servicer pursuant to Section 3.2;
(v) fifth, from the Distribution Amount, on Distribution Dates with
respect to the Amortization Period so long as no Amortization Event shall
have occurred, to the Note Distribution Account, an amount equal to the
Advance Principal Distributable Amount for such Distribution Date;
(vi) sixth, from the Distribution Amount, to the Security Insurer, to
the extent of any amounts owing to the Security Insurer under the Insurance
Agreement and not paid, whether or not OFL or any other Person is also
obligated to pay such amounts;
45
<PAGE>
(vii) seventh, from the Distribution Amount, on Distribution Dates
with respect to the Revolving Period, an amount determined and certified by
the Servicer and included in the Servicer's Certificate delivered on the
related Determination Date to be at least equal to the sum of (1) the WAC
Deficiency Amount, if any, on such Determination Date, and (2) the amount
necessary to be held in the Collection Account such that after giving
effect to all deposits and distributions to be made on such Distribution
Date, the Collateral Test will be satisfied (not taking into account any
WAC Deficiency Amounts provided for in clause (1) above) as of the
immediately preceding Accounting Date, shall remain on deposit in the
Collection Account;
(viii) eighth, from the Distribution Amount, on Distribution Dates
with respect to the Amortization Period so long as no Amortization Event
shall have occurred, to the Note Distribution Account, an amount equal to
the remaining amount on deposit in the Collection Account until an amount
payable in respect of the principal of the Advances equal to the unpaid
principal amount of the Advances has been deposited in the Note
Distribution Account;
(ix) ninth, from the Distribution Amount, to the Agent for
distribution to the applicable parties, any amounts owing to the Agent, the
Noteholders or any Permitted Assignee by the Issuer or the Seller under the
Note Purchase Agreement, the Fee Letter or any other Related Document, to
the extent not otherwise paid; and
(x) tenth, from the Distribution Amount (excluding amounts required
to be retained in the Collection Account pursuant to clause (vii) above),
the remaining portion of the Distribution Amount to the Spread Account
Collateral Agent for deposit in the Spread Account.
(b) On each Distribution Date after the occurrence of an Amortization
Event, the Indenture Trustee shall (based on the information contained in the
Servicer's Certificate delivered on the related Determination Date) distribute
the following amounts and in the following order of priority:
(i) first, from the Distribution Amount, to the Servicer (or to
OFL if OFL is not the Servicer and OFL has made a Monthly Advance
pursuant to Section 3.4(b)), an amount equal to the amount of
Outstanding Monthly Advances for which the Servicer (or OFL) is
entitled to be reimbursed and for which the Servicer (or OFL) has not
previously been reimbursed;
(ii) second, from the Distribution Amount, to the Note
Distribution Account, an amount equal to the Advance Interest
Distributable Amount for such Distribution Date;
46
<PAGE>
(iii) third, from the Distribution Amount, PRO RATA, to the
Indenture Trustee, an amount equal to any accrued and unpaid fees of
the Indenture Trustee in accordance with the Indenture; to any Lockbox
Bank, Custodian, Backup Servicer, Collateral Agent (including the
Indenture Trustee if acting in any such additional capacity), an
amount equal to any accrued and unpaid fees owing to such Persons (in
each case, to the extent such Person has not previously received such
amount from the Servicer or OFL); to any successor Servicer, to the
extent not previously paid by the predecessor Servicer pursuant to
Section 5.2, reasonable transition expenses incurred in acting as
successor Servicer in an amount not to exceed $50,000 in total;
(iv) fourth, from the Distribution Amount, to the Servicer, the
sum of the Basic Servicing Fee for the related Monthly Period, any
Supplemental Servicing Fees for the related Monthly Period, and any
amounts specified in Section 3.2;
(v) fifth, from the Distribution Amount, to the Note
Distribution Account, an amount equal to the Advance Principal
Distributable Amount for such Distribution Date;
(vi) sixth, from the Distribution Amount, to the Security
Insurer, to the extent of any amounts owing to the Security Insurer
under the Insurance Agreement and not paid, whether or not OFL or any
other Person is also obligated to pay such amounts; and
(vii) seventh, if an Insurer Default has occurred, from the
Distribution Amount, to the Note Distribution Account, an amount equal
to the Default Amount Distributable Amount for such Distribution Date;
(viii) eighth, from the Distribution Amount, to the Note
Distribution Account, an amount equal to the remaining Distribution
Amount until an amount payable in respect of principal of the Notes
equal to the unpaid principal amount of the Notes has been deposited
in the Note Distribution Account;
(ix) ninth, from the Distribution Amount, PRO RATA, (I) to the
Agent, for distribution to the applicable parties, an amount equal to
the sum, without duplication, of (A) any expenses incurred by the
Agent or the Noteholders as a result of any failure of the Seller to
perform under the Repurchase Agreement PLUS (B) any amounts owing to
the Agent, the Noteholders or any Permitted Assignee under the Note
Purchase Agreement, the Fee Letter or any other Related Document, to
the extent not otherwise paid; and (II) if an Insurer Default has not
occurred, to the Note
47
<PAGE>
Distribution Account, an amount equal to the Default Amount
Distributable Amount for such Distribution Date; and
(x) tenth, any remaining Distribution Amount to the Spread
Account Collateral Agent for deposit in the Spread Account.
Section 3.7. STATEMENTS TO NOTEHOLDERS. On each Distribution Date,
the Indenture Trustee shall include with each distribution to each Noteholder, a
Servicer's Certificate.
Section 3.8. INDENTURE TRUSTEE AS AGENT; CALCULATION OF WEIGHTED
AVERAGE APR, WAC DEFICIENCY AMOUNTS, BASIS FEE PERCENT AND ADVANCE INTEREST
RATE.
(a) The Indenture Trustee, in making distributions as provided in
this Agreement, shall act solely on behalf of and as agent for the Noteholders.
(b) Prior to the occurrence of an Amortization Event, on each
Business Day the Seller shall calculate the Maximum Interest Rate, the weighted
average APR of the Receivables, the WAC Deficiency Percentage and the WAC
Deficiency Amount, if any, and shall, upon request, provide such calculation in
writing to the Indenture Trustee, the Issuer, the Agent, the Servicer or the
Security Insurer. Prior to the occurrence of an Amortization Event, if on any
Business Day the WAC Deficiency Amount is greater than zero, the Seller shall
provide written notice of such WAC Deficiency Amount and the corresponding WAC
Deficiency Percentage and the WAC Deficiency Deposit, if any, with respect to
such Business Day to the Issuer, the Agent, the Indenture Trustee, the Servicer,
and the Security Insurer by 12:00 noon, New York City time, on such day.
(c) On the Closing Date, the Basis Fee Percent shall be 0%. On any
Business Day on which the Agent determines, in its sole discretion, that there
has been a change in the Basis Fee Percent, the Agent shall calculate the Basis
Fee Percent and shall provide the Seller with telephonic notice of such
calculation by 10:00 a.m. New York City time on each such day. In the absence
of notice of a change in the Basis Fee Percent, the Basis Fee Percent shall
remain the same as it was as of the Closing Date or, if notice of a change in
the Basis Fee Percent has been given to the Seller by the Agent, as it was as of
the date of the last such notice of change in the Basis Fee Percent.
(d) The Agent shall provide the Indenture Trustee, the Security
Insurer, the Issuer, the Seller and the Servicer by facsimile transmission no
later than 10:00 a.m. on the Business Day prior to each Determination Date, a
certificate of a responsible officer, which shall set forth the Advance Interest
Rate for the immediately preceding Interest Period and shall set forth in
reasonable detail the manner in which such calculation of the Advance Interest
Rate was determined and, absent manifest
48
<PAGE>
error, the amount set forth in such certificate with respect to the Advance
Interest Rate shall be conclusive. The Agent shall provide to the Security
Insurer, the Issuer, the Seller, OFL and the Indenture Trustee, on the
Business Day preceding the date of prepayment, if the Agent shall have
received notice of such prepayment on or prior to such Business Day, or on
the prepayment date, if the Agent shall receive notice of such prepayment on
such date of prepayment, a certificate of a responsible officer, which shall
set forth the interest due on the Notes being prepaid together with the
Breakage Fee, if any, due on such prepayment date, and which also shall set
forth, in reasonable detail, the manner in which the calculation of the
interest due on the Notes and the Breakage Fee was determined. Absent
manifest error, the amount set forth in such certificate with respect to the
Breakage Fee and interest shall be conclusive.
Section 3.9. ELIGIBLE ACCOUNTS. Any account which is required to be
established as an Eligible Account pursuant to this Agreement and which ceases
to be an Eligible Account shall within five Business Days (or such longer
period, not to exceed 30 days, as to which each Rating Agency, the Agent and the
Security Insurer may consent) be established as a new account which shall be an
Eligible Account and any cash or any investments shall be transferred to such
new account.
Section 3.10. ADDITIONAL WITHDRAWALS FROM THE COLLECTION ACCOUNT.
(a) On each Purchase Date under the Repurchase Agreement, the
Servicer shall instruct the Indenture Trustee in writing by 10:00 a.m.,
Minneapolis, Minnesota time, to withdraw from the Collection Account and deposit
to the Spread Account and pay to the account of the Seller specified by the
Servicer in such writing, and upon such instruction, the Indenture Trustee shall
withdraw from the Collection Account and initiate a wire transfer to the Spread
Account and to such account of the Seller no earlier than 2:00 p.m., New York
City time, and no later than 3:00 p.m., New York City time, the amounts set
forth in such instructions. The aggregate amount set forth in the instruction
referred to in the preceding sentence shall be equal to the least of (i) the
Purchase Price for the Receivables being purchased by the Issuer on such date,
(ii) for any Purchase Date occurring during the period from but excluding a
Determination Date through and including the related Distribution Date, an
amount equal to the total amount on deposit in the Collection Account on such
date over the sum of (A) the amounts to be distributed from or retained in the
Collection Account on such Distribution Date pursuant to clauses (i) through
(ix) of Section 3.6(a) as set forth in the Servicer's Certificate delivered on
such Determination Date, and (B) any increase in the WAC Deficiency Amount on
such date, if any, above the WAC Deficiency Amount on such Determination Date,
and (iii) an amount equal to the excess of the total amount on deposit in the
Collection Account on such date over the WAC Deficiency Amounts, if any,
required to be on deposit in the Collection Account on such date. The Servicer
49
<PAGE>
shall instruct the Trustee to wire an amount equal to 1% of the aggregate
Principal Balance of Receivables being purchased by the Issuer on such date
to the Spread Account and the Servicer shall instruct the Trustee to wire the
remainder of the amount specified in the preceding sentence to the account of
the Seller.
(b) On the Business Day specified by the Seller in the notice of a
prepayment of an Advance delivered to the Indenture Trustee pursuant to Section
3(e) of the Repurchase Agreement, the Indenture Trustee shall withdraw from the
Collection Account and, if applicable, the Spread Account the amount of such
prepayment determined in accordance with the provisions of Section 3(e) of the
Repurchase Agreement (as set forth in a certificate of a Responsible Officer of
the Seller) and shall deposit such amount into the Note Distribution Account for
application in accordance with the provisions of the Indenture.
Section 3.11. CROSS-COLLATERALIZATION WITH THE SPREAD ACCOUNT
AGREEMENT.
(a) In the event that the Indenture Trustee shall determine on any
Deficiency Claim Date, based on information in the Servicer's Certificate, that
there exists a Collection Account Shortfall or a Warehousing Shortfall (each as
defined in the Spread Account Agreement) (any such shortfall being a "Deficiency
Claim Amount"), then on such Deficiency Claim Date, the Indenture Trustee shall
deliver to the Collateral Agent, the Spread Account Collateral Agent, the
Security Insurer, the Issuer and the Servicer, by hand delivery, telex or
facsimile transmission, a written notice (a "Deficiency Notice") specifying the
Deficiency Claim Amount for such Distribution Date. Such Deficiency Notice
shall direct the Spread Account Collateral Agent to remit such Deficiency Claim
Amount (to the extent of the funds available to be distributed pursuant to the
Spread Account Agreement) to the Indenture Trustee for deposit in the Collection
Account.
(b) Any Deficiency Notice shall be delivered by 10:00 a.m., New York
City time, on the related Deficiency Claim Date. The amounts distributed by the
Spread Account Collateral Agent to the Indenture Trustee pursuant to a
Deficiency Notice shall be deposited by the Indenture Trustee into the
Collection Account pursuant to Section 3.5.
ARTICLE IV
THE SERVICER
Section 4.1. LIABILITY OF SERVICER; INDEMNITIES.
(a) The Servicer (in its capacity as such and, in the case of OFL,
without limitation of its obligations under the Purchase Agreement) shall be
liable hereunder only to the extent
50
<PAGE>
of the obligations in this Agreement specifically undertaken by the Servicer
and the representations made by the Servicer.
(b) The Servicer shall defend, indemnify and hold harmless the Issuer,
the Indenture Trustee, the Collateral Agent, the Backup Servicer, the Agent, the
Security Insurer, their respective officers, directors, agents and employees and
the Noteholders from and against any and all costs, expenses, losses, damages,
claims and liabilities, including reasonable fees and expenses of counsel and
expenses of litigation arising out of or resulting from the use, ownership or
operation by the Servicer or any Affiliate thereof other than the Seller or the
Issuer of any Financed Vehicle.
(c) The Servicer shall indemnify, defend and hold harmless the Issuer,
the Indenture Trustee, the Collateral Agent, the Backup Servicer, the Agent, the
Security Insurer, their respective officers, directors, agents and employees and
the Noteholders from and against any taxes that may at any time be asserted
against the Issuer, the Indenture Trustee, the Backup Servicer, the Agent, the
Collateral Agent, or the Noteholders with respect to the execution, delivery and
performance of this Agreement, including, without limitation, any sales, gross
receipts, general corporation, tangible personal property, privilege or license
taxes (but not including any taxes asserted with respect to, and as of the date
of, the sale of the Receivables and the other Seller Conveyed Property to the
Issuer or the issuance and original sale of the Notes, or federal or other
income taxes arising out of distributions on the Notes) and costs and expenses
in defending against the same.
(d) The Servicer shall indemnify, defend and hold harmless the Issuer,
the Indenture Trustee, the Collateral Agent, the Backup Servicer, the Agent, the
Security Insurer, their respective officers, directors, agents and employees and
the Noteholders from and against any and all costs, expenses, losses, claims,
damages, and liabilities to the extent that such cost, expense, loss, claim,
damage, or liability arose out of, or was imposed upon the Issuer, the Indenture
Trustee, the Collateral Agent, the Backup Servicer, the Agent, the Security
Insurer or the Noteholders through the breach of this Agreement, the negligence,
willful misfeasance, or bad faith of the Servicer in the performance of its
duties under this Agreement or by reason of reckless disregard of its
obligations and duties under this Agreement.
(e) Indemnification under this Article shall include, without
limitation, reasonable fees and expenses of counsel and expenses of litigation.
If the Servicer has made any indemnity payments pursuant to this Article and the
recipient thereafter collects any of such amounts from others, the recipient
shall promptly repay such amounts collected to the Servicer, without interest.
51
<PAGE>
(f) OFL, in its individual capacity, hereby acknowledges that the
indemnification provisions in the Purchase Agreement benefiting the Issuer, the
Agent, the Indenture Trustee, the Collateral Agent and the Backup Servicer are
enforceable by each hereunder.
(g) OFL, in its individual capacity, shall indemnify, defend and hold
harmless the Issuer, the Indenture Trustee, the Collateral Agent, the Backup
Servicer, the Agent, the Security Insurer, their respective officers, directors,
agents and employees and the Noteholders from and against any taxes that may at
any time be asserted against the Issuer, the Indenture Trustee, the Backup
Servicer, the Agent, the Collateral Agent, the Security Insurer or the
Noteholders with respect to the transactions contemplated in this Agreement,
including, without limitation, any sales, gross receipts, general corporation,
tangible personal property, privilege or license taxes (but not including any
taxes asserted with respect to, and as of the date of, the sale of the
Receivables and the other Seller Conveyed Property to the Issuer or the issuance
and original sale of the Notes, or federal or other income taxes arising out of
distributions on the Notes) and costs and expenses in defending against the
same, but only to the extent such amounts are not otherwise covered by the
indemnities set forth in Sections 4.1(b) through (f) above.
Section 4.2. MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE
OBLIGATIONS OF, THE SERVICER OR BACKUP SERVICER.
(a) The Servicer shall not merge or consolidate with any other person,
convey, transfer or lease substantially all its assets as an entirety to another
Person, or permit any other Person to become the successor to the Servicer's
business unless, after the merger, consolidation, conveyance, transfer, lease or
succession, the successor or surviving entity shall be an Eligible Servicer and
shall be capable of fulfilling the duties of the Servicer contained in this
Agreement. Any corporation (i) into which the Servicer may be merged or
consolidated, (ii) resulting from any merger or consolidation to which the
Servicer shall be a party, (iii) which acquires by conveyance, transfer, or
lease substantially all of the assets of the Servicer, or (iv) succeeding to the
business of the Servicer, in any of the foregoing cases shall execute an
agreement of assumption to perform every obligation of the Servicer under this
Agreement and, whether or not such assumption agreement is executed, shall be
the successor to the Servicer under this Agreement without the execution or
filing of any paper or any further act on the part of any of the parties to this
Agreement, anything in this Agreement to the contrary notwithstanding; PROVIDED,
HOWEVER, that nothing contained herein shall be deemed to release the Servicer
from any obligation. The Servicer shall provide notice of any merger,
consolidation or succession pursuant to this Section 4.2(a) to the Issuer, the
Indenture Trustee, the Agent, the Security Insurer and each Rating Agency.
Notwithstanding the foregoing, the Servicer shall not merge or consolidate with
any
52
<PAGE>
other Person or permit any other Person to become a successor to the
Servicer's business, unless (x) immediately after giving effect to such
transaction, no representation or warranty made pursuant to Section 2.6 shall
have been breached (for purposes hereof, such representations and warranties
shall speak as of the date of the consummation of such transaction) and no
event that, after notice or lapse of time, or both, would become an Insurance
Agreement Event of Default shall have occurred and be continuing, (y) the
Servicer shall have delivered to the Issuer, the Agent, the Indenture Trustee
and the Security Insurer an Officer's Certificate and an Opinion of Counsel
each stating that such consolidation, merger or succession and such agreement
of assumption comply with this Section 4.2(a) and that all conditions
precedent, if any, provided for in this Agreement relating to such
transaction have been complied with, and (z) the Servicer shall have
delivered to the Issuer, the Agent, the Indenture Trustee and the Security
Insurer an Opinion of Counsel, stating, in the opinion of such counsel,
either (A) all financing statements and continuation statements and
amendments thereto have been executed and filed that are necessary to
preserve and protect the interest of the Issuer in the Seller Conveyed
Property and reciting the details of the filings or (B) no such action shall
be necessary to preserve and protect such interest.
(b) Any corporation (i) into which the Backup Servicer may be merged
or consolidated, (ii) resulting from any merger or consolidation to which the
Backup Servicer shall be a party, (iii) which acquires by conveyance, transfer
or lease substantially all of the assets of the Backup Servicer, or (iv)
succeeding to the business of the Backup Servicer, in any of the foregoing cases
shall execute an agreement of assumption to perform every obligation of the
Backup Servicer under this Agreement and, whether or not such assumption
agreement is executed, shall be the successor to the Backup Servicer under this
Agreement without the execution or filing of any paper or any further act on the
part of any of the parties to this Agreement, anything in this Agreement to the
contrary notwithstanding; PROVIDED, HOWEVER, that nothing contained herein shall
be deemed to release the Backup Servicer from any obligation.
Section 4.3. LIMITATION ON LIABILITY OF SERVICER, BACKUP SERVICER AND
OTHERS.
(a) Neither the Servicer, the Backup Servicer nor any of the directors
or officers or employees or agents of the Servicer or Backup Servicer shall be
under any liability to the Noteholders, except as provided in this Agreement,
for any action taken or for refraining from the taking of any action pursuant to
this Agreement; PROVIDED, HOWEVER, that this provision shall not protect the
Servicer, the Backup Servicer or any such Person against any liability that
would otherwise be imposed by reason of a breach of this Agreement or willful
misfeasance, bad faith or negligence in the performance of duties, by reason of
reckless disregard of obligations and duties under this Agreement or any
53
<PAGE>
violation of law by the Servicer, Backup Servicer or such Person, as the case
may be; PROVIDED FURTHER, that this provision shall not affect any liability to
indemnify the Issuer and the Indenture Trustee for costs, taxes, expenses,
claims, liabilities, losses or damages paid by the Issuer or the Indenture
Trustee, each in its individual capacity. The Servicer, the Backup Servicer and
any director, officer, employee or agent of the Servicer or Backup Servicer may
rely in good faith on the advice of counsel or on any document of any kind PRIMA
FACIE properly executed and submitted by any Person respecting any matters
arising under this Agreement.
(b) The Backup Servicer shall not be liable for any obligation of the
Servicer contained in this Agreement, and the Issuer, the Indenture Trustee, the
Agent, the Seller, the Security Insurer and the Noteholders shall look only to
the Servicer to perform such obligations.
Section 4.4. DELEGATION OF DUTIES. The Servicer may delegate duties
under this Agreement to an Affiliate of OFL with the prior written consent of
the Security Insurer (unless an Insurer Default shall have occurred and be
continuing) and the Agent. Any successor Servicer may delegate duties under
this Agreement with the prior written consent of the Security Insurer (unless an
Insurer Default shall have occurred and be continuing) and the Agent. The
Servicer also may at any time perform the specific duty of repossession of
Financed Vehicles through sub-contractors who are in the business of servicing
automotive receivables and may perform other specific duties through such
sub-contractors with the prior written consent of the Security Insurer (unless
an Insurer Default shall have occurred and be continuing); PROVIDED, HOWEVER,
that no such delegation or sub-contracting duties by the Servicer shall relieve
the Servicer of its responsibility with respect to such duties. Neither OFL nor
any party acting as Servicer hereunder shall appoint any subservicer hereunder
without the prior written consent of the Security Insurer (unless an Insurer
Default shall have occurred and be continuing) and the Agent.
Section 4.5. SERVICER AND BACKUP SERVICER NOT TO RESIGN. Subject to
the provisions of Section 4.2, neither the Servicer nor the Backup Servicer
shall resign from the obligations and duties imposed on it by this Agreement as
Servicer or Backup Servicer except upon a determination that by reason of a
change in legal requirements the performance of its duties under this Agreement
would cause it to be in violation of such legal requirements in a manner which
would have a material adverse effect on the Servicer or the Backup Servicer, as
the case may be, and the Security Insurer (so long as an Insurer Default shall
not have occurred and be continuing) or the Agent (if an Insurer Default shall
have occurred and be continuing) does not elect to waive the obligations of the
Servicer or the Backup Servicer, as the case may be, to perform the duties which
render it legally unable to act or to delegate those duties to another Person.
Any such determination permitting the
54
<PAGE>
resignation of the Servicer or Backup Servicer shall be evidenced by an
Opinion of Counsel to such effect delivered and acceptable to the Issuer, the
Indenture Trustee, the Agent and the Security Insurer (unless an Insurer
Default shall have occurred and be continuing). No resignation of the
Servicer shall become effective until, so long as no Insurer Default shall
have occurred and be continuing, the Backup Servicer or an entity acceptable
to the Security Insurer shall have assumed the responsibilities and
obligations of the Servicer or, if an Insurer Default shall have occurred and
be continuing, the Backup Servicer or a successor Servicer that is an
Eligible Servicer shall have assumed the responsibilities and obligations of
the Servicer. No resignation of the Backup Servicer shall become effective
until, so long as no Insurer Default shall have occurred and be continuing,
an entity acceptable to the Security Insurer shall have assumed the
responsibilities and obligations of the Backup Servicer or, if an Insurer
Default shall have occurred and be continuing, a Person that is an Eligible
Servicer shall have assumed the responsibilities and obligations of the
Backup Servicer; PROVIDED, HOWEVER, that in the event a successor Backup
Servicer is not appointed within 60 days after the Backup Servicer has given
notice of its resignation and has provided the Opinion of Counsel required by
this Section 4.5, the Backup Servicer may petition a court for its removal.
ARTICLE V
SERVICER TERMINATION EVENTS
Section 5.1. SERVICER TERMINATION EVENT. For purposes of this
Agreement, each of the following shall constitute a "Servicer Termination
Event":
(a) Any failure by the Servicer to deliver to the Indenture Trustee
for distribution to Noteholders any proceeds or payment required to be so
delivered under the terms of this Agreement (or, if OFL is the Servicer, the
Purchase Agreement) that continues unremedied for a period of two Business Days
(one Business Day with respect to payment of Purchase Amounts) after written
notice is received by the Servicer from the Indenture Trustee or (unless an
Insurer Default shall have occurred and be continuing) the Security Insurer or
after discovery of such failure by a Responsible Officer of the Servicer;
(b) Failure by the Servicer to deliver the Servicer's Certificate to
the Indenture Trustee, the Issuer, the Agent and (so long as an Insurer Default
shall not have occurred and be continuing) the Security Insurer by 5:00 p.m.,
New York City time on the fifth Business Day prior to the Distribution Date, or
failure on the part of the Servicer to observe its covenants and agreements set
forth in Section 4.2(a);
(c) Failure on the part of the Servicer duly to observe or perform in
any material respect any other covenants or
55
<PAGE>
agreements of the Servicer set forth in this Agreement (or, if OFL is the
Servicer, the Purchase Agreement), which failure (i) materially and adversely
affects the rights of the Issuer (determined without regard to the
availability of funds under the Note Policy), or of the Security Insurer
(unless an Insurer Default shall have occurred and be continuing), and (ii)
continues unremedied for a period of 30 days after the date on which written
notice of such failure, requiring the same to be remedied, shall have been
given to the Servicer by the Issuer, the Agent, the Indenture Trustee or the
Security Insurer;
(d) The entry of a decree or order for relief by a court or regulatory
authority having jurisdiction in respect of the Servicer or the Seller in an
involuntary case under the federal bankruptcy laws, as now or hereafter in
effect, or another present or future, federal or state, bankruptcy, insolvency
or similar law, or appointing a receiver, liquidator, assignee, trustee,
custodian, sequestrator or other similar official of the Servicer or the Seller
or of any substantial part of their respective properties or ordering the
winding up or liquidation of the affairs of the Servicer or the Seller and the
continuance of any such decree or order unstayed and in effect for a period of
60 consecutive days or the commencement of an involuntary case under the federal
bankruptcy laws, as now or hereafter in effect, or another present or future
federal or state bankruptcy, insolvency or similar law and such case is not
dismissed within 60 days;
(e) The commencement by the Servicer or the Seller of a voluntary case
under the federal bankruptcy laws, as now or hereafter in effect, or any other
present or future, federal or state, bankruptcy, insolvency or similar law, or
the consent by the Servicer or the Seller to the appointment of or taking
possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator
or other similar official of the Servicer or the Seller or of any substantial
part of its property or the making by the Servicer or the Seller of an
assignment for the benefit of creditors or the failure by the Servicer or the
Seller generally to pay its debts as such debts become due or the taking of
corporate action by the Servicer or the Seller in furtherance of any of the
foregoing;
(f) Any representation, warranty or statement of the Servicer or the
Seller made in this Agreement or any certificate, report or other writing
delivered pursuant hereto shall prove to be incorrect in any material respect as
of the time when the same shall have been made, and the incorrectness of such
representation, warranty or statement has a material adverse effect on the
Issuer or the Security Insurer and, within 30 days after written notice thereof
shall have been given to the Servicer or the Seller by the Issuer, the Agent,
the Indenture Trustee or the Security Insurer (or, if an Insurer Default shall
have occurred and be continuing, a Noteholder), the circumstances or condition
in respect of which such representation, warranty or
56
<PAGE>
statement was incorrect shall not have been eliminated or otherwise cured;
(g) So long as an Insurer Default shall not have occurred and be
continuing, the Security Insurer shall not have delivered a Servicer Extension
Notice pursuant to Section 2.14;
(h) So long as an Insurer Default shall not have occurred and be
continuing, an Insurance Agreement Event of Default shall have occurred;
(i) A claim is made under the Note Policy; or
(j) A servicer termination event or like event shall occur in any
other securitization with respect to which OFL or any of its Affiliates is
acting as servicer.
Section 5.2. CONSEQUENCES OF A SERVICER TERMINATION EVENT. If a
Servicer Termination Event shall occur and be continuing, the Security Insurer
(or, if an Insurer Default shall have occurred and be continuing, either the
Indenture Trustee or the Agent), by notice given in writing to the Servicer (and
to the Indenture Trustee and the Agent if given by the Security Insurer) may
terminate all of the rights and obligations of the Servicer under this
Agreement; PROVIDED, that if the Security Insurer shall not deliver a Servicer
Extension Notice, the rights and obligations of the Servicer hereunder shall
terminate automatically upon the expiration of the term of the Servicer without
the requirement of notice. On or after the receipt by the Servicer of such
written notice or upon such automatic termination, all authority, power,
obligations and responsibilities of the Servicer under this Agreement
automatically shall pass to, be vested in and become obligations and
responsibilities of the Backup Servicer (or such other successor Servicer
appointed by the Security Insurer); PROVIDED, HOWEVER, that the successor
Servicer shall have no liability with respect to any obligation which was
required to be performed by the terminated Servicer prior to the date that the
successor Servicer becomes the Servicer or any claim of a third party based on
any alleged action or inaction of the terminated Servicer. The successor
Servicer is authorized and empowered by this Agreement to execute and deliver,
on behalf of the terminated Servicer, as attorney-in-fact or otherwise, any and
all documents and other instruments and to do or accomplish all other acts or
things necessary or appropriate to effect the purposes of such notice of
termination, whether to complete the transfer and endorsement of the Receivables
and the other Seller Conveyed Property and related documents to show the Issuer
as lienholder or secured party on the related Lien Certificates, or otherwise.
The terminated Servicer agrees to cooperate with the successor Servicer in
effecting the termination of the responsibilities and rights of the terminated
Servicer under this Agreement, including, without limitation, the transfer to
the successor Servicer for administration by it of all cash amounts that shall
at the time be held by the terminated Servicer for deposit, or
57
<PAGE>
have been deposited by the terminated Servicer, in the Collection Account or
thereafter received with respect to the Receivables and the delivery to the
successor Servicer of all Receivable Files, Monthly Records and Collection
Records and a computer tape or diskette in readable form as of the most
recent Business Day containing all information necessary to enable the
successor Servicer to service the Receivables and the other Seller Conveyed
Property. If requested by the Agent or the Security Insurer (unless an
Insurer Default shall have occurred and be continuing), the successor
Servicer shall terminate the Lockbox Agreement and direct the Obligors to
make all payments under the Receivables directly to the successor Servicer
(in which event the successor Servicer shall process such payments in
accordance with Section 2.2(e)), or to a lockbox established by the successor
Servicer at the direction of the Agent or the Security Insurer (unless an
Insurer Default shall have occurred and be continuing), at the successor
Servicer's expense. In addition to any other amounts that are then payable
to the terminated Servicer under this Agreement, the terminated Servicer
shall then be entitled to receive out of Available Funds reimbursements for
any Outstanding Monthly Advances made during the period prior to the notice
pursuant to this Section 5.2 which terminates the obligation and rights of
the terminated Servicer under this Agreement. The Issuer, the Agent, the
Indenture Trustee and the successor Servicer may set off and deduct any
amounts owed by the terminated Servicer from any amounts payable to the
terminated Servicer pursuant to the preceding sentence. The terminated
Servicer shall grant the Issuer, the Agent, the Indenture Trustee, the
successor Servicer and the Security Insurer reasonable access to the
terminated Servicer's premises at the terminated Servicer's expense.
Section 5.3. APPOINTMENT OF SUCCESSOR.
(a) On and after the time the Servicer receives a notice of
termination pursuant to Section 5.2 or upon the resignation of the Servicer
pursuant to Section 4.5, or in the event the term of the Servicer expires as a
consequence of the Security Insurer electing not to deliver a Servicer Extension
Notice, the Backup Servicer (unless the Security Insurer shall have exercised
its option pursuant to Section 5.3(b) to appoint an alternate successor
Servicer) shall be the successor in all respects to the Servicer in its capacity
as servicer under this Agreement and the transactions set forth or provided for
in this Agreement, and shall be subject to all the responsibilities,
restrictions, duties, liabilities and termination provisions relating thereto
placed on the Servicer by the terms and provisions of this Agreement; PROVIDED,
HOWEVER, that the successor Servicer shall have no liability with respect to any
obligation which was required to be performed by the terminated Servicer prior
to the date that the successor Servicer becomes the Servicer or any claim of a
third party based on any alleged action or inaction of the terminated Servicer.
The Issuer and such successor shall take such action, consistent with this
Agreement, as shall be necessary to effectuate any such
58
<PAGE>
succession. If a successor Servicer is acting as Servicer hereunder, it
shall be subject to termination under Section 5.2 upon the occurrence of any
Servicer Termination Event applicable to it as Servicer.
(b) The Security Insurer may (so long as an Insurer Default shall not
have occurred and be continuing) exercise at any time its right to appoint as
Backup Servicer or as successor to the Servicer a Person other than the Person
serving as Backup Servicer at the time, and (without limiting its obligations
under the Note Policy) shall have no liability to the Issuer, the Indenture
Trustee, OFL, the Seller, the Person then serving as Backup Servicer, any
Noteholders or any other Person if it does so. Notwithstanding the above, if
the Backup Servicer shall be legally unable or unwilling to act as Servicer and
an Insurer Default shall have occurred and be continuing, the Backup Servicer,
the Indenture Trustee or the Agent may petition a court of competent
jurisdiction to appoint any Eligible Servicer as the successor to the Servicer.
Pending appointment pursuant to the preceding sentence, the Backup Servicer
shall act as successor Servicer unless it is legally unable to do so, in which
event the outgoing Servicer shall continue to act as Servicer until a successor
has been appointed and accepted such appointment. Subject to Section 4.5, no
provision of this Agreement shall be construed as relieving the Backup Servicer
of its obligation to succeed as successor Servicer upon the termination of the
Servicer pursuant to Section 5.2, the resignation of the Servicer pursuant to
Section 4.5 or the expiration of the term of the Servicer. If upon the
termination of the Servicer pursuant to Section 5.2, the resignation of the
Servicer pursuant to Section 4.5 or the expiration of the term of the Servicer,
the Security Insurer appoints a successor Servicer other than the Backup
Servicer, the Backup Servicer shall not be relieved of its duties as Backup
Servicer hereunder.
(c) Any successor Servicer shall be entitled to such compensation
(whether payable out of the Collection Account or otherwise) as the Servicer
would have been entitled to under the Agreement if the Servicer had not resigned
or been terminated hereunder. If any successor Servicer is appointed as a
result of the Backup Servicer's refusal (in contravention of the terms of this
Agreement) to act as Servicer although it is legally able to do so, the Security
Insurer and such successor Servicer may agree on reasonable additional
compensation to be paid to such successor Servicer by the Backup Servicer, which
additional compensation shall be paid by the Backup Servicer in its individual
capacity and solely out of its own funds. If any successor Servicer is
appointed for any reason other than the Backup Servicer's refusal to act as
Servicer although legally able to do so, the Security Insurer and such successor
Servicer may agree on additional compensation to be paid to such successor
Servicer, which additional compensation may be payable by the Security Insurer
as a Security Insurer Optional Deposit. In addition, any successor Servicer
shall be entitled to reasonable
59
<PAGE>
transition expenses incurred in acting as successor Servicer to the extent
provided in Section 3.6(a)(iii) or 3.6(b)(iii).
Section 5.4. NOTIFICATION TO NOTEHOLDERS. Upon any termination of or
appointment of a successor to the Servicer pursuant to this Article V, the
Indenture Trustee shall give prompt written notice thereof to Noteholders at
their respective addresses appearing in the Note Register.
Section 5.5. WAIVER OF PAST DEFAULTS. The Security Insurer (or, if
an Insurer Default shall have occurred and be continuing, the Agent) may, waive
any default by the Servicer in the performance of its obligations hereunder and
its consequences. Upon any such waiver of a past default, such default shall
cease to exist, and any Servicer Termination Event arising therefrom shall be
deemed to have been remedied for every purpose of this Agreement. No such
waiver shall extend to any subsequent or other default or impair any right
consequent thereon.
ARTICLE VI
MISCELLANEOUS PROVISIONS
Section 6.1. AMENDMENT.
(a) This Agreement may be amended by the Seller, the Servicer, the
Agent and the Issuer, with the prior written consent of the Indenture Trustee,
the Backup Servicer and the Security Insurer (so long as an Insurer Default
shall not have occurred and be continuing) but without the consent of any of the
Noteholders, (i) to cure any ambiguity, (ii) to correct or supplement any
provisions in this Agreement or (iii) for the purpose of adding any provision to
or changing in any manner or eliminating any provision of this Agreement or of
modifying in any manner the rights of the Noteholders; PROVIDED, HOWEVER, that
such action shall not, as evidenced by an Opinion of Counsel, adversely affect
in any material respect the interests of the Noteholders.
(b) This Agreement may also be amended from time to time by the
Seller, the Servicer, the Agent and the Issuer with the prior written consent of
the Indenture Trustee, the Collateral Agent, the Backup Servicer and the
Security Insurer (so long as an Insurer Default shall not have occurred and be
continuing) and with the consent of a Note Majority (which consent of any Holder
of a Note given pursuant to this Section or pursuant to any other provision of
this Agreement shall be conclusive and binding on such Holder and on all future
Holders of such Note and of any Note issued upon the transfer thereof or in
exchange thereof or in lieu thereof whether or not notation of such consent is
made upon the Note) for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Agreement, or of
modifying in any manner the
60
<PAGE>
rights of the Holders of Notes; PROVIDED, HOWEVER, that subject to the
express rights of the Security Insurer under the Related Documents, including
its rights to agree to certain modifications of the Receivables pursuant to
Section 2.2 and its rights to cause the Collateral Agent to liquidate the
Collateral under the circumstances and subject to the provisions of Section
6.1 of the Security Agreement, no such amendment shall (a) increase or reduce
in any manner the amount of, or accelerate or delay the timing of,
collections of payments on Receivables or distributions required to be made
with respect to any Advance or the Advance Interest Rate, (b) amend any
provisions of Section 3.6 in such a manner as to affect the priority of
payment of interest, principal or premium to Noteholders, or (c) reduce the
aforesaid percentage required to consent to any such amendment or any waiver
hereunder, without the consent of the Holders of all Notes then outstanding.
(c) Prior to the execution of any such amendment or consent, the
Issuer shall furnish written notification of the substance of such amendment or
consent to each Rating Agency.
(d) Promptly after the execution of any such amendment or consent, the
Issuer shall furnish written notification of the substance of such amendment or
consent to the Indenture Trustee.
(e) It shall not be necessary for the consent of Noteholders pursuant
to Section 6.1(b) to approve the particular form of any proposed amendment or
consent, but it shall be sufficient if such consent shall approve the substance
thereof. The manner of obtaining such consents (and any other consents of
Noteholders provided for in this Agreement) and of evidencing the authorization
of the execution thereof by Noteholders shall be subject to such reasonable
requirements as the Issuer or Indenture Trustee, as applicable, may prescribe,
including the establishment of record dates.
(f) Prior to the execution of any amendment to this Agreement, the
Issuer and the Indenture Trustee shall be entitled to receive and rely upon an
Opinion of Counsel stating that the execution of such amendment is authorized or
permitted by this Agreement, in addition to the Opinion of Counsel referred to
in Section 6.2(i). The Indenture Trustee may, but shall not be obligated to,
enter into any such amendment which affects the Indenture Trustee's own rights,
duties or immunities under this Agreement or otherwise.
Section 6.2. PROTECTION OF TITLE TO SELLER CONVEYED PROPERTY.
(a) The Servicer and the Seller shall execute and file such financing
statements and cause to be executed and filed such continuation and other
statements, all in such manner and in such places as may be required by law
fully to preserve, maintain and protect the interest of the Issuer and the
Collateral Agent in the Seller Conveyed Property and in the proceeds thereof.
The
61
<PAGE>
Servicer shall deliver (or cause to be delivered) to the Issuer, the Agent,
the Collateral Agent and the Security Insurer file-stamped copies of, or
filing receipts for, any document filed as provided above, as soon as
available following such filing.
(b) Neither the Seller nor the Servicer shall change its name,
identity or corporate structure in any manner that would, could or might make
any financing statement or continuation statement filed by the Seller in
accordance with paragraph (a) above seriously misleading within the meaning of
Section 9-402(7) of the UCC, unless it shall have given the Issuer, the Agent,
the Indenture Trustee and the Security Insurer (so long as an Insurer Default
shall not have occurred and be continuing) at least 60 days prior written notice
thereof, and shall promptly file appropriate amendments to all previously filed
financing statements and continuation statements; provided that no prior notice
need be given for a change in the name of the Seller from Olympic Receivables
Finance Corp. to Arcadia Receivables Finance Corp. or the Servicer from Olympic
Financial Ltd. to Arcadia Financial Ltd.
(c) Each of the Seller and the Servicer shall give the Issuer, the
Agent, the Indenture Trustee and the Security Insurer at least 60 days' prior
written notice of any relocation of its principal executive office if, as a
result of such relocation, the applicable provisions of the UCC would require
the filing of any amendment of any previously filed financing or continuation
statement or of any new financing statement. The Servicer shall at all times
maintain each office from which it services Receivables and its principal
executive office within the United States of America.
(d) The Servicer shall maintain accounts and records as to each
Receivable accurately and in sufficient detail to permit (i) the reader thereof
to know at any time the status of such Receivable, including payments and
recoveries made and payments owing (and the nature of each) and (ii)
reconciliation between payments or recoveries on (or with respect to) each
Receivable and the amounts from time to time deposited in the Collection Account
in respect of such Receivable.
(e) The Servicer shall maintain its computer systems so that, from and
after the time of sale under the Repurchase Agreement of the Receivables to the
Issuer, the Servicer's master computer records (including any backup archives)
that refer to any Receivable indicate clearly that the Receivable is owned by
the Issuer. Indication of the Issuer's ownership of a Receivable shall be
deleted from or modified on the Servicer's computer systems when, and only when,
the Receivable has been paid in full or repurchased by the Seller or Servicer.
(f) If at any time the Seller or the Servicer proposes to sell, grant
a security interest in, or otherwise transfer any interest in automotive
receivables to any prospective purchaser,
62
<PAGE>
lender or other transferee, the Servicer shall give to such prospective
purchaser, lender or other transferee computer tapes, records or printouts
(including any restored from backup archives) that, if they refer in any
manner whatsoever to any Receivable, indicate clearly that such Receivable
has been sold and is owned by the Issuer unless such Receivable has been paid
in full or repurchased by the Seller or Servicer.
(g) The Servicer shall permit the Issuer, the Agent, the Indenture
Trustee, the Collateral Agent, the Backup Servicer, the Security Insurer and
their respective agents, at any time to inspect, audit and make copies of and
abstracts from the Servicer's records regarding any Receivables or any other
portion of the Seller Conveyed Property.
(h) The Servicer shall furnish to the Issuer, the Agent, the Indenture
Trustee, the Collateral Agent, the Backup Servicer and the Security Insurer at
any time upon request a list of all Receivables then held by the Issuer,
together with a reconciliation of such list to the Receivables Schedule and to
each of the Servicer's Certificates furnished before such request indicating
repurchase of Receivables from the Issuer. Upon request, the Servicer shall
furnish a copy of any list to the Seller. The Indenture Trustee shall hold any
such list and Receivables Schedule for examination by interested parties during
normal business hours at the Corporate Trust Office upon reasonable notice by
such Persons of their desire to conduct an examination.
(i) The Seller and the Servicer shall deliver to the Issuer, the
Agent, the Indenture Trustee, the Collateral Agent and the Security Insurer
simultaneously with the execution and delivery of this Agreement and of each
amendment thereto and upon the occurrence of the events giving rise to an
obligation to give notice pursuant to Section 6.2(b) or (c), an Opinion of
Counsel either (a) stating that, in the opinion of such counsel, all financing
statements and continuation statements have been executed and filed that are
necessary fully to preserve and protect the interest of the Issuer and the
Collateral Agent in the Receivables and the other Seller Conveyed Property, and
reciting the details of such filings or referring to prior Opinions of Counsel
in which such details are given, or (b) stating that, in the opinion of such
counsel, no such action is necessary to preserve and protect such interest.
(j) The Servicer shall deliver to the Issuer, the Agent, the Indenture
Trustee, the Collateral Agent and the Security Insurer, within 90 days after the
beginning of each calendar year beginning with the first calendar year beginning
more than three months after the Closing Date, an Opinion of Counsel, either (a)
stating that, in the opinion of such counsel, all financing statements and
continuation statements have been executed and filed that are necessary fully to
preserve and protect the interest of the Issuer and the Collateral Agent in the
Receivables, and reciting the details of such filings or
63
<PAGE>
referring to prior Opinions of Counsel in which such details are given, or
(b) stating that, in the opinion of such counsel, no action shall be
necessary to preserve and protect such interest.
Section 6.3. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO
THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF AND THE OBLIGATIONS, RIGHTS AND
REMEDIES OF THE PARTIES UNDER THIS AGREEMENT SHALL BE DETERMINED IN ACCORDANCE
WITH SUCH LAWS.
Section 6.4. SEVERABILITY OF PROVISIONS. If any one or more of the
covenants, agreements, provisions or terms of this Agreement shall be for any
reason whatsoever held invalid, then such covenants, agreements, provisions or
terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement or of the Notes or the
respective rights of the Holders thereof.
Section 6.5. ASSIGNMENT. Notwithstanding anything to the contrary
contained in this Agreement, except as provided in Section 4.2 or Section 5.2
(and as provided in the provisions of the Agreement concerning the resignation
of the Servicer and the Backup Servicer), this Agreement may not be assigned by
the Seller or the Servicer without the prior written consent of the Issuer, the
Agent, the Indenture Trustee, the Collateral Agent and the Security Insurer (or,
if an Insurer Default shall have occurred and be continuing, the Agent, the
Issuer and the Indenture Trustee)
Section 6.6. THIRD-PARTY BENEFICIARIES. This Agreement shall inure
to the benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns. The Security Insurer and the Noteholders and
their successors and assigns shall be third-party beneficiaries to the
provisions of this Agreement, and shall be entitled to rely upon and directly to
enforce such provisions of this Agreement so long as, with respect to the
Security Insurer, no Insurer Default shall have occurred and be continuing.
Except as set forth in this Section 6.6, nothing in this Agreement, express or
implied, shall give to any Person, other than the parties hereto and their
successors hereunder, any benefit or any legal or equitable right, remedy or
claim under this Agreement. Except as expressly stated otherwise herein or in
the Related Documents, any right of the Security Insurer to direct, appoint,
consent to, approve of, or take any action under this Agreement, shall be a
right exercised by the Security Insurer in its sole and absolute discretion.
Section 6.7. DISCLAIMER BY SECURITY INSURER. The Security Insurer
may disclaim any of its rights and powers under this Agreement (but not its
duties and obligations under the Note Policy) upon delivery of a written notice
to the Issuer, the Agent and the Indenture Trustee.
64
<PAGE>
Section 6.8. COUNTERPARTS. For the purpose of facilitating its
execution and for other purposes, this Agreement may be executed simultaneously
in any number of counterparts, each of which counterpart shall be deemed to be
an original, and all of which counterparts shall constitute but one and the same
instrument.
Section 6.9. NOTICES. All demands, notices and communications under
this Agreement shall be in writing, personally delivered, sent by facsimile
transmission or mailed by certified mail-return receipt requested, and shall be
deemed to have been duly given upon receipt (a) in the case of OFL, the Seller
or the Servicer, at the following address: Olympic Receivables Finance Corp.,
7825 Washington Avenue South, Suite 410, Minneapolis, Minnesota 55439-2435,
Attention: Treasurer, with copies to: Olympic Financial Ltd., 7825 Washington
Avenue South, Minneapolis, Minnesota 55439-2435, Attention: Treasurer, (b) in
the case of the Issuer, Arcadia Receivables Conduit Corp., 7825 Washington
Avenue South, Suite 900, Minneapolis, Minnesota 55439-2435, Attention:
Treasurer, (c) in the case of the Indenture Trustee and, for so long as the
Indenture Trustee is the Backup Servicer or the Collateral Agent, at Sixth
Street and Marquette Avenue, Minneapolis, Minnesota 55479-0070, Attention:
Corporate Trust Services - Asset-Backed Administration, (d) in the case of each
Rating Agency, 99 Church Street, New York, New York 10007 (for Moody's) and 26
Broadway, New York, New York 10004 (for Standard & Poor's), Attention:
Asset-Backed Surveillance), (e) in the case of the Security Insurer, Financial
Security Assurance Inc., 350 Park Avenue, New York, New York 10022, Attention:
Surveillance Department, Telex No.: (2) 688-3103, Confirmation: (2) 826-0100,
Telecopy Nos.: (2) 339-3518, (2) 339-3529, (in each case in which notice or
other communication to Financial Security refers to an Event of Default, a claim
on the Note 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 the General Counsel and the Head-Financial Guaranty Group "URGENT MATERIAL
ENCLOSED"), and (f) in the case of the Agent, Bank of America National Trust and
Savings Association, Asset Securitization Group, 231 South LaSalle Street,
Chicago, Illinois, 60697, Attention: Mr. Albert Yoshimura or at such other
address as shall be designated by any such party in a written notice to the
other parties. Any notice required or permitted to be mailed to a Noteholder
shall be given by first class mail, postage prepaid, at the address of such
Holder as shown in the Note Register, and any notice so mailed within the time
prescribed in this Agreement shall be conclusively presumed to have been duly
given, whether or not the Noteholder receives such notice.
Section 6.10. INTEREST RATE PROTECTION. The parties hereto agree,
upon the request of the Seller, to amend this Agreement to allow for the
substitution of interest rate caps or other interest rate hedges acceptable to
the Security Insurer and
65
<PAGE>
the Agent for the obligation of the Seller to make deposits to the Collection
Account or retain amounts on deposit in the Collection Account in respect of
the WAC Deficiency Amount, but only to the extent that such interest rate
caps or other interest rate hedges would have the same economic effect as the
WAC Deficiency Amount, as determined by the Security Insurer and the Agent in
their reasonable discretion.
66
<PAGE>
IN WITNESS WHEREOF, the Issuer, the Agent, the Seller, OFL, the
Servicer and the Backup Servicer have caused this Servicing Agreement to be duly
executed by their respective officers as of the day and year first above
written.
ISSUER:
ARCADIA RECEIVABLES CONDUIT CORP.
By /s/ [illegible]
____________________________
Name:
Title:
SELLER:
OLYMPIC RECEIVABLES FINANCE CORP.
By /s/ [illegible]
____________________________
Name:
Title:
OLYMPIC FINANCIAL LTD.,
in its individual capacity and as Servicer
By /s/ [illegible]
____________________________
Name:
Title:
BACKUP SERVICER:
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION,
as Backup Servicer
By /s/ Thomas A. Wraabsted
____________________________
Name:
Title:
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Agent
By
By /s/ Erik G. Ford
____________________________
Name: ERIK G. FORD
Title: as Attorney-in-Fact
Acknowledged and Accepted:
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
not in its individual capacity
but as Indenture Trustee and
Collateral Agent,
By /s/ Thomas A. Wraabsted
____________________________
Name:
Title:
[Signature Page to Servicing Agreement]
<PAGE>
SERVICING POLICIES AND PROCEDURES
NOTE: APPLICABLE TIME PERIODS WILL VARY BY STATE.
I. PAST DUE PAYMENT COLLECTIONS
A. Past due payment notices are generated and sent on the 9th and 15th day
of delinquency.
B. The collection officer will make at least one phone call by day 10.
C. The collection officer will write a personalized collection letter by
day 15 and will have made at least two collection phone calls.
D. The collection officer will make at least two (2) more phone calls and
write at least one (1) more letter between days 15 and 30.
E. The collection officer will send a final demand letter on or about 31
days past due. The letter will allow 10 days to bring the account
current.
F. The collection officer will recommend either repossession, or some
form of reasonable forbearance (e.g., one extension in exchange for a
partial payment for cooperative debtors).
All phone calls and correspondence will require a brief handwritten
comment in the credit file. The date of each comment and the officer's
initials will be documented.
II. PAYMENT EXTENSIONS
Extensions of monthly payments must be granted only after careful
consideration and analysis. The extension is not to be used to mask
delinquencies, but rather assist in the collection and correction of
verifiable and legitimate customer problems. All extensions or modifications
require the prior approval of the Branch Manager. In the absence of the
Branch Manager, the Executive Vice President's or the President's approval is
required.
Possible qualifications for extensions to cooperative and trustworthy
customers include:
(a) Medical problems - verifiable;
(b) Temporary work loss - verifiable;
<PAGE>
(c) Pending insurance claim - verifiable; or
(d) Bankruptcy trustee cram down.
III. REPOSSESSIONS
Repossessions of the collateral is only to be pursued after exhausting
all other collection efforts. Once the decision is made to attempt
repossession, the following process is to be utilized:
(a) Decision on repossession.
(b) If the customer is cooperative, attempt repossession by Servicer
personnel. If uncooperative or unable to locate, utilize a third
party collection agency.
(c) Once secured, complete an inventory of personal belongings and
brief condition report on the vehicle. Return the property to the
customer and obtain a signed statement of inventory receipt.
(d) If the repossession is involuntary, notify the police department in
the city where the repossession occurred.
(e) Notify the originating dealership of repossession as soon as possible
and request a refund of all rebateable dealer adds.
(f) Send written notification to the customer regarding a 10-day notice
to redeem the loan.
(g) Decide on proper method of liquidation and plan for sale after the
10-day redemption period has expired.
(h) If consignment, set 21-day maximum term with the dealership, after
which time, if unsold, the vehicle is returned to the Servicer.
If wholesale, contact the appropriate auction company to make
arrangements for immediate sale.
If private sale, place advertisements in the proper media and attempt
to liquidate within one week.
(i) After the collateral is liquidated, send the debtor a letter stating
the amount of deficiency. Continued collection efforts will take the
form of voluntary payments or involuntary payments via judgment,
garnishment, and levy.
<PAGE>
IV. CHARGE OFFS
It is the responsibility of the collection officer to diligently pursue
any and all deficiencies which result from problem accounts. All avenues of
potential collection will be pursued, ranging from cash settlements to
amortized deficiency notes to judgment and garnishment.
A complete list of all charge offs will be maintained. The list will be
categorized into "active" and "dead" accounts. A brief action plan will be
shown for each active account. Accounts will only be designated as "dead"
with the recommendation of the collection officer and approval of the
Executive Vice President. The "dead" designation will only be granted for
those accounts which hold no potential for recovery (e.g., discharged
Chapter 7).
Active charge off action plans will be presented at least monthly to the
Executive Vice President. Decisions regarding pursuit of legal action and
incurring potential legal fees will need prior approval by the Executive Vice
President.
V. DEFICIENCY COLLECTIONS
(a) Establish the exact amount of the deficiency, using the repossession
worksheet. This includes all fees and per diem interest.
(b) Attempt verbal and/or written negotiations with the debtor to settle
the deficiency.
(c) Send a certified letter to the debtor and cosigner(s) stating that we
need $X by _____________, 19__ (7-10 days), or we will begin legal
action. If no reasonable response is received move to (d).
(d) Complete a General Claim Form. Send the form to [applicable local
court].
(e) We should receive notification of the court's decision within one
week. If we receive notice of judgment, it is possible that the debtor
will pay the court and the court will then pay the Servicer. As this
usually does not happen, proceed to exercise on the judgment as
follows:
(1) File both the Transcript of Judgment and the Affidavit of
Identification of Judgment Debtor with [appropriate office].
(2) Order a Writ of Execution from [appropriate office].
(3) "Service" of the Writ of Execution is handled by the Sheriff or
an Attorney.
<PAGE>
SERVICER'S CERTIFICATE
Delivered by Olympic Financial Ltd. ("the Servicer").
In accordance with the terms of the Servicing Agreement, dated December 3,
1996, among Arcadia Receivables Conduit Corporation ("the Issuer"), Olympic
Receivables Finance Corporation ("Seller"), Olympic Financial Ltd. in its
individual capacity and as Servicer, Bank of America National Trust & Savings
Association as Agent, and Norwest Bank Minnesota, National Association as
Backup Servicer, Collateral Agent and Indenture Trustee, the Servicer hereby
certifies that the following information is true and correct as of the close
of business on
INPUT SHEET (INPUTS ARE BLUE)
Dates
1 Accounting Date:
2 Determination Date:
3 Distribution Date:
4 Number of Days in Accounting Date Month 30
5 Has an Amortization Period commenced (Y/N) N
Rates 5 2-year Treasury 0.00%
6 30-day CP composite ratio 0.00%
7 Offshore Rate 0.00%
8 Weighted Average APR of Qualifying Receivables 0.00%
9 Basis Fee Percent 0.00%
10 Total Expense Percent 0.000%
Auto Loan Information
11 Total Premier Receivables $0
12 Total Classic Receivables $0
13 Total Financed Repossessions $0
--
Aggregate Principal Balance $0
Less: Classic Receivables in excess of 65% of Total $0
Less: Financed Repossession in excess of 5% of Total $0
--
Total aggregate Principal Balance of Qual. Receivables $0
14 Amount on deposit in Collection Account $0
15 WAC Deficiency Deposit $0
Aging of Pool
16 Current $0
17 1-30 days past due $0
18 31-60 days past due $0
19 61-90 days past due $0
20 90+ days past due $0
--
Total (should equal aggregate Principal Balance) $0
21 Advance Principal Distribution Amount $0
Funding Data
22 Is the purchase of Notes funded with CP (Y/N) Y
23 Outstanding Principal Amount as of Accounting Date $0
24 Advance Interest Carryover Shortfall $0
25 Interest Related to Prepayments (Sec. 3 (e) of Repo Agmt) $0
26 Total Interest due on Distribution Date $0
Portfolio Performance
Liquidated Receivables Calculation
Those Receivables where:
27 (i) 91 days have elapsed since the Servicer repossessed
the Financed Vehicle; $0
28 (ii) the Servicer has determined in good faith that
all amounts it expects to recover have been
received; $0
29 (iii) all or any portion of a Scheduled Payment shall
have become more than 180 days delinquent $0
--
Total Liquidated Receivables $0
30 Total Collections for the Accounting Period $0
Required Distributions from the Distribution Amount, Pursuant to Section
3.6(a) of the Servicing Agreement:
(i) Advance Interest Distributable Amount $0
(ii) Amount of Outstanding Monthly Advances for which the Servicer
(or OFL) is entitled to be reimbursed and for which the
Servicer (or OFL) has not been previously reimbursed $0
(iii) Accrued and unpaid fees and expenses, pro rata, to the extent
Exhibit B Page 1
<PAGE>
that such Person has not previously received such amounts
from Servicer or OFL:
Accrued and unpaid fees of the Indenture Trustee $0
Accrued and unpaid expenses of the Indenture Trustee $0
Accrued and unpaid fees of the Lockbox Bank $0
Accrued and unpaid fees of the Custodian $0
Accrued and unpaid fees of the Backup Servicer $0
Accrued and unpaid fees of the Collateral Agent $0
Transition expense of successor Servicer (not to exceed
$50,000) $0
(iv) Basic Servicing Fee for the related Monthly Period $0
Supplemental Servicing Fees for the Related Monthly period $0
Amounts permitted to be paid to the Servicer pursuant to
Section 3.2: $0
(v) With respect to an Amortization Period, so long as no
Amortization Event has occurred, the Advance Principal
Distributable Amount $0
(vi) Any amount owed and unpaid to the Security Insurer under
the Insurer Agreement, whether or not OFL or any other
Person is also obligated to pay such amounts $0
(vii) With respect to the Revolving Period, an amount required
to be at least equal to the sum of:
(1) the WAC Deficiency Amount, if any, and $0
(2) the amount necessary to be held in the Collection
Account such that Collateral Test will be satisfied $0
(viii) With respect to an Amortization Period, so long as no
Amortization Event has occurred, the amount equal to the
remaining amount on deposit in the Collection Account
necessary to pay down the unpaid principal amount of
the Advances $0
(ix) To the Agent for distribution, any amounts owing to the
Agent, the Noteholders or any Permitted Assignee under
the Note Purchase Agreement, the Fee Letter or any other
Related Document, to the extent not otherwise paid $0
Total Required Distribution (Note: item (vii) not
distributed but retained in Collection Account) $0
(x) Any remaining portion of Distribution Amount to the Spread
Account (Collection Account balance less Total Required
Distribution note: Item (vii) not distributed but retained
in the Collection Account) $0
CALCULATION OF WAC DEFICIENCY PERCENTAGE AND AMOUNT
The excese, if any, of (A) 6.5% 6.500%
plus the greatest of:
(i) the sum of 2 year Treasury Yield + 0.60%
+ Basis Fee % + Total Expense % 0.600%
(ii) (30 day CP composite x 1.2)
+0.25% + Total Exp. % 0.250%
(iii) (Offshore Rate x 1.2) + 0.375%
+ Total Exp. % NA
--
Maximum: 0.600%
over (B) the Weighted Average APR of Qualifying Receivables 0.000%
------
WAC Deficiency Percentage 7.100%
multiplied by 1.7 12.070%
multiplied by the Principal Balance of Qualifying Receivables $0
--
equals WAC Deficiency Amount $0
Calculation of Collateral Value of Premier Receivables
1) Total current principal outstanding on Qualifying Premier
Receivables $0
2) multiplied by Premier Collateral Ratio 98.00%
------
Premier Collateral Value $0
Exhibit B Page 2
<PAGE>
Calculation of Collateral Value of Classic Receivables
1) Total aggregate outstanding Principal Balance of
Qualifying Receivables (net of 65% cap) $0
2) multiplied by Classic Collateral Ratio 98.00%
------
Classic Collateral Value $0
Calculation of Collateral Value of Financed Repossessed Receivables
1) Outstanding Principal Balance of Classic Receivables that are
Financed Repossessions and are Qualifying Receivables $0
2) multiplied by Financed Repossessed Collateral Ratio 85.00%
------
Financed Repossessions Collateral Value $0
Total Collateral Value of all Qualifying Receivables $0
Collateral Test
1) Amount on deposit in Collection Account $0
Less WAC Deficiency Deposit $0
Plus the Total Collateral Value of all Qualifying Receivables $0
--
2) Aggregate outstanding amount of all Advances (LESS THAN or
EQUAL to above) $0
Is the Collateral Test satisfied? YES
If Collateral Test not satisfied, amount required to be held in
Collection Account $0
Determination of Advance Interest Distributable Amount
1) Outstanding Advance Balance $0
2) Total interest accrued during the immediately preceding
Interest Period $0
3) Less the amount of any Interest that accrued during the preceding
Interest Period on any Advance that was prepaid during such
Interest Period pursuant to section 3(e) of the Repurchase
Agreement and deposited into the Note Distribution account pursuant
to Section 3.10(b) of the Servicing Agreement $0
--
Advance Monthly Interest Distributable Amount $0
4) Determination of the Advance Interest Distributable Amount
a) Advance Monthly Interest Distributable Amount $0
b) Advance Interest Carryover Shortfall $0
--
Advance Interest Distributable Amount $0
Determination of the Basic Servicing Fee
1) Average Aggregate Principal Balance $0
multiplied by the Basic Servicing Fee Rate 1.00%
multiplied by 30/360 8.33%
-----
0.00
IN WITNESS WHEREOF, I ________________________
executed this Certificate as of the date set forth above
By: _____________________
Title: _____________________
Exhibit B
<PAGE>
EXHIBIT C
INTERCOMPANY DISCRETIONARY ADVANCE
AND SUBORDINATION AGREEMENT
This Agreement is made as of this __ day of ______________, 199_ by and
between Olympic Financial Ltd. ("OFL") and Olympic Receivables Finance Corp.
("ORFC").
RECITALS
OFL and ORFC are parties to a Servicing Agreement dated as of December 3,
1996 (the "Servicing Agreement"), a Spread Account Agreement dated as of
March 25, 1994, as amended and restated as of December 3, 1996 (the "Spread
Account Agreement"), and an Insurance and Indemnity Agreement dated as of
August 1, 1994 (the "Insurance Agreement").
ORFC is party to a Repurchase Agreement dated as of December 3, 1996
between ORFC and Arcadia Receivables Conduit Corp. (the "Repurchase
Agreement").
Pursuant to the terms of the Servicing Agreement, ORFC has the right,
but not the obligation, to make deposits into the Collection Account in order
to satisfy the Collateral Test. Failure to satisfy the Collateral Test is an
Event of Default under the Repurchase Agreement.
In the event ORFC wishes to mace deposits to satisfy the Collateral
Test and does not have sufficient funds to do so, ORFC may seek to borrow
funds for that purpose from OFL.
OFL is not obligated, and has not committed, to lend funds to ORFC.
OFL and ORFC wish to enter into this Agreement to define the terms under
which ORFC will repay any loans OFL elects to make to ORFC for the purpose of
making deposits into the Collection Account to satisfy the Collateral Test.
NOW, THEREFORE, for good and valuable consideration the receipt and
sufficiency of which are hereby acknowledged, OFL and ORFC agree as follows:
1. DEFINITIONS. All undefined capitalized terms used in this Agreement
shall have the Leanings pen them in the Servicing Agreement, Spread Account
Agreement and Insurance Agreement.
2. ADVANCES. ORFC may request from time to time that OFL lend ORFC such
funds as may be required to satisfy the Collateral Test. OFL may, in its sole
and
<PAGE>
absolute discretion, make a loan to ORFC (each such loan, an "Advance"). In
no event will OFL make an Advance unless its officers believe at the time that
there is a reasonable expectation of repayment.
3. REPAYMENT OF ADVANCES.
3.1 NOTE. The obligation of ORFC to repay the aggregate balance of
the Advances shall be evidenced by a nonrecourse promissory note of ORFC
dated the date hereof and substantially in the form of Exhibit A
attached hereto (the "Note"). OFL shall, and is hereby authorized by
ORFC to, endorse on the Note or on a schedule attached thereto an
appropriate notation evidencing the date and amount of each Advance made
by OFL and each principal payment and interest payment made by ORFC.
Such notations will be presumed correct unless and until the contrary is
established; PROVIDED, HOWEVER, that failure to make or any error in
making any such notation will not limit or expand or otherwise affect
the obligations of ORFC under this Agreement or the Note.
3.2 UNSECURED OBLIGATION. The obligation of ORFC to repay the
Advances shall be unsecured.
3.3 SUBORDINATION; LIMITED RECOURSE. The obligation of ORFC to
repay the Advances shall be subordinated in accordance with Section 4
and shall be recourse only to the extent of amounts released to ORFC
pursuant to priority EIGHTH of Section 3.03(b) of the Spread Account
Agreement after payment by ORFC of any amounts owing under, or in
connection with, any of the Transaction Documents (as defined in the
Spread Account Agreement) to any party, including any amounts payable to
OFL other than in respect of the Advances (such amounts, net of all such
payments, the "Available Funds").
3.4 INTEREST. Subject to the provisions of Section 4 of this
Agreement, ORFC agrees to pay interest on the principal balance of the
Advances at a per annum rate equal to [IBOR (as defined in the Servicing
Agreement) plus one percent] calculated on the basis of actual days
elapsed and a year of 360 days.
3.5 PAYMENTS. Funds shall be allocated for application to the Note
each month on the Distribution Date in an amount equal to the lesser of
(a) Available Funds, if any, and (b) the principal balance outstanding
on the Note plus accrued interest. Each payment shall be applied first
to accrued interest and the balance to principal.
4. SUBORDINATION. The parties hereto hereby agree that, except as and
to the extent hereinafter provided in this paragraph 4, the indebtedness of
ORFC
-2-
<PAGE>
evidenced by the Note, whether now outstanding or hereafter owing (the
"Subordinated Debt"), is and shall be subordinate and subject in right of
payment to the prior payment in full of all of OFRC's obligations under the
Repurchase Agreement and the other Transaction Documents (the "Senior Debt");
provided, however, that so long as no Act of Insolvency or Event of Default
(as defined in the Repurchase Agreement) shall have occurred and is
continuing, ORFC can borrow, repay and reborrow the Subordinated
Indebtedness, subject to the terms and conditions contained in this
Agreement. In the event of any distribution of all or part of the assets of
ORFC or the proceeds thereof to the creditors of ORFC, by reason of the
liquidation, dissolution or winding up of ORFC, or any sale, receivership,
insolvency or bankruptcy proceeding, then all payments or distributions of
cash, securities or property which but for this paragraph would be payable
upon the Subordinated Debt, shall instead be paid to the Collateral Agent for
application on the Senior Debt, whether or not due, until the Senior Debt is
paid in full.
5. NONPETITION COVENANT. OFL agrees that it will not commences or join
with any other creditor of ORFC in commencing, against ORFC, any bankruptcy,
insolvency, arrangement, reorganization, receivership, relief or similar
proceeding under any bankruptcy or similar law or assignment for the benefit
of creditors or any marshalling of assets and liabilities.
6. MISCELLANEOUS.
6.1. AMENDMENTS. The provisions of this Agreement may be modified,
amended, waived or terminated, only by a written document signed by both
parties or, in the case of a waiver, signed by the party against which such
waiver is being enforced, and, in each case, only with the prior written
consent of the Rating Agencies.
6.2. NOTICES. Except as otherwise expressly provided herein, all
notices and other communications hereunder will be in writing and will be
delivered in person or by courier or mailed, registered or certified mail,
postage prepaid and return address requested, to the parties at the following
addresses:
To ORFC: 7825 Washington Avenue
Suite 410
Minneapolis, MN 554389-2044
Attn: Treasurer
To OFL: 7825 Washington Avenue
Suite 400
Minneapolis, MS 554389-2044
Attn: John A. Witham
-3-
<PAGE>
or to such other address or to the attention of such other person as the
recipient has previously designated to the sender in writing. All such
notices and communications will be effective when delivered (if delivered
personals or by courier) or received (in the case of telecommunications) or
three days after they have been deposited in the mail (if sent by U.S. mail).
6.3. GOVERNING LAW. This Agreement and the Note, and all questions
relating to their validity, interpretations, performance and enforcement,
shall be governed and construed in accordance with the substantive laws of
the State of Minnesota without regard to the principles of conflicts of law
thereof.
6.4. ASSIGNMENT. This Agreement and the Note shall not be assigned
or transferred by OFL to arm person other than a direct or indirect
subsidiary of OFL.
6.5. RATING AGENCY COPIES. Upon the execution and delivery of this
Agreement, OFL will deliver an executed copy of this Agreement and the
executed Note to each Rating Agency.
IN WITNESS WHEREOF, this Agreement has been executed as of the date
first written above.
OLYMPIC FINANCIAL LTD.
By:
-----------------------------------
Its:
-------------------------------
OLYMPIC RECEIVABLES FINANCE CORP.
By:
-----------------------------------
Its:
-------------------------------
-4-
<PAGE>
EXHIBIT A
SUBORDINATED
REVOLVING CREDIT PROMISSORY NOTE
Minneapolis, Minnesota
____________, 199_
FOR VALUE RECEIVED, Olympic Receivables Finance Corp. ("ORFC")
promises to pay to the order of Olympic Financial Ltd. ("OFL") the principal
amount of Advances, if any, made by OFL to ORFC in accordance with the terms
of the Intercompany Discretionary Advance and Subordination Agreement of even
date herewith (the "Agreement"), together with interest at the rate provided
in the Agreement.
This Note shall be payable at the times and in the amounts specified in
the Agreement.
Payment of the obligations of ORFC evidenced by this Note is
subordinated on the terms of the Agreement and shall be recourse only to the
extent provided in the Agreement.
The terms of the Agreement are incorporated by reference herein with the
same force and effect as if fully set forth herein.
This Note shall be governed by and construed in accordance with the
internal laws of the state of Minnesota.
OLYMPIC RECEIVABLES FINANCE CORP.
By
------------------------------------
Its
---------------------------------
[COPY TO BE DELIVERED TO MOODY'S AND
S&P IF AND WHEN EXECUTED]
-5-
<PAGE>
THIRD AMENDED AND RESTATED
STOCK PLEDGE AGREEMENT
THIS THIRD AMENDED AND RESTATED STOCK PLEDGE AGREEMENT dated as of
December 3, 1996 (the "Pledge Agreement") among Olympic Financial Ltd., a
Minnesota corporation (the "Pledgor"), as owner of all of the outstanding
capital stock in (a) Olympic Receivables Finance Corp., a Delaware
corporation ("ORFC"), (b) Olympic First GP Inc., a Delaware corporation
("First GP"), (c) Olympic Second GP Inc., a Delaware corporation ("Second
GP", together with First GP, the "General Partners") and (d) Arcadia
Receivables Conduit Corp., a Delaware corporation ("ARCC"), Financial
Security Assurance Inc., a New York stock insurance company ("Financial
Security") and Norwest Bank Minnesota, National Association, as collateral
agent (the "Collateral Agent") on behalf of Financial Security.
INTRODUCTORY STATEMENTS
The Pledgor is the sole shareholder of each of ORFC, First GP,
Second GP and ARCC (together, the "Pledged Entities"). The Pledgor and ORFC
have previously entered into three Pooling and Servicing Agreements pursuant
to which Olympic Automobiles Receivables Trust, 1993-A (the "Series 1993-A
Trust"), Olympic Automobile Receivables Trust, 1993-B (the "Series 1993-B
Trust") and Olympic Automobiles Receivables Trust, 1995-A (the "Series 1995-A
Trust") were formed. Financial Security has issued a Series 1993-A Policy
with respect to the Series 1993-A Trust, a Series 1993-B Policy with respect
to the Series 1993-B Trust and a Series 1995-A Policy with respect to the
Series 1995-A Trust. The Pledgor, ORFC, First GP, Second GP, Financial
Security and Wilmington Trust Company, as Owner Trustee, have previously
entered into thirteen Trust Agreements pursuant to which Olympic Automobile
Receivables Trust, 1993-C (the "Series 1993-C Trust"), Olympic Automobile
Receivables Trust, 1993-D (the "Series 1993-D Trust"), Olympic Automobile
Receivables Trust, 1994-A (the "Series 1994-A Trust"), Olympic Automobile
Receivables Trust, 1994-B (the "Series 1994-B Trust"), Olympic Automobile
Receivables Trust, 1994-D (the "Series 1994-C Trust"), Olympic Automobile
Receivables Trust, 1994-D (the "Series 1994-D Trust"), Olympic Automobile
Receivables Trust, 1995-B (the "Series 1995-B Trust"), Olympic Automobile
Receivables Trust, 1995-C (the "Series 1995-C Trust"), Olympic Automobile
Receivables Trust, 1995-D (the "Series 1995-D Trust"), Olympic Automobile
Receivables Trust, 1995-E (the "Series 1995-E Trust"), Olympic Automobile
Receivables Trust, 1996-A
<PAGE>
(the "Series 1996-A Trust"), Olympic Automobile Receivables Trust, 1996-B
(the "Series 1996-B Trust"), and Olympic Automobile Receivables Trust, 1996-C
(the "Series 1996-C Trust") were formed. Financial Security has issued a
Series 1993-C Certificate Policy and a Series 1993-C Note Policy with respect
to the Series 1993-C Trust, a Series 1993-D Certificate Policy and a Series
1993-D Note Policy with respect to the Series 1993-D Trust, a Series 1994-A
Certificate Policy and a Series 1994-A Note Policy with respect to the Series
1994-A Trust, a Series 1994-B Certificate Policy and a Series 1994-B Note
Policy with respect to the Series 1994-B Trust, a Series 1994-C Certificate
Policy and a Series 1994-C Note Policy with respect to the Series 1994-C
Trust, a Series 1994-D Certificate Policy and a Series 1994-D Note Policy
with respect to the Series 1994-D Trust, a Series 1995-B Certificate Policy
and a Series 1995-B Note Policy with respect to the Series 1995-B Trust, a
Series 1995-C Certificate Policy and a Series 1995-C Note Policy with respect
to the Series 1995-C Trust, a Series 1995-D Certificate Policy and a Series
1995-D Note Policy with respect to the Series 1995-D Trust, a Series 1995-E
Certificate Policy and a Series 1995-E Note Policy with respect to the Series
1995-E Trust, a Series 1996-A Certificate Policy and a Series 1996-A Note
Policy with respect to the Series 1996-A Trust, a Series 1996-B Certificate
Policy and a Series 1996-B Note Policy with respect to the Series 1996-B
Trust, and a Series 1996-C Certificate Policy and a Series 1996-C Note Policy
with respect to the Series 1996-C Trust.
Contemporaneously herewith, ORFC has agreed to sell to ARCC from
time to time all of its right, title and interest in and to certain motor
vehicle retail installment sale contracts and other property, and ARCC is
entering into an Indenture, dated as of November , 1996, between itself
and [ ] (the "Indenture"), pursuant to which the Issuer
is issuing certain notes (the "Warehousing Series"). Financial Security is
contemporaneously herewith issuing a Warehousing Series Policy in respect of
the Warehousing Notes.
In addition to the foregoing, the Pledgor and ORFC may enter into
one or more Pooling and Servicing Agreements or Trust Agreements and Sale and
Servicing Agreements and Financial Security may issue additional policies
(such policies together with the Series 1993-A Policy, Series 1993-B Policy,
the Series 1993-C Certificate Policy, the Series 1993-C Note Policy, the
Series 1993-D Certificate Policy, the Series 1993-D Note Policy, the Series
1994-A Certificate Policy, the Series 1994-A Note Policy, the Series 1994-B
Certificate Policy, the Series 1994-B Note Policy, the Series 1994-C
Certificate Policy, the Series 1994-C Note Policy, the Series 1994-D
Certificate Policy, the Series 1994-D Note Policy, the Series 1995-A Policy,
the Series 1995-B Certificate Policy, the Series 1995-B Note Policy, the
Series 1995-C Certificate Policy, the Series 1995-C Note Policy, the Series
1995-D Certificate Policy, the Series 1995-D Note Policy, the 1995-E
Certificate Policy, the 1995-E Note Policy, the 1996-A Certificate Policy,
the 1996-A Note Policy, the Series 1996-B Certificate Policy, the 1996-B Note
Policy, the Series 1996-C
2
<PAGE>
Certificate Policy, the Series 1996-C Note Policy and the Warehousing Series
Policy, the "Policies") with respect to certain guaranteed distributions and
guaranteed payments on the corresponding additional series of certificates
and notes (such series together with Series 1993-A, Series 1993-B, Series
1993-C, Series 1993-D, Series 1994-A, Series 1994-B, Series 1994-C, Series
1994-D, Series 1995-A, Series 1995-B, Series 1995-C, Series 1995-D, Series
1995-E, Series 1996-A, Series 1996-B, Series 1996-C and the Warehousing
Series, the "Series"). To secure the Insurer Secured Obligations (as defined
in the Spread Account Agreement referred to below) with respect to each
Series the Pledgor has agreed to pledge its interest as sole shareholder of
each of ORFC, First GP, Second GP and ARCC to the Collateral Agent on behalf
of Financial Security, all such interests represented by the stock
certificates listed on attached Schedule A (the "Pledged Shares").
In consideration of the premises and of the agreements herein
contained, the Pledgor, Financial Security and the Collateral Agent agree as
follows:
Section 1. DEFINITIONS. Capitalized terms used but not
otherwise defined in this Pledge Agreement shall have the meanings specified
therefor in the Insurance and Indemnity Agreement dated as of August 17, 1993
among Financial Security, the Trust, the Pledgor, ORFC, First GP, Second GP
and the Spread Account Agreement, dated as of March 25, 1993, as amended and
restated as of December 3, 1996, among the Pledgor, ORFC, Financial Security
and Norwest Bank Minnesota, National Association, as Collateral Agent.
Section 2. SECURITY INTEREST. As security for the full and
complete performance of all the Insurer Secured Obligations with respect to
each Series (the "Obligations"), the Pledgor hereby delivers, pledges and
assigns to the Collateral Agent on behalf of Financial Security, and creates
in the Collateral Agent on behalf of Financial Security, a first priority
security interest in all of the Pledgor's right, title and interest in and to
the Pledged Shares together with all of the Pledgor's rights and privileges
with respect thereto, all proceeds, income and profits thereof and all
property received in exchange thereof or in substitution therefor (the
"Collateral").
Section 3. STOCK DIVIDENDS, OPTIONS, OR OTHER ADJUSTMENTS.
Until the occurrence of the last Insurer Termination Date with respect to any
Series, the Pledgor shall deliver, as Collateral, to the Collateral Agent,
any and all additional shares of stock or any other property of any kind
distributable on or by reason of the Collateral, whether in the form of or by
way of stock dividends, warrants, total or partial liquidation, conversion,
prepayments, redemptions or otherwise, with the sole exception of cash
dividends or cash interest payments, as the case may be. If any additional
shares of capital stock, instruments, or other property a security interest
in which can only be perfected by possession by the Collateral Agent, which
are distributable on or
3
<PAGE>
by reason of the Collateral pledged hereunder, shall come into the possession
or control of the Pledgor, the Pledgor shall forthwith transfer and deliver
such property to the Collateral Agent, as Collateral hereunder.
Section 4. DELIVERY OF SHARE CERTIFICATES; STOCK POWERS.
Simultaneously with the delivery of this Pledge Agreement, the Pledgor is
delivering to the Collateral Agent all instruments and stock certificates
representing the Collateral, together with stock powers duly executed in
blank by the Pledgor. The Pledgor shall promptly deliver to the Collateral
Agent, or cause the relevant Pledged Entity or any other entity issuing the
Collateral to deliver directly to the Collateral Agent, share certificates or
other instruments representing any Collateral acquired or received after the
date of this Pledge Agreement with a stock or bond power duly executed by the
Pledgor. If at any time either the Collateral Agent or Financial Security
notifies the Pledgor that it requires additional stock powers endorsed in
blank, the Pledgor shall promptly execute in blank and deliver the requested
power to the requesting party.
Section 5. POWER OF ATTORNEY. The Pledgor hereby constitutes
and irrevocably appoints the Collateral Agent and Financial Security, or
either one acting alone, with full power of substitution and revocation, as
the Pledgor's true and lawful attorney-in-fact, with the power, after the
occurrence of a Stock Pledge Event (as defined in Section 11 hereof), to the
full extent permitted by law, to affix to any certificates and documents
representing the Collateral the stock or bond powers delivered with respect
thereto, and to transfer or cause the transfer of the Collateral, or any part
thereof, on the books of each Pledged Entity or other entity issuing such
Collateral, to the name of the Collateral Agent or Financial Security or any
nominee, and thereafter to exercise with respect to such Collateral, all the
rights, powers and remedies of an owner. The power of attorney granted
pursuant to this Pledge Agreement and all authority hereby conferred are
granted and conferred solely to protect Financial Security's interest in the
Collateral and shall not impose any duty upon the Collateral Agent or
Financial Security to exercise any power. This power of attorney shall be
irrevocable as one coupled with an interest until the occurrence of the last
Insurer Termination Date with respect to any Series.
Section 6. INDUCING REPRESENTATIONS OF THE PLEDGOR. The
Pledgor represents and warrants to Financial Security that:
(a) The Pledged Shares are validly issued, fully paid for and
non-assessable.
(b) The Pledged Shares represent all of the issued and
outstanding capital stock of each of ORFC, First GP, Second GP and ARCC.
4
<PAGE>
(c) The Pledgor is the sole legal and beneficial owner of,
and has good and marketable title to, the Pledged Shares, free and clear of
all pledges, liens, security interests and other encumbrances other than the
security interest created by this Pledge Agreement, and the Pledgor has the
unqualified right and authority to execute and perform this Pledge Agreement.
(d) No options, warrants or other agreements with respect to
the Collateral are outstanding.
(e) Any consent, approval or authorization of or designation
or filing with any authority on the part of the Pledgor which is required in
connection with the pledge and security interest granted under this Pledge
Agreement has been obtained or effected.
(f) Neither the execution and delivery of this Pledge
Agreement by the Pledgor, the consummation of the transaction contemplated
hereby nor the satisfaction of the terms and conditions of this Pledge
Agreement:
(i) conflicts with or results in any breach or
violation of any provision of the articles of incorporation or bylaws of the
Pledgor or any law, rule, regulation, order, writ, judgment, injunction,
decree, determination or award currently in effect having applicability to
the Pledgor or any of its properties, including regulations issued by an
administrative agency or other governmental authority having supervisory
powers over the Pledgor;
(ii) conflicts with, constitutes a default (or an
event which with the giving of notice or the passage of time, or both, would
constitute a default) by the Pledgor under, or a breach of or contravenes any
provision of, the Transaction Documents related to any Series, any loan
agreement, mortgage, indenture or other agreement or instrument to which the
Pledgor or any of its Subsidiaries is a party or by which it or any of 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 the Pledgor's assets except the Lien
created by this Pledge Agreement.
(g) Upon the Pledgor's delivery of the Pledged Shares to the
Collateral Agent, the Collateral Agent, on behalf of Financial Security, will
have a valid, perfected first priority Lien on the Collateral, enforceable as
such against all creditors of the Pledgor and against all Persons purporting
to purchase any of the Collateral from the Pledgor.
5
<PAGE>
Section 7. OBLIGATIONS OF THE PLEDGOR. The Pledgor further
represents, warrants and covenants to Financial Security that:
(a) The Pledgor will not sell, transfer or convey any
interest in, or suffer or permit any Lien or encumbrance to be created upon
or with respect to, any of the Collateral (other than as created under this
Pledge Agreement) during the term of this Pledge Agreement.
(b) The Pledgor will, at its own expense, at any time and
from time to time at the request of the Collateral Agent or Financial
Security, do, make, procure, execute and deliver all acts, things, writings,
assurances and other documents as may be proposed by the Collateral Agent or
Financial Security to preserve, establish, demonstrate or enforce the
Collateral Agent's rights, interests and remedies as created by, provided in,
or emanating from this Pledge Agreement.
(c) The Pledgor will not take any action which would cause
any of the Subsidiaries to issue any other capital stock, without the prior
written consent of Financial Security so long as no Insurer Default has
occurred and is continuing. Any such issuance shall be subject to this
Pledge Agreement.
(d) The Pledgor will not consent to any amendment of any
Pledged Entity's Certificate of Incorporation without the prior written
consent of Financial Security prior to an Insurer Default.
Section 8. DIVIDENDS. (a) Pledgor agrees that it shall not
cause ORFC to declare or make payment of (i) any dividend or other
distribution on any shares of its capital stock, (ii) any payment on account
of the purchase, redemption, retirement or acquisition of (x) 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 ORFC under any Transaction Document with
respect to any Series is then due and owing but unpaid.
(b) Pledgor agrees that it shall not cause First GP to
declare or make payment of (i) any dividend or other distribution on any
shares of its capital stock, (ii) any payment on account of the purchase,
redemption, retirement or acquisition of (x) 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) the
aggregate net worth of the two General Partners would be greater than the
Minimum Net Worth (as defined in the Trust Agreement).
(c) Pledgor agrees that it shall not cause Second GP to
declare or make payment of (i) any dividend or other distribution on any
shares of its capital stock, (ii) any payment on account of the purchase,
redemption, retirement or acquisition
6
<PAGE>
of (x) 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) the aggregate net worth of the two General
Partners would be greater than the Minimum Net Worth (as defined in the Trust
Agreement).
(d) Pledgor agrees that it shall not cause ARCC to declare or
make payment of (i) any dividend or other distribution on any shares of its
capital stock, (ii) any payment on account of the purchase, redemption,
retirement or acquisition of (x) 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 ARCC under any Transaction Document with respect to the
Warehousing Series is then due and owing but unpaid.
Section 9. VOTING PROXY. The Pledgor hereby grants to the
Collateral Agent on behalf of Financial Security an irrevocable proxy to vote
the Pledged Shares with respect to the matters contained in Articles III, IX,
XIV, XVI and XVII of each Pledged Entity's certificate of incorporation,
which proxy shall continue, so long as no Insurer Default has occurred and is
continuing, until the occurrence of the last Insurer Termination Date with
respect to any Series. The Pledgor represents and warrants that it has
directed each Pledged Entity, in accordance with Section 217 of the Delaware
Corporation Law, to reflect the Collateral Agent's right to vote the
Collateral, on behalf of Financial Security, on such Pledged Entity's books.
Upon the request of the Collateral Agent or Financial Security, the Pledgor
shall deliver to the Collateral Agent such further evidence of such
irrevocable proxy or such further irrevocable proxy to vote the Collateral as
the Collateral Agent or Financial Security may request. The Collateral Agent
shall exercise all such rights to vote the Collateral granted hereunder in
accordance with the written directions given by Financial Security.
Section 10. RIGHTS OF THE COLLATERAL AGENT AND FINANCIAL
SECURITY. At any time and without notice, Financial Security, so long as no
Insurer Default with respect to any Series has occurred and is continuing,
may, upon providing the Collateral Agent with the full amount necessary to
carry out such direction, direct the Collateral Agent to discharge any taxes,
liens, security interests or other encumbrances levied or placed on the
Collateral, pay for the maintenance and preservation of the Collateral, or
pay for insurance on the Collateral; the amount of such payments, plus any
and all fees, costs and expenses of the Collateral Agent and Financial
Security, (including attorneys' fees and disbursements) in connection
therewith, shall, at the option of the Collateral Agent or Financial
Security, as appropriate, be reimbursed by the Pledgor on demand, with
interest thereon from the date paid at the Late Payment Rate. The Collateral
Agent shall have no duty or obligation to follow any direction provided in
this Section 10,
7
<PAGE>
unless Financial Security has provided the Collateral Agent with the full
amount necessary to carry out such direction.
Section 11. REMEDIES UPON EVENT OF DEFAULT.
(a) Upon the occurrence of an "Event of Default" under and as
defined in any Insurance Agreement relating to any Series currently
outstanding or issued hereafter, which "Event of Default" is not defined as a
"Portfolio Performance Event of Default" in such Insurance Agreement (a
"Stock Pledge Event") Financial Security, so long as no Insurer Default with
respect to any Series has occurred and is continuing, may, directly or
through the Collateral Agent, without notice to the Pledgor:
(i) cause the Collateral to be transferred to the
Collateral Agent's name or Financial Security's name or in the name of
nominees of either and thereafter exercise as to such Collateral all of the
rights, powers and remedies of an owner;
(ii) collect by legal proceedings or otherwise all
dividends, interest, principal payments, capital distributions and other sums
now or hereafter payable on account of the Collateral, and hold all such sums
as part of the Collateral, or apply such sums to the payment of the
Obligations in such manner and order as Financial Security may decide, in its
sole discretion;
(iii) enter into any extension, subordination,
reorganization, deposit, merger, or consolidation agreement, or any other
agreement relating to or affecting the Collateral, and in connection
therewith deposit or surrender control of the Collateral thereunder, and
accept other property in exchange therefor and hold and apply such property
or money so received in accordance with the provisions hereof; and
(b) In addition to all the rights and remedies of a secured
party under the Uniform Commercial Code, Financial Security, shall have the
right, and without demand of performance or other demand, advertisement or
notice of any kind, except as specified below, to or upon the Pledgor or any
other person (all and each of which demands, advertisements and/or notices
are hereby expressly waived to the extent permitted by law), to proceed
forthwith, or direct the Collateral Agent to proceed forthwith, to collect,
receive, appropriate and realize upon the Collateral, or any part thereof and
to proceed forthwith to sell, assign, give an option or options to purchase,
contract to sell, or otherwise dispose of and deliver the Collateral or any
part thereof in one or more parcels in accordance with applicable securities
laws and in a manner designed to ensure that such sale will not result in a
distribution of the Pledged Shares in violation of Section 5 of the
Securities Act of 1933, as amended and on such terms (including, without
limitation, a requirement that any purchaser of all or any part of the
Collateral shall be required to purchase any securities constituting the
Collateral solely for investment and without any intention to make a
distribution thereof) as Financial Security, in
8
<PAGE>
its sole and absolute discretion deems appropriate without any liability for
any loss due to decrease in the market value of the Collateral during the
period held. If any notification of intended disposition of the Collateral is
required by law, such notification shall be deemed reasonable and properly
given if mailed to the Pledgor, postage prepaid, at least five (5) days
before any such disposition at the address indicated by their respective
signatures. Any disposition of the Collateral or any part thereof may be for
cash or on credit or for future delivery without assumption of any credit
risk, with the right of Financial Security to purchase all or any part of the
Collateral so sold at any such sale or sales, public or private, free of any
equity or right of redemption in the Pledgor, which right of equity is, to
the extent permitted by applicable law, hereby expressly waived or released
by the Pledgor.
(c) Financial Security, in its sole discretion, may elect to
obtain or cause the Collateral Agent to obtain the advice of any independent
nationally known investment banking firm, which is a member firm of the New
York Stock Exchange, with respect to the method and manner of sale or other
disposition of any of the Collateral, the best price reasonably obtainable
therefor, the consideration of cash and/or credit terms, or any other details
concerning such sale or disposition; costs and expenses of obtaining such
advice shall be for the account of Financial Security. Financial Security,
in its sole discretion, may elect to sell or cause the Collateral Agent to
sell, the Collateral on any credit terms which it deems reasonable; the
out-of-pocket costs and expenses of such sale shall be for the account of
Financial Security. The sale of any of the Collateral on credit terms shall
not relieve the Pledgor of its liability with respect to the Obligations.
All payments received by the Collateral Agent, if any, and Financial Security
in respect of any sale of the Collateral shall be applied to the Obligations
as and when such payments are received.
(d) The Pledgor recognizes that it may not be feasible to
effect a public sale of all or a part of the Collateral by reason of certain
prohibitions contained in the Securities Act, and that it may be necessary to
sell privately to a restricted group of purchasers who will be obliged to
agree, among other things, to acquire the Collateral for their own account,
for investment and not with a view for the distribution or resale thereof.
The Pledgor agrees that private sales may be at prices and other terms less
favorable to the seller than if the Collateral were sold at public sale, and
that neither the Collateral Agent nor Financial Security has any obligation
to delay the sale of any Collateral for the period of time necessary to
permit the registration of the Collateral for public sale under the
Securities Act. The Pledgor agrees that a private sale or sales made under
the foregoing circumstances shall be deemed to have been made in a
commercially reasonable manner.
9
<PAGE>
(e) If any consent, approval or authorization of any state,
municipal or other governmental department, agency or authority shall be
necessary to effectuate any sale or other disposition of the Collateral, or
any partial disposition of the Collateral, the Pledgor will execute all such
applications and other instruments as may be required in connection with
securing any such consent, approval or authorization, and will otherwise use
its best efforts to secure the same.
(f) Upon any sale or other disposition, the Collateral Agent
acting at the direction of Financial Security or Financial Security shall
have the right to deliver, assign and transfer to the purchaser thereof the
Collateral so sold or disposed of. Each purchaser at any such sale or other
disposition (including Financial Security) shall hold the Collateral free
from any claim or right of whatever kind, including any equity or right of
redemption of the Pledgor. The Pledgor specifically waives, to the extent
permitted by applicable law, all rights of redemption, stay or appraisal
which it may have under any rule of law or statute now existing or hereafter
adopted.
(g) Neither the Collateral Agent nor Financial Security shall
be obligated to make any sale or other disposition of the Collateral, unless
the terms thereof shall be satisfactory to Financial Security. The
Collateral Agent or Financial Security may, without notice or publication,
adjourn any private or public sale, and, upon five (5) days' prior notice to
the Pledgor, hold such sale at any time or place to which the same may be so
adjourned. In case of any sale of all or any part of the Collateral, on
credit or future delivery, the Collateral so sold may be retained by the
Collateral Agent or Financial Security until the selling price is paid by the
purchaser thereof, but neither the Collateral Agent nor Financial Security
shall incur any liability in case of the failure of such purchaser to take up
and pay for the property so sold and, in case of any such failure, such
property may again be sold as herein provided.
(h) All of the rights and remedies granted to the Collateral
Agent and Financial Security, including but not limited to the foregoing,
shall be cumulative and not exclusive and shall be enforceable alternatively,
successively or concurrently as Financial Security may deem expedient.
Section 12. LIMITATION ON LIABILITY.
(a) Neither the Collateral Agent nor Financial Security, nor any
of their respective directors, officers or employees, shall be liable to the
Pledgor or to any Pledged Entity for any action taken or omitted to be taken
by it or them hereunder, or in connection herewith, except that the
Collateral Agent and Financial Security shall each be liable for its own
gross negligence, bad faith or willful misconduct.
10
<PAGE>
(b) The Collateral Agent shall incur no liability to Financial
Security except for the Collateral Agent's negligence or willful misconduct
in carrying out its duties hereunder.
(c) The Collateral Agent shall be protected and shall incur no
liability to any 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 the Collateral Agent
reasonably believes 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.
(d) The Collateral Agent may consult with qualified counsel,
financial advisors or accountants 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, financial advisors or accountants.
(e) The Collateral Agent shall not be under any obligation to
exercise any of the remedial rights or powers vested in it by this Pledge
Agreement unless it shall have received reasonable security or indemnity
satisfactory to the Collateral Agent against the costs, expenses and
liabilities which it might incur.
Section 13. PERFORMANCE OF DUTIES. The Collateral Agent shall
have no duties or responsibilities except those expressly set forth in this
Pledge Agreement and the Spread Account Agreement, subject to the provisions
of this Pledge Agreement and the Spread Account Agreement, or as directed by
Financial Security in accordance with this Pledge Agreement or the Spread
Account Agreement.
Section 14. APPOINTMENT AND POWERS. Subject to the terms and
conditions hereof, Financial Security appoints Norwest Bank Minnesota,
National Association as its Collateral Agent and Norwest Bank Minnesota,
National Association accepts such appointment and agrees to act as Collateral
Agent on behalf of Financial Security to maintain custody and possession of
the Collateral and to perform the other duties of the Collateral Agent in
accordance with the provisions of this Pledge Agreement. The Collateral
Agent shall, subject to the other terms and provisions of this Pledge
Agreement, act upon and in compliance with Financial Security's written
instructions delivered pursuant to this Pledge Agreement as promptly as
possible following receipt of such written instructions. Receipt of written
instructions shall not be a condition to the exercise by the Collateral Agent
of its express duties hereunder, unless this Pledge Agreement provides that
the
11
<PAGE>
Collateral Agent is permitted to act only following receipt of such
instructions.
Section 15. 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, 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.
(b) RESIGNATION. The Collateral Agent and any successor
Collateral Agent may resign only (i) with the prior written consent of
Financial Security or (ii) if the Collateral Agent is unable to perform its
duties hereunder as a matter of law as evidenced by an opinion of counsel
acceptable to Financial Security. Upon the occurrence of (i) or (ii) above,
the Collateral Agent shall give notice of its resignation by registered or
certified mail to the Pledgor (with a copy to Financial Security). Any
resignation by the Collateral Agent shall take effect only upon the date
which is the later of (x) the effective date of the appointment by Financial
Security of a successor Collateral Agent and the acceptance in writing by
such successor Collateral Agent of such appointment and (y) the date on which
the Collateral is delivered to the successor Collateral Agent.
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 has been appointed Collateral
Agent or becomes the Collateral Agent pursuant to subsection (d) below, the
resigning Collateral Agent may petition a court of competent jurisdiction for
the appointment of a successor.
(c) REMOVAL. The Collateral Agent may be removed by
Financial Security at any time, with or without cause, by an instrument or
concurrent instruments in writing delivered to the Collateral Agent. Any
removal pursuant to the provisions of this subsection (c) shall take effect
only upon the later to occur 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 and (ii) the date
on which the Collateral is delivered to the successor Collateral Agent. In
the event of any removal by Financial Security pursuant to this Section
15(c), the Pledgor shall pay the
12
<PAGE>
Collateral Agent its fees and expenses then due and owing in accordance with
Section 19 hereof.
(d) APPOINTMENT OF AND ACCEPTANCE BY SUCCESSOR.
(i) Financial Security shall have the sole right to
appoint each successor Collateral Agent. Every successor Collateral Agent
appointed hereunder shall execute, acknowledge and deliver to its predecessor
and to Financial Security and the Pledgor 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,
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 Financial Security, execute and deliver an instrument
transferring to such successor all the estates, properties, rights and powers
of such predecessor hereunder.
(ii) Every predecessor Collateral Agent shall
assign, transfer and deliver all Collateral held by it as Collateral Agent
hereunder to its successor as Collateral Agent.
(iii) Should any instrument in writing from the
Pledgor or any Pledged Entity be reasonably required by a successor
Collateral Agent for more fully and certainly vesting 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 successor Collateral Agent,
be forthwith executed, acknowledged and delivered by the Pledgor or such
Subsidiary, as the case may be.
(iv) 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 and preserve the security interests
granted hereunder.
Section 16. INDEMNIFICATION. The Pledgor shall indemnify the
Collateral Agent, its directors, officers, employees and its agents for, and
hold the Collateral Agent, its directors, officers, employees and its 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
13
<PAGE>
negligence, bad faith or willful misconduct of the Collateral Agent or its
directors, officers, employees or agents. The obligation of the Pledgor
under this Section shall survive the termination of this Agreement and the
resignation or removal of the Collateral Agent.
Section 17. REPRESENTATIONS AND WARRANTIES OF THE COLLATERAL
AGENT. The Collateral Agent represents and warrants to Pledgor and to
Financial Security 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 Pledge Agreement and
the other Documents to which it is a party and to perform all of its duties
as Collateral Agent hereunder and thereunder.
(c) DUE AUTHORIZATION. The execution and delivery by the
Collateral Agent of this Pledge 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
Pledge Agreement and such other Transaction Documents.
(d) VALID AND BINDING AGREEMENTS. The Collateral Agent has
duly executed and delivered this Pledge Agreement and each other Transaction
Document to which it is a party, and each of this Pledge 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)
rights of acceleration and the availability of equitable remedies may be
limited by equitable principles of general applicability.
Section 18. TERMINATION. This Pledge Agreement shall continue
in full force and effect until the date which is the last Insurer Termination
Date with respect to any Series. Subject to any sale or other disposition by
the Collateral Agent or Financial Security of the Collateral or any part
thereof pursuant to and in accordance with this Pledge Agreement, the
Collateral shall be returned to the Pledgor on the date which is the last
Insurer Termination Date with respect to any Series.
14
<PAGE>
Section 19. COMPENSATION AND REIMBURSEMENT. The Pledgor agrees
for the benefit of Financial Security and as part of the Insurer Secured
Obligations (a) to pay to the Collateral Agent, from time to time, reasonable
compensation for all services rendered by it hereunder; 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 20. FORECLOSURE EXPENSES OF THE COLLATERAL AGENT AND
FINANCIAL SECURITY. All expenses (including reasonable fees and
disbursements of counsel) incurred by the Collateral Agent or Financial
Security in connection with any actual or attempted sale, exchange of, or any
enforcement, collection, compromise or settlement respecting, this Agreement
or the Collateral, or any other action taken by Financial Security hereunder
whether directly or as attorney-in-fact pursuant to a power of attorney or
other authorization herein conferred, for the purpose of satisfaction of the
Obligations shall be deemed an Obligation for all purposes of this Pledge
Agreement, and an Insurer Secured Obligation for all purposes of the Spread
Account Agreement, and the Collateral Agent (with the consent of Financial
Security) and Financial Security may apply the Collateral to payment of or
reimbursement of itself for such liability.
Section 21. NOTICES. Any notice or other communication given
hereunder shall be in writing and shall be sent by registered mail, postage
prepaid, or personally delivered or telecopied to the recipient as follows:
(a) To the Collateral Agent:
Norwest Bank Minnesota, National Association
Norwest Center
Sixth Street & Marquette Avenue
Minneapolis, MN 55479-0069
Attention: Corporate Trust Department
Telecopy No.: (612) 667-9825
(b) To Financial Security:
Financial Security Assurance Inc.
350 Park Avenue
New York, New York 10022
Attention: Surveillance Department
Confirmation: (212) 826-0100
Telecopy Nos.: (212) 339-3518
(212) 339-3529
15
<PAGE>
(c) To the Pledgor:
Olympic Financial Ltd.
Olympic Place
7825 Washington Avenue South
Minneapolis, MN 55439-2444
Attention: Treasurer
Confirmation: (612) 944-4880
Telecopy No: (612) 942-6730
Section 22. GENERAL PROVISIONS.
(a) The Collateral Agent on behalf of Financial Security and
its successors and assigns shall have no obligation in respect of the
Collateral, except to use reasonable care in holding the Collateral and to
hold and dispose of the same in accordance with the terms of this Pledge
Agreement.
(b) The failure of the Collateral Agent or Financial Security
to exercise, or delay in exercising, any right, power or remedy hereunder,
shall not operate as a waiver thereof, nor shall any single or partial
exercise by the Collateral Agent or Financial Security of any right, power or
remedy hereunder preclude any other or future exercise thereof, or the
exercise of any other right, power or remedy. The remedies herein provided
are cumulative and are not exclusive of any remedies provided by law or any
other agreement.
(c) The representations, covenants and agreements of the
Pledgor herein contained shall survive the date hereof.
(d) Neither this Pledge Agreement nor the provisions hereof
can be changed, waived or terminated orally. This Pledge Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors, legal representatives and assigns. If any provision
of this Pledge Agreement shall be invalid or unenforceable in any respect or
in any jurisdiction, the remaining provisions shall remain in full force and
effect and shall be enforceable to the maximum extent permitted by law.
(e) This Pledge Agreement may be executed in counterparts.
(f) 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 OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREUNDER OR
THEREUNDER. EACH OF THE PARTIES HERETO (I) 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 (II) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER
INTO THIS
16
<PAGE>
AGREEMENT AND THE OTHER TRANSACTION DOCUMENTS TO WHICH IT IS A PARTY, BY
AMONG OTHER THINGS, THIS WAIVER.
(g) 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.
(h) The Pledgor 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 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 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. The Pledgor 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. The Pledgor 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 related to any of the Transaction
Documents against the Pledgor or its respective property in the courts of any
jurisdiction.
17
<PAGE>
SCHEDULE A
PLEDGED SHARES
Certificate No. 1, 100 Shares of the Common Stock of Olympic Receivables
Finance Corp.
Certificate No. 1, 100 Shares of the Common Stock of Olympic First GP Inc.
Certificate No. 1, 100 Shares of the Common Stock of Olympic Second GP Inc.
Certificate No. 1, 100 Shares of the Common Stock of ARCC
<PAGE>
(i) the Collateral Agent, by the execution hereof, acknowledges receipt
of the Pledged Shares on behalf of Financial Security.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Pledge Agreement on the date first above written.
OLYMPIC FINANCIAL LTD.
By: [Illegible]
----------------------------------
Name:
Title:
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
as Collateral Agent
By: ----------------------------------
Name:
Title:
FINANCIAL SECURITY ASSURANCE INC.
By: ---------------------------------
Name:
Title:
<PAGE>
(i) The Collateral Agent, by the execution hereof, acknowledges receipt
of the Pledged Shares on behalf of Financial Security.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Pledge Agreement on the date first above written.
OLYMPIC FINANCIAL LTD.
By:________________________________
Name:
Title:
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
as Collateral Agent
By: [Illegible]
________________________________
Name:
Title:
FINANCIAL SECURITY ASSURANCE, INC.
By:________________________________
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Amendment to be
executed by their respective officers thereunto duly authorized, as of the
date first above written.
OLYMPIC AUTOMOBILE RECEIVABLES
WAREHOUSE TRUST,
as Seller
By: Wilmington Trust Company,
not in its individual
capacity but solely as
Owner Trustee
By:_________________________________
Name:
Title:
OLYMPIC FINANCIAL LTD.
By:__________________________________
Name:
Title: Treasurer
DELAWARE FUNDING CORPORATION,
as Purchaser
By: Morgan Guaranty Trust
Company of New York,
as attorney-in-fact for
Delaware Funding Corporation
By: RICHARD A. BURKE
Name: Richard A. Burke
Title: Vice President
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
as Administrative Agent
By: RICHARD A. BURKE
Name: Richard A. Burke
Title: Vice President
<PAGE>
PLEASE SEE RESTRICTIVE LEGEND ON REVERSE SIDE HEREOF
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
NUMBER SHARES
1 100
ARCADIA RECEIVABLES CONDUIT CORP.
This Certifies that OLYMPIC FINANCIAL LTD. is the owner and
registered holder of ONE HUNDRED (100) Shares of
fully paid and nonassessable Common Stock, $.01 par value, of
ARCADIA RECEIVABLES CONDUIT CORP.
transferable only on the books of the corporation by the holder hereof in
person or by duly authorized attorney upon surrender of this certificate
properly endorsed.
IN WITNESS WHEREOF, the said corporation has caused this certificate to
be signed by its duly authorized officers and to be sealed with the seal
of the corporation.
this 2ND day of December, 1996
[Illegible] [Illegible]
_____________________________ __________________________________
Secretary President
SEAL
<PAGE>
The shares represented by this
certificate have not been registered
or qualified under the Securities Act
of 1933, as amended, or any state
securities laws. Such shares of stock
may not be sold, transferred or
otherwise disposed of without either
(i) an opinion of counsel
satisfactory to the corporation that
such transfer may lawfully be made
without registration or qualification
under the federal Securities Act of
1933, as amended, and all applicable
state securities laws; or (ii) such
registration or qualification.
For Value Received _________ hereby sell, assign and transfer unto
__________________________________________________________________
___________________________________________________________ Shares
represented by the within Certificate, and do hereby irrevocably
constitute and appoint
_________________________________________________________ Attorney
to transfer the said shares on the Books of the within named
Corporation with full power of substitution in the premises.
Dated ___________________, 19 ____________________________________
IN PRESENCE OF ____________________________________________________
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT
MUST CORRESPOND WITH THE NAME AS WRITTEN
UPON THE FACE OF THIS CERTIFICATE IN
EVERY PARTICULAR, WITHOUT ALTERATION OR
ENLARGEMENT OR ANY CHANGE WHATEVER.
<PAGE>
4B-Stock Power
For Value Received, Olympic Financial Ltd. does hereby transfer unto
____________________________________, One hunded (100) shares of the common
stock, $.01 par value, of Arcadia Receivables Conduit Corp., a Delaware
corporation, standing in the name on the books of the corporation and
represented by Stock Certificate Number _________________ and does hereby
irrevocably constitute and appoint its attorney-in-fact to transfer the said
stock on the books of the corporation with full power of substitution in the
premises.
OLYMPIC FINANCIAL LTD.
Dated:_____________________ By: [Illegible]
______________________________
Its:______________________________
<PAGE>
EXECUTION COPY
- --------------------------------------------------------------------------------
SECURITY AGREEMENT
among
OLYMPIC FINANCIAL LTD.,
OLYMPIC RECEIVABLES FINANCE CORP.,
ARCADIA RECEIVABLES CONDUIT CORP.,
FINANCIAL SECURITY ASSURANCE INC.,
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION
and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
as Indenture Trustee and as Collateral Agent
Dated as of December 3, 1996
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I
DEFINITIONS
Section 1.1. Defined Terms................................................. 2
Section 1.2. Rules of Interpretation....................................... 4
ARTICLE II
THE COLLATERAL
Section 2.1. Grant of Security Interest by the Issuer...................... 4
Section 2.2. No Transfer of Duties......................................... 5
Section 2.3. Termination and Release of Rights............................. 5
ARTICLE III
THE COLLATERAL AGENT
Section 3.1. Appointment and Powers........................................ 7
Section 3.2. Performance of Duties......................................... 7
Section 3.3. Limitation on Liability....................................... 7
Section 3.4. Reliance upon Documents....................................... 8
Section 3.5. Successor Collateral Agent.................................... 8
Section 3.6. Indemnification............................................... 10
Section 3.7. Compensation and Reimbursement................................ 10
Section 3.8. Representations and Warranties of the
Collateral Agent.............................................. 11
Section 3.9. Waiver of Setoffs............................................. 11
Section 3.10. Control by the Controlling Party.............................. 12
ARTICLE IV
COVENANTS OF THE ISSUER
Section 4.1. Preservation of Collateral.................................... 12
Section 4.2. Notices....................................................... 12
Section 4.3. Waiver of Stay or Extension Laws;
Marshalling of Assets......................................... 12
Section 4.4. Noninterference, Etc.......................................... 13
Section 4.5. Issuer Changes................................................ 13
i
<PAGE>
ARTICLE V
CONTROLLING PARTY; INTERCREDITOR PROVISIONS
Section 5.1. Appointment of Controlling Party.............................. 14
Section 5.2. Controlling Party's Authority................................. 14
Section 5.3. Rights of Secured Parties..................................... 15
Section 5.4. Degree of Care................................................ 15
ARTICLE VI
REMEDIES UPON DEFAULT
Section 6.1. Remedies upon a Default....................................... 16
Section 6.2. Restoration of Rights and Remedies............................ 18
Section 6.3. No Remedy Exclusive........................................... 18
ARTICLE VII
MISCELLANEOUS
Section 7.1. Further Assurances............................................ 19
Section 7.2. Waiver........................................................ 19
Section 7.3. Amendments; Waivers........................................... 19
Section 7.4. Severability.................................................. 19
Section 7.5. Nonpetition Covenant.......................................... 20
Section 7.6. Notices....................................................... 20
Section 7.7. Term of this Security Agreement............................... 22
Section 7.8. Assignments; Third-Party Rights; Reinsurance.................. 23
Section 7.9. Consent of Controlling Party.................................. 23
Section 7.10. Trial by Jury Waived.......................................... 23
Section 7.11. Governing Law................................................. 24
Section 7.12. Consents to Jurisdiction...................................... 24
Section 7.13. Limitation of Liability....................................... 25
Section 7.14. Determination of Adverse Effect............................... 25
Section 7.15. Counterparts.................................................. 25
Section 7.16. Headings...................................................... 25
Section 7.17. Limited Recourse.............................................. 25
Section 7.18. Respective Rights of the Issuer and the
Secured Parties in the Collateral............................. 25
ii
<PAGE>
SECURITY AGREEMENT
SECURITY AGREEMENT, dated as of December 3, 1996, by and among OLYMPIC
FINANCIAL LTD., a Minnesota corporation ("OFL"), OLYMPIC RECEIVABLES FINANCE
CORP., a Delaware corporation (the "Seller"), ARCADIA RECEIVABLES CONDUIT CORP.,
a Delaware corporation (the "Issuer"), FINANCIAL SECURITY ASSURANCE INC., a New
York stock insurance company (the "Security Insurer"), BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION (the "Agent") and NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as collateral agent (in such capacity, the "Collateral Agent") and
as indenture trustee (in such capacity, the "Indenture Trustee").
W I T N E S E T H
- - - - - - - - -
WHEREAS, pursuant to the Receivables Purchase Agreement and Assignment
dated as of December 3, 1996 (the "Purchase Agreement") between OFL and the
Seller, OFL is selling to the Seller from time to time all of its right, title
and interest in and to certain Receivables and the other property specified
therein; and
WHEREAS, pursuant to the Repurchase Agreement dated as of December 3,
1996 (the "Repurchase Agreement"), between the Seller and the Issuer, the Seller
is selling to the Issuer from time to time all of its right, title and interest
in and to certain Receivables and the other property specified therein; and
WHEREAS, pursuant to the Indenture dated as of December 3, 1996 (the
"Indenture"), between the Issuer and the Indenture Trustee, the Issuer is
issuing from time to time its Floating Rate Automobile Receivables-Backed Notes
(the "Notes"); and
WHEREAS, the Seller has requested that the Security Insurer issue the
Note Policy to the Indenture Trustee to guarantee payment of the Scheduled
Payments (as defined in such Note Policy) on each Distribution Date in respect
of the Notes;
NOW THEREFORE, in order to secure the performance of the Secured
Obligations and for other good and valuable consideration, the adequacy, receipt
and sufficiency of which are hereby acknowledged, the parties hereto hereby
agree as follows:
<PAGE>
ARTICLE I
DEFINITIONS
Section 1.1. DEFINED TERMS.
Terms defined in the Servicing Agreement (including by way of
reference to other documents), unless otherwise defined herein, shall have such
defined meanings when used herein, and the following terms shall have such
following meanings:
"AUTHORIZED OFFICER" shall mean, (i) with respect to Financial
Security, the Chairman of the Board, the President, the Chief Executive Officer,
Chief Operating Officer, or any Managing Director of Financial Security, (ii)
with respect to the Indenture Trustee or the Collateral Agent, any Vice
President or Trust Officer thereof, (iii) with respect to any of OFL, the Seller
or the Issuer, the President, any Vice President or the Treasurer thereof.
"COLLATERAL" shall have the meaning assigned to such term in Section
2.1(a) hereof.
"COLLATERAL AGENT" shall mean, 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 3.1, and thereafter
"Collateral Agent" shall mean such successor Person.
"CONTROLLING PARTY" shall mean at any time the Person designated as
the Controlling Party at such time pursuant to Section 5.1.
"FINAL TERMINATION DATE" shall mean the date that is the later of (i)
the Insurer Termination Date and (ii) the Trustee Termination Date.
"INSURER SECURED OBLIGATIONS" shall mean all amounts and obligations
that may at any time be owed or required to be performed to or on behalf of the
Security Insurer (or any agents, accountants or attorneys for the Security
Insurer), including the Security Insurer as third party beneficiary, under the
Insurance Agreement or under any other Transaction Document, 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" shall mean the date that is the latest of
(i) the date of the expiration of the Note Policy, (ii) the date on which the
Security Insurer shall have received payment and performance in full of all
Insurer Secured Obligations and (iii) the latest date on which any payment
referred to in clause (ii) above could be avoided as a preference under the
United States Bankruptcy Code or any other similar
2
<PAGE>
federal or state law relating to insolvency, bankruptcy, rehabilitation,
liquidation or reorganization, as specified in an Opinion of Counsel
delivered to the Collateral Agent.
"NON-CONTROLLING PARTY" shall mean at any time a Secured Party that is
not the Controlling Party at such time.
"OPINION OF COUNSEL" shall mean a written opinion of counsel
acceptable, as to form, substance and issuing counsel, to the Controlling Party.
"PROCEEDING" means any suit in equity, action at law or other judicial
or administrative proceeding.
"PURCHASE DATE" shall have the meaning assigned to such term in the
Repurchase Agreement.
"RECEIVABLES SCHEDULE" shall have the meaning assigned to such term in
the Repurchase Agreement.
"SECURED OBLIGATIONS" shall mean the Insurer Secured Obligations and
the Trustee Secured Obligations.
"SECURED PARTIES" shall mean each of the Indenture Trustee, in respect
of the Trustee Secured Obligations, and the Security Insurer, in respect of the
Insurer Secured Obligations.
"SECURITY AGREEMENT" shall mean this Security Agreement, as the same
may from time to time be amended, supplemented, waived or modified.
"SERVICING AGREEMENT" shall mean the Servicing Agreement dated as of
December 3, 1996 among the Issuer, the Seller, Olympic Financial Ltd., in its
individual capacity and as Servicer, Bank of America National Trust and Savings
Association, as Agent, and Norwest Bank Minnesota, National Association, as
Backup Servicer, Collateral Agent and Indenture Trustee.
"TRANSACTION DOCUMENTS" shall mean the Indenture, this Security
Agreement, the Repurchase Agreement, the Servicing Agreement, the Note Purchase
Agreement, the Purchase Agreement and any Assignment Agreements (but only with
respect to the Collateral), the Spread Account Agreement, the Insurance
Agreement, the Custodian Agreement and the Lockbox Agreement.
"TRUSTEE SECURED OBLIGATIONS" shall mean all amounts and obligations
that the Issuer may at any time owe or be required to perform to or for the
benefit of the Indenture Trustee or the Noteholders under the Indenture.
"TRUSTEE TERMINATION DATE" shall mean the date on which the Indenture
Trustee shall have received on behalf of the Noteholders payment and performance
in full of all Trustee Secured Obligations.
3
<PAGE>
"UNIFORM COMMERCIAL CODE" or "UCC" shall mean, with respect to any
jurisdiction, the Uniform Commercial Code, or any successor statute, or any
comparable law, as the same may from time to time be amended, supplemented or
otherwise modified and in effect.
Section 1.2. RULES OF INTERPRETATION. The terms "hereof," "herein"
or "hereunder," unless otherwise modified by more specific reference, shall
refer to this Security Agreement in its entirety. Unless otherwise indicated
in context, the terms "Article" or "Section" shall refer to an Article or
Section of this Security 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 terms.
ARTICLE II
THE COLLATERAL
Section 2.1. GRANT OF SECURITY INTEREST BY THE ISSUER.
(a) The Issuer hereby grants to the Collateral Agent at the Closing
Date and on each Purchase Date, on behalf of and for the benefit of the
Secured Parties to secure the performance of the respective Secured
Obligations, a security interest in all of the Issuer's right, title and
interest, whether now owned or hereafter acquired, in and to all accounts,
contract rights, general intangibles, chattel paper, instruments, documents,
money, deposit accounts, certificates of deposit, goods, letters of credit,
advices of credit and authenticated securities consisting of, arising from or
relating to any of the following property: (i) the Receivables; (ii) the
Other Conveyed Property related thereto; (iii) the rights of the Seller under
the Purchase Agreement and each Assignment Agreement assigned to the Issuer
pursuant to the Repurchase Agreement, including the right to cause OFL to
repurchase Receivables from Seller under certain circumstances; (iv) all
amounts required to be deposited, or deposited, or delivered to the
Collateral Agent for deposit, to the Collection Account by the Seller in
respect of the WAC Deficiency Amount or the Collateral Test; (v) all funds on
deposit from time to time in the Secured Accounts, and in all investments and
proceeds thereof (including all income thereon); (vi) the Servicing Agreement
and the Repurchase Agreement; and (vii) all present and future claims,
demands, causes and choses in action in respect of any or all of the
foregoing and all payments on or under and all proceeds of every kind and
nature whatsoever in respect of any and all of the foregoing, including all
proceeds of the conversion, voluntary or involuntary, into cash or other
liquid property, all cash proceeds, accounts, accounts receivables, notes,
drafts, acceptances, chattel paper, checks, deposit accounts, insurance
proceeds, condemnation awards, rights to payment of any and every kind and
other forms of obligations and receivables, instruments and other property
which at any time constitute all or part of or are included in
4
<PAGE>
the proceeds of any of the foregoing (collectively, the "Collateral").
The Collateral Agent, for the benefit of the Indenture Trustee on
behalf of the Holders of the Notes and for the benefit of the Security Insurer
acknowledges such grant of a security interest.
(b) In order to effectuate the provisions and purposes of this
Security Agreement, including for the purpose of perfecting the security
interests granted hereunder, the Issuer represents and warrants that it has,
prior to the execution of this Security Agreement, executed and filed an
appropriate UCC-1 financing statement in Minnesota sufficient to ensure that the
Collateral Agent, as agent for the Secured Parties, has a first priority
perfected security interest in all of the Collateral that can be perfected by
the filing of a financing statement.
Section 2.2. NO TRANSFER OF DUTIES. The security interests granted
hereby are granted as security only and shall not (i) transfer or in any way
affect or modify, or relieve the Issuer from, any obligation to perform or
satisfy any term, covenant, condition or agreement to be performed or satisfied
by the Issuer under or in connection with this Security 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 specifically provided herein and in the other Transaction Documents.
Section 2.3. TERMINATION AND RELEASE OF RIGHTS.
(a) On the Insurer Termination Date, the rights, remedies, powers,
duties, authority and obligations conferred upon the Security Insurer
pursuant to this Security Agreement in respect of the Collateral shall
terminate and be of no further force and effect and all rights, remedies,
powers, duties, authority and obligations of the Security Insurer with
respect to the Collateral shall be automatically released; PROVIDED, that any
indemnity provided to or by the Security Insurer herein shall survive such
Insurer Termination Date. If the Security Insurer is acting as Controlling
Party on the Insurer Termination Date, the Security Insurer agrees, at the
expense of OFL, 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 the
Security Insurer and any Person claiming by, through or under the Security
Insurer.
5
<PAGE>
(b) On the Trustee Termination Date, the rights, remedies, powers,
duties, authority and obligations, if any, conferred upon the Indenture Trustee
pursuant to this Security Agreement in respect of the Collateral shall terminate
and be of no further force and effect and all such rights, remedies, powers,
duties, authority and obligations of the Indenture Trustee with respect to such
Collateral shall be automatically released; PROVIDED, that any indemnity
provided to the Indenture Trustee herein shall survive such Trustee Termination
Date. If the Indenture Trustee is acting as Controlling Party on the related
Trustee Termination Date, the Indenture Trustee agrees, at the expense of OFL,
to execute and deliver such instruments as OFL may reasonably request to
effectuate such release, and any such instruments so executed and delivered
shall be fully binding on the Indenture Trustee.
(c) On the Final Termination Date, the rights, remedies, powers,
duties, authority and obligations conferred upon the Collateral Agent and each
Secured Party pursuant to this Security Agreement 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 shall be automatically released. On the Final Termination Date, the
Collateral Agent and each Secured Party agrees, at the expense of OFL, to
execute such instruments of release, in recordable form if necessary, in favor
of the Seller or OFL as the Seller or OFL may reasonably request, to deliver any
Collateral in its possession to the Issuer, and to otherwise release the lien of
this Security Agreement and release and deliver to the Issuer the Collateral.
(d) To the extent required of the Issuer and its assignees by the
terms of any Transaction Document and permitted by the terms hereof, each of the
Collateral Agent and the Controlling Party shall, and otherwise upon the prior
written instructions of an Authorized Officer of the Controlling Party, the
Collateral Agent shall, at the expense of OFL take (in each case) such steps as
may be necessary, or as the Issuer, in a manner consistent with the Transaction
Documents, may reasonably request, to release the interests of the Secured
Parties in the Collateral, including but not limited to redelivering and
reassigning to the Issuer any releases necessary to permit the Issuer to release
its interest in the Collateral in accordance with the terms thereof and of the
Repurchase Agreement.
ARTICLE III
THE COLLATERAL AGENT
Section 3.1. 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, and Norwest Bank
Minnesota, National Association hereby accepts such appointment and agrees to
act as
6
<PAGE>
Collateral Agent with respect to the Collateral for the Secured Parties, to
maintain custody and possession of the Collateral (except as otherwise
provided hereunder and under the Custodian Agreement) and to perform the
other duties of the Collateral Agent in accordance with the provisions of
this Security 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 and under the other Transaction
Documents, as the Controlling Party may direct and as are specifically
authorized to be exercised by the Collateral Agent by the terms hereof or by
the terms of any Transaction Document, 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 Security
Agreement promptly following receipt of such written instructions; PROVIDED,
that the Collateral Agent shall not act in accordance with any instructions
(i) which are not authorized by, or are in violation of the provisions of,
this Security Agreement or any Transaction Document, (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 or under any Transaction Document, except
where this Security Agreement provides that the Collateral Agent is permitted
to act only following and in accordance with such instructions.
Section 3.2. PERFORMANCE OF DUTIES. The Collateral Agent shall have
no duties or responsibilities except those expressly set forth in this Security
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 Security
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 3.3. 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
Issuer, the Seller or OFL of this Security Agreement or any of the Collateral
(or any part thereof). Notwithstanding any term or provision of this Security
Agreement, the Collateral Agent shall incur no liability to the Seller, OFL, the
Issuer 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 shall incur no liability to
the Seller, OFL, the Issuer or the Secured Parties except for negligence or
willful misconduct in carrying out its duties. Subject to Section 3.4, the
Collateral Agent shall be protected
7
<PAGE>
and shall incur no liability to any such party in relying upon 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 Security 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 3.4. 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, 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 3.5. 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.
8
<PAGE>
(b) RESIGNATION. The Collateral Agent and any successor Collateral
Agent may resign upon not less than 60 days' prior written notice of such
resignation by registered or certified mail to the other Secured Parties and the
Seller; PROVIDED, that such resignation shall take effect only upon the date
that 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 and (ii) delivery of the Collateral to
such successor to be held in accordance with the procedures specified in this
Agreement and the Custodian Agreement. 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
become 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
Parties 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 that 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 the Servicing Agreement and (iii) receipt by the
Controlling Party of an Opinion of Counsel to the effect described in Section
4.5.
(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 the Servicing Agreement, 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 any Secured Party or
the Seller, execute and deliver an instrument transferring to such
9
<PAGE>
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 or such Secured
Party. 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.
Section 3.6. INDEMNIFICATION. 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
OFL under this Section shall survive the termination of this Agreement and the
resignation or removal of the Collateral Agent. The Collateral Agent covenants
not to assert any Lien or to take any other action in respect of the Collateral
to enforce its rights to indemnification hereunder until the Final Termination
Date.
Section 3.7. 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 Security 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.
10
<PAGE>
Section 3.8. 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 Security 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 Security 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 Security Agreement and such other
Transaction Documents.
(d) VALID AND BINDING AGREEMENT. The Collateral Agent has duly
executed and delivered this Security Agreement and each other Transaction
Document to which it is a party, and each of this Security 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 3.9. 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 under applicable law with respect to any Secured
Account and agrees that amounts in the Secured Accounts shall at all times be
held and applied solely in accordance with the provisions hereof and of the
Transaction Documents.
Section 3.10. CONTROL BY THE CONTROLLING PARTY. The Collateral Agent
shall comply with notices and instructions given by the Issuer only if
accompanied by the written consent of the Controlling Party, except that if any
Amortization Event 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 Issuer.
11
<PAGE>
ARTICLE IV
COVENANTS OF THE ISSUER
Section 4.1. PRESERVATION OF COLLATERAL. Subject to the rights,
powers and authorities granted to the Collateral Agent and the Controlling Party
in this Security Agreement, the Issuer 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 Issuer 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
Issuer 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 4.2. NOTICES. In the event that the Issuer acquires
knowledge of the occurrence and continuance of any Amortization Event or of any
event of default or like event, howsoever described or called, under any of the
Transaction Documents, the Issuer shall immediately give notice thereof to the
Collateral Agent and each Secured Party.
Section 4.3. WAIVER OF STAY OR EXTENSION LAWS; MARSHALLING OF ASSETS.
The Issuer 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 Security Agreement or any
absolute sale of the Collateral or any part thereof, or the possession thereof
by any purchaser at any sale under Article VI of this Security Agreement; and
the Issuer, 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
12
<PAGE>
fullest extent permitted by applicable law, all right to have the Collateral
marshalled upon any foreclosure or other disposition thereof.
Section 4.4. NONINTERFERENCE, ETC. The Issuer 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 4.5. ISSUER CHANGES.
(a) CHANGE IN NAME, STRUCTURE, ETC. The Issuer shall not change
its name, identity or corporate structure unless it shall have given each
Secured Party and the Collateral Agent at least 30 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 either (a) stating that, in the opinion of such counsel,
such action has been taken with respect to the execution and filing of any
amendments to previously recorded 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 and purchasers from the Issuer 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.
(b) RELOCATION OF THE ISSUER. The Issuer shall not change its
principal executive office unless it gives each Secured Party and the Collateral
Agent at least 30 days' prior written notice of any relocation of its principal
executive office. If the Issuer relocates its principal executive office or
principal place of business from 7825 Washington Avenue South, Suite 900,
Minneapolis, Minnesota 55439-2435, the Issuer 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
13
<PAGE>
other actions as may be specified in such opinion, the security interests in
the Collateral shall remain, after such relocation, valid and perfected.
ARTICLE V
CONTROLLING PARTY; INTERCREDITOR PROVISIONS
Section 5.1. APPOINTMENT OF CONTROLLING PARTY. From and after the
Closing Date until the Insurer Termination Date, the Security Insurer shall be
the Controlling Party and shall be entitled to exercise all the rights given the
Controlling Party hereunder. From and after the Insurer Termination Date until
the Trustee Termination Date, the Indenture Trustee hereby agrees that the Agent
shall be the Controlling Party. Notwithstanding the foregoing, in the event
that an Insurer Default shall have occurred and be continuing, the Agent shall
be the Controlling Party until the Trustee Termination Date. If prior to an
Insurer Termination Date the Agent shall have become the Controlling Party as a
result of the occurrence of an Insurer Default and either such Insurer Default
is cured or for any other reason ceases to exist or the Trustee Termination Date
occurs, then upon such cure or other cessation or on such Trustee Termination
Date, as the case may be, the Security Insurer shall, upon notice thereof being
duly given to the Collateral Agent, again be the Controlling Party.
Section 5.2. CONTROLLING PARTY'S AUTHORITY.
(a) Each of the Issuer, OFL, the Seller and the Secured Parties hereby
irrevocably appoints the Controlling Party, and any successor to the Controlling
Party appointed pursuant to Section 5.1, its true and lawful attorney, with full
power of substitution, in the name of the Issuer, OFL, the Seller, the Secured
Parties or otherwise, but at the expense of the Seller, to the extent permitted
by law to exercise in its sole and absolute discretion, at any time and from
time to time while any Amortization Event has occurred and is continuing, any or
all of the following powers with respect to all or any of the Collateral:
(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, securitize, 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
adjustments with respect thereto; PROVIDED, that the foregoing powers and
rights shall be exercised in accordance with the provisions of Article VI.
(b) Each Secured Party hereby irrevocably and unconditionally
constitutes and appoints the Controlling Party,
14
<PAGE>
and any successor to the Controlling Party appointed pursuant to Section 5.1
from time to time, as the true and lawful attorney-in-fact of such Secured
Party for so long as such Secured Party is a 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 Security Agreement that such Secured Party
could or might do or which may be necessary, desirable or convenient in the
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, and the enforcement of the rights of the
Secured Parties hereunder, on behalf of and for the benefit of the
Controlling Party and such Non-Controlling Party, as their interests may
appear.
Section 5.3. RIGHTS OF SECURED PARTIES. The Non-Controlling Parties
at any time expressly agree that they shall not assert any right that they 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 continuation of any Amortization Event or any
non-performance by OFL, the Seller or the Issuer 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 5.4. DEGREE OF CARE.
(a) CONTROLLING PARTY. Notwithstanding any term or provision of this
Security Agreement, the Controlling Party shall incur no liability to OFL, the
Seller or the Issuer 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 Parties except for a breach of the
terms of this Security Agreement or for gross negligence, bad faith or willful
misconduct in carrying out its duties to the Non-Controlling Parties. 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 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
15
<PAGE>
the existence or nonexistence of which shall be a condition to the exercise
or enforcement of any right or remedy under this Security Agreement or any of
the Transaction Documents.
(b) THE NON-CONTROLLING PARTIES. The Non-Controlling Parties shall
not be liable to the Seller, OFL or the Issuer 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 VI
REMEDIES UPON DEFAULT
Section 6.1. REMEDIES UPON A DEFAULT.
(a) If an Amortization Event 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 Secured
Obligations (including, but not limited to, foreclosure upon the Collateral
and sale or securitization of 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. In addition to all other rights and remedies granted
to the Collateral Agent for the benefit of the Secured Parties by this
Security Agreement, the other Transaction Documents, the UCC and other
applicable law, rules, or regulations, the Collateral Agent may with the
consent of the Controlling Party, and shall upon the request of the
Controlling Party, upon the occurrence and during the continuance of any such
Amortization Event, exercise any one or more of the following rights and
remedies: (i) foreclose upon or otherwise enforce the security interests in
any or all Collateral in any manner permitted by applicable law, rules, or
regulations or in this Security Agreement; (ii) notify any or all Obligors to
make payments with respect to Receivables directly to the Collateral Agent;
(iii) sell or otherwise dispose of any or all Collateral at one or more
public or private sales, for cash or credit or future delivery, on such terms
and in such manner as the Controlling Party may determine; (iv) require OFL,
the Seller or the Issuer to assemble the Collateral and make it available to
the Collateral Agent at a place to be designated by the Collateral Agent;
(v) enter onto any property where any Collateral is located and take possession
thereof with or without judicial process; and (vi) enforce any rights of the
Issuer under any Receivable or other agreement to the extent the Controlling
Party deems appropriate. In furtherance of the Collateral Agent's rights
hereunder, each of OFL, the Seller and the Issuer hereby grants to the
Collateral Agent an irrevocable, non-exclusive license (exercisable without
royalty or other payment by the Collateral Agent) to use, license or
sublicense any patent, trademark, tradename, copyright or other intellectual
16
<PAGE>
property in which the Issuer now or hereafter has any right, title or
interest, together with the right of access to all media in which any of the
foregoing may be recorded or stored. Each of OFL, the Seller and the Issuer
hereby agrees that ten (10) days notice of any intended sale or disposition
of any Collateral is reasonable. 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
Collateral, except to the extent provided herein and in the Servicing
Agreement or other Transaction Documents.
(b) In the event of any sale, collection, conversion or other
disposition into cash of the Collateral, or any part thereof, after deducting
any actual costs and expenses incurred in connection with any such disposition,
the Collateral Agent shall deposit the proceeds thereof into the Collection
Account for distribution on the next succeeding Distribution Date in accordance
with the priorities set forth in Section 3.6 of the Servicing Agreement.
(c) The Controlling Party and the Collateral Agent shall be entitled
to obtain from OFL, the Seller and the Issuer all records and documentation in
the possession of OFL, the Seller or the Issuer, as the case may be, pertaining
to any Collateral. Upon consummation of any sale pursuant to this Section 6.1,
the Controlling Party, or the Collateral Agent acting on behalf of and at the
direction of the Controlling Party, shall have the right to assign, transfer,
endorse and deliver to the purchaser or purchasers thereof (which may include
the Security Insurer), free and clear of any Lien, the Collateral, or any
portion thereof or any interest therein, so sold. Each purchaser at any such
sale shall hold the property purchased by it absolutely free and clear from any
claim or right on the part of the Secured Parties, OFL, the Seller or the Issuer
and OFL, the Seller and the Issuer hereby irrevocably waive all rights of
redemption, stay, marshalling of assets or appraisal that either of them now has
or may at any time in the future have under applicable law or statute now
existing or hereafter enacted.
(d) In addition to the remedies granted in this Agreement and the
other Transaction Documents, if an Amortization Event 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 the amounts then
due and thereafter to become due under this Agreement and any of the other
Transaction Documents (including but not limited to, all 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,
including the exercise of the following powers with respect to the Collateral:
(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
17
<PAGE>
defend any action or proceeding with respect thereto, (iii) to sell,
securitize, 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 adjustment with respect thereto. All
proceeds of any portion of the Collateral liquidated pursuant to this
Section 6.1 shall be applied as set forth in Subsection (b) above.
(e) The Collateral Agent and the Controlling Party, as the case may
be, may exercise the powers and rights granted by this Section 6.1, without
notice or demand to the Indenture Trustee, OFL, the Seller or the Issuer except
as provided in (a) above.
Section 6.2. 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.
Section 6.3. NO REMEDY EXCLUSIVE. No right or remedy herein
conferred upon or reserved to the Collateral Agent, the Controlling Party or any
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 and each and every right,
power and remedy whether specifically herein given or otherwise existing may be
exercised 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 VII
MISCELLANEOUS
Section 7.1. 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
Security Agreement or to confirm or perfect any transaction described or
contemplated herein.
18
<PAGE>
Section 7.2. WAIVER. Any waiver by any party of any provision of
this Security 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 Security 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 7.3. AMENDMENTS; WAIVERS. No amendment, modification, waiver
or supplement to this Security Agreement or any provision of this Security
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 the Notes; PROVIDED, HOWEVER, that, for so long as
the Security Insurer shall be the Controlling Party, amendments, modifications,
waivers or supplements hereto or any requirement hereunder to deposit or retain
any amounts in the Secured Accounts shall be effective if made or consented to
in writing by the Security Insurer, the Seller, OFL, the Issuer, the Agent, the
Indenture Trustee and the Collateral Agent (the consent of which shall not be
withheld or delayed with respect to any amendment that has been consented to by
the Security Insurer and that does not adversely affect the Collateral Agent)
but shall in no circumstances require the consent of the Noteholders.
Section 7.4. SEVERABILITY. In the event that any provision of this
Security Agreement or the application thereof to any party hereto or to any
circumstance or in any jurisdiction governing this Security 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 Security
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 Security
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 Security Agreement limiting such remedies).
19
<PAGE>
Section 7.5. NONPETITION COVENANT. Notwithstanding any prior
termination of this Security Agreement, each of the parties hereto agrees that
it shall not, prior to one year and one day after the Final Termination Date,
acquiesce, petition or otherwise invoke or cause the Seller or the Issuer 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 or the
Issuer 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 or the Issuer or all or any part of its
property or assets or ordering the winding up or liquidation of the affairs of
the Seller or the Issuer. The parties agree that damages will be an inadequate
remedy for breach of this covenant and that this covenant may be specifically
enforced.
Section 7.6. 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 400
Minneapolis, Minnesota 55439-2435
Attention: Treasurer
Telecopier No.: (612) 942-6730
(ii) If to the Seller:
Olympic Receivables Finance Corp.
7825 Washington Avenue South
Suite 410
Minneapolis, Minnesota 55439-2435
Attention: Treasurer
Telecopier No.: (612) 942-0015
20
<PAGE>
(iii) If to the Security Insurer:
Financial Security Assurance Inc.
350 Park Avenue - 13th Floor
New York, New York 10022
Attention: Surveillance Department
Telecopier No.: (212) 755-5165
(212) 688-3101
(in each case in which notice or other communication to the
Security Insurer refers to an Amortization Event or a claim on
the Policy or in which failure on the part of the Security
Insurer 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 Indenture Trustee:
Norwest Bank Minnesota, National Association
Sixth 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
Sixth Street and Marquette Avenue
Minneapolis, Minnesota 55479-0070
Attention: Corporate Trust Services -
Asset-Backed Administration
Telecopier No.: (612) 667-3539
(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
21
<PAGE>
(viii) If to the Issuer:
Arcadia Receivables Conduit Corp.
7825 Washington Avenue South
Suite 900
Minneapolis, Minnesota 55439-2435
Telecopier No.: (612) 942-6730
(ix) If to the Agent:
Bank of America National Trust and Savings Association
Asset Securitization Group
231 South LaSalle Street
Chicago, Illinois 60697
Attention: Albert Yoshimura
Telecopier No.: (312) 923-0273
A copy of each notice given hereunder to any party hereto shall also be given to
(without duplication) the Security Insurer, the Seller, the Issuer, the Agent,
the Indenture 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 7.7. TERM OF THIS SECURITY AGREEMENT. This Security
Agreement shall continue in effect until the Final Termination Date. On such
Final Termination Date, this Security 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 Issuer, the Seller or OFL in respect of the Secured Obligations or otherwise
under this Agreement or any of the Transaction Documents, shall be released to
and in favor of the Issuer; PROVIDED, that the provisions of Sections 3.6, 3.7
and 7.5 shall survive any termination of this Security Agreement and the release
of any Collateral upon such termination.
Section 7.8. ASSIGNMENTS; THIRD-PARTY RIGHTS; REINSURANCE.
(a) This Security 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. None of the Issuer, the Seller nor OFL
may assign this Security Agreement, or delegate any of its duties hereunder,
without the prior written consent of the Controlling Party.
22
<PAGE>
(b) The Security Insurer shall have the right (unless an Insurer
Default shall have occurred and be continuing) to give participations in its
rights under this Security Agreement and to enter into contracts of reinsurance
with respect to the Note Policy and each such participant or reinsurer shall be
entitled to the benefit of any representation, warranty, covenant and obligation
of each party (other than the Security Insurer) hereunder as if such participant
or reinsurer was a party hereto and, subject 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 the
Security Insurer of its obligations hereunder, under the Transaction Documents
to which it is a party or under the Note Policy. In addition, nothing contained
herein shall restrict the Security Insurer from assigning to any Person pursuant
to any liquidity facility or credit facility any rights of the Security Insurer
under this Security Agreement or with respect to any real or personal property
or other interests pledged to the Security Insurer, or in which the Security
Insurer 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 the Security Insurer hereunder.
Section 7.9. 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
and absolute discretion.
SECTION 7.10. 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 SECURITY 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 WAVIER AND (B) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO
THIS SECURITY AGREEMENT AND THE OTHER TRANSACTION DOCUMENTS TO WHICH IT IS A
PARTY, BY AMONG OTHER THINGS, THIS WAIVER.
SECTION 7.11. 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.
23
<PAGE>
Section 7.12. 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 sate 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 Security 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 or proceeding is brought in an inconvenient forum, that the venue of the
suit, action or proceeding is improper or that this Security 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, the Seller and the Issuer
hereby irrevocably appoints and designates CT Corporation System, 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 OFL, the Seller and
the Issuer agrees that service of such process upon such Person shall constitute
personal service of such process upon it. Nothing contained in this Security
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, the Seller, the Issuer or their
respective property in the courts of any jurisdiction.
Section 7.13. LIMITATION OF LIABILITY. It is expressly understood
and agreed by the parties hereto that Norwest Bank Minnesota, National
Association is executing this Security Agreement not in its individual capacity
but solely in its capacity as indenture trustee pursuant to the Indenture and as
Collateral Agent hereunder.
Section 7.14. DETERMINATION OF ADVERSE EFFECT. Any determination of
an adverse effect on the interest of the Secured Parties or the Noteholders
shall be made without consideration of the availability of funds under the Note
Policy.
Section 7.15. COUNTERPARTS. This Security 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.
24
<PAGE>
Section 7.16. 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 Security Agreement and shall not affect its
construction or interpretation.
Section 7.17. LIMITED RECOURSE. Notwithstanding anything to the
contrary contained herein, the obligations of the Issuer hereunder shall not be
recourse to the Issuer (or any person or organization acting on behalf of the
Issuer or any affiliate, employee, incorporator, stockholder, officer or
director of the Issuer), other than to the Receivables and the other Collateral
and the proceeds thereof as provided in this Security Agreement, the Repurchase
Agreement and the Servicing Agreement. Each of the parties hereto hereby agree
that to the extent such funds are insufficient or assets are unavailable to pay
any amounts owing to it from the other party pursuant to this Security
Agreement, it shall not constitute a claim against the other party.
Section 7.18. RESPECTIVE RIGHTS OF THE ISSUER AND THE SECURED PARTIES
IN THE COLLATERAL. The Issuer hereby acknowledges and agrees that its interest
in the Collateral under the Repurchase Agreement is subject and subordinate in
all respects to its pledge of the Collateral to the Secured Parties under this
Security Agreement and that the Collateral Agent holds the Collateral first for
the Secured Parties hereunder and second on behalf of the Issuer in respect of
its interest in the Collateral under the Repurchase Agreement.
25
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Security
Agreement as of the date set forth on the first page hereof.
OLYMPIC FINANCIAL LTD.
By: /s/ ILLEGIBLE
------------------------------------
Name:
Title:
OLYMPIC RECEIVABLES FINANCE CORP.
By: /s/ ILLEGIBLE
------------------------------------
Name:
Title:
ARCADIA RECEIVABLES CONDUIT CORP.
By: /s/ ILLEGIBLE
------------------------------------
Name:
Title:
FINANCIAL SECURITY ASSURANCE INC.
By: /s/ ILLEGIBLE
------------------------------------
Name:
Title:
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION,
as Indenture Trustee
By: /s/ Thomas A. Wraablert
------------------------------------
Name:
Title:
[Signature Page to Security Agreement]
<PAGE>
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION,
as Collateral Agent
By: /s/ Thomas A. Wraablert
--------------------------
Name:
Title:
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
By: /s/ Erik G. Ford
--------------------------
Name: Erik G. Ford
Title: Attorney-in-Fact
<PAGE>
EXECUTION COPY
==============================================================================
ARCADIA RECEIVABLES CONDUIT CORP.
____________________
INDENTURE
Dated as of December 3, 1996
_____________________________
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
Trustee and Collateral Agent
==============================================================================
<PAGE>
TABLE OF CONTENTS
Page
-----
PARTIES
RECITALS OF THE ISSUER
ARTICLE ONE
Definitions and Other Provisions
of General Application
Section 101. Definitions......................................... 1
Act........................................................... 2
Advance....................................................... 2
Agent......................................................... 2
Assignment Agreement.......................................... 2
Authenticating Agent.......................................... 2
Authorized Officer............................................ 2
Board of Directors............................................ 2
Board Resolution.............................................. 2
BofA.......................................................... 3
Closing Date.................................................. 3
Code.......................................................... 3
Collateral.................................................... 3
Collateral Agent.............................................. 3
Commercial Paper Notes........................................ 3
Commission.................................................... 3
Controlling Party............................................. 3
Corporate Trust Office........................................ 3
corporation................................................... 3
covenant defeasance........................................... 4
CP Composite Rate............................................. 4
CP Rate....................................................... 4
Default....................................................... 4
defeasance.................................................... 4
Draw Date..................................................... 4
Event of Default.............................................. 4
Exchange Act.................................................. 4
Executive Officer............................................. 4
Holder........................................................ 4
Noteholder.................................................... 4
Indebtedness.................................................. 4
Indenture..................................................... 5
Indenture Supplement.......................................... 5
Insurer Notice Date........................................... 5
Insurer Secured Obligations................................... 5
Interest Period............................................... 5
Issuer........................................................ 5
Issuer Request" or "Issuer Order.............................. 5
Letter Agreement.............................................. 6
Lien.......................................................... 6
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
Page
-----
Liquidity Asset Purchase Agreement............................ 6
Maturity Date................................................. 6
Maximum Authorized Amount..................................... 6
Maximum Interest Rate......................................... 6
Note Interest Rate............................................ 6
Note Policy................................................... 7
Note Register................................................. 7
Note Registrar................................................ 7
Noteholders' Interest Carryover Shortfall..................... 7
Noteholders' Interest Distributable Amount.................... 7
Noteholders' Principal Distributable Amount................... 7
Notes......................................................... 7
Officers' Certificate......................................... 7
Opinion of Counsel............................................ 7
Original Issue Date........................................... 8
Outstanding................................................... 8
Outstanding Amount............................................ 9
Paying Agent.................................................. 9
Payment Date.................................................. 9
Permitted Assignee............................................ 9
Person........................................................ 9
Policy Claim Amount........................................... 9
Predecessor Note.............................................. 9
Preference Claim.............................................. 9
Prepayment Price.............................................. 9
Proceeding.................................................... 9
Program Support Provider...................................... 9
Property...................................................... 10
Rating Agency Condition....................................... 10
RCC........................................................... 10
Record Date................................................... 10
Registered Holder............................................. 10
Related Documents............................................. 10
Responsible Officer........................................... 10
Scheduled Payments............................................ 10
Secured Obligations........................................... 10
Secured Parties............................................... 10
Securities Act................................................ 10
Servicing Agreement........................................... 11
State......................................................... 11
Termination Date.............................................. 11
Tranche....................................................... 11
Trustee....................................................... 11
Trustee Secured Obligations................................... 11
Trust Estate.................................................. 11
Trust Indenture Act........................................... 11
UCC........................................................... 11
U.S. Government Obligations................................... 11
Vice President................................................ 11
-ii-
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
Page
-----
Section 102. Compliance Certificates and Opinions................ 13
Section 103. Form of Documents Delivered to Trustee.............. 14
Section 104. Acts of Holders..................................... 15
Section 105. Notices Etc., to Trustee, Issuer and Rating
Agencies............................................ 15
Section 106. Notice to Holders; Waiver........................... 16
Section 107. Alternate Payment and Notice Provisions............. 17
Section 108. Conflict with Trust Indenture Act................... 17
Section 109. Effect of Headings and Table of Contents............ 17
Section 110. Successors and Assigns.............................. 18
Section 111. Separability Clause................................. 18
Section 112. Benefits of Indenture............................... 18
Section 113. Governing Law....................................... 18
Section 114. Legal Holidays...................................... 18
Section 115. No Bankruptcy Petition Against the Issuer or
the Seller.......................................... 18
ARTICLE TWO
Security
Section 201. Collateral.......................................... 19
Section 202. Limited Recourse to Issuer.......................... 19
Section 203. Authorization of Actions to be Taken by the
Trustee............................................. 20
Section 204. Termination of Security Interests................... 20
ARTICLE THREE
Note Forms
Section 301. Forms Generally..................................... 20
Section 302. Form of Trustee's Certificate of
Authentication...................................... 21
Section 303. Securities Legend................................... 21
ARTICLE FOUR
The Notes
Section 401. Amount Limited; Issuable in Tranches................ 22
Section 402. Maturity, Principal Payments and
Denominations....................................... 22
Section 403. Interest Payments................................... 23
Section 404. Execution, Authentication, Delivery and
Dating.............................................. 24
-iii-
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
Page
-----
Section 405. Temporary Notes..................................... 25
Section 406. Registration, Registration of Transfer and Exchange,
Transfer Restrictions............................... 25
Section 407. Mutilated, Destroyed, Lost and Stolen Notes......... 27
Section 408. Payment of Interest; Interest Rights
Preserved........................................... 28
Section 409. Persons Deemed Owners............................... 28
Section 410. Cancellation........................................ 28
ARTICLE FIVE
Accounts, Disbursements and Releases
Section 501. Collection of Money................................. 29
Section 502. General Provisions Regarding Accounts............... 29
ARTICLE SIX
Remedies
Section 601. Events of Default................................... 30
Section 602. Rights upon Event of Default........................ 31
Section 603. Collection of Indebtedness and Suits for Enforcement
by Trustee; Authority of Controlling Party.......... 32
Section 604. Limitation on Suits................................. 34
Section 605. Unconditional Right of Holders to Receive
Principal and Interest.............................. 35
Section 606. Restoration of Rights and Remedies.................. 36
Section 607. Rights and Remedies Cumulative...................... 36
Section 608. Delay or Omission Not Waiver........................ 36
Section 609. Control by Holders.................................. 36
Section 610. Waiver of Past Defaults............................. 37
Section 611. Undertaking for Costs............................... 37
Section 612. Waiver of Stay or Extension Laws.................... 38
Section 613. Action on Notes..................................... 38
Section 614. Performance and Enforcement of Certain
Obligations......................................... 38
Section 615. Claims Under Note Policy............................ 39
Section 616. Preference Claims................................... 40
ARTICLE SEVEN
The Trustee
Section 701. Certain Duties and Responsibilities................. 41
Section 702. Notice of Defaults.................................. 44
-iv-
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
Page
-----
Section 703. Certain Rights of Trustee........................... 44
Section 704. Not Responsible for Recitals or Issuance of
Notes............................................... 45
Section 705. May Hold Notes...................................... 45
Section 706. Money Held in Trust................................. 45
Section 707. Compensation and Indemnity.......................... 46
Section 708. Disqualification; Conflicting Interests............. 46
Section 709. Corporate Trustee Required; Eligibility............. 47
Section 710. Resignation and Removal; Appointment of
Successor........................................... 47
Section 711. Acceptance of Appointment by Successor.............. 48
Section 712. Merger, Conversion, Consolidation or
Succession to Business.............................. 49
Section 713. Preferential Collection of Claims Against
Issuer.............................................. 49
Section 714. Appointment of Authenticating Agent................. 49
Section 715. Paying Agent........................................ 51
Section 716. Appointment of Co-Trustee or Separate
Trustee............................................. 52
ARTICLE EIGHT
Holders' Lists and Reports by Trustee and Issuer
Section 801. Issuer to Furnish Trustee Names and Addresses
of Holders.......................................... 53
Section 802. Preservation of Information; Communications
to Holders.......................................... 53
Section 803. Reports by Trustee.................................. 54
Section 804. Reports by Issuer................................... 54
ARTICLE NINE
Indenture Supplements
Section 901. Indenture Supplements Without Consent of
Holders............................................. 55
Section 902. Indenture Supplements with Consent of
Holders............................................. 57
Section 903. Execution of Indenture Supplements.................. 58
Section 904. Effect of Indenture Supplements..................... 59
Section 905. Reference in Notes to Indenture Supplements......... 59
Section 906. Rating Agency Confirmation.......................... 59
ARTICLE TEN
-v-
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
Page
-----
Covenants
Section 1001. Payment of Principal and Interest................... 59
Section 1002. Maintenance of Office or Agency..................... 59
Section 1003. Consolidation, Merger, Sale of Assets............... 60
Section 1004. Negative Covenants.................................. 62
Section 1005. Performance of Obligations; Servicing of
Receivables......................................... 63
Section 1006. Other Indebtedness.................................. 64
Section 1007. Guarantees, Loans, Advances and Other
Liabilities......................................... 64
Section 1008. Dividends; Distributions............................ 65
Section 1009. Money for Note Payments to Be Held in Trust......... 65
Section 1010. Corporate Existence................................. 66
Section 1011. Payment of Taxes and Other Claims................... 67
Section 1012. Notice of Events of Default......................... 67
Section 1013. Amendment of Certificate of Incorporation
and Bylaws.......................................... 67
Section 1014. Statement as to Compliance.......................... 67
Section 1015. Rule 144A Information............................... 68
Section 1016. Further Instruments and Acts........................ 68
Section 1017. Compliance with Laws................................ 68
Section 1018. Income Tax Characterization......................... 68
ARTICLE ELEVEN
Prepayment of Notes
Section 1101. Prepayment.......................................... 69
Section 1102. Notice of Prepayment in Whole of a Tranche.......... 69
Section 1103. Deposit of Prepayment Price......................... 69
Section 1104. Notes Prepayable in Whole on any Date............... 70
ARTICLE TWELVE
DEFEASANCE AND COVENANT DEFEASANCE
Section 1201. Issuer's Option to Effect Defeasance or
Covenant Defeasance................................. 70
Section 1202. Defeasance and Discharge............................ 70
Section 1203. Covenant Defeasance................................. 71
Section 1204. Conditions to Defeasance or Covenant
Defeasance.......................................... 71
Section 1205. Deposited Money and U.S. Government
Obligations to Be Held in Trust; Other Miscellaneous
Provisions.......................................... 73
-vi-
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
Page
-----
TESTIMONIUM
SIGNATURES
ACKNOWLEDGMENTS
EXHIBIT A Form of Note
EXHIBIT B Form of Note Policy
-vii-
<PAGE>
INDENTURE, dated as of December 3, 1996, between ARCADIA RECEIVABLES
CONDUIT CORP., a corporation duly organized and existing under the laws of the
State of Delaware (herein called the "Issuer"), and NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION, a national banking association duly organized and existing
under the laws of the United States of America, in its capacities as Trustee
(the "Trustee") and as Collateral Agent (as defined below) and not in its
individual capacity.
RECITALS OF THE ISSUER
Each party agrees as follows for the benefit of the other party and
for the equal and ratable benefit of the Holders of the Issuer's Floating Rate
Automobile Receivables-Backed Notes (the "Notes"):
The Issuer has duly authorized the execution and delivery of this
Indenture to provide for the issuance from time to time of its Notes to be
issued in one or more tranches as in this Indenture provided.
Financial Security Assurance Inc. (the "Security Insurer") has issued
and delivered a financial guaranty insurance policy, dated the Closing Date
(with endorsements, the "Note Policy"), pursuant to which the Security Insurer
guarantees certain Scheduled Payments, as defined in the Note Policy.
As an inducement to the Security Insurer to issue and deliver the Note
Policy, the Issuer and the Security Insurer have executed and delivered the
Insurance and Indemnity Agreement, dated as of December 3, 1996 (as amended from
time to time, the "Insurance Agreement"), among the Security Insurer, the
Issuer, Olympic Receivables Finance Corp. and Olympic Financial Ltd.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the Notes
by the Holders thereof, it is mutually covenanted and agreed, for the equal and
proportionate benefit of all Holders of the Notes, as follows:
ARTICLE ONE
Definitions and Other Provisions
of General Application
SECTION 101. DEFINITIONS.
(a) For all purposes of this Indenture, except as otherwise
expressly provided or unless the context otherwise requires:
-1-
<PAGE>
(1) the terms defined in this Article have the meanings assigned to
them in this Article and include the plural as well as the singular;
(2) all other terms used herein which are defined in the Trust
Indenture Act (as hereinafter defined), either directly or by reference
therein, have the meanings assigned to them therein;
(3) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles, and, except as otherwise herein expressly provided, the term
"generally accepted accounting principles" with respect to any computation
required or permitted hereunder shall mean such accounting principles as
are generally accepted at the date of such computation; and
(4) the words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision, or is not exclusive and including
means including without limitation.
Certain terms, used principally in Article Six, are defined in that
Article.
"Act," when used with respect to any Holder, has the meaning specified
in Section 104.
"Advance" has the meaning specified therefor in the Repurchase
Agreement.
"Agent" means BofA as administrator of RCC and as agent for certain
liquidity purchasers under the Liquidity Asset Purchase Agreement, and its
successors and assigns in such capacity under the Note Purchase Agreement.
"Assignment Agreement" has the meaning specified therefor in the
Purchase Agreement.
"Authenticating Agent" means any Person authorized by the Trustee to
act on behalf of the Trustee to authenticate Notes.
"Authorized Officer" means, with respect to the Issuer, any President
or Vice President of the Issuer.
"Board of Directors" means either the board of directors of the Issuer
or any committee of that board duly authorized to act hereunder.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Issuer to have been duly adopted by
the Board of Directors and to
-2-
<PAGE>
be in full force and effect on the date of such certification, and delivered
to the Trustee.
"BofA" means Bank of America National Trust and Savings Association
and its successors.
"Closing Date" means December 3, 1996.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time, and Treasury Regulations promulgated thereunder.
"Collateral" has the meaning specified therefor in the Security
Agreement.
"Collateral Agent" has the meaning specified therefor in the Security
Agreement.
"Commercial Paper Notes" means the short-term promissory notes issued
or to be issued in the United States commercial paper market to fund the
purchase of the Notes, which unless otherwise agreed to in writing by the
Seller, the Agent and the Security Insurer, shall mature within 120 days from
the date of issuance of such notes.
"Commission" means the Securities and Exchange Commission, as from
time to time constituted, created under the Securities Exchange Act of 1934, as
amended, or, if at any time after the execution of this instrument such
Commission is not existing and performing the duties now assigned to it under
the Trust Indenture Act, then the body performing such duties at such time.
"Controlling Party" has the meaning specified therefor in the Security
Agreement.
"Corporate Trust Office" means the office of the Trustee at which at
any particular time its corporate trust business shall be administered, such
office at the date of the execution of this Indenture is located at Sixth Street
and Marquette Avenue, Minneapolis, Minnesota 55479-0070, Attention: Corporate
Trust Services - Asset-Backed Administration; or at such other address as the
Trustee may designate from time to time by notice to the Agent, the Noteholders,
the Security Insurer and the Issuer, or the principal corporate trust office of
any successor Trustee (the address of which the successor Trustee will notify
the Agent, the Noteholders, the Security Insurer and the Issuer).
"corporation" includes corporations, associations, companies and
business trusts.
"covenant defeasance" has the meaning specified in Section 1203.
-3-
<PAGE>
"CP Composite Rate" means for any date of determination, the Money
Market Yield of the rate set forth in the weekly statistical release designated
as H.15(519), or any successor publication, published by the Board of Governors
of the Federal Reserve System ("H.15(519)") for the 30 day maturity under the
caption "Commercial Paper." If such rate cannot be determined, the Offshore
Rate.
"CP Rate" means, for any Interest Period or any shorter period for
which interest accrues, and with respect to any portion of the principal amount
of the Notes as to which the Noteholders' funding of their purchase or carrying
thereof is provided by Commercial Paper Notes, the rate of interest per annum
determined in arrears in good faith by the Agent equal to the Noteholders' cost
of funding the purchase or carrying of such portion of the Notes, which shall be
equal to the weighted daily average interest rate payable in respect of such
Commercial Paper Notes during such period (determined in the case of discount
Commercial Paper Notes by converting the discount to an interest bearing
equivalent rate per annum), plus applicable placement fees and commissions, but
excluding any other fees related to such funding.
"Default" means any occurrence that is, or with notice or the lapse of
time or both would become, an Event of Default.
"defeasance" has the meaning specified in Section 1202.
"Draw Date" means, with respect to any Deficiency Claim Date, the
third Business Day preceding the related Distribution Date.
"Event of Default" has the meaning specified in Section 601.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Executive Officer" means, with respect to any corporation, the Chief
Executive Officer, Chief Operating Officer, Chief Financial Officer, President,
Executive Vice President, Managing Director, any Vice President, any Responsible
Officer, the Secretary or the Treasurer of such corporation.
"Holder" or "Noteholder" means RCC and any Permitted Assignee, and, in
any case, in whose name a Note is registered in the Note Register.
"Indebtedness" means, with respect to any Person at any time, (a)
indebtedness or liability of such Person for borrowed money whether or not
evidenced by bonds, debentures, notes or other instruments, or for the deferred
purchase price of property or services (including trade obligations); (b)
obligations of such Person as lessee under leases which should have been or
should be, in accordance with generally accepted accounting
-4-
<PAGE>
principles, recorded as capital leases; (c) current liabilities of such
Person in respect of unfunded vested benefits under plans covered by Title IV
of ERISA; (d) obligations issued for or liabilities incurred on the account
of such Person; (e) obligations or liabilities of such Person arising under
acceptance facilities; (f) obligations of such Person under any guarantees,
endorsements (other than for collection or deposit in the ordinary course of
business) and other contingent obligations to purchase, to provide funds for
payment, to supply funds to invest in any Person or otherwise to assure a
creditor against loss; (g) obligations of such Person secured by any lien on
property or assets of such Person, whether or not the obligations have been
assumed by such Person; or (h) obligations of such Person under any interest
rate or currency exchange agreement.
"Indenture" means this instrument as originally executed or as it may
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof
and shall include the terms of particular Tranche of Notes established as
contemplated by Section 401.
"Indenture Supplement" means the supplement to this Indenture relating
to a Tranche of Notes, and any other supplemental indentures executed pursuant
to Article Nine.
"Insurer Notice Date" has the meaning specified therefor in the
Repurchase Agreement.
"Insurer Secured Obligations" has the meaning specified therefor in
the Security Agreement.
"Interest Period" means, with respect to any Distribution Date, the
Monthly Period immediately preceding such Distribution Date (or, in the case of
the first Distribution Date, the period from and including the Closing Date to
and excluding the first day of the succeeding calendar month; PROVIDED, that the
final Interest Period shall commence on the first day of the calendar month
immediately preceding the month in which the Final Distribution Date occurs and
shall end on, but shall exclude, the Final Distribution Date.
"Issuer" means the Person named as the "Issuer" in the first paragraph
of this instrument until a successor Person shall have become such pursuant to
the applicable provisions of this Indenture, and thereafter "Issuer" shall mean
such successor Person.
"Issuer Request" or "Issuer Order" means a written request or order
signed in the name of the Issuer by its Chairman of the Board, its Vice
Chairman, its President or a Vice President, and by its Treasurer, an Assistant
Treasurer, its Secretary or an Assistant Secretary, or signed on behalf of the
Issuer by a duly appointed agent of the Issuer and delivered to the Trustee.
-5-
<PAGE>
"Letter Agreement" has the meaning specified in Section 707(a).
"Lien", in respect of the Property of any Person, means any ownership
interest of any other Person, any mortgage, deed of trust, hypothecation,
pledge, lien, security interest, grant of a power to confess judgment, filing of
any financing statement, charge or other encumbrance or security arrangement of
any nature whatsoever, including, without limitation, any conditional sale or
title retention arrangement, and any assignment, deposit arrangement,
consignment or lease intended as, or having the effect of, security.
"Liquidity Asset Purchase Agreement" means that certain Liquidity
Asset Purchase Agreement dated as of December 3, 1996 among the purchasers from
time to time party thereto, BofA as administrator and liquidity agent, and RCC,
as amended, supplemented or otherwise modified from time to time.
"Maturity Date", when used with respect to any Note, means the date on
which the principal of such Note or an installment of principal becomes due and
payable as therein or herein provided, whether on the Final Distribution Date or
by declaration of acceleration, prepayment or otherwise.
"Maximum Authorized Amount" has the meaning specified therefor in the
Note Purchase Agreement.
"Maximum Interest Rate" means as of the date on which an Amortization
Event occurs, the greater of (I) the sum of (i) the Two Year Treasury Yield
determined as of such day by the Trustee pursuant to Section 403(b) plus (ii)
0.60% plus (iii) the Basis Fee Percent and (II) the weighted average APR
(weighted based on the aggregate outstanding Principal Balance of the relevant
Receivables as of the immediately preceding Accounting Date PLUS the outstanding
Principal Balance of any Receivables transferred by the Seller to the Issuer
since such Accounting Date and LESS the outstanding Principal Balance of any
Receivables that become Purchased Receivables or Repurchased Receivables since
such Accounting Date) of Qualifying Receivables, MINUS 6.50%, MINUS the Total
Expense Percent.
"Note Interest Rate" means with respect to each Interest Period or any
shorter period for which interest accrues, a per annum rate determined in
arrears of the daily weighted average cost of funding of the Noteholders'
purchase or carrying of the Notes during such Interest Period or any shorter
period for which interest accrues, which shall be: (A) prior to the occurrence
of an Amortization Event, (i) the CP Rate plus 0.20%, to the extent the purchase
or carrying of the Notes issued pursuant to this Indenture is funded by the
Noteholders by issuing Commercial Paper Notes, or (ii) the Offshore Rate plus
the Applicable Margin, to the extent the purchase or carrying of the Notes
issued pursuant to this Indenture is not so funded by the Noteholders and (B)
after the occurrence of an Amortization
-6-
<PAGE>
Event, the Reference Rate; PROVIDED, that, from and after the occurrence of
an Amortization Event, the Note Interest Rate shall not exceed the Maximum
Interest Rate, and the Agent may, on any Business Day, by prior written
notice to the Issuer, the Trustee, the Seller, the Servicer and the Security
Insurer, convert the Note Interest Rate to a fixed interest rate not to
exceed the Maximum Interest Rate as of the close of business on the date such
Amortization Event occurs, such fixed interest rate not to exceed the Two
Year Treasury Yield (as of the close of business on the date on the date such
Amortization Event occurs) plus 0.60% PLUS the Basis Fee Percent.
"Note Policy" means the Financial Guaranty Insurance Policy No.
50528-N issued by the Security Insurer with respect to the Notes, including any
endorsements thereto, in the form of Exhibit B.
"Note Register" and "Note Registrar" have the respective meanings
specified in Section 406.
"Noteholders' Interest Carryover Shortfall" means, with respect to a
Payment Date, the Advance Interest Carryover Shortfall with respect to such
date.
"Noteholders' Interest Distributable Amount" means, with respect to a
Payment Date, the Advance Interest Distributable Amount with respect to such
date.
"Noteholders' Principal Distributable Amount" means, with respect to a
Payment Date, the Advance Principal Distributable Amount with respect to such
date.
"Notes" has the meaning stated in the first recital of this Indenture
and more particularly means any Notes authenticated and delivered under this
Indenture.
"Officers' Certificate" means a certificate signed by the Chairman of
the Board, the Deputy Chairman, the Comptroller, a Vice Chairman, the President
or a Vice President, the Treasurer, an Assistant Treasurer, the Secretary or an
Assistant Secretary, of the Issuer, or signed on behalf of the Issuer by a duly
appointed agent of the Issuer and delivered to the Trustee.
"Opinion of Counsel" means a written opinion of counsel who may,
except as otherwise expressly stated in this Indenture, be employees of or
counsel for the Issuer and who shall be acceptable to the Trustee and, if
addressed to the Security Insurer, satisfactory to the Security Insurer, and
which shall comply with any applicable requirements of Section 102, and shall be
in form and substance satisfactory to the Trustee, and if addressed to the
Security Insurer, satisfactory to the Security Insurer.
"Original Issue Date" means, for any Tranche of Notes, the date of
original issue of such Tranche of Notes.
-7-
<PAGE>
"Outstanding", when used with respect to Notes, means, as of the date
of determination, all Notes theretofore authenticated and delivered under this
Indenture EXCEPT,
(i) Notes theretofore cancelled by the Note Registrar or delivered to
the Note Registrar for cancellation; and
(ii) Notes for whose payment or prepayment money in the necessary
amount has been theretofore deposited with the Trustee or any Paying Agent
for the Holders of such Notes; and
(iii) Notes which have been defeased pursuant to Section 1202 hereof;
and
(iv) Notes which have been paid pursuant to Section 407 or in exchange
for or in lieu of which other Notes have been authenticated and delivered
pursuant to this Indenture, other than any such Notes in respect of which
there shall have been presented to the Trustee proof satisfactory to it
that such Notes are held by a bona fide purchaser in whose hands such Notes
are valid obligations of the Issuer;
PROVIDED, HOWEVER, that Notes which have been paid with proceeds of the Note
Policy shall continue to remain Outstanding for purposes of this Indenture until
the Security Insurer has been paid as subrogee hereunder or reimbursed pursuant
to the Insurance Agreement as evidenced by a written notice from the Security
Insurer delivered to the Trustee, and the Security Insurer shall be deemed to be
the Holder thereof to the extent of any payments thereon made by the Security
Insurer; PROVIDED FURTHER, HOWEVER, that in determining whether the Holders of
the requisite principal amount of the Outstanding Notes have given any request,
demand, authorization, direction, notice, consent or waiver hereunder or under
any related document, Notes owned by the Issuer or any other obligor upon the
Notes, the Seller or any Affiliate of any of the foregoing shall be disregarded
and deemed not to be Outstanding, except that, in determining whether the
Trustee shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Notes that the Trustee
knows to be so owned shall be so disregarded. Notes so owned that have been
pledged in good faith may be regarded as Outstanding if the pledgee establishes
to the satisfaction of the Trustee the pledgee's right so to act with respect to
such Notes and that the pledgee is not the Issuer, any other obligor upon the
Notes, the Seller or any Affiliate of the Issuer or of any of the foregoing
Persons.
"Outstanding Amount" means the aggregate principal amount of all Notes
Outstanding at the date of determination after giving effect to all
distributions of principal on such date of determination.
"Paying Agent" means the Trustee or any other Person that meets the
eligibility standards for the trustee specified in
-8-
<PAGE>
Section 709 and, so long as no Insurer Default shall have occurred and be
continuing, is consented to by the Security Insurer and is authorized by the
Issuer to make the distributions from the Note Distribution Account,
including payment of principal of or interest on the Notes on behalf of the
Issuer.
"Payment Date" means a Distribution Date.
"Permitted Assignee" means, collectively, one or more banks or other
institutions party to the Liquidity Asset Purchase Agreement from time to time
and any other Program Support Provider.
"Person" means any individual, corporation, estate partnership, joint
venture, association, limited liability company, joint-stock company, trust
(including any beneficiary thereof), unincorporated organization or government
or any agency or political subdivision thereof.
"Policy Claim Amount" has the meaning specified in Section 615.
"Predecessor Note" of any particular Note means every previous Note
evidencing all or a portion of the same debt as that evidenced by such
particular Note; and, for the purposes of this definition, any Note
authenticated and delivered under Section 406 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Note shall be deemed to evidence the same
debt as the mutilated, destroyed, lost or stolen Note.
"Preference Claim" has the meaning specified in Section 616.
"Prepayment Price" means an amount equal to (i) the outstanding
principal amount of the Notes being prepaid in whole PLUS (ii) accrued and
unpaid interest thereon at the Note Interest Rate to, but excluding, the date on
which such Notes are to be prepaid in whole PLUS (iii) any Breakage Fees.
"Proceeding" means any suit in equity, action at law or other judicial
or administrative proceeding.
"Program Support Provider" means and includes any Person (other than
any customer of RCC) now or hereafter extending credit or having a commitment to
extend credit to or for the account of, or to make purchase from, RCC or issuing
a letter of credit, surety bond or other instrument to support any obligations
arising under or in connection with RCC's securitization program.
"Property" shall mean any right or interest in or to property of any
kind whatsoever, whether real, personal or mixed and whether tangible or
intangible.
- 9 -
<PAGE>
"Rating Agency Condition" means, with respect to any action, that each
Rating Agency shall have been given 10 business days prior written notice
thereof and that each of the Rating Agencies shall have notified the Seller, the
Servicer, the Security Insurer, the Trustee and the Issuer in writing that such
action will not, in and of itself result in an increased capital charge to the
Security Insurer.
"RCC" means Receivables Capital Corporation, a Delaware corporation.
"Record Date" means, with respect to a Payment Date, the close of
business on the last Business Day immediately preceding such Payment Date.
"Registered Holder" means the Person in whose name a Note is
registered on the Note Register on the applicable Record Date.
"Related Documents" means the Notes, the Purchase Agreement, the
Repurchase Agreement, the Servicing Agreement, each Assignment Agreement, the
Custodian Agreement, the Note Policy, the Security Agreement, the Note Purchase
Agreement, the Spread Account Agreement, the Insurance Agreement, and the
Lockbox Agreement. The Related Documents executed by any party are referred to
herein as "such party's Related Documents," "its Related Documents" or by a
similar expression.
"Responsible Officer" means, with respect to the Trustee, any officer
of the Trustee assigned by the Trustee to administer its corporate trust affairs
relating to the Trust Estate.
"Scheduled Payments" has the meaning specified therefor in the Note
Policy.
"Secured Obligations" has the meaning specified therefor in the
Security Agreement.
"Secured Parties" has the meaning specified therefor in the Security
Agreement.
"Securities Act" means the United States Securities Act of 1933, as
amended.
"Servicing Agreement" means the Servicing Agreement, dated as of
December 3, 1996, among the Issuer, the Seller, Olympic Financial Ltd., in its
individual capacity and as Servicer, the Agent and Norwest Bank Minnesota,
National Association, as Backup Servicer, Collateral Agent and Trustee.
"State" means any one of the 50 States of the United States of America
or the District of Columbia.
- 10 -
<PAGE>
"Termination Date" means the latest of (i) the expiration of the Note
Policy and the return of the Note Policy to the Security Insurer for
cancellation, (ii) the date on which the Security Insurer shall have received
payment and performance of all Insurer Secured Obligations and (iii) the date on
which the Trustee shall have received payment and performance of all Trustee
Secured Obligations.
"Tranche" with respect to any Notes means those Notes having the same
Original Issue Date.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this instrument until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean or include the Person who is then the Trustee hereunder.
"Trustee Secured Obligations" has the meaning specified therefor in
the Security Agreement.
"Trust Estate" means the assets and property rights that constitute
the Collateral.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as
amended from time to time.
"UCC" means the Uniform Commercial Code as adopted in the State of New
York.
"U.S. Government Obligations" has the meaning specified in Section
1204(1).
"Vice President", when used with respect to the Issuer or the Trustee,
means any vice president, whether or not designated by a number or a word or
words added before or after the title "Vice President."
(b) Except as otherwise specified herein or as the context may
otherwise require, the following terms have the respective meanings set forth in
the Servicing Agreement as in effect on the Closing Date for all purposes of
this Indenture, and the definitions of such terms are equally applicable both to
the singular and plural forms of such terms:
Section of
Term Servicing Agreement
- ---- -------------------
Accounting Date........................................ Section 1.1
Advance Interest Distributable Amount.................. Section 1.1
Advance Principal Distributable Amount................. Section 1.1
Affiliate.............................................. Section 1.1
Amortization Event..................................... Section 1.1
Amortization Period.................................... Section 1.1
- 11 -
<PAGE>
Applicable Margin...................................... Section 1.1
APR.................................................... Section 1.1
Available Funds........................................ Section 1.1
Backup Servicer........................................ Section 1.1
Basis Fee Percent...................................... Section 1.1
Breakage Fee........................................... Section 1.1
Business Day........................................... Section 1.1
Collateral Agent....................................... Section 1.1
Collection Account..................................... Section 1.1
Custodian Agreement.................................... Section 1.1
Default Amount Distributable Amount.................... Section 1.1
Deficiency Claim....................................... Section 1.1
Deficiency Claim Date.................................. Section 1.1
Deficiency Notice...................................... Section 1.1
Determination Date..................................... Section 1.1
Distribution Date...................................... Section 1.1
Eligible Investments................................... Section 1.1
Final Distribution Date................................ Section 1.1
Financed Vehicle....................................... Section 1.1
Insurance Agreement.................................... Section 1.1
Insurance Agreement Event of Default................... Section 1.1
Insurer Default........................................ Section 1.1
Lockbox Agreement...................................... Section 1.1
Monthly Period......................................... Section 1.1
Moody's................................................ Section 1.1
Note Distribution Account.............................. Section 1.1
Note Majority.......................................... Section 1.1
Note Purchase Agreement................................ Section 1.1
Obligor................................................ Section 1.1
OFL.................................................... Section 1.1
Offshore Rate.......................................... Section 1.1
Principal Balance...................................... Section 1.1
Purchase Agreement..................................... Section 1.1
Purchased Receivable................................... Section 1.1
Qualifying Receivable.................................. Section 1.1
Rating Agency.......................................... Section 1.1
Receivable............................................. Section 1.1
Reference Rate......................................... Section 1.1
Repurchase Agreement................................... Section 1.1
Repurchased Receivable................................. Section 1.1
Revolving Period....................................... Section 1.1
Secured Accounts....................................... Section 1.1
Security Agreement..................................... Section 1.1
Security Insurer....................................... Section 1.1
Seller................................................. Section 1.1
Servicer............................................... Section 1.1
Servicer Termination Event............................. Section 1.1
Spread Account Agreement............................... Section 1.1
Spread Account Available Funds......................... Section 1.1
Spread Account Collateral Agent........................ Section 1.1
- 12 -
<PAGE>
Standard & Poor's...................................... Section 1.1
Total Expense Percent.................................. Section 1.1
Two Year Treasury Yield................................ Section 1.1
SECTION 102. COMPLIANCE CERTIFICATES AND OPINIONS.
Upon any application or request by the Issuer to the Trustee or the
Collateral Agent to take any action under any provision of this Indenture, other
than any request that the Trustee authenticate the Notes specified in such
request or the Trustee pay monies due and payable to the Issuer hereunder to the
Issuer's assignee specified in such request, the Trustee may require the Issuer
to furnish to the Trustee or the Collateral Agent, as the case may be, and to
the Security Insurer, (i) an Officers' Certificate stating that all conditions
precedent, if any, provided for in this Indenture relating to the proposed
action have been complied with and (ii) an Opinion of Counsel stating that in
the opinion of such counsel all such conditions precedent, if any, have been
complied with, except that in the case of any such application or request as to
which the furnishing of such documents is specifically required by any provision
of this Indenture relating to such particular application or request, no
additional certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include
(1) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of each such individual, such
individual has made such examination or investigation as is necessary to
enable such individual to express an informed opinion as to whether or not
such covenant or condition has been complied with; and
(4) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
SECTION 103. FORM OF DOCUMENTS DELIVERED TO TRUSTEE.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or
- 13 -
<PAGE>
covered by the opinion of, only one such Person, or that they be so certified
or covered by only one document, but one such Person may certify or give an
opinion with respect to some matters and one or more other such Persons as to
other matters, and any such Person may certify or give an opinion as to such
matters in one or several documents.
Any certificate or opinion of an Authorized Officer of the Issuer may
be based, insofar as it relates to legal matters, upon a certificate or opinion
of, or representations by, counsel, unless such officer knows, or in the
exercise of reasonable care should know, that the certificate or opinion or
representations with respect to the matters upon which such officers'
certificate or opinion is based are erroneous. Any such certificate of an
Authorized Officer or any Opinion of Counsel may be based, insofar as it relates
to factual matters, upon a certificate or opinion of, or representations by, an
officer or officers of the Servicer, the Seller or the Issuer stating that the
information with respect to such factual matters is in the possession of such
Person, unless such counsel knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations with respect to such
matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
Whenever in this Indenture, in connection with any application or
certificate or report to the Trustee, it is provided that the Issuer shall
deliver any document as a condition of the granting of such application, or as
evidence of the Issuer's compliance with any term hereof, it is intended that
the truth and accuracy, at the time of granting of such application or at the
effective date of such certificate or report (as the case may be), of the facts
and opinions stated in such document shall in such case be conditions precedent
to the right of the Issuer to have such application granted or to the
sufficiency of such certificate or report. The foregoing shall not, however, be
construed to affect the Trustee's right to rely upon the truth and accuracy of
any statement or opinion contained in any such document as provided in Article
VII.
SECTION 104. ACTS OF HOLDERS.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given or taken by
Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by agents duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to the Trustee and, where it is hereby expressly required, to the Issuer. Such
instrument or instruments (and the action embodied therein and evidenced
- 14 -
<PAGE>
thereby) are herein sometimes referred to as the "Act" of the Holders signing
such instrument or instruments. Proof of execution of any such instrument or of
a writing appointing any such agent shall be sufficient for any purpose of this
Indenture and (subject to Section 701) conclusive in favor of the Trustee and
the Issuer, if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved in any manner that the Trustee deems
sufficient.
(c) The ownership of Notes shall be proved by the Note Register.
(d) Any request, demand, authorization, direction, notice, consent,
waiver or other Act of the Holder of any Note shall bind every future Holder of
the same Note and the Holder of every Note issued upon the registration of
transfer thereof or in exchange therefor or in lieu thereof in respect of
anything done, omitted or suffered to be done by the Trustee or the Issuer in
reliance thereon, whether or not notation of such action is made upon such Note.
SECTION 105. NOTICES ETC., TO TRUSTEE, ISSUER AND RATING AGENCIES.
Any request, demand, authorization, direction, notice, consent, waiver
or Act of Holders or other documents provided or permitted by this Indenture to
be made upon, given or furnished to, or filed with,
(1) the Trustee by any Holder or by the Issuer shall be sufficient for
every purpose hereunder if made, given, furnished or filed in writing to or
with the Trustee at its Corporate Trust Office,
(2) the Issuer by the Trustee or by any Holder shall be sufficient
for every purpose hereunder (unless otherwise herein expressly provided) if
in writing and mailed, first-class postage prepaid, to the Issuer addressed
to:
Arcadia Receivables Conduit Corp.
7825 Washington Avenue South
Suite 900
Minneapolis, Minnesota 55439-2435
Attention: Treasurer
or at any other address furnished in writing to the Trustee by the Issuer.
The Issuer shall promptly transmit any notice received by it from the
Noteholders to the Trustee, or
(3) the Security Insurer by the Issuer or the Trustee shall be
sufficient for any purpose hereunder if in writing
- 15 -
<PAGE>
and mailed by registered mail or personally delivered or telexed or
telecopied to the recipient as follows:
Financial Security Assurance Inc.
350 Park Avenue
New York, NY 10022
Attention: Surveillance Department
Telex No.: (212) 688-3101
Confirmation: (212) 826-0100
Telecopy Nos.: (212) 339-3518
(212) 339-3529
(In each case in which notice or other communication to the Security
Insurer refers to an Event of Default, a claim on the Note Policy or with
respect to which failure on the part of the Security Insurer 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 the
General Counsel and the Head-Financial Guaranty Group "URGENT MATERIAL
ENCLOSED.")
Notices required to be given to the Rating Agencies by the Issuer
or the Trustee shall be in writing, personally delivered or mailed by
certified mail, return receipt requested to (i) in the case of
Moody's, at the following address: Moody's Investors Service Inc., ABS
Monitoring Department, 99 Church Street, New York, New York 10007 and
(ii) in the case of Standard & Poor's, at the following address:
Standard & Poor's Ratings Group, 26 Broadway (20th Floor), New York,
New York 10004, Attention of Asset Backed Surveillance Department; or
as to each of the foregoing, at such other address as shall be
designated by written notice to the other parties.
SECTION 106. NOTICE TO HOLDERS; WAIVER.
Where this Indenture provides for notice to Holders of any event, such
notice shall be sufficiently given (unless otherwise herein expressly provided)
if in writing and mailed, first-class postage prepaid, to each Holder affected
by such event, at such Holder's address as it appears in the Note Register, not
later than the latest date, and not earlier than the earliest date, prescribed
for the giving of such notice. In any case where notice to Holders is given by
mail, neither the failure to mail such notice, nor any defect in any notice so
mailed, to any particular Holder shall affect the sufficiency of such notice
with respect to other Holders, and any notice that is mailed in the manner
herein provided shall conclusively be presumed to have been duly given. Where
this Indenture provides for notice in any manner, such notice may be waived in
writing by the Person entitled to receive such notice, either before or after
the event, and such waiver shall be the equivalent of such notice. Waivers of
notice by Holders shall be filed with the
- 16 -
<PAGE>
Trustee, but such filing shall not be a condition precedent to the validity
of any action taken in reliance upon such waiver.
In case by reason of the suspension of regular mail service or by
reason of any other cause it shall be impracticable to give such notice by mail,
then such notification as shall be made with the approval of the Trustee shall
constitute a sufficient notification for every purpose hereunder.
Where this Indenture provides for notice to the Rating Agencies,
failure to give such notice shall not affect any rights or obligations created
hereunder, and shall not under any circumstance constitute a Default or Event of
Default.
SECTION 107. ALTERNATE PAYMENT AND NOTICE PROVISIONS.
Notwithstanding any provision of this Indenture or any of the Notes to
the contrary, the Issuer may enter into any agreement with any Holder of a Note
providing for a method of payment, or notice by the Trustee or any Paying Agent
to such Holder, that is different from the methods provided for in this
Indenture for such payments or notices. The Issuer will furnish to the Trustee
a copy of each such agreement and the Trustee will cause payments to be made and
notices to be given in accordance with such agreements.
SECTION 108. CONFLICT WITH TRUST INDENTURE ACT.
If this Indenture is qualified under the Trust Indenture Act and any
provision hereof limits, qualifies or conflicts with another provision hereof
that is deemed to be included in and to govern this Indenture by any of the
provisions of the Trust Indenture Act, such provision deemed to be included
herein shall control.
SECTION 109. EFFECT OF HEADINGS AND TABLE OF CONTENTS.
The Article and Section headings herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.
SECTION 110. SUCCESSORS AND ASSIGNS.
All covenants and agreements in this Indenture by the Issuer shall
bind its successors and assigns, whether so expressed or not.
All agreements by the Trustee in this Indenture shall bind its
successors.
SECTION 111. SEPARABILITY CLAUSE.
In case any provision in this Indenture or in the Notes shall be
invalid, illegal or unenforceable, the validity,
- 17 -
<PAGE>
legality and enforceability of the remaining provisions shall not in any way
be affected or impaired thereby.
SECTION 112. BENEFITS OF INDENTURE.
The Security Insurer and its successors and assigns shall be a
third-party beneficiary of the provisions of this Indenture, and shall be
entitled to rely upon and directly to enforce such provisions of this
Indenture so long as no Insurer Default shall have occurred and be
continuing. Except as aforesaid, nothing in this Indenture or in the Notes,
express or implied, shall give to any Person, other than the parties hereto
and their successors hereunder, the Agent and the Holders, and any other
party secured hereunder, and any other Person with an ownership interest in
any part of the Trust Estate, any benefit or any legal or equitable right,
remedy or claim under this Indenture. The Security Insurer may disclaim any
of its rights and powers under this Indenture (in which case the Trustee may
exercise such right or power hereunder), but not its duties and obligations
under the Note Policy, upon delivery of a written notice to the Trustee.
SECTION 113. GOVERNING LAW.
THIS INDENTURE AND THE NOTES SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
SECTION 114. LEGAL HOLIDAYS.
In any case where the date on which any payment is due shall not be a
Business Day, then (notwithstanding any other provision of this Indenture or of
the Notes) payment need not be made on such date, but may be made on the next
succeeding Business Day with the same force and effect as if made on the date on
which nominally due, and no interest shall accrue on the amount to be so paid
for the period from and after any such nominal date.
SECTION 115. NO BANKRUPTCY PETITION AGAINST THE ISSUER OR THE SELLER.
The Trustee, by entering into this Indenture, and, notwithstanding the
provisions of Section 607, each Holder by its acceptance of a Note hereunder,
severally and not jointly, hereby covenants and agrees that, prior to the date
that is one year and four days after the payment in full of all outstanding
Notes, it will not institute against, join any other Person in instituting
against, the Seller or the Issuer any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceeding or other similar proceeding under the laws
of the United States or any state of the United States.
- 18 -
<PAGE>
ARTICLE TWO
Security
SECTION 201. COLLATERAL.
In order to secure the due and punctual payment of the principal of
and interest on the Notes and all other Trustee Secured Obligations when and as
the same shall become due and payable, whether on a Payment Date, the Final
Distribution Date or by declaration of acceleration, prepayment or otherwise,
according to the terms of this Indenture and the Notes, the Issuer, pursuant to
the Security Agreement, has granted (or in the case of after-acquired property,
has agreed to grant) first priority perfected Liens on the Collateral to the
Collateral Agent, all for the benefit of the Holders, the Trustee and the other
Secured Parties.
SECTION 202. LIMITED RECOURSE TO ISSUER.
(a) The Trustee and each Holder by its acceptance of a Note
hereunder agree that the obligations of the Issuer hereunder, including,
without limitation, the obligation of the Issuer in respect of the Notes
shall be payable solely from the Trust Estate, and that neither the Trustee
nor any Holder shall look to any other Property or assets of the Issuer or to
any Affiliate, stockholder, employee, officer, director or incorporator of
the Issuer in respect of such obligations.
(b) The Issuer's obligation to pay certain fees or expenses under, or
claims arising out of, this Indenture shall be limited to moneys available to
the Issuer from the Collateral in accordance with the payment priority set forth
in the Servicing Agreement, and to the extent such funds are insufficient to pay
such fees or expenses, it shall not constitute a claim against the Issuer.
SECTION 203. AUTHORIZATION OF ACTIONS TO BE TAKEN BY THE TRUSTEE.
(a) Subject to the rights of the Secured Parties under the Security
Agreement, the Trustee may take all actions it deems necessary or appropriate
in order to enforce or exercise its rights under the Security Agreement in
accordance with and subject to the provisions thereof. Such actions shall
include, but not be limited to, advising, instructing or otherwise directing
the Collateral Agent in connection with enforcing or effecting any term or
provision of the Security Agreement. Subject to the provisions thereof, the
Trustee shall have power to institute and to maintain suits and proceedings
to prevent any impairment of the Collateral by any acts which may be unlawful
or in violation of the Security Agreement or this Indenture, and suits and
proceedings to preserve or protect its interests and the interests of the
Holders in the Collateral (including power to institute and maintain suits or
proceedings to restrain the
- 19 -
<PAGE>
enforcement of or compliance with any legislative or other governmental
enactment, rule or order that may be unconstitutional or otherwise invalid if
the enforcement of, or compliance with, such enactment, rule or order would
impair the security hereunder or be prejudicial to the interests of the
Holders or of the Trustee).
(b) The Trustee is authorized to receive any funds for the benefit of
the Holders distributed under the Servicing Agreement or the Security Agreement
and to make further distributions of such funds to the Holders according to the
provisions of this Indenture.
SECTION 204. TERMINATION OF SECURITY INTERESTS.
Upon the payment in full of all Trustee Secured Obligations, the
Trustee shall, with the consent of the Issuer and at the request of the Seller,
deliver a certificate to the Collateral Agent stating that all Trustee Secured
Obligations have been paid in full, in which case the Liens created by the
Security Agreement shall be released with respect to the Trustee Secured
Obligations.
ARTICLE THREE
Note Forms
SECTION 301. FORMS GENERALLY.
The Notes of each Tranche shall be in substantially the form set forth
in Exhibit A, or in such other form as shall be established by or pursuant to a
Board Resolution and in one or more Indenture Supplements, in each case with
such appropriate insertions, omissions, substitutions and other variations as
are required or permitted by this Indenture, and may have such letters, numbers
or other marks of identification and such legends or endorsements placed thereon
as may be required to comply with the rules of any securities exchange or as
may, consistently herewith, be determined by the officers executing such Notes,
as evidenced by their execution of the Notes. If the form of Notes of any
Tranche is established by action taken pursuant to a Board Resolution, a copy of
an appropriate record of such action shall be certified by the Secretary or an
Assistant Secretary of the Issuer and delivered to the Trustee at or prior to
the delivery of the Issuer Order contemplated by Section 404 for the
authentication and delivery of such Notes.
The Trustee's certificates of authentication shall be in substantially
the form set forth in this Article.
The Notes shall be printed, lithographed or engraved on steel engraved
borders or may be produced in any other manner (provided that if any Notes are
to be listed on any securities exchange, then in any such manner as may be
permitted by the
- 20 -
<PAGE>
rules of any such securities exchange, all as determined by the officers
executing such Notes, as evidenced by their execution of such Notes).
SECTION 302. FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION.
This is one of the Notes designated herein referred to in the
within-mentioned Indenture.
Norwest Bank Minnesota, National
Association, as Trustee
By__________________________
Authorized Signatory
SECTION 303. SECURITIES LEGEND.
Each Note issued hereunder will contain the following legend
limiting sales to "Qualified Institutional Buyers" within the meaning of Rule
144A of the Securities Act:
THIS NOTE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND HAS NOT BEEN
APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR
REGULATORY AUTHORITY OF ANY STATE. THIS NOTE HAS BEEN OFFERED AND SOLD
PRIVATELY. THE HOLDER HEREOF ACKNOWLEDGES THAT THESE SECURITIES ARE
"RESTRICTED SECURITIES" THAT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT AND AGREES FOR THE BENEFIT OF THE ISSUER AND ITS AFFILIATES THAT THESE
SECURITIES MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED
EXCEPT (A) TO A PERMITTED ASSIGNEE WHOM THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE
SECURITIES ACT IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A OR
(B) TO A PERMITTED ASSIGNEE PURSUANT TO AN EXEMPTION FROM REGISTRATION
PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), OR (C) TO A
PERMITTED ASSIGNEE PURSUANT TO ANY OTHER EXEMPTION FROM THE REGISTRATION
REQUIREMENTS UNDER SECTION 5 OF THE SECURITIES ACT, AND IN EACH CASE IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES OR ANY OTHER JURISDICTION.
ARTICLE FOUR
The Notes
SECTION 401. AMOUNT LIMITED; ISSUABLE IN TRANCHES.
The aggregate principal amount of Notes which may be authenticated and
delivered and Outstanding at any time under
- 21 -
<PAGE>
this Indenture is limited to the Maximum Authorized Amount. The Notes may be
issued in one or more Tranches.
No Tranche of Notes shall be issued under this Indenture unless (i) no
Default or Event of Default shall have occurred and be continuing, (ii) the
Amortization Period shall not have begun, (iii) the Insurer Notice Date shall
not have occurred and (iv) after giving effect to such issuance, the Outstanding
Amount of the Notes will not be greater than the aggregate principal amount of
the Advances that are outstanding.
All Notes shall be substantially identical except as to Original Issue
Date and denomination and except as may otherwise be provided in or pursuant to
the Board Resolution referred to in Section 301 and set forth in any Indenture
Supplement hereto.
All Notes issued under this Indenture shall be in all respects equally
and ratably entitled to the benefits hereof and secured by the Collateral
without preference, priority or distinction on account of the actual time or
times of authentication and delivery, all in accordance with the terms and
provisions of this Indenture. Payments of interest on the Notes and Default
Interest Distributable Amount shall be made pro rata among all Outstanding
Notes, without preference or priority of any kind. Except as provided in
Section 1101 concerning principal prepayments on the Notes, payments of
principal on the Notes shall be made pro rata among all Outstanding Notes,
without preference or priority of any kind.
SECTION 402. MATURITY, PRINCIPAL PAYMENTS AND DENOMINATIONS.
(a) The principal of each Note shall be payable in installments equal
to the sum of the Advance Principal Distributable Amount deposited in the Note
Distribution Account pursuant to Sections 3.6(a)(v) and 3.6(b)(v) of the
Servicing Agreement on each Payment Date with respect to the Amortization Period
and the amounts deposited in the Note Distribution Account pursuant to Sections
3.6(a)(viii) and 3.6(b)(viii) of the Servicing Agreement on each such Payment
Date. Subject to Section 602 and notwithstanding the foregoing, the entire
unpaid principal amount of the Notes shall be due and payable, if not previously
paid, on the date on which an Event of Default shall have occurred and be
continuing so long as an Insurer Default shall not have occurred and be
continuing or, if an Insurer Default shall have occurred and be continuing, on
the date on which an Event of Default shall have occurred and be continuing and
the Trustee or a Note Majority have declared the Notes to be immediately due and
payable in the manner provided in Section 602(a). All such principal payments
on the Notes shall be made pro rata to the Noteholders entitled thereto. The
Trustee shall notify the Person in whose name a Note is registered at the close
of business on the Record Date preceding the Payment Date on which the Issuer
expects that the final installment of principal of and interest on such Note
will be paid. Such notice shall be mailed no later than five days prior to such
final Payment Date
- 22 -
<PAGE>
and shall specify that such final installment will be payable only upon
presentation and surrender of such Note and shall specify the place were such
Note may be presented and surrendered for payment of such installment.
Notices in connection with prepayments in whole of Notes shall be mailed,
couriered or sent by facsimile transmission to Noteholders as provided in
Section 1102.
(b) Promptly following the date on which all principal of and interest
on the Notes has been paid in full and the Notes have been surrendered to the
Trustee, the Trustee shall, if the Security Insurer has paid any amount in
respect of the Notes under the Note Policy that has not been reimbursed to it,
deliver such surrendered Notes to the Security Insurer.
(c) The Notes shall be issuable only in registered form and only in
denominations of $100,000 and any amount in excess thereof; PROVIDED, that the
foregoing shall not restrict or prevent the transfer in accordance with Section
406 of any Note having a remaining outstanding principal amount of less than
$100,000.
SECTION 403. INTEREST PAYMENTS.
(a) Interest on the unpaid principal amount of each Outstanding
Note shall be payable on each Payment Date at the Note Interest Rate for the
period from its Original Issue Date, or such later date to which interest has
been paid or duly provided for, to such Payment Date. Interest on the Notes
shall be computed on the basis of a 360-day year and actual days elapsed.
Except in connection with the prepayment of a Note, the first payment of
interest on a Note issued between the first day of a calendar month and the
Payment Date occurring in such calendar month will be made on the Payment
Date occurring in the next succeeding calendar month. In addition, on each
Payment Date with respect to any Interest Period or portion thereof after the
occurrence of an Amortization Event, the Default Amount Distributable Amount
shall be payable with respect to the Notes to the extent funds are available
therefor pursuant to Section 3.6(b)(vii) or (ix) of the Servicing Agreement.
(b) On each Business Day, the Trustee shall determine the Two Year
Treasury Yield and, in addition, upon the occurrence of an Amortization Event,
the Trustee shall determine the Maximum Interest Rate. On each Business Day,
prior to 12:00 noon, the Trustee shall send to the Servicer, by facsimile
transmission, notification of the Two Year Treasury Yield, the CP Composite Rate
and the Offshore Rate, and, on the date on which an Amortization Event occurs,
the Maximum Interest Rate. The Two Year Treasury Yield, the CP Composite Rate
and the Offshore Rate and, if applicable, the Maximum Interest Rate, may be
obtained by any Noteholder, the Agent or the Security Insurer by telephoning the
Trustee at its Corporate Trust Office at (612) 667-3538.
SECTION 404. EXECUTION, AUTHENTICATION, DELIVERY AND DATING.
- 23 -
<PAGE>
The Notes shall be executed on behalf of the Issuer by any of its
Authorized Officers. The signature of any of these officers on the Notes may be
manual or facsimile.
Notes bearing the manual or facsimile signatures of individuals who
were at any time the proper officers of the Issuer shall bind the Issuer,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Notes or did not hold
such offices at the date of such Notes.
At any time and from time to time after the execution and delivery of
this Indenture and receipt of the Note Policy, and upon satisfaction of all the
conditions set forth in Section 401, the Issuer may deliver Notes of any Tranche
executed by the Issuer to the Trustee or Authenticating Agent for
authentication, together with an Issuer Order for the authentication and
delivery of such Notes and an Officer's Certificate that all conditions
precedent for such issuance have been satisfied, and the Trustee in accordance
with the Issuer Order shall authenticate and make available for delivery such
Notes.
Each Note shall be dated the date of its authentication.
No Note shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose unless there appears on such Note a
certificate of authentication substantially in the form provided for herein
executed by the Trustee or the Authenticating Agent by manual signature, and
such certificate upon any Note shall be conclusive evidence, and the only
evidence, that such Note has been duly authenticated and delivered hereunder and
is entitled to the benefits of this Indenture. Notwithstanding the foregoing,
if any Note shall have been authenticated and delivered hereunder but never
issued and sold by the Issuer, and the Issuer shall deliver such Note to the
Trustee or the Authenticating Agent for cancellation as provided in Section 410
together with a written statement (which need not comply with Section 102 and
need not be accompanied by an Opinion of Counsel) stating that such Note has
never been issued and sold by the Issuer, for all purposes of this Indenture
such Note shall be deemed never to have been authenticated and delivered
hereunder and shall never be entitled to the benefits of this Indenture.
SECTION 405. TEMPORARY NOTES.
Pending the preparation of definitive Notes of any Tranche, the Issuer
may execute, and upon Issuer Order the Trustee or the Authenticating Agent shall
authenticate and deliver, temporary Notes which are printed, lithographed,
typewritten, reproduced or otherwise produced, in any authorized denomination,
substantially of the tenor of the definitive Notes in lieu of which they are
issued and with such appropriate insertions, omissions, substitutions and other
variations as the
- 24 -
<PAGE>
officers executing such Notes may determine, as evidenced by
their execution of such Notes.
If temporary Notes of any Tranche are issued, the Issuer will cause
definitive Notes of that Tranche to be prepared without unreasonable delay.
After the preparation of definitive Notes of such Tranche, the temporary Notes
of such Tranche shall be exchangeable for definitive Notes of such Tranche upon
surrender of the temporary Notes of such Tranche at the office or agency of the
Issuer to be maintained as provided in Section 1002. Upon surrender for
cancellation of any one or more temporary Notes of any Tranche the Issuer shall
execute, and the Trustee or the Authenticating Agent shall authenticate and make
available for delivery, in exchange therefor a like principal amount of
definitive Notes of the same Tranche and tenor of authorized denominations.
Until so exchanged, the temporary Notes of any Tranche shall in all respects be
entitled to the same benefits under this Indenture as definitive Notes of such
Tranche.
SECTION 406. REGISTRATION, REGISTRATION OF TRANSFER AND EXCHANGE, TRANSFER
RESTRICTIONS.
The Issuer shall cause to be kept a register (the "Note Register") in
which, subject to such reasonable regulations as it may prescribe, the Issuer
shall provide for the registration of Notes and of transfers of the Notes.
Norwest Bank Minnesota, National Association, is hereby initially appointed
"Note Registrar" for the purpose of registering Notes and transfers of the Notes
as herein provided. Upon any resignation of any Note Registrar, the Issuer
shall promptly appoint a successor or, if it elects not to make such an
appointment, assume the duties of the Note Registrar.
If a Person other than the Trustee is appointed by the Issuer as Note
Registrar, the Issuer will give the Trustee prompt written notice of the
appointment of such Note Registrar and of the location, and any change in the
location, of the Note Registrar, and the Trustee shall have the right to inspect
the Note Register at all reasonable times and to obtain copies thereof, and the
Trustee shall have the right to rely upon a certificate executed on behalf of
the Note Registrar by an Executive Officer thereof as the names and addresses of
the Holders of the Notes and the principal amounts and number of such Notes.
Upon surrender for registration of transfer of any Note at the office
or agency of the Issuer to be maintained as provided in Section 1002, the Issuer
shall execute, and the Trustee or the Authenticating Agent shall authenticate
and make available for delivery, in the name of the designated transferee or
transferees, one or more new Notes of any authorized denominations and of a like
tenor and aggregate principal amount.
- 25 -
<PAGE>
At the option of the Holder, Notes may be exchanged for other Notes in
any authorized denominations, of a like tenor and aggregate principal amount,
upon surrender of the Notes to be exchanged at such office or agency. Whenever
any Notes are so surrendered for exchange, the Issuer shall execute, and the
Trustee or the Authenticating Agent shall authenticate and make available for
delivery, the Notes which the Holder making the exchange is entitled to receive.
All Notes issued upon any registration of transfer or exchange of
Notes shall be the valid obligations of the Issuer, evidencing the same debt,
and entitled to the same benefits under this Indenture, as the Notes surrendered
upon such registration of transfer or exchange.
Every Note presented or surrendered for registration of transfer or
for exchange shall (if so required by the Issuer or the Trustee) be duly
endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Issuer and the Note Registrar duly executed, by the Holder
thereof or his attorney duly authorized in writing with such signature
guaranteed by a commercial bank or trust company located, or having a
correspondent located, in the City of New York or the city in which the
Corporate Trust Office is located, or by a member firm of a national securities
exchange, and such other documents as the Trustee may require.
No service charge shall be made for any registration of transfer or
exchange of Notes, but the Issuer or the Trustee may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any registration of transfer or exchange of Notes, other than
exchanges pursuant to Section 404 or 905 not involving any transfer.
No Holder of a Note shall transfer its Note unless such transfer is
made (i) in accordance (A) with Rule 144A of the Securities Act, (B) an
exemption from registration provided by Rule 144 under the Securities Act (if
available) or any other exemption from the registration requirements under
Section 5 of the Securities Act provided the Issuer is provided an Opinion of
Counsel that such transfer is so exempt, and (C) the registration and
qualification requirements (or any applicable exemptions therefrom) under
applicable state securities laws and (ii) to a Permitted Assignee.
SECTION 407. MUTILATED, DESTROYED, LOST AND STOLEN NOTES.
If any mutilated Note is surrendered to the Trustee, the Issuer shall
execute and the Trustee shall authenticate and deliver in exchange therefor a
new Note of like tenor and principal amount and bearing a number not
contemporaneously outstanding. If there shall be delivered to the Issuer and
the Trustee and the Security Insurer (unless an Insurer Default shall have
occurred and be continuing) (i) evidence to their
- 26 -
<PAGE>
satisfaction of the destruction, loss or theft of any Note and (ii) such
security or indemnity as may be required by them to save each of them and any
agent of any of them harmless, then, in the absence of notice to the Issuer,
the Trustee or the Security Insurer that such Note has been acquired by a
bona fide purchaser, the Issuer shall execute and upon its request the
Trustee shall authenticate and make available for delivery, in lieu of any
such destroyed, lost or stolen Note, a new Note of like tenor and principal
amount and bearing a number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Note has become
or is about to become due and payable, the Issuer in its discretion may, instead
of issuing a new Note, pay such Note.
Upon the issuance of any new Note under this Section, the Issuer or
the Trustee may require the payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Note of any Tranche issued pursuant to this Section in lieu
of any destroyed, lost or stolen Note shall constitute an original additional
contractual obligation of the Issuer, whether or not the destroyed, lost or
stolen Note shall be at any time enforceable by anyone, and shall be entitled to
all the benefits of this Indenture equally and proportionately with any and all
other Notes duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Notes.
SECTION 408. PAYMENT OF INTEREST; INTEREST RIGHTS PRESERVED.
Interest on any Note that is payable, and is punctually paid or duly
provided for, on any Payment Date shall be paid to the Person in whose name that
Note (or one or more Predecessor Notes) is registered at the close of business
on the Record Date, by wire transfer in immediately available funds to the
account and number specified in the Note Register on such Record Date for such
Person or, if no such account or number is so specified, then by check mailed to
such Person's address as it appears in the Note Register on such Record Date.
Subject to the foregoing provisions of this Section, each Note
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Note shall carry the rights to interest accrued and
unpaid, and to accrue, which were carried by such other Note.
- 27 -
<PAGE>
SECTION 409. PERSONS DEEMED OWNERS.
Prior to due presentment of a Note for registration of transfer, the
Issuer, the Security Insurer, the Trustee and any agent of the Issuer, the
Security Insurer or the Trustee may treat the Person in whose name such Note is
registered as the owner of such Note for the purpose of receiving payment of
principal of and (subject to Section 408) interest on such Note and for all
other purposes whatsoever, whether or not such Note be overdue, and the Issuer,
the Security Insurer, the Trustee nor any agent of the Issuer, the Security
Insurer or the Trustee shall be affected by notice to the contrary.
SECTION 410. CANCELLATION.
Subject to Section 402(b), all Notes surrendered for payment,
prepayment in whole, registration of transfer or exchange shall, if surrendered
to any Person other than the Trustee, be delivered to the Trustee and shall be
promptly cancelled by the Trustee. Subject to Section 402(b), the Issuer may at
any time deliver to the Trustee for cancellation any Notes previously
authenticated and delivered hereunder which the Issuer may have acquired in any
manner whatsoever, and may deliver to the Trustee (or to any other Person for
delivery to the Trustee) for cancellation any Notes previously authenticated
hereunder which the Issuer has not issued and sold, and all Notes so delivered
shall be promptly cancelled by the Trustee. No Notes shall be authenticated in
lieu of or in exchange for any Notes cancelled as provided in this Section,
except as expressly permitted by this Indenture. All cancelled Notes held by
the Trustee shall be held or destroyed by the Trustee in accordance with its
standard retention or disposal policy as in effect at the time.
ARTICLE FIVE
Accounts, Disbursements and Releases
SECTION 501. COLLECTION OF MONEY.
Except as otherwise expressly provided herein, the Trustee may demand
payment or delivery of, and shall receive and collect, directly and without
intervention or assistance of any fiscal agent or other intermediary, all money
and other property payable to or receivable by the Trustee pursuant to this
Indenture. The Trustee shall apply all such money received by it as provided in
this Indenture. Subject to the provisions of the Security Agreement and except
as otherwise expressly provided in this Indenture, if any default occurs in the
making of any payment or performance under any agreement or instrument that is
part of this Indenture or the Notes, the Trustee may take such action as may be
appropriate to enforce such payment or performance, including the institution
and prosecution of appropriate Proceedings. Any such action shall be without
- 28 -
<PAGE>
prejudice to any right to claim a Default or Event of Default under this
Indenture and any right to proceed thereafter as provided in Article VI.
SECTION 502. GENERAL PROVISIONS REGARDING ACCOUNTS.
(a) On each Payment Date, the Trustee shall distribute all amounts
on deposit in the Note Distribution Account to Noteholders in respect of the
Notes based on the instructions set forth in the Servicer's Certificate to
the extent of amounts due and unpaid on the Notes for principal, interest and
Default Amount Distributable Amounts (if any), first to pay all accrued and
unpaid interest, then to pay principal on the Notes and then to pay any
Default Amount Distributable Amount.
(b) Subject to Section 701(c), the Trustee shall not in any way be
held liable by reason of any insufficiency in any of the Secured Accounts
resulting from any loss or any Eligible Investment included therein except for
losses attributable to the Trustee's failure to make payments on such Eligible
Investments issued by the Trustee, in its commercial capacity as principal
obligor and not as Trustee, in accordance with their terms.
ARTICLE SIX
Remedies
SECTION 601. EVENTS OF DEFAULT.
"Event of Default," wherever used herein with respect to the Notes,
means any one of the following events (whatever the reason for such Event of
Default and whether it shall be voluntary or involuntary or be effected by
operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(i) default in the payment of any interest on any Note when the same
becomes due and payable, and such default shall continue for a period of
two Business Days (solely for purposes of this clause, a payment on the
Notes funded by the Security Insurer or the Collateral Agent shall be
deemed to be a payment made by the Issuer); or
(ii) default in the payment of or any installment of the principal on
any Note when the same becomes due and payable and such default shall
continue for a period of two Business Days (solely for purposes of this
clause, a payment on the Notes funded by the Security Insurer or the
Collateral Agent shall be deemed to be a payment made by the Issuer); or
(iii) so long as an Insurer Default shall not have occurred and be
continuing, an Insurance Agreement Event of
- 29 -
<PAGE>
Default shall have occurred; provided, however, that the occurrence of
an Insurance Agreement Event of Default may not form the basis of an
Event of Default unless the Security Insurer shall have delivered to
the Issuer and the Trustee and not rescinded a written notice
specifying that such Insurance Agreement Event of Default constitutes
an Event of Default under the Indenture; or
(iv) so long as an Insurer Default shall have occurred and be
continuing, default in the observance or performance or any covenant or
agreement of the Issuer made in this Indenture (other than a covenant or
agreement, a default in the observance or performance of which is elsewhere
in this Section specifically dealt with), or any representation or warranty
of the Issuer made in this Indenture or in any certificate or other writing
delivered pursuant hereto or in connection herewith proving to have been
incorrect in any material respect as of the time when the same shall have
been made, and such default shall continue or not be cured, or the
circumstances 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 Issuer by the Trustee or to the Issuer and the
Trustee by the Holders of at least 25% of the Outstanding Amount of the
Notes, a written notice specifying such default or incorrect representation
or warranty and requiring it to be remedied and stating that such notice is
a "Notice of Default" hereunder; or
(v) so long as an Insurer Default shall have occurred and be
continuing, the filing of a decree or order for relief by a court having
jurisdiction in the premises in respect of the Issuer or any substantial
part of the Trust Estate in an involuntary case under any applicable
Federal or state bankruptcy, insolvency or other similar law now or
hereafter in effect, or appointing receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official of the Issuer or for
any substantial part of the Trust Estate, or ordering the winding-up or
liquidation of the Issuer's affairs, and such decree or order shall remain
unstayed and in effect for a period of 60 consecutive days; or
(vi) so long as an Insurer Default shall have occurred and be
continuing, the commencement by the Issuer of a voluntary case under any
applicable Federal or state bankruptcy, insolvency or other similar law now
or hereafter in effect, or the consent by the Issuer to the entry of an
order for relief in an involuntary case under any such law, or the consent
by the Issuer to the appointment or taking possession by a receiver,
liquidator, assignee, custodian, trustee, sequestrator or similar official
of the Issuer for any substantial part of the Trust Estate, or the making
by the Issuer of any general assignment for the benefit of
- 30 -
<PAGE>
creditors, or the failure by the Issuer generally to pay its debts as such
debts become due, or the taking of action by the Issuer in furtherance of
any of the foregoing.
The Issuer shall deliver to the Trustee and the Security Insurer,
within five days after obtaining knowledge of the occurrence thereof, written
notice in the form of an Officers' Certificate of any event which with the
giving of notice and the lapse of time would become an Event of Default under
clause (iii), its status and what action the Issuer is taking or proposes to
take with respect thereto.
SECTION 602. RIGHTS UPON EVENT OF DEFAULT.
(a) If an Insurer Default shall not have occurred and be continuing
and an Event of Default shall have occurred and be continuing, the Notes
shall become immediately due and payable at par, together with accrued
interest thereon. In the event of any acceleration of the Notes by operation
of this Section 602, the Trustee shall continue to be entitled to make claims
under the Note Policy pursuant to Section 615 hereof for Scheduled Payments
on the Notes. Payments under the Note Policy following acceleration of the
Notes shall be applied by the Trustee:
FIRST: to Noteholders for amounts due and unpaid on the Notes for
interest, ratably, without preference or priority of any kind, according to
the amounts due and payable on the Notes for interest; and
SECOND: to Noteholders for amounts due and unpaid on the Notes for
principal, ratably, without preference or priority of any kind, according
to the amounts due and payable on the Notes for principal;
(b) In the event the Notes are accelerated due to an Event of Default,
the Security Insurer shall have the right (in addition to its obligation to pay
Scheduled Payments on the Notes in accordance with the Note Policy), but not the
obligation, to make payments under the Note Policy or otherwise of interest and
principal due on the Notes, in whole or in part, on any date or dates following
such acceleration as the Security Insurer, in its sole discretion, shall elect.
(c) If an Insurer Default shall have occurred and be continuing and an
Event of Default shall have occurred and be continuing, the Trustee if so
requested in writing by the Agent shall, upon prior written notice to the Rating
Agencies, declare by written notice to the Issuer that the Notes become,
whereupon they shall become, immediately due and payable at par, together with
accrued interest thereon. Notwithstanding anything to the contrary in this
paragraph (c), if an Event of Default specified in Section 601(v) or (vi) shall
occur and be continuing when an Insurer Default has occurred and is continuing,
the Notes shall become immediately due and payable at par, together with accrued
interest thereon.
- 31 -
<PAGE>
SECTION 603. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY TRUSTEE;
AUTHORITY OF CONTROLLING PARTY.
(a) Subject to the provisions of the Security Agreement, the Issuer
covenants that if the Notes are accelerated following the occurrence of an Event
of Default, the Issuer will, upon demand of the Trustee, pay to it, for the
benefit of the Holders of the Notes, the whole amount then due and payable on
such Notes for principal and interest, with interest upon the overdue principal,
and, to the extent payment at such rate of interest shall be legally
enforceable, upon overdue installments of interest, at the Note Interest Rate
and in addition thereto such further amount as shall be sufficient to cover the
costs and expenses of collection, including the reasonable compensation,
expenses, disbursements and advances of the Trustee and its agents and counsel.
(b) If an Event of Default occurs and is continuing, the Trustee may
in its discretion but with the consent of the Controlling Party (except as
provided in Section 603(c) below), proceed to protect and enforce its rights and
the rights of the Noteholders, by such appropriate Proceedings as the Trustee
shall deem most effective to protect and enforce any such rights, whether for
the specific enforcement of any covenant or agreement in this Indenture or in
aid of the exercise of any power granted herein, or to enforce any other proper
remedy or legal or equitable right vested in the Trustee by this Indenture or by
law.
(c) In case there shall be pending, relative to the Issuer or any
other obligor upon the Notes or any Person having or claiming an ownership
interest in the Trust Estate, Proceedings under Title 11 of the United States
Code or any other applicable Federal or state bankruptcy, insolvency or other
similar law, or in case a receiver, assignee or trustee in bankruptcy or
reorganization, liquidator, sequestrator or similar official shall have been
appointed for or taken possession of the Issuer or its property or such other
obligor or Person, or in case of any other comparable judicial Proceedings
relative to the Issuer or other obligor upon the Notes, or to the creditors or
property of the Issuer or such other obligor, the Trustee, irrespective of
whether the principal of any Notes shall then be due and payable as therein
expressed or by declaration or otherwise and irrespective of whether the Trustee
shall have made any demand pursuant to the provisions of this Section, shall be
entitled and empowered, by intervention in such Proceedings or otherwise:
(i) to file and prove a claim or claims for the whole amount of
principal and interest owing and unpaid in respect of the Notes and to file
such other papers or documents as may be necessary or advisable in order to
have the claims of the Trustee (including any claim for reasonable
compensation to the Trustee and each predecessor Trustee, and their
- 32 -
<PAGE>
respective agents, attorneys and counsel, and for reimbursement of all
expenses and liabilities incurred, and all advances made, by the Trustee
and each predecessor Trustee, except as a result of negligence or bad
faith) and of the Noteholders allowed in such Proceedings;
(ii) unless prohibited by applicable law and regulations, to vote on
behalf of the Holders of Notes in any election of a trustee, as standby
trustee or person performing similar functions in any such Proceedings;
(iii) to collect and receive any moneys or other property payable or
deliverable on such claims and to distribute all amounts received with
respect to the claims of the Noteholders and of the Trustee on their
behalf; and
(iv) to file such proofs of claim and other papers or documents as may
be necessary or advisable in order to have the claims of the Trustee or the
Holders of Notes allowed in any judicial proceedings relative to the
Issuer, its creditors and its property;
and any trustee, receiver, liquidator, custodian or other similar official in
any such Proceeding is hereby authorized by each of such Noteholders to make
payments to the Trustee, and, in the event that the Trustee shall consent to the
making of payments directly to such Noteholders, to pay to the Trustee such
amounts as shall be sufficient to cover reasonable compensation to the Trustee,
each predecessor Trustee and their respective agents, attorneys and counsel, and
all other expenses and liabilities incurred, and all advances made, by the
Trustee and each predecessor Trustee except as a result of negligence or bad
faith.
(e) Nothing herein contained shall be deemed to authorize the Trustee
to authorize or consent to or vote for or accept or adopt on behalf of any
Noteholder any plan of reorganization, arrangement, adjustment or composition
affecting the Notes or the rights of any Holder thereof or to authorize the
Trustee to vote in respect of the claim of any Noteholder in any such proceeding
except, as aforesaid, to vote for the election of a trustee in bankruptcy or
similar Person.
(f) All rights of action and of asserting claims under this
Indenture, the Security Agreement, or under any of the Notes, may be enforced by
the Trustee without the possession of any of the Notes or the production thereof
in any trial or other Proceedings relative thereto, and any such action or
Proceedings instituted by the Trustee shall be brought in its own name as
trustee of an express trust, and any recovery of judgment, subject to the
payment of the expenses, disbursements and compensation of the Trustee, each
predecessor Trustee and their respective agents and attorneys, shall be for the
ratable benefit of the Holders of the Notes,
- 33 -
<PAGE>
(g) In any Proceedings brought by the Trustee (including any
Proceedings involving the interpretation of any provision of this Indenture or
the Security Agreement), the Trustee shall be held to represent all the Holders
of the Notes, and it shall not be necessary to make any Noteholder a party to
any such Proceedings.
SECTION 604. LIMITATION ON SUITS.
No Holder of any Note shall have any right to institute any
Proceeding, judicial or otherwise, with respect to this Indenture, or for the
appointment of a receiver or trustee, or for any other remedy hereunder, unless
(1) such Holder has previously given written notice to the Trustee of
a continuing Event of Default with respect to the Notes;
(2) the Holders of not less than 25% of the Outstanding Amount
of the Notes shall have made written request to the Trustee to
institute such Proceeding in respect of such Event of Default in its
own name as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee
reasonable indemnity against the costs, expenses and liabilities to be
incurred in compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such
Proceeding;
(5) no direction inconsistent with such written request has been
given to the Trustee during such 60-day period by the Holders of a
majority of the Outstanding Amount of the Notes; and
(6) an Insurer Default shall have occurred and be continuing.
It is understood and intended that no one or more of the Holders shall
have any right in any manner whatever hereunder or under the Notes to
(i) affect, disturb or prejudice or the rights of the Holders of any other
Notes, (ii) obtain or seek to obtain priority or preference over any other such
Holder or (iii) enforce any right under this Indenture, except in the manner
herein provided and for the equal, ratable and common benefit of all such
Holders.
- 34 -
<PAGE>
SECTION 605. UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE PRINCIPAL AND INTEREST.
Notwithstanding any other provision in this Indenture, the Holder of
any Note shall have the right, which is absolute and unconditional, to receive
payment of the principal of and interest (including, without limitation, any
Breakage Fee) on such Note on or after the respective due dates thereof
expressed in such Note or in this Indenture and to institute suit for the
enforcement of any such payment, and such rights shall not be impaired without
the consent of such Holder; PROVIDED, HOWEVER, that so long as an Insurer
Default shall not have occurred and be continuing, no such suit shall be
instituted; PROVIDED FURTHER, HOWEVER, that notwithstanding the foregoing
proviso, a Holder shall be entitled to institute suit against the Seller for the
enforcement of payment of any Breakage Fee to which it may be entitled to
receive hereunder.
SECTION 606. RESTORATION OF RIGHTS AND REMEDIES.
If any of the Trustee, the Controlling Party or any Holder has
instituted any Proceeding to enforce any right or remedy under this Indenture
and such Proceeding has been discontinued or abandoned for any reason, or has
been determined adversely to the Trustee, the Controlling Party or to such
Holder, then and in every such case, subject to any determination in such
Proceeding, the Issuer, the Trustee and the Holders shall be restored severally
and respectively to their former positions hereunder and thereafter all rights
and remedies of the Trustee and the Holders shall continue as though no such
Proceeding had been instituted.
SECTION 607. RIGHTS AND REMEDIES CUMULATIVE.
Except as otherwise provided with respect to the replacement or
payment of mutilated, destroyed, lost or stolen securities in the last paragraph
of Section 407, no right or remedy herein conferred upon or reserved to any of
the Trustee, the Controlling Party or to the Holders is intended to be exclusive
of any other right or remedy, and every right and remedy shall, to the extent
permitted by law, be cumulative and in addition to every other right and remedy
given hereunder or now or hereafter existing at law or in equity or otherwise.
The assertion or employment of any right or remedy hereunder, or otherwise,
shall not prevent the concurrent assertion or employment of any other
appropriate right or remedy.
SECTION 608. DELAY OR OMISSION NOT WAIVER.
No delay or omission of any of the Trustee, the Controlling Party or
any Holder of any Note to exercise any right or remedy accruing upon any Default
or Event of Default shall impair any such right or remedy or constitute a waiver
of any such Default or Event of Default or an acquiescence therein. Every right
and remedy given by this Article or by law to the
- 35 -
<PAGE>
Trustee or to the Holders may be exercised from time to time, and as often as
may be deemed expedient, by the Trustee or by the Holders, as the case may be.
SECTION 609. CONTROL BY HOLDERS.
If the Issuer is the Controlling Party, the Holders of a majority of
the Outstanding Amount of the Notes shall have the right to direct the time,
method and place of conducting any Proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred on the Trustee, with respect
to the Notes; PROVIDED that
(1) such direction shall not be in conflict with any rule of law,
with this Indenture or with the Security Agreement, and
(2) the Issuer may take any other action deemed proper by the
Issuer which is not inconsistent with such direction.
SECTION 610. WAIVER OF PAST DEFAULTS.
If an Insurer Default shall have occurred and be continuing, the
Holders of not less than a majority of the Outstanding Amount of the Notes may
on behalf of the Holders of all the Notes waive any past Default or Event of
Default hereunder and its consequences, except a Default:
(1) in the payment of the principal of or interest, if any, on any
Note, or
(2) in respect of a covenant or provision hereof which cannot be
modified or amended without the consent of the Holder of each
Outstanding Note affected.
The Issuer may, but shall not be obligated to, fix a record date for
the purpose of determining the Persons entitled to waive any past Default or
Event of Default hereunder. If a record date is fixed, the Holders on such
record date, or their duly designated proxies, and only such Persons, shall be
entitled to waive any Default or Event of Default hereunder, whether or not such
Holders remain Holders after such record date; and unless such majority in
principal amount shall have been obtained prior to the date which is 90 days
after such record date, any such waiver previously given shall automatically and
without further action by any Holder be cancelled and of no further effect.
Upon any such waiver, such Default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other Default or Event of Default or impair any right consequent thereon.
- 36 -
<PAGE>
SECTION 611. UNDERTAKING FOR COSTS.
All parties to this Indenture agree, and each Holder of any Note by
such Holder's acceptance thereof shall be deemed to have agreed, that any court
may in its discretion require, in any suit for the enforcement of any right or
remedy under this Indenture, or in any suit against the Trustee for any action
taken, suffered or omitted by it as Trustee, the filing by any party litigant in
such suit of an undertaking to pay the costs of such suit, and that such court
may in its discretion assess reasonable costs, including reasonable attorneys'
fees, against any party litigant in such suit, having due regard to the merits
and good faith of the claims or defenses made by such party litigant; but the
provisions of this Section shall not apply to any suit instituted by the Issuer,
to any suit instituted by the Trustee, to any suit instituted by any Holder, or
group of Holders, holding in the aggregate more than 10% of the Outstanding
Amount of the Notes, or to any suit instituted by any Holder for the enforcement
of the payment of the principal of or interest on any Note on or after the
respective due dates expressed in such Note and in this Indenture.
SECTION 612. WAIVER OF STAY OR EXTENSION LAWS.
The Issuer covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, or plead or in any manner whatsoever, claim
or take the benefit or advantage of, any stay or extension law wherever enacted,
now or at any time hereafter in force, that may affect the covenants or the
performance of this Indenture; and the Issuer (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantages of any such
law and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.
SECTION 613. ACTION ON NOTES.
The Trustee's right to seek and recover judgment on the Notes or under
this Indenture shall not be affected by the seeking, obtaining or application or
any other relief under or with respect to this Indenture. Neither the lien of
the Security Agreement nor any rights or remedies of the Trustee or the
Noteholders shall be impaired by the recovery of any judgment by the Trustee
against the Issuer or by the levy of any execution under such judgment upon any
portion of the Trust Estate or upon any of the assets of the Issuer.
SECTION 614. PERFORMANCE AND ENFORCEMENT OF CERTAIN OBLIGATIONS.
Subject to the provisions of the Security Agreement and the other
Related Documents, promptly following a request from the Trustee to do so and at
the Issuer's expense, the Issuer agrees to take all such lawful action as the
Trustee may request
- 37 -
<PAGE>
to compel or secure the performance and observance by the Seller, the
Servicer and OFL, as applicable, of each of their obligations to the Issuer
under or in connection with the Servicing Agreement or to OFL and the Seller
under or in connection with the Purchase Agreement or to the Seller under or
in connection with the Repurchase Agreement in accordance with the terms of
each thereof, and to exercise any and all rights, remedies, powers and
privileges lawfully available to the Issuer under or in connection with the
Servicing Agreement, the Repurchase Agreement and the Purchase Agreement to
the extent and in the manner directed by the Trustee, including the
transmission of notices of default on the part of the Seller or the Servicer
thereunder and the institution of legal or administrative actions or
proceedings to compel or secure performance by any of OFL, the Seller or the
Servicer of each of their obligations under such agreements.
SECTION 615. CLAIMS UNDER NOTE POLICY.
(a) In the event that the Trustee has delivered a Deficiency Notice
with respect to any Deficiency Claim Date and the Trustee has not cancelled and
returned the Note Policy to the Security Insurer, the Trustee shall determine on
the related Draw Date whether the sum of (i) the amount of Spread Account
Available Funds with respect to such Deficiency Claim Date (excluding, following
the occurrence of an Amortization Event, amounts distributable to the Servicer
pursuant to Section 3.6(b)(i)) and (ii) the amount of the Deficiency Claim
Amount, if any, to be delivered by the Spread Account Collateral Agent to the
Trustee pursuant to a Deficiency Notice with respect to such Deficiency Claim
Date (as stated in the certificate delivered on such Deficiency Claim Date by
the Spread Account Collateral Agent pursuant to Section 3.03(a) of the Spread
Account Agreement) would be insufficient to pay the Noteholders' Interest
Distributable Amount and, with respect to a Payment Date with respect to the
Amortization Period, the amounts referred to in clauses (i) and (ii) would be
insufficient, after giving effect to the distributions required by clauses (i)
through (iv) of Section 3.6(a) of the Servicing Agreement or, if an Amortization
Event shall have occurred, after giving effect to the distributions required by
clauses (i) through (iv) of Section 3.6(b) of the Servicing Agreement, to pay
the Noteholders' Principal Distributable Amount for the related Payment Date,
then in any such event the Trustee shall furnish to the Security Insurer no
later than 12:00 noon New York City time on the related Draw Date a completed
Notice of Claim in the amount of the shortfall in amounts so available to pay
the Noteholders' Interest Distributable Amount and, on Payment Dates with
respect to the Amortization Period, the Noteholders' Principal Distributable
Amount with respect to such Payment Date (the amount of any such shortfall being
hereinafter referred to as the "Policy Claim Amount"). Amounts paid by the
Security Insurer pursuant to a claim submitted under this Section 615 shall be
deposited by the Trustee into the Note Distribution Account for payment to
Noteholders on the related Payment Date.
- 38 -
<PAGE>
(b) Any notice delivered by the Trustee to the Security Insurer
pursuant to Section 615(a) shall specify the Policy Claim Amount claimed under
the Note Policy and shall constitute a "Notice of Claim" under the Note Policy.
In accordance with the provisions of the Note Policy, the Security Insurer is
required to pay to the Trustee the Policy Claim Amount properly claimed
thereunder by 12:00 noon, New York City time, on the later of (i) the third
Business Day following receipt on a Business Day of the Notice of Claim, and
(ii) the applicable Payment Date. Any payment made by the Security Insurer
under the Note Policy shall be applied solely to the payment of the Notes, and
for no other purpose.
(c) The Trustee shall (i) receive as attorney-in-fact of each
Noteholder any Policy Claim Amount from the Security Insurer and (ii) deposit
the same in the Note Distribution Account for disbursement to the Noteholders as
provided in Section 402, 403 or 602. Any and all Policy Claim Amounts disbursed
by the Trustee from claims made under the Note Policy shall not be considered
payment by the Issuer, and shall not discharge the obligations of the Issuer
with respect thereto. The Security Insurer shall, to the extent it makes any
payment with respect to the Notes, become subrogated to the rights of the
recipients of such payments to the extent of such payments. Subject to and
conditioned upon any payment with respect to the Notes by or on behalf of the
Security Insurer, the Trustee shall assign to the Security Insurer all rights to
the payment of interest or principal with respect to the Notes which are then
due for payment to the extent of all payments made by the Security Insurer and
the Security Insurer may exercise any option, vote, right, power or the like
with respect to the Notes to the extent that it has made payment pursuant to the
Note Policy. To evidence such subrogation, the Note Registrar shall note the
Security Insurer's rights as subrogee upon the register of Noteholders upon
receipt from the Security Insurer of proof of payment by the Security Insurer of
any Noteholders' Interest Distributable Amount or Noteholders' Principal
Distributable Amount. The foregoing subrogation shall in all cases be subject
to the rights of the Noteholders to receive all scheduled payments in respect of
the Notes.
(d) The Trustee shall keep a complete and accurate record of all
funds delivered by the Security Insurer to the Trustee and the allocation of
such funds to the payment of interest on and principal paid with respect to any
Note. The Security Insurer shall have the right to inspect such records at
reasonable times upon one Business Day's prior notice to the Trustee.
(e) The Trustee shall be entitled to enforce on behalf of the
Noteholders the obligations of the Security Insurer under the Note Policy.
Notwithstanding any other provision of this Indenture or any Related Document,
the Noteholders are not entitled to institute proceedings directly against the
Security Insurer.
- 39 -
<PAGE>
SECTION 616. PREFERENCE CLAIMS.
(a) In the event that the Trustee has received a certified copy of an
order of the appropriate court that any Noteholders' Interest Distributable
Amount or Noteholders' Principal Distributable Amount paid on a Note (including
in the computation of such Noteholders' Principal Distributable Amount for the
purpose of this Section 616, if the Security Insurer shall have received the
items described in clauses (A), (B) and (C) of Section 3 of the Note Policy, any
distribution in respect of principal on the Notes prior to the Final Maturity
Date that was subsequently avoided as a preference payment under applicable
bankruptcy, insolvency, receivership or similar law to the extent any such
amount remains unpaid on such date) has been avoided in whole or in part as a
preference payment under applicable bankruptcy law, the Trustee shall so notify
the Security Insurer, shall comply with the provisions of the Note Policy to
obtain payment by the Security Insurer of such avoided payment, and shall, at
the time it provides notice to the Security Insurer, notify Holders of the Notes
by mail that, in the event that any Noteholder's payment is so recoverable, such
Noteholder will be entitled to payment pursuant to the terms of the Note Policy.
Pursuant to the terms of the Note Policy, the Security Insurer will make such
payment on behalf of the Noteholder to the receiver, conservator,
debtor-in-possession or trustee in bankruptcy named in the order (as defined in
the Note Policy) and not to the Trustee or any Noteholder directly (unless a
Noteholder has previously paid such payment to the receiver, conservator,
debtor-in-possession or trustee in bankruptcy, in which case the Security
Insurer will make such payment to the Trustee for distribution to such
Noteholder upon proof of such payment reasonably satisfactory to the Security
Insurer).
(b) The Trustee shall promptly notify the Security Insurer of any
proceeding or the institution of any action (of which the Trustee has actual
knowledge) seeking the avoidance as a preferential transfer under applicable
bankruptcy, insolvency, receivership, rehabilitation or similar law (a
"Preference Claim") of any distribution made with respect to the Notes. Each
Holder, by its purchase of Notes, and the Trustee hereby agree that so long as
an Insurer Default shall not have occurred and be continuing, the Security
Insurer may at any time during the continuation of any proceeding relating to a
Preference Claim direct all matters relating to such Preference Claim including,
without limitation, (i) the direction of any appeal of any order relating to any
Preference Claim and (ii) the posting of any surety, supersedeas or performance
bond pending any such appeal at the expense of the Security Insurer, but subject
to reimbursement as provided in the Insurance Agreement. In addition, and
without limitation of the foregoing, as set forth in Section 615(c), the
Security Insurer shall be subrogated to, and each Noteholder and the Trustee
hereby delegate and assign, to the fullest extent permitted by law, the rights
of the Trustee and each Noteholder in the conduct of any proceeding with respect
to a Preference Claim, including, without limitation, all rights
- 40 -
<PAGE>
of any party to an adversary proceeding action with respect to any court
order issued in connection with any such Preference Claim.
ARTICLE SEVEN
The Trustee
SECTION 701. CERTAIN DUTIES AND RESPONSIBILITIES.
(a) Except during the continuance of an Event of Default,
(1) the Trustee undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture, the Servicing
Agreement or any other Related Document to which it is a party, and no
implied covenants or obligations shall be read into this Indenture
against the Trustee; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture, the
Servicing Agreement or any other Related Document to which it is a party;
but in the case of any such certificates or opinions which by any provision
hereof are specifically required to be furnished to the Trustee, the
Trustee shall be under a duty to examine the same to determine whether or
not they conform to the requirements of this Indenture.
(b) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in their exercise, as a
prudent man would exercise or use under the circumstances in the conduct of his
own affairs.
(c) No provision of this Indenture, the Servicing Agreement or any
other Related Document to which it is a party, shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act, or its own wilful misconduct; PROVIDED, that
(1) this subsection shall not be construed to limit the effect of
subsection (a) of this Section;
(2) the Trustee shall not be liable for any error of judgment made in
good faith by a Responsible Officer, unless it shall be proved that the
Trustee was negligent in ascertaining the pertinent facts;
- 41 -
<PAGE>
(3) the Trustee shall not be liable with respect to any action taken
or omitted to be taken by it in good faith in accordance with the direction
of the Security Insurer or the Holders of a majority of the Outstanding
Amount of the Notes, relating to 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 this Indenture with
respect to the Notes; and
(4) no provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder, or in the exercise of any
of its rights or powers, if it shall have reasonable grounds for believing
that repayment of such funds or adequate indemnity against such risk or
liability is not reasonably assured to it.
(d) Whether or not therein expressly so provided, every provision of
this Indenture relating to the conduct or affecting the liability of or
affording protection to the Trustee shall be subject to the provisions of
paragraphs (a), (b) and (c) of this Section.
(e) The Trustee shall not be liable for interest on any money
received by it.
(f) Money held in trust by the Trustee need not be segregated from
other funds except to the extent required by law or the terms of this Indenture
or the Servicing Agreement.
(g) The Trustee shall, upon one Business Day's prior notice to the
Trustee, permit any representative of the Security Insurer or the Agent, during
the Trustee's normal business hours, to examine all books of account, records,
reports and other papers of the Trustee relating to the Notes, to make copies
and extracts therefrom and to discuss the Trustee's affairs and actions, as such
affairs and actions relate to the Trustee's duties with respect to the Notes,
with the Trustee's officers and employees responsible for carrying out the
Trustee's duties with respect to the Notes.
(h) In no event shall the Trustee be required to perform, or be
responsible for the manner of performance of, any of the obligations of the
Servicer, or any other party, under the Servicing Agreement except during such
time, if any, as the Trustee, in its capacity as Backup Servicer shall be the
successor to, and be vested with the rights, powers, duties and privileges of
the Servicer in accordance with the terms of the Servicing Agreement.
(i) The Trustee shall, and hereby agrees that it will, perform all of
the obligations and duties required of it under the Servicing Agreement and all
other Related Documents to which it is a party.
- 42 -
<PAGE>
(j) The Trustee shall, and hereby agrees that it will, hold the Note
Policy in trust, and will hold any proceeds of any claim on the Note Policy in
trust solely for the use and benefit of the Noteholders.
(k) Without limiting the generality of this Section 701, the Trustee
shall have no duty (i) to see to any recording, filing or depositing of this
Indenture or any agreement referred to herein or any financing statement
evidencing a security interest in the Financed Vehicles, or to see the
maintenance of any such recording or filing or depositing or to any recording,
refiling or redepositing of any thereof, (ii) to see to any insurance of the
Financed Vehicles or Obligors or to the effect or maintain any such insurance,
(iii) to see to the payment or discharge of any tax, assessment or other
governmental charge or any Lien or encumbrance of any kind owing with respect
to, assessed or levied against any part of the Trust Estate, (iv) to confirm or
verify the contents of any reports or certificates delivered to the Trustee
pursuant to this Indenture or the Servicing Agreement believed by the Trustee to
be genuine and to have been signed or presented by the proper party or parties,
or (v) to inspect the Financed Vehicles at any time or ascertain or inquire as
to the performance or observance of any of the Issuer's, the Seller's or the
Servicer's representation, warranties or covenants or the Servicer's duties and
obligations as Servicer under the Agreement.
SECTION 702. NOTICE OF DEFAULTS.
If a Default occurs and is continuing and if it is known to a
Responsible Officer of the Trustee, the Trustee shall notify the Agent and each
Rating Agency of any such Default promptly after it occurs.
SECTION 703. CERTAIN RIGHTS OF TRUSTEE.
Subject to the provisions of Section 701:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or
document believed by it to be genuine and to have been signed or presented
by the proper party or parties;
(b) any request or direction of the Issuer mentioned herein shall be
sufficiently evidenced by an Issuer Request or Issuer Order and any
resolution of the Board of Directors may be sufficiently evidenced by a
Board Resolution;
(c) whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established prior to
taking, suffering or omitting any action hereunder, the Trustee (unless
other evidence be
- 43 -
<PAGE>
herein specifically prescribed) may, in the absence of
bad faith on its part, request and rely upon an Officers' Certificate;
(d) the Trustee may consult with counsel and the written advice of
such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or
omitted by it hereunder in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction
of any of the Security Insurer or the Holders pursuant to this Indenture,
unless the Security Insurer or such Holders shall have offered to the
Trustee reasonable security or indemnity against the costs, expenses and
liabilities which might be incurred by it in compliance with such request
or direction;
(f) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or
document, but the Trustee, in its discretion, may make such further inquiry
or investigation into such facts or matters as it may see fit, and, if the
Trustee shall determine to make such further inquiry or investigation, it
shall be entitled to examine the books, records and premises of the Issuer,
personally or by agent or attorney;
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by
it hereunder.
SECTION 704. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF NOTES.
The recitals contained herein, in any Indenture Supplement and in the
Notes, except the Trustee's certificates of authentication, shall be taken as
the statements of the Issuer, and the Trustee or any Authenticating Agent
assumes no responsibility for their correctness. The Trustee makes no
representations as to the validity or sufficiency of this Indenture or of the
Notes, the Collateral or the Trust Estate. The Trustee or any Authenticating
Agent shall not be accountable for the use or application by the Issuer of Notes
or the proceeds thereof.
SECTION 705. MAY HOLD NOTES.
The Trustee, any Authenticating Agent, any Paying Agent, any Note
Registrar or any other agent of the Issuer, in
- 44 -
<PAGE>
its individual or any other capacity, may become the owner or pledgee of
Notes and, subject to Sections 708 and 713, may otherwise deal with the
Issuer with the same rights it would have if it were not Trustee,
Authenticating Agent, Paying Agent, Note Registrar or such other agent.
SECTION 706. MONEY HELD IN TRUST.
Money held by the Trustee in trust hereunder must be segregated from
other funds. The Trustee shall be under no liability for interest on any money
received by it and held by it hereunder in trust except as otherwise agreed with
the Issuer.
SECTION 707. COMPENSATION AND INDEMNITY.
(a) OFL in a separate letter agreement (the "Letter Agreement") has
covenanted and agreed to pay to the Trustee, and the Trustee shall be entitled
to, certain annual fees, which shall not be limited by any law on compensation
of a Trustee of an express trust. In the Letter Agreement, OFL has also agreed
to reimburse the Trustee for all reasonable out-of-pocket expenses incurred or
made by it, including costs of collection, in addition to the compensation for
its services. Such expenses shall include the reasonable compensation and
expenses, disbursements and advances of the Trustee's agents, counsel,
accountants and experts. Pursuant to the Letter Agreement, OFL has agreed to
indemnify the Trustee against any and all loss, liability or expense (including
attorneys' fees) incurred by it in connection with the administration of this
trust and the performance of its duties hereunder.
(b) If notwithstanding the provisions of the Letter Agreement, OFL
fails to pay any fee or expense due to the Trustee pursuant to the terms of the
Letter Agreement, the Trustee shall be entitled to a distribution in respect of
such amount pursuant to Section 3.6(a)(iii) or Section 3.6(b)(iii) of the
Servicing Agreement. OFL's payment obligations to the Trustee pursuant to this
Section shall survive the discharge of this Indenture. When the Trustee incurs
expenses after the occurrence of a Default specified in Section 601(v) or (vi)
with respect to the Issuer, the expenses are intended to constitute expenses of
administration under Title 11 of the United States Code or any other applicable
Federal or state bankruptcy, insolvency or similar law. Notwithstanding
anything else set forth in this Indenture or the Related Documents, the Trustee
agrees that the obligations of the Issuer (but not OFL) to the Trustee hereunder
and under the Related Documents shall be recourse to the Trust Estate only. In
addition, the Trustee agrees that its recourse to the Issuer, the Trust Estate
and the Seller shall be limited to the right to receive the distributions
referred to in the first sentence of this Section 707(b).
- 45 -
<PAGE>
SECTION 708. DISQUALIFICATION; CONFLICTING INTERESTS.
If this Indenture is qualified under the Trust Indenture Act and if
the Trustee has or shall acquire a conflicting interest within the meaning of
the Trust Indenture Act, the Trustee shall either eliminate such interest or
resign, to the extent and in the manner provided by, and subject to the
provisions of, the Trust Indenture Act and this Indenture.
SECTION 709. CORPORATE TRUSTEE REQUIRED; ELIGIBILITY.
There shall at all times be a Trustee hereunder, which (a) shall be a
commercial bank or trust company organized and doing business under the laws
of the United States of America or any State thereof,(b) shall have a
combined capital and surplus of at least $50,000,000 and a long-term deposit
rating of at least Baa3 from Moody's or otherwise be acceptable to Moody's
and (c) shall be authorized to exercise corporate trust powers and be subject
to supervision or examination by Federal or State authority. If such
commercial bank or trust company publishes reports of condition at least
annually, pursuant to law or to the requirements of said supervising or
examining authority, then for the purposes of this Section, the combined
capital and surplus of such commercial bank or trust company shall be deemed
to be its combined capital and surplus as set forth in its most recent report
of condition so published. If at any time the Trustee shall cease to be
eligible in accordance with the provisions of this Section, it shall resign
immediately in the manner and with the effect hereinafter specified in this
Article.
SECTION 710. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR.
(1) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee in accordance with the
applicable requirements of Section 711.
(2) The Trustee may resign at any time with respect to the Notes by
giving written notice thereof to the Issuer. If the instrument of acceptance by
a successor Trustee required by Section 711 shall not have been delivered to the
Trustee within 30 days after the giving of such notice of resignation, the
resigning Trustee may petition any court of competent jurisdiction for the
appointment of a successor Trustee with respect to the Notes.
(3) The Trustee may be removed at any time with respect to the Notes
by Act of the Holders of a majority of the Outstanding Amount of the Notes,
delivered to the Trustee and to the Issuer.
(4) If at any time:
- 46 -
<PAGE>
(1) The Trustee shall fail to comply with Section 708 after written
request therefor by the Issuer or by any Holder who has been a
bona fide Holder of a Note for at least six months, or
(2) the Trustee shall cease to be eligible under Section 709 and
shall fail to resign after written request therefor by the Issuer
or by any such Holder, or
(3) the Trustee shall become incapable of acting or shall be adjudged
a bankrupt or insolvent or a receiver of the Trustee or of its
property shall be appointed or any public officer shall take
charge or control of the Trustee or of its property or affairs
for the purpose of rehabilitation, conservation or liquidation,
then, in any such case, the Issuer may, with the consent of the Security Insurer
(and at the request of the Security Insurer shall, unless an Insurer Default
shall have occurred and be continuing) remove the Trustee.
(5) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause, with
respect to the Notes, the Issuer shall promptly appoint a successor Trustee
acceptable to the Security Insurer (so long as an Insurer Default shall not have
occurred and be continuing) and shall comply with the applicable requirements of
Section 711. If the Issuer fails to appoint such a successor Trustee, the
Security Insurer may appoint a successor Trustee.
(6) The Issuer shall give notice of each resignation and each removal
of the Trustee with respect to the Notes and each appointment of a successor
Trustee with respect to the Notes by mailing written notice of such event by
first-class mail, postage prepaid, to all holders of Notes as their names and
addresses appear in the Note Register. Each notice shall include the name of
the successor Trustee with respect to the Notes and the address of its Corporate
Trust Office.
SECTION 711. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR.
(a) In case of the appointment hereunder of a successor Trustee
with respect to the Notes, every such successor Trustee so appointed shall
execute, acknowledge and deliver to the Issuer and to the retiring Trustee an
instrument accepting such appointment, and thereupon the resignation or
removal of the retiring Trustee shall become effective and such successor
Trustee, without any further act, deed or conveyance, shall become vested
with all the rights, powers, trusts and duties of the retiring Trustee; but,
on the request of the Issuer or the successor Trustee, such retiring Trustee
shall, upon payment of its charges, execute and deliver an instrument
transferring to
- 47 -
<PAGE>
such successor Trustee all the rights, powers and trusts of the retiring
Trustee and shall duly assign, transfer and deliver to such successor Trustee
all property and money held by such retiring Trustee hereunder.
(b) Upon request of any such successor Trustee, the Issuer shall
execute any and all instruments for more fully and certainly vesting in and
confirming to such successor Trustee all such rights, powers and trusts referred
to in paragraph (a) of this Section.
(c) No successor Trustee shall accept its appointment unless at the
time of such acceptance such successor Trustee shall be qualified and eligible
under this Article.
SECTION 712. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS.
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all the corporate trust business
of the Trustee, shall be the successor of the Trustee hereunder, provided such
corporation shall be otherwise qualified and eligible under this Article,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto. The Trustee shall provide the Rating Agencies prompt
notice of any such transaction. In case any Notes shall have been
authenticated, but not delivered, by the Trustee then in office, any successor
by merger, conversion or consolidation to such authenticating Trustee may adopt
such authentication and deliver the Notes so authenticated with the same effect
as if such successor Trustee had itself authenticated such Notes.
SECTION 713. PREFERENTIAL COLLECTION OF CLAIMS AGAINST ISSUER.
If this Indenture is ever qualified under the Trust Indenture Act,
then the provisions of Section 311 of the Trust Indenture Act shall govern.
SECTION 714. APPOINTMENT OF AUTHENTICATING AGENT.
As of the date of the Indenture and at any time when any of the Notes
remain Outstanding, the Trustee may appoint an Authenticating Agent or Agents
with respect to one or more Tranche of Notes which shall be authorized to act on
behalf of the Trustee to authenticate Notes of such Tranche issued upon
exchange, registration of transfer or partial prepayment thereof, or pursuant to
Section 406, and Notes so authenticated shall be entitled to the benefits of
this Indenture and shall be valid and obligatory for all purposes as if
authenticated by the Trustee hereunder. Wherever reference is made in this
Indenture to the authentication and delivery of Notes by the Trustee upon
- 48 -
<PAGE>
exchange, registration of transfer or partial prepayment thereof or the
Trustee's certificate of authentication in connection therewith, such reference
shall be deemed to include authentication and delivery on behalf of the Trustee
by an Authenticating Agent and a certificate of authentication executed on
behalf of the Trustee by an Authenticating Agent. Each Authenticating Agent
shall be acceptable to the Issuer and shall at all times be a corporation
organized and doing business under the laws of the United States of America or
any State thereof, authorized under such laws to act as Authenticating Agent,
having a combined capital and surplus of not less than $50,000,000 and subject
to supervision or examination by Federal or State authority. If such
Authenticating Agent publishes reports of condition at least annually, pursuant
to law or to the requirements of said supervising or examining authority, then
for the purposes of this Section, the combined capital and surplus of such
Authenticating Agent shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so published. If at any time
an Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, such Authenticating Agent shall resign immediately
in the manner and with the effect specified in this Section.
Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any corporation succeeding to the corporate agency or
corporate trust business of an Authenticating Agent, shall continue to be an
Authenticating Agent, provided such corporation shall be otherwise eligible
under this Section, without the execution or filing of any paper or any further
act on the part of the Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving written
notice thereof to the Trustee and to the Issuer. The Trustee may at any time
terminate the agency of an Authenticating Agent by giving written notice thereof
to such Authenticating Agent and to the Issuer. Upon receiving such a notice of
resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, the Trustee may appoint a successor Authenticating
Agent which shall be acceptable to the Issuer and shall mail written notice of
such appointment by first-class mail, postage prepaid, to all Holders of Notes,
as their names and addresses appear in the Note Register. Any successor
Authenticating Agent upon acceptance of its appointment hereunder shall become
vested with all the rights, powers and duties of its predecessor hereunder, with
like effect as if originally named as an Authenticating Agent. No successor
Authenticating Agent shall be appointed unless eligible under the provisions of
this Section. No resignation or termination of an Authenticating Agent shall
become effective until a successor Authenticating Agent shall be appointed and
- 49 -
<PAGE>
qualified hereunder or the Trustee assumes the duties of Authenticating Agent
hereunder.
The Issuer agrees to pay to each Authenticating Agent from time to
time reasonable compensation for its services under this Section.
In the event an Authenticating Agent is appointed under this
Indenture, the Trustee shall incur no liability for such appointment or for any
misconduct or negligence of such Authenticating Agent, including without
limitation, its authentication of the Notes upon original issuance or pursuant
to Section 406. In the event the Trustee does incur liability for any such
misconduct or negligence of the Authenticating Agent, the Issuer agrees to
indemnify the Trustee for, and hold it harmless against, any such liability,
including the costs and expenses of defending itself against any liability in
connection with such misconduct or negligence of the Authenticating Agent.
If an appointment with respect to one or more Tranches is made
pursuant to this Section, the Notes of such Tranche may have endorsed thereon,
in addition to the Trustee's certificate of authentication, an alternate
certificate of authentication in the following form:
This is one of the Notes referred to in the within-mentioned
Indenture.
Norwest Bank Minnesota, National
Association
As Trustee
By: ___________________________
As Authenticating Agent
By: _______________________
Authorized Officer
SECTION 715. PAYING AGENT.
(a) The payment responsibilities for the Notes shall be performed by
a Paying Agent, appointed by the Issuer and, so long as no Insurer Default
shall have occurred and be continuing, consented to by the Security Insurer,
which (a) shall be a commercial bank or trust company organized and doing
business under the laws of the United States or of any State thereof, (b) shall
have a combined capital and surplus of at least $50,000,000 and a long-term
deposits rating of at least Baa3 from Moody's or otherwise be acceptable to
Moody's, and (c) shall be authorized to exercise corporate trust powers and be
subject to supervision or examination by Federal or State authority.
- 50 -
<PAGE>
Norwest Bank Minnesota, National Association, is hereby initially appointed
Paying Agent for the purpose of making payments on the Notes as herein
provided.
(b) Upon the resignation or removal of the Paying Agent, the Trustee
shall, with the consent of the Issuer and, so long as no Insurer Default shall
have occurred and be continuing, promptly appoint a successor Paying Agent
meeting the requirements of Section 715(a) to perform the duties and exercise
the rights of the Paying Agent pursuant to this Indenture. Such resignation or
removal shall not be effective until a successor Paying Agent is appointed
hereunder. Upon the appointment of a successor Paying Agent, the Paying Agent
shall transfer all funds held by it hereunder to such successor.
SECTION 716. APPOINTMENT OF CO-TRUSTEE OR SEPARATE TRUSTEE.
(a) Notwithstanding any other provisions of this Indenture, at any
time, for the purpose of meeting any legal requirement or any jurisdiction in
which any part of the Trust may at the time be located, the Trustee, with the
consent of the Security Insurer (so long as an Insurer Default shall not have
occurred and be continuing), shall have the power and may execute and deliver
all instruments to appoint one or more Persons to act as a co-trustee or
co-trustees, or separate trustee or separate trustees, of all or any part of
the Trust, and to vest in such Person or Persons, in such capacity and for
the benefit of the Noteholders, such title to the Trust, or any part hereof,
and subject to the other provisions of this Section, such powers, duties,
obligations, rights and trusts as the Trustee may consider necessary or
desirable. No co-trustee or separate trustee hereunder shall be required to
meet the terms of eligibility as a successor Trustee under Section 709.
(b) Every separate trustee and co-trustee shall, to the extent
permitted by law, be appointed and act subject to the following provisions and
conditions:
(i) all rights, powers, duties and obligations conferred or imposed
upon the Trustee shall be conferred or imposed upon and exercised or
performed by the Trustee and such separate trustee or co-trustee jointly
(it being understood that such separate trustee or co-trustee is not
authorized to act separately without the Trustee joining in such act),
except to the extent that under any law of any jurisdiction in which any
particular act or acts are to be performed the Trustee shall be incompetent
or unqualified to perform such act or acts, in which event such rights,
powers, duties and obligations (including the holding of title to the Trust
or any portion thereof in any such jurisdiction) shall be exercised and
performed singly by such separate trustee or co-trustee, but solely at the
direction of the Trustee;
- 51 -
<PAGE>
(ii) no trustee hereunder shall be personally liable by reason of any
act or omission of any other trustee hereunder, and
(iii) the Trustee may at any time accept the resignation of or remove
any separate trustee or co-trustee.
(c) Any notice, request or other writing given to the Trustee shall be
deemed to have been given to each of the then separate trustees and co-trustees,
as effectively as if given to each of them. Each instrument appointing any
separate trustee or co-trustee shall refer to this Agreement and the conditions
of this Article. Each separate trustee and co-trustee, upon its acceptance of
the trusts conferred, shall be vested with the estates or property specified in
its instrument of appointment, either jointly with the Trustee or separately, as
may be provided therein, subject to all the provisions of this Indenture,
specifically including every provision of this Indenture relating to the conduct
of, affecting the liability of, or affording protection to, the Trustee. Every
such instrument shall be filed with the Trustee.
(d) Any separate trustee or co-trustee may at any time constitute the
Trustee, its agent or attorney-in-fact with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of this
Indenture on its behalf and in its name. If any separate trustee or co-trustee
shall die, become incapable of acting, resign or be removed, all of its estates,
properties, rights, remedies and trusts shall vest in and be exercised by the
Trustee, to the extent permitted by law, without the appointment of a new
successor trustee.
ARTICLE EIGHT
Holders' Lists and Reports by Trustee and Issuer
SECTION 801. ISSUER TO FURNISH TRUSTEE NAMES AND ADDRESSES OF HOLDERS.
The Issuer will furnish or cause to be furnished to the Trustee (a)
not more than five days after the earlier of (i) each Record Date and (ii)
three months after the last Record Date, a list, in such form as the Trustee
may reasonably require, of the names and addresses of the Holders of Notes as
of such Record Date, (b) at such other times as the Trustee may request in
writing, within 30 days after receipt by the Issuer of any such request, a
list of similar form and content as of a date not more than 10 days prior to
the time such list is furnished; PROVIDED, HOWEVER, that so long as the
Trustee is the Note Registrar, no such list shall be required to be
furnished. The Trustee or, if the Trustee is not the Note Registrar, the
Issuer shall furnish to the Security Insurer in writing on an annual basis on
each November 30 and at such other times as the Security Insurer may request
a copy of the list.
- 52 -
<PAGE>
SECTION 802. PRESERVATION OF INFORMATION; COMMUNICATIONS TO HOLDERS.
(a) The Trustee shall preserve, in as current a form as is
reasonably practicable, the names and addresses of Holders contained in the
most recent list furnished to the Trustee as provided in Section 801 and the
names and addresses of Holders received by the Trustee in its capacity as
Note Registrar. The Trustee may destroy any list furnished to it as provided
in Section 801 upon receipt of a new list so furnished.
(b) Every Holder of Notes, by receiving and holding the same, agrees
with the Issuer and the Trustee that neither the Issuer nor the Trustee nor any
agent of either of them shall be held accountable by reason of the disclosure of
any such information as to the names and addresses of the Holders in accordance
with Section 802(b), regardless of the source from which such information was
derived, and that the Trustee shall not be held accountable by reason of mailing
any material pursuant to a request made under Section 802(b).
SECTION 803. REPORTS BY TRUSTEE.
If this Indenture is ever qualified under the Trust Indenture Act,
then the Trustee shall comply with the provisions of Section 313 of the Trust
Indenture Act.
SECTION 804. REPORTS BY ISSUER.
If this Indenture is qualified under the Trust Indenture Act, the
Issuer shall:
(1) file with the Trustee, within 15 days after the Issuer is
required to file the same with the Commission, copies of the annual reports
and of the information, documents and other reports (or copies of such
portions of any of the foregoing as the Commission may from time to time by
rules and regulations prescribe) which the Issuer may be required to file
with the Commission pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934; or, if the Issuer is not required to file
information, documents or reports pursuant to either of said Sections, then
it shall file with the Trustee and the Commission, in accordance with rules
and regulations prescribed from time to time by the Commission, such of the
supplementary and periodic information, documents and reports which may be
required pursuant to Section 13 of the Securities Exchange Act of 1934 in
respect of a security listed and registered on a national securities
exchange as may be prescribed from time to time in such rules and
regulations;
(2) file with the Trustee and the Commission, in accordance with
rules and regulations prescribed from time to time by the Commission, such
additional information, documents and reports with respect to compliance by
the
- 53 -
<PAGE>
Issuer with the conditions and covenants of this Indenture as may be
required from time to time by such rules and regulations;
(3) transmit by mail to all Holders, as their names and addresses
appear in the Note Register, and each Rating Agency within 30 days after
the filing thereof with the Trustee, such summaries of any information,
documents and reports required to be filed by the Issuer pursuant to
paragraphs (1) and (2) of this Section as may be required by rules and
regulations prescribed from time to time by the Commission; and
(4) furnish any other periodic reports as required by the Trust
Indenture Act.
ARTICLE NINE
Indenture Supplements
SECTION 901. INDENTURE SUPPLEMENTS WITHOUT CONSENT OF HOLDERS.
(a) Without the consent of any Holders but with the consent of the
Security Insurer (unless an Insurer Default shall have occurred and be
continuing), the Agent and the Trustee (the consent of which shall not be
withheld or delayed with respect to any Indenture Supplement that has been
consented to by the Security Insurer that does not materially and adversely
affect the Trustee), and with prior written notice to the Rating Agencies and
the Issuer, when authorized by an Issuer Order, at any time and from time to
time, may enter into one or more Indenture Supplements, in form satisfactory to
the Trustee, for any of the following purposes:
(1) to evidence the succession, in compliance with the applicable
provisions hereof, of another corporation to the Issuer and the assumption
by any such successor of the covenants of the Issuer herein and in the
Notes; or
(2) to add to the covenants of the Issuer for the benefit of the
Holders of the Notes or to surrender any right or power herein conferred
upon the Issuer; or
(3) to add any additional Events of Default; or
(4) to add to or change any of the provisions of this Indenture to
such extent as shall be necessary to permit or facilitate the issuance of
Notes in bearer form, registrable or not registrable as to principal, and
with or without interest coupons, or to permit or facilitate the issuance
of Notes in uncertificated form, or to facilitate the issuance of Notes in
global form through the facilities of a Depository; or
- 54 -
<PAGE>
(5) to modify the restrictions on and procedures for resale and other
transfers of the Notes to reflect any change in applicable law or
regulation (or the interpretation thereof) or in practices relating to the
resale or transfer of restricted securities generally; or
(6) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Notes and to add to or
change any of the provisions of this Indenture as shall be necessary to
provide for or facilitate the administration of the trusts hereunder by
more than one Trustee, pursuant to the requirements of Section 711(b); or
(7) to modify, eliminate or add to the provisions of this Indenture
to such extent as shall be necessary to qualify, requalify or continue the
qualification of this Indenture (including any supplemental indenture)
under the Trust Indenture Act, or under any similar Federal statute
hereafter enacted, and to add to this Indenture such other provisions as
may be expressly permitted by the Trust Indenture Act, excluding, however,
the provisions referred to in Section 316(a)(2) of the Trust Indenture Act
as in effect at the date as of which this instrument was executed or any
corresponding provision in any similar Federal statute hereinafter enacted;
or
(8) to convey, transfer and assign to the Trustee Property to secure
the Notes, and to correct or amplify the description of any Property at any
time subject to this Indenture or to assure, convey, and confirm unto the
Trustee or the Collateral Agent any Property subject or required to be
subject to this Indenture; or
(9) to cure any ambiguity, to correct or supplement any provision
herein which may be inconsistent with any other provision herein, or to
make any other provisions with respect to matters or questions arising
under this Indenture, as long as such action shall not adversely affect the
interests of the Holders of Notes in any material respect.
(b) The Issuer and the Trustee, when authorized by an Issuer Order,
may, also without the consent of any of the Holders of the Notes but with the
consent of the Security Insurer (unless an Insurer Default shall have occurred
and be continuing) and with prior written notice to the Agent and the Rating
Agencies, enter into an Indenture Supplement or Supplements for the purpose of
adding any provisions to, or changing in any manner or eliminating any of the
provisions of, this Indenture or of modifying in any manner the rights of the
Holders of the Notes under this Indenture; PROVIDED, HOWEVER, that such action
shall not, as evidenced by an Opinion of Counsel, adversely affect in any
material respect the interests of any Noteholder or Permitted Assignee.
- 55 -
<PAGE>
SECTION 902. INDENTURE SUPPLEMENTS WITH CONSENT OF HOLDERS.
The Issuer and the Trustee, when authorized by an Issuer Order, also
may, with prior notice to the Rating Agencies, with the consent of the Security
Insurer (unless an Insurer Default shall have occurred and be continuing), and
with the consent of the Agent, by notice delivered to the Issuer and the
Trustee, enter into an Indenture Supplement or Supplements hereto for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of this Indenture or of modifying in any manner the rights of
the Holders of Notes under this Indenture; PROVIDED, that, subject to the
express rights of the Security Insurer under the Related Documents, no such
Indenture Supplement shall, without the consent of the Holder of each
Outstanding Note affected thereby,
(1) change the date of payment any installment of principal of or
interest on any Note, or reduce the principal amount thereof or the rate
of, or method of computation of the rate of, interest thereon or the
Prepayment Price with respect thereto, change the provision of this
Indenture relating to the application or collections on, or the proceeds of
the sale of, the Trust Estate to payment of principal of or interest on the
Notes, or change any place of payment where, or the coin or currency in
which, any Note or the interest thereon is payable, or impair the right to
institute suit for the enforcement of any such payment on or after the
respective due dates thereof, or
(2) reduce the percentage of the Outstanding Amount of the Notes, the
consent of whose Holders is required for any such Indenture Supplement, or
the consent of whose Holders is required for any waiver (of compliance with
certain provisions of this Indenture or certain defaults hereunder and
their consequences) provided for in this Indenture, or
(3) permit the creation of any lien prior to the lien created by the
Security Agreement with respect to any part of the Trust Estate, or
terminate the lien created by the Security Agreement on any Property
subject hereto or deprive any Holder of the security afforded by the lien
of the Security Agreement, except to the extent expressly permitted by this
Indenture or the Security Agreement, or
(4) modify any of the provisions of this Section or Section 610,
except to increase any such percentage or to provide that certain other
provisions of this Indenture or the Related Document cannot be modified or
waived without the consent of the Holder of each Outstanding Note affected
thereby, or
(5) modify or alter the provisions of the second proviso to the
definition of the term "Outstanding."
- 56 -
<PAGE>
PROVIDED, FURTHER, that no such Indenture Supplement, without the consent
of the Agent shall have a material adverse effect on the rights of the
Agent.
The Issuer may, but shall not be obligated to, fix a record date for
the purpose of determining the Persons entitled to consent to any Indenture
Supplement hereto. If a record date is fixed, the Holders on such record date
or their duly designated proxies, and only such Persons, shall be entitled to
consent to such Indenture Supplement, whether or not such Holders remain Holders
after such record date; PROVIDED, that unless such consent shall have become
effective by virtue of the requisite percentage having been obtained prior to
the date which is 90 days after such record date, any such consent previously
given shall automatically and without further action by any Holder be cancelled
and of no further effect.
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed Indenture Supplement, but it shall
be sufficient if such Act shall approve the substance thereof.
The Trustee may in its discretion determine whether or not any Notes
would be affected by any Indenture Supplement and any such determination shall
be conclusive upon the Holders of all Notes, whether theretofore or thereafter
authenticated and delivered hereunder. The Trustee shall not be liable for any
such determination made in good faith.
Promptly after the execution by the Issuer and the Trustee of any
Supplemental Indenture pursuant to this Section, the Trustee shall mail to the
Holders of the Notes to which such amendment or Supplemental Indenture relates a
notice setting forth in general terms the substance of such Supplemental
Indenture. Any failure of the Trustee to mail such notice, or any defect
therein, shall not, however, in any way impair or affect the validity of any
such Supplemental Indenture.
SECTION 903. EXECUTION OF INDENTURE SUPPLEMENTS.
In executing, or accepting the additional trusts created by, any
Indenture Supplement permitted by this Article or the modifications thereby of
the trusts created by this Indenture, the Trustee may receive, and (subject to
Section 701) shall be fully protected in relying upon, an Opinion of Counsel
stating that the execution of such Indenture Supplement is authorized or
permitted by this Indenture. The Trustee may, but shall not be obligated to,
enter into any such Supplemental Indenture which affects the Trustee's own
rights, duties or immunities under this Indenture or otherwise.
SECTION 904. EFFECT OF INDENTURE SUPPLEMENTS.
Upon the execution of any Indenture Supplement under this Article,
this Indenture shall be modified in accordance
-57-
<PAGE>
therewith, and such Indenture Supplement shall form a part of this Indenture
for all purposes; and every Holder of Notes theretofore or thereafter
authenticated and delivered hereunder shall be bound thereby.
SECTION 905. REFERENCE IN NOTES TO INDENTURE SUPPLEMENTS.
Notes authenticated and delivered after the execution of any Indenture
Supplement pursuant to this Article may, and shall if required by the Trustee,
bear a notation in form approved by the Trustee as to any matter provided for in
such Indenture Supplement. If the Issuer or the Trustee shall so determine, new
Notes so modified as to conform, in the opinion of the Trustee and the Issuer,
to any such Indenture Supplement may be prepared and executed by the Issuer and
authenticated and delivered by the Trustee in exchange for Outstanding Notes.
SECTION 906. RATING AGENCY CONFIRMATION.
No Indenture Supplement authorized and executed pursuant to this
Article Nine shall be effective until the Trustee shall have received
confirmation from the Rating Agencies that such Indenture Supplement shall not
result in a capital charge to the Security Insurer.
ARTICLE TEN
Covenants
The Issuer hereby covenants and agrees that so long as this Indenture
is in effect and any Notes remain Outstanding:
SECTION 1001. PAYMENT OF PRINCIPAL AND INTEREST.
The Issuer will duly and punctually pay the principal of and interest
on the Notes in accordance with the terms of the Notes and this Indenture.
Without limiting the foregoing, the Issuer will cause to be distributed all
amounts on deposit in the Note Distribution Account on a Payment Date. Amounts
properly withheld under the Code by any Person from a payment to any Noteholder
of interest or principal shall be considered as having been paid by the Issuer
to such Noteholder for all purposes of this Indenture.
SECTION 1002. MAINTENANCE OF OFFICE OR AGENCY.
The Issuer will maintain in The City of New York, the City of Chicago,
Illinois or the City of Minneapolis, Minnesota an office or agency where Notes
may be surrendered for registration of transfer or exchange and where notices
and demands to or upon the Issuer in respect of the Notes and this Indenture may
be served. The Issuer will give prompt written notice to the Trustee of the
location, and any change in the location, of such office or agency. If at any
time the Issuer
-58-
<PAGE>
shall fail to maintain any such required office or agency or shall fail to
furnish the Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the Corporate Trust Office of
the Trustee, and the Issuer hereby appoints the Trustee as its agent to
receive all such presentations, surrenders, notices and demands.
SECTION 1003. CONSOLIDATION, MERGER, SALE OF ASSETS.
(a) the Issuer shall not consolidate or merge with or into any other
Person, unless
(i) the Person (if other than the Issuer) formed by or surviving such
consolidation or merger shall be a Person organized and existing under the
laws of the United States of America or any State and shall expressly
assume, by an indenture supplemental hereto, executed and delivered to the
Trustee and the Agent, in form and substance satisfactory to the Trustee,
the Agent and the Security Insurer (so long as no Insurer Default shall
have occurred and be continuing), the due and punctual payment of the
principal of and interest on all Notes and the performance or observance of
every agreement and covenant of this Indenture and each other Related
Document on the part of the Issuer to be performed or observed, all as
provided herein;
(ii) immediately after giving effect to such transaction, no Default
or Event of Default shall have occurred and be continuing;
(iii) the Rating Agency Condition shall have been satisfied with
respect to such transaction;
(iv) any action as is necessary to maintain the lien and security
interest created in favor of the Collateral Agent by the Security Agreement
shall have been taken;
(v) the Issuer shall have delivered to the Trustee and the Agent an
Officers' Certificate and an Opinion of Counsel (which shall describe the
actions taken as required by clause (a)(iv) of this Section 1003 or that no
such actions will be taken) each stating that such consolidation or merger
and such supplemental indenture comply with this Article and that all
conditions precedent herein provided for relating to such transaction have
been complied with (including any filing required by the Exchange Act); and
(vi) so long as no Insurer Default shall have occurred and be
continuing, the Issuer shall have given the Security Insurer written notice
of such consolidation or merger at least 20 Business Days prior to the
consummation of such action and shall have received the prior written
approval of the Security Insurer of such consolidation or merger and the
Issuer or the Person (if other than the Issuer) formed by or surviving such
consolidation or merger has a net worth,
-59-
<PAGE>
immediately after such consolidation or merger, that is (a) greater than
zero and (b) not less than the net worth of the Issuer immediately prior to
giving effect to such consolidation or merger.
(b) The Issuer shall not convey or transfer all or substantially all
of its properties or assets, including those included in the Trust Estate, to
any Person (except as expressly permitted by the Indenture, the Security
Agreement, the Repurchase Agreement or the Servicing Agreement), unless
(i) the Person that acquires by conveyance or transfer the
properties and assets of the Issuer shall (A) be a United States citizen
or a Person organized and existing under the laws of the United States of
America or any State, (B) expressly assume, by an indenture supplemental
hereto, executed and delivered to the Trustee and the Agent in form and
substance satisfactory to the Trustee, the Agent and the Security Insurer
(so long as no Insurer Default shall have occurred and be continuing),
the due and punctual payment of the principal of and interest on all
Notes and the performance or observance of every agreement and covenant
of this Indenture and each Related Document on the part of the Issuer to
be performed or observed, all as provided herein, (C) expressly agree by
means of such supplemental indenture that all right, title and interest
so conveyed or transferred shall be subject and subordinate to the rights
of Holders of the Notes, (D) unless otherwise provided in such
Supplemental Indenture, expressly agree to indemnify, defend and hold
harmless the Issuer against and from any loss, liability or expense
arising under or related to this Indenture and the Notes and (E)
expressly agree by means of such supplemental indenture that such Person
(or if a group of Persons, then one specified Person) shall make all
filings with the Commission (and any other appropriate Person) required
by the Exchange Act in connection with the Notes;
(ii) immediately after giving effect to such transaction, no Default
or Event of Default shall have occurred and be continuing;
(iii) the Rating Agency Condition shall have been satisfied with
respect to such transaction;
(iv) the Issuer shall have received an Opinion of Counsel which shall
be delivered to and shall be satisfactory to the Trustee, the Agent and the
Security Insurer (so long as no Insurer Default shall have occurred and be
continuing) to the effect that such transaction will not have any material
adverse tax consequence to the Issuer, the Security Insurer or any
Noteholder;
-60-
<PAGE>
(v) any action as is necessary to maintain the lien and security
interest created in favor of the Collateral Agent by the Security Agreement
shall have been taken;
(vi) the Issuer shall have delivered to the Trustee and the Agent an
Officers' Certificate and an Opinion of Counsel (which shall describe the
actions taken as required by clause (b)(v) of this Section 1003 or that no
such actions will be taken) each stating that such conveyance or transfer
and such supplemental indenture comply with this Article and that all
conditions precedent herein provided for relating to such transaction have
been complied with (including any filing required by the Exchange Act); and
(vii) so long as no Insurer Default shall have occurred and be
continuing, the Issuer shall have given the Security Insurer written notice
of such conveyance or transfer of properties or assets at least 20 Business
Days prior to the consummation of such action and shall have received the
prior written approval of the Security Insurer of such conveyance or
transfer and the Person acquiring by conveyance or transfer the properties
or assets of the Issuer has a net worth, immediately after such conveyance
or transfer, that is (a) greater than zero and (b) not less than the net
worth of the Issuer immediately prior to giving effect to such conveyance
or transfer.
SECTION 1004. NEGATIVE COVENANTS.
Until the Termination Date, the Issuer shall not:
(i) except as expressly permitted by this Indenture, the Security
Agreement, the Repurchase Agreement or the Servicing Agreement, sell,
transfer, exchange or otherwise dispose of any of the properties or assets
constituting the Trust Estate, unless directed to do so by the Controlling
Party;
(ii) claim any credit on, or make any deduction from the principal or
interest in respect of, the Notes (other than amounts properly withheld
from such payments under the Code) or assert any claim against any present
or former Noteholder by reason of the payment of the taxes levied or
assessed upon any part of the Trust Estate; or
(iii) (A) permit the validity or effectiveness of this Indenture to
be impaired, or permit the first priority perfected lien in favor of the
Collateral Agent created by the Security Agreement to be amended,
hypothecated, subordinated, terminated or discharged, or permit any Person
to be released from any covenants or obligations with respect to the Notes
under this Indenture except as may be expressly permitted hereby, (B)
permit any lien, charge, excise, claim, security interest, mortgage or
other encumbrance (other than the lien in favor of the Collateral
-61-
<PAGE>
Agent created by the Security Agreement) to be created on or extend to or
otherwise arise upon or burden the Trust Estate or any part thereof or any
interest therein or the proceeds thereof (other than tax liens, mechanics'
liens and other liens that arise by operation of law, in each case on a
Financed Vehicle and arising solely as a result of an action or omission of
the related Obligor), (C) permit the lien in favor of the Collateral Agent
created by the Security Agreement not to constitute a valid first priority
(other than with respect to any such tax, mechanics' or other lien)
security interest in the Trust Estate, or (D) amend, modify or fail to
comply with the provisions of the Related Documents without the prior
written consent of the Controlling Party.
SECTION 1005. PERFORMANCE OF OBLIGATIONS; SERVICING OF RECEIVABLES.
(a) The Issuer will not take any action and will use its best efforts
not to permit any action to be taken by others that would release any Person
from any of such Person's material covenants or obligations under any instrument
or agreement included in the Trust Estate or that would result in the amendment,
hypothecation, subordination, termination or discharge of, or impair the
validity or effectiveness of, any such instrument or agreement, except as
expressly provided in this Indenture, the Security Agreement, the Servicing
Agreement or such other instrument or agreement.
(b) The Issuer may contract with other Persons acceptable to the
Security Insurer (so long as no Insurer Default shall have occurred and be
continuing) to assist it in performing its duties under this Indenture, and any
performance of such duties by a Person identified to the Trustee, the Agent and
the Security Insurer in an Officers' Certificate of the Issuer shall be deemed
to be action taken by the Issuer.
(c) The Issuer will punctually perform and observe all of its
obligations and agreements contained in this Indenture, the Related Documents
and in the instruments and agreements included in the Trust Estate, including
but not limited to filing or causing to be filed all UCC financing statements
and continuation statements required to be filed by the terms of this Indenture,
the Security Agreement, the Repurchase Agreement and the Servicing Agreement in
accordance with and within the time periods provided for herein and therein.
(d) If the Issuer shall have knowledge of the occurrence of a
Servicer Termination Event under the Servicing Agreement, the Issuer shall
promptly notify the Trustee, the Security Insurer and the Rating Agencies
thereof, and shall specify in such notice the action, if any, the Issuer is
taking with respect of such default. If a Servicer Termination Event shall
arise from the failure of the Servicer to perform any of its duties or
obligations under the Servicing Agreement with
-62-
<PAGE>
respect to the Receivables, the Issuer shall take all reasonable steps
available to it to remedy such failure.
(e) If an Insurer Default shall have occurred and be continuing and
if the Issuer has given notice of termination to the Servicer of the Servicer's
rights and powers pursuant to Section 5.2 of the Servicing Agreement, as
promptly as possible thereafter, the Issuer shall appoint a successor servicer
in accordance with Section 5.3 of the Servicing Agreement.
(f) Upon any termination of the Servicer's rights and powers pursuant
to the Servicing Agreement, the Issuer shall promptly notify the Trustee. As
soon as a successor Servicer is appointed, the Issuer shall notify the Trustee
of such appointment, specifying in such notice the name and address of such
successor Servicer.
(g) The Issuer agrees that it will not waive timely performance or
observance by the Servicer, the Backup Servicer, the Seller or OFL of their
respective duties under the Related Documents; (x) without the prior consent of
the Security Insurer (unless an Insurer Default shall have occurred and be
continuing) or (y) if the effect thereof would adversely affect the Holders of
the Notes.
SECTION 1006. OTHER INDEBTEDNESS.
The Issuer will not create, incur, assume or suffer to exist any
Indebtedness for borrowed money, whether current or funded, other than (i) the
Notes, (ii) any other Indebtedness permitted by or arising under the Related
Documents, and (iii) any indebtedness to which the Rating Agencies confirm
beforehand in writing will not result in a capital charge to the Security
Insurer.
SECTION 1007. GUARANTEES, LOANS, ADVANCES AND OTHER LIABILITIES.
The Issuer will not make any loan or advance credit to, or guaranty
(directly or indirectly by an instrument having the effect of assuring another's
payment or performance on any obligation) or otherwise become contingently
liable for any Indebtedness or other obligations of any other Person (other than
(i) by endorsement of instruments in the ordinary course of collection, (ii) by
operation of law and (iii) as otherwise permitted by the Related Documents)
unless the Rating Agencies have confirmed beforehand in writing that such action
will not result in capital charge to the Security Insurer.
SECTION 1008. DIVIDENDS; DISTRIBUTIONS.
The Issuer will not declare or pay any dividends in respect of, or
make any distributions upon any of the capital stock of the Issuer, if the
effect of such declaration, payment or distribution would be to reduce the sum
of the paid-in
-63-
<PAGE>
capital, paid-in surplus, retained earnings and deferred income (net of
anticipated taxes) of the Issuer to less than $10,000.
SECTION 1009. MONEY FOR NOTE PAYMENTS TO BE HELD IN TRUST.
All payments of amounts due and payable with respect to any Notes that
are to be made from amounts withdrawn from the Note Distribution Account shall
be made on behalf of the Issuer by the Trustee or by another Paying Agent, and
no amounts so withdrawn from the Note Distribution Account for payments of Notes
shall be paid over to the Issuer.
On or before each Payment Date, the Issuer shall, subject to the
provisions hereof, deposit or cause to be deposited in the Note Distribution
Account from amounts specified therefor in the Servicing Agreement and the other
Related Documents an aggregate sum sufficient to pay the amounts then becoming
due, such sum to be held in trust for the benefit of the Persons entitled
thereto and (unless the Paying Agent is the Trustee) shall promptly notify the
Trustee of its action or failure so to act.
The Issuer will cause each Paying Agent other than the Trustee to
execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee, subject to the provisions of this Section, that
such Paying Agent will:
(1) hold all sums held by it for the payment of the principal of or
interest on the Notes in trust for the benefit of the Persons entitled
thereto until such sums shall be paid to such Persons or otherwise disposed
of as herein provided;
(2) give the Trustee notice of any default by the Issuer (or any
other obligor upon the Notes) in the making of any payment of principal or
interest on the Notes;
(3) at any time during the continuance of any such default, upon the
written request of the Trustee, forthwith pay to the Trustee all sums so
held in trust by such Paying Agent;
(4) immediately resign as a Paying Agent and forthwith pay to the
Trustee all sums held by it in trust for the payment of Notes if at any
time it ceases to meet the standards required to be met by a Paying Agent
at the time of its appointment; and
(5) comply with all requirements of the Code with respect to the
withholding from any payments made by it on any Notes of any applicable
withholding taxes imposed thereon and with respect to any applicable
reporting requirements in connection therewith.
-64-
<PAGE>
The Issuer may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay,
or by Issuer Order direct any Paying Agent to pay, to the Trustee all sums
held in trust by such Paying Agent, such sums to be held by the Trustee upon
the same trusts as those upon which such sums were held by such Paying Agent;
and, upon such payment by any Paying Agent to the Trustee, such Paying Agent
shall be released from all further liability with respect to such money.
Any money deposited with the Trustee or any Paying Agent, in trust for
the payment of the principal of or interest on any Note and remaining unclaimed
for two years after such principal or interest has become due and payable shall
be paid to the Issuer on Issuer Request; and the Holder of such Note shall
thereafter, as an unsecured general creditor, look only to the Issuer for
payment thereof, and all liability of the Trustee or such Paying Agent with
respect to such trust money, and all liability of the Issuer as trustee thereof,
shall thereupon cease; PROVIDED, HOWEVER, that the Trustee or such Paying Agent,
before being required to make any such repayment, may at the expense of the
Issuer cause to be published once, in a newspaper published in the English
language, customarily published on each Business Day and of general circulation
in the Borough of Manhattan, The City of New York, notice that such money
remains unclaimed and that, after a date specified therein, which shall not be
less than 30 days from the date of such publication, any unclaimed balance of
such money then remaining will be repaid to the Issuer.
SECTION 1010. CORPORATE EXISTENCE.
Except as provided in Section 1003, the Issuer will do or cause to be
done all things necessary to preserve and keep in full force and effect its
corporate existence and material rights (charter and statutory) and material
franchises of the Issuer; PROVIDED, HOWEVER, that the Issuer shall not be
required to preserve any such right or franchise if the Issuer shall determine
that the preservation thereof is no longer desirable in the conduct of the
business of the Issuer, and that the loss thereof is not disadvantageous in any
material respect to the Holders.
SECTION 1011. PAYMENT OF TAXES AND OTHER CLAIMS.
The Issuer will pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (1) all taxes, assessments and
governmental charges levied or imposed upon the Issuer or upon the income,
profits or property of the Issuer, and (2) all lawful claims for labor,
materials and supplies which, if unpaid, might by law become a Lien upon the
Property of the Issuer; PROVIDED, HOWEVER, that the Issuer shall not be required
to pay or discharge or cause to be paid or discharged any such tax, assessment,
charge or claim whose
-65-
<PAGE>
amount, applicability or validity is being contested in good faith by
appropriate proceedings.
SECTION 1012. NOTICE OF EVENTS OF DEFAULT.
The Issuer agrees to give the Trustee, the Security Insurer, the Agent
and the Rating Agencies prompt written notice of each Event of Default
hereunder, each default on the part of the Servicer or the Seller of its
obligations under the Servicing Agreement or the Repurchase Agreement and each
default on the part of OFL of its obligations under the Purchase Agreement.
SECTION 1013. AMENDMENT OF CERTIFICATE OF INCORPORATION AND BYLAWS.
The Issuer will not amend its Certificate of Incorporation or Bylaws
in any manner that materially and adversely affects the Holders and without
prior written confirmation of the Rating Agencies that such amendment will not
result in any downgrade or withdrawal of their ratings on the Notes.
SECTION 1014. STATEMENT AS TO COMPLIANCE.
The Issuer will deliver to the Trustee, with copies to the Rating
Agencies, within 120 days after the end of each fiscal year, a written
statement, which need not comply with Section 102, signed on behalf of the
Issuer stating, as to each signatory thereof, that
(1) a review of the activities of the Issuer during such year and of
performance under this Indenture has been made under such person's
supervision, and
(2) to the best of such person's knowledge, based on such review, (a)
the Issuer has fulfilled all its obligations under this Indenture
throughout such year, or, if there has been a default in the fulfillment of
any such obligation, specifying each such default known to such person and
the nature and status thereof, and (b) no event has occurred and is
continuing which is, or after notice or lapse of time or both would become,
an Event of Default or Default, or, if such an event has occurred and is
continuing, specifying each such event known to such person and the nature
and status thereof.
SECTION 1015. RULE 144A INFORMATION.
At any time when the Issuer is not subject to Section 13 or 15(d) of
the Securities Exchange Act of 1934, as amended, upon the request of a Holder,
the Issuer shall promptly furnish to such Holder or to a prospective purchaser
of a Note designated by such Holder, as the case may be, the information
required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act
("Rule 144A Information") in order to permit compliance by such
-66-
<PAGE>
Holder with Rule 144A in connection with the resale of such Note by such
Holder; PROVIDED, HOWEVER, that the Issuer shall not be required to furnish
Rule 144A Information in connection with any request made on or after the
date which is three years from the later of (i) the date such Note (or any
predecessor Note) was acquired from the Issuer or (ii) the date such Note (or
any predecessor Note) was last acquired from an "affiliate" of the Issuer
within the meaning of Rule 144 under the Securities Act; and PROVIDED FURTHER,
that the Issuer shall not be required to furnish such information at any
time to a prospective purchaser located outside the United States who is not
a "United States Person" within the meaning of Regulation S under the
Securities Act if such Note may then be sold to such prospective purchaser in
accordance with Rule 904 under the Securities Act (or any successor provision
thereto).
SECTION 1016. FURTHER INSTRUMENTS AND ACTS.
Upon request of the Trustee or the Security Insurer, the Issuer will
execute and deliver such further instruments and do such further acts as may be
reasonably necessary or proper to carry out more effectively the purpose of this
Indenture.
SECTION 1017. COMPLIANCE WITH LAWS.
The Issuer shall comply with the requirements of all applicable laws,
the non-compliance with which would, individually or in the aggregate,
materially and adversely affect the ability of the Issuer to perform its
obligations under the Notes, this Indenture or any Related Document.
SECTION 1018. INCOME TAX CHARACTERIZATION.
For purposes of Federal income, State and local income and franchise
and any other income taxes, the Issuer will treat the Notes as debt of the
Issuer.
ARTICLE ELEVEN
Prepayment of Notes
SECTION 1101. PREPAYMENT.
The Notes shall be prepayable in whole or in part at the Prepayment
Price on any Business Day in accordance (and simultaneously) with the prepayment
of any Advance pursuant to Section 3(e) of the Repurchase Agreement and Section
3.10(b) of the Servicing Agreement in an amount equal to the amount deposited
with respect to principal in the Note Distribution Account pursuant to Section
3.10(b) of the Servicing Agreement. Principal prepayments on Notes of a Tranche
shall be applied pro rata among all Notes of such Tranche, without priority or
preference of any kind.
-67-
<PAGE>
SECTION 1102. NOTICE OF PREPAYMENT IN WHOLE OF A TRANCHE.
To the extent practicable, notice of the prepayment in whole of any
Tranche of Notes shall be given by the Issuer by facsimile transmission, courier
or first-class mail, postage prepaid, mailed, faxed or couriered not less than 1
nor more than 5 days prior to the date on which such prepayment in whole shall
occur, to each Holder of Notes of such Tranche to be so prepaid in whole, at
such Holder's address appearing in the Note Register.
All notices of prepayment in whole shall state:
(1) the date on which such prepayment in whole shall occur,
(2) the Prepayment Price,
(3) the place or places where such Notes are to be surrendered for
payment of the Prepayment Price (which shall be the office or agency of the
Issuer to be maintained as provided in Section 1002).
Failure to give notice of prepayment in whole, or any defect therein,
to any Holder of any Note shall not impair or affect the validity of such
prepayment.
SECTION 1103. DEPOSIT OF PREPAYMENT PRICE.
On any date on which such prepayment in whole shall occur, the Issuer
shall deposit with the Trustee or with a Paying Agent an amount of money
sufficient to pay the Prepayment Price of all Notes which are to be prepaid in
whole on that date.
SECTION 1104. NOTES PREPAYABLE IN WHOLE ON ANY DATE.
Notice of prepayment in whole having been given as aforesaid, the
Notes so to be prepaid in whole shall, on the date on which such prepayment in
whole shall occur, become due and payable at the Prepayment Price therein
specified, and from and after such date (unless the Issuer shall default in the
payment of the Prepayment Price and accrued interest) such Notes shall cease to
bear interest. Upon surrender of any such Note for prepayment in whole in
accordance with said notice, such Note shall be prepaid by the Issuer at the
Prepayment Price, together with accrued interest to the date on which such
prepayment in whole shall occur; PROVIDED, HOWEVER, that installments of
interest due and payable on or prior to the date on which such prepayment in
whole shall occur shall be payable to the Holders of such Notes, or one or more
Predecessor Notes, registered as such at the close of business on the relevant
Record Dates according to their terms and the provisions of Section 408.
If any Note called for prepayment in whole shall not be so paid upon
surrender thereof for prepayment in whole, the
-68-
<PAGE>
principal shall, until paid, bear interest from the date on which such
prepayment in whole shall occur at the Note Interest Rate.
ARTICLE TWELVE
DEFEASANCE AND COVENANT DEFEASANCE
SECTION 1201. ISSUER'S OPTION TO EFFECT DEFEASANCE OR COVENANT DEFEASANCE.
The Issuer may at its option by Board Resolution and with the consent
of the Agent and the Security Insurer (as long as no Insurer Default has
occurred and is continuing), at any time, elect to have either Section 1202 (if
applicable) or Section 1203 (if applicable) be applied to the Outstanding Notes
upon compliance with the conditions set forth below in this Article Twelve.
SECTION 1202. DEFEASANCE AND DISCHARGE.
Upon the Issuer's exercise of the above option applicable to this
Section, the Issuer shall be deemed to have been discharged from its obligations
with respect to the Outstanding Notes on and after the date the conditions
precedent set forth below are satisfied but subject to satisfaction of the
conditions subsequent set forth below (hereinafter, "defeasance"). For this
purpose, such defeasance means that the Issuer shall be deemed to have paid and
discharged the entire indebtedness represented by the Outstanding Notes and to
have satisfied all its other obligations under the Notes and this Indenture (and
the Trustee, at the expense of the Issuer, shall execute proper instruments
acknowledging the same), except for the following which shall survive until
otherwise terminated or discharged hereunder: (A) the rights of Holders of
Outstanding Notes to receive, solely from the trust fund described in Section
1204 and as more fully set forth in such Section, payments of the principal of
and interest on the Notes when such payments are due, (B) the Issuer's
obligations under Sections 404, 405, 406, 1002, 1010 and 1016 and such
obligations as shall be ancillary thereto, (C) the rights, powers, trusts,
duties, immunities and other provisions in respect of the Trustee hereunder and
(D) this Article Twelve. Subject to compliance with this Article Twelve, the
Issuer may exercise its option under this Section 1202 notwithstanding the prior
exercise of its option under Section 1203. Following a defeasance, payment of
the Notes may not be accelerated because of an Event of Default.
SECTION 1203. COVENANT DEFEASANCE.
Upon the Issuer's exercise of the above option applicable to this
Section, the Issuer shall be released from its obligations under Sections 1003
through 1008, 1011, 1012 and 1013 and the occurrence of an Event of Default
specified in Section 601(iv) (insofar as it is with respect to Sections 1002
through
-69-
<PAGE>
1008, 1011, 1012 and 1013) shall be deemed not to be an Event of Default with
respect to the Outstanding Notes on and after the date the conditions
precedent set forth below are satisfied but subject to satisfaction of the
conditions subsequent set forth below (hereinafter, "covenant defeasance"). For
this purpose, such covenant defeasance means that, with respect to the
Outstanding Notes, the Issuer may omit to comply with and shall have no
liability in respect of any term, condition or limitation set forth in any such
Section, whether directly or indirectly by reason of any reference elsewhere
herein to any such Section or by reason of any reference in any such Section to
any other provision herein or in any other document, but the remainder of this
Indenture and the Notes shall be unaffected thereby.
SECTION 1204. CONDITIONS TO DEFEASANCE OR COVENANT DEFEASANCE.
The following shall be the conditions precedent or, as specifically
noted below, the conditions subsequent to application of either Section 1202 or
Section 1203 to the Outstanding Notes:
(1) the Issuer shall irrevocably have deposited or caused to be
deposited with the Trustee as trust funds in trust for the purpose of
making the following payments, specifically pledged as security for, and
dedicated solely to, the benefit of the Holders of the Notes, (A) money in
an amount, or (B) U.S. Government Obligations which through the scheduled
payment of principal and interest in respect thereof in accordance with
their terms will provide, not later than one day before the due date of any
payment, money in an amount, or (C) a combination thereof, sufficient,
without reinvestment, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee, to pay and discharge, and which shall be applied
by the Trustee to pay and discharge, the principal of and interest on the
Outstanding Notes to maturity or redemption, as the case may be. Before
such a deposit the Issuer may make arrangements satisfactory to the Trustee
for the redemption of Notes at a future date or dates in accordance with
Article Eleven, which shall be given effect in applying the foregoing. For
this purpose, "U.S. Government Obligations" means securities that are (x)
direct obligations of the United States of America for the payment of which
its full faith and credit is pledged or (y) obligations of a Person
controlled or supervised by and acting as an agency or instrumentality of
the United States of America the payment of which is unconditionally
guaranteed as a full faith and credit obligation by the United States of
America, which, in either case, are not callable or redeemable at the
option of the issuer thereof, and shall also include a depository receipt
issued by a bank (as defined in Section 3(a)(2) of the Securities Act of
1933, as amended) as custodian with respect to any such U.S. Government
Obligation or a specific payment of principal of or interest on any such
U.S.
-70-
<PAGE>
Government Obligation held by such custodian for the account of the holder
of such depository receipt (except as required by law) such custodian is
not authorized to make any deduction from the amount payable to the holder
of such depository receipt from any amount received by the custodian in
respect of the U.S. Government Obligation or the specific payment of
principal of or interest on the U.S. Government Obligation evidenced by
such depository receipt.
(2) No Event of Default or event which with notice or lapse of time
or both would become an Event of Default with respect to the Notes shall
have occurred and be continuing (A) on the date of such deposit or
(B) insofar as subsections 601(v) and (vi) are concerned, at any time
during the period ending on the 123rd day after the date of such deposit
or, if longer, ending on the day following the expiration of the longest
preference period applicable to the Issuer in respect of such deposit (it
being understood that the condition in this clause (B) is a condition
subsequent and shall not be deemed satisfied until the expiration of such
period).
(3) Such defeasance or covenant defeasance shall not (A) cause the
Trustee to have a conflicting interest as defined in Section 708 or for
purposes of the Trust Indenture Act with respect to any securities of the
Issuer or (B) result in the trust arising from such deposit to constitute,
unless it is qualified as, a regulated investment company under the
Investment Company Act of 1940, as amended.
(4) Such defeasance or covenant defeasance shall not result in a
breach or violation of, or constitute a default under, this Indenture or
any other agreement or instrument to which the Issuer is a party or by
which it is bound.
(5) Such defeasance or covenant defeasance shall not cause any Notes
then listed on any registered national securities exchange under the
Securities Exchange Act of 1934, as amended, to be delisted.
(6) In the case of an election under Section 1202, the Issuer shall
have delivered to the Trustee and the Agent an Opinion of Counsel stating
that (x) the Issuer has received from, or there has been published by, the
Internal Revenue service a ruling, or (y) since the date of this Indenture
there has been a change in the applicable Federal income tax law, in either
case to the effect that, and based thereon such opinion shall confirm that,
the Holders of the Outstanding Notes will not recognize income, gain or
loss for Federal income tax purposes as a result of such defeasance and
will be subject to Federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such defeasance
had not occurred.
-71-
<PAGE>
(7) In the case of an election under Section 1203, the Issuer shall
have delivered to the Trustee and the Agent an Opinion of Counsel to the
effect that the Holders of the Outstanding Notes will not recognize income,
gain or loss for Federal income tax purposes as a result of such covenant
defeasance and will be subject to Federal income tax on the same amounts,
in the same manner and at the same times as would have been the case if
such covenant defeasance had not occurred.
(8) The Issuer shall have delivered to the Trustee and the Agent an
Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent provided for relating to either the defeasance under
Section 1202 or the covenant defeasance under Section 1203 (as the case may
be) have been complied with.
(9) The Issuer shall have delivered or caused to be delivered to the
Trustee and the Agent written confirmation of the Rating Agencies that such
defeasance under Section 1202 or covenant defeasance under Section 1203
will not result in a capital charge to the Security Insurer.
SECTION 1205. DEPOSITED MONEY AND U.S. GOVERNMENT OBLIGATIONS TO BE HELD IN
TRUST; OTHER MISCELLANEOUS PROVISIONS.
Subject to the provisions of the last paragraph of Section 1009, all
money and U.S. Government Obligations (including the proceeds thereof) deposited
with the Trustee pursuant to Section 1204 in respect of the Outstanding Notes
shall be held in trust and applied by the Trustee, in accordance with the
provisions of the Notes and this Indenture, to the payment, either directly or
through any Paying Agent as the Trustee may determine, to the Holders of the
Notes, of all sums due and to become due thereon in respect of principal and
interest, but such money need not be segregated from other funds except to the
extent required by law.
The Issuer shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the money or U.S. Government
Obligations deposited pursuant to Section 1204 or the principal and interest
received in respect thereof.
Anything herein to the contrary notwithstanding, the Trustee shall
deliver or pay to the Issuer from time to time upon Issuer Request any money or
U.S. Government Obligations held by it as provided in Section 1204 which, in the
opinion of a nationally recognized firm of independent public accountants
expressed in a written certification thereof delivered to the Trustee, are in
excess of the amount thereof which would then be required to be deposited to
effect an equivalent defeasance or covenant defeasance.
-72-
<PAGE>
Anything herein to the contrary notwithstanding, if and to the extent
the deposited money or U.S. Government Obligations (or the proceeds thereof)
either (i) cannot be applied by the Trustee in accordance with this Section
because of a court order or (ii) are for any reason insufficient in amount, then
the Issuer's obligations to pay principal of and interest on the Notes shall be
reinstated to the extent necessary to cover the deficiency on any due date for
payment. In any case specified in clause (i), the Issuer's interest in the
deposited money and U.S. Government Obligations (and proceeds thereof) shall be
reinstated to the extent the Issuer's payment obligations are reinstated.
_________________________
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
-73-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed as of the day and year first above written.
ARCADIA RECEIVABLES CONDUIT CORP.
By /s/ [Illegible]
--------------------------------
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
as Trustee
By /s/ [Illegible]
--------------------------------
[Signature page to Indenture]
<PAGE>
EXHIBIT A
[Form of Note]
REGISTERED
No.
ARCADIA RECEIVABLES CONDUIT CORP.
FLOATING RATE AUTOMOBILE RECEIVABLES-BACKED NOTES
THIS NOTE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND HAS NOT BEEN
APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR
REGULATORY AUTHORITY OF ANY STATE. THIS NOTE HAS BEEN OFFERED AND SOLD
PRIVATELY. THE HOLDER HEREOF ACKNOWLEDGES THAT THESE SECURITIES ARE
"RESTRICTED SECURITIES" THAT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT AND AGREES FOR THE BENEFIT OF THE ISSUER AND ITS AFFILIATES THAT THESE
SECURITIES MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED
EXCEPT (A) TO A PERMITTED ASSIGNEE WHOM THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE
SECURITIES ACT IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A OR
(B) TO A PERMITTED ASSIGNEE PURSUANT TO AN EXEMPTION FROM REGISTRATION
PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), OR (C) TO A
PERMITTED ASSIGNEE PURSUANT TO ANY OTHER EXEMPTION FROM THE REGISTRATION
REQUIREMENTS UNDER SECTION 5 OF THE SECURITIES ACT, AND IN EACH CASE IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES OR ANY OTHER JURISDICTION.
THIS NOTE WILL BE PREPAYABLE IN WHOLE OR IN PART ON ANY BUSINESS DAY.
THEREFORE IT IS POSSIBLE THAT SOME TRANCHES OF NOTES MAY BE RETIRED
BEFORE ANY PAYMENTS OF PRINCIPAL ARE MADE ON THIS NOTE.
THE PRINCIPAL ON THIS NOTE IS PAYABLE IN INSTALLMENTS ON THE PAYMENT
DATES AND IN THE AMOUNTS DESCRIBED IN THE INDENTURE REFERRED TO
HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF AND UNPAID
INTEREST ON THIS NOTE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON
THE FACE HEREOF.
Original Issue Date:
Principal Amount: $
<PAGE>
Arcadia Receivables Conduit Corp. (the "Issuer"), a corporation duly
organized and existing under the laws of the State of Delaware, for value
received hereby promises to pay to ___________ the principal sum of ___________
Dollars payable in installments on the Payment Dates and in the amounts
described in the Indenture referred to herein and to pay interest thereon on
each Payment Date at the Note Interest Rate until the principal hereof is paid
or made available for payment. The Note Interest Rate will be a per annum rate
equal to (A) prior to the occurrence of an Amortization Event, (i) the CP Rate
plus 0.20%, to the extent the purchase or carrying of the Notes issued pursuant
to this Indenture is funded by the Noteholders by issuing Commercial Paper
Notes, or (ii) the Offshore Rate plus the Applicable Margin, to the extent the
purchase or carrying of the Notes issued pursuant to this Indenture is not so
funded by the Noteholders and (B) after the occurrence of an Amortization Event,
the Reference Rate; PROVIDED, that from and after the occurrence of an
Amortization Event, the Note Interest Rate shall not exceed the Maximum Interest
Rate, and the Agent may, on any Business Day, by prior written notice to the
Issuer, the Trustee, the Seller, the Servicer and the Security Insurer, convert
the Note Interest Rate to a fixed interest rate not to exceed the Maximum
Interest Rate as of the close of business on the date such Amortization Event
occurs, such fixed interest rate not to exceed the Two Year Treasury Yield (as
of the close of business on the date such Amortization Event occurs) plus 0.60%
PLUS the Basis Fee Percent.
This Note will bear interest, payable in arrears, from the Original Issue
Date at the Note Interest Rate. Interest will accrue on each Note from the most
recent Payment Date to which interest has been paid in full or duly provided for
(or, if no interest has been paid, from the Original Issue Date), to but
excluding the next succeeding Payment Date. The first payment of interest on
any Note issued between the first day of a calendar month and a Payment Date
will be made on the Payment Date following the next succeeding calendar month.
In addition, on each Payment Date with respect to any Interest Period or portion
thereof after the occurrence of an Amortization Event, the Default Amount
Distributable Amount, if any, shall be payable with respect to the Notes to the
extent funds are available therefor pursuant to Section 3.6(b)(vii) or (ix) of
the Servicing Agreement.
Payments on this Note will be paid to the Person in whose name this Note
(or one or more Predecessor Notes) is registered at the close of business on the
Record Date, by wire transfer in immediately available funds to the account and
number specified in the Note Register on such Record Date for such Person or, if
no such account or number is so specified, then by check mailed
<PAGE>
to the address of such Person as such address shall appear in the Note
Register.
The Record Date for each Payment Date for this Note will be the close of
business on the last Business Day immediately preceding such Payment Date.
This Note is entitled to the benefits of an Indenture dated as of December
3, 1996, as amended and supplemented, (as amended and supplemented from time to
time, the "Indenture") between the Issuer and Norwest Bank Minnesota, National
Association, as Trustee (in such capacity, the "Trustee") and as Collateral
Agent (in such capacity, the "Collateral Agent").
The Notes are entitled to the benefits of a financial guaranty insurance
policy (the "Note Policy") issued by Financial Security Assurance Inc. (the
"Security Insurer"), pursuant to which the Security Insurer has unconditionally
guaranteed payments of the Noteholders' Interest Distributable Amount on each
Payment Date and the Noteholders' Principal Distributable Amount on each Payment
Date.
NO HOLDER OF A NOTE SHALL TRANSFER ITS NOTE UNLESS SUCH TRANSFER IS MADE IN
ACCORDANCE WITH RULE 144A OF THE SECURITIES ACT OR PURSUANT TO AN EXEMPTION FROM
REGISTRATION PROVIDED BY RULE 144A UNDER THE SECURITIES ACT (IF AVAILABLE), OR
PURSUANT TO ANY OTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS UNDER SECTION
5 OF THE SECURITIES ACT PROVIDED THE ISSUER IS PROVIDED WITH AN OPINION OF
COUNSEL THAT SUCH TRANSFER IS SO EXEMPT, AND IN EACH CASE IN ACCORDANCE WITH THE
REGISTRATION AND QUALIFICATION REQUIREMENTS (OR ANY APPLICABLE EXEMPTION
THEREFROM) UNDER APPLICABLE STATE SECURITIES LAWS.
This Note shall not be valid or entitled to any benefit under the Indenture
or be valid or obligatory for any purpose unless the certificate of
authentication appearing hereon has been executed by the Trustee or the
Authenticating Agent by manual signature. THIS NOTE SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS OF THIS NOTE SET FORTH
ON THE REVERSE HEREOF, WHICH FURTHER PROVISIONS SHALL FOR ALL PURPOSES HAVE THE
SAME EFFECT AS IF SET FORTH AT THIS PLACE.
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed,
manually or in facsimile, by its Authorized Officer.
ARCADIA RECEIVABLES CONDUIT CORP.
By
-------------------------
Authorized Officer
Dated:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes referred to in the within-mentioned Indenture.
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION,
as Trustee
By
-------------------------
Authorized Signatory
<PAGE>
[FORM OF REVERSE SIDE OF NOTE]
ARCADIA RECEIVABLES CONDUIT CORP.
(Continued)
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its Floating Rate Automobile Receivables Backed Notes (herein
called the "Notes") authorized to be issued under and pursuant to an Indenture
by and between the Issuer and Norwest Bank Minnesota, National Association, as
Trustee and as Collateral Agent, dated as of December 3, 1996, as amended and
supplemented (as amended and supplemented from time to time, the "Indenture") to
which Indenture and all indentures supplemental thereto reference is hereby made
for a statement of the respective rights and obligations thereunder of the
Issuer, the Trustee and the Holders of the Notes. The Notes are subject to all
terms of the Indenture. All terms used in this Note that are defined in the
Indenture, as supplemented or amended, shall have meanings assigned to them in
or pursuant to the Indenture, as so supplemented or amended.
The Notes are and will be equally and ratably secured by the collateral
pledged as security therefor as provided in the Indenture.
Principal of the Notes will be payable in installments on the Payment Dates
and in the amounts described in the Indenture. "Payment Date" means the
fifteenth day of each month, or if any such date is not a Business Day, the next
succeeding Business Day, commencing January 15, 1997.
As described above, the entire unpaid principal amount of this Note shall
be due and payable on the Final Distribution Date. In addition, the Notes are
prepayable in whole or in part on any Business Day as set forth in the
Indenture. Notwithstanding the foregoing, the entire unpaid principal amount of
the Notes shall be due and payable on the date on which an Event of Default
shall have occurred and be continuing so long as an Insurer Default shall not
have occurred and be continuing or, if an Insurer Default shall have occurred
and be continuing, on the date on which an Event of Default shall have occurred
and be continuing and the Trustee or the Agent have declared the Notes to be
immediately due and payable in the manner provided in Section 602 of the
Indenture. All principal payments on the Notes shall be made pro rata to the
Noteholders entitled thereto.
Payments of interest on this Note due and payable on each Payment Date,
together with an installment of principal, if any, to the extent not in full
payment of this Note, shall be paid to the Person in whose name this Note (or
one or more Predecessor
<PAGE>
Notes) is registered at the close of business on the Record Date, by wire
transfer in immediately available funds to the account and number specified
in the Note Register on such Record Date for such Person or, if no such
account or number is so specified, then by check mailed to such Person's
address as it appears in the Note Register on each such Record Date. Such
payments shall be sent without requiring that this Note be submitted for
notation of payment. Any reduction in the principal amount of this Note (or
any one or more Predecessor Notes) affected by any payments made on any
Payment Date shall be binding upon all future Holders of this Note and of any
Note issued upon the registration of transfer hereof or in exchange hereof or
in lieu hereof, whether or not noted hereon. If funds are expected to be
available, as provided in the Indenture, for payment in full of the final
installment of the then remaining unpaid principal amount of this Note on a
Payment Date, then the Trustee will notify the Person who was the Registered
Holder hereof as of the Record Date preceding such Payment Date by notice
mailed within five days of such Payment Date and the amount then due and
payable shall be payable only upon presentation and surrender of this Note at
the place specified by the Trustee in such notice. Notices in connection
with prepayments in whole shall be couriered, mailed or sent by facsimile
transmission as provided in Section 1102 of the Indenture.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer with the consent of the Security Insurer and of the Agent or
the Holders of Notes representing a majority of the Outstanding Amount of all
Notes at the time Outstanding. The Indenture also contains provisions
permitting the Holders of Notes representing specified percentages of the
Outstanding Amount of the Notes, on behalf of the Holders of all the Notes, to
waive compliance by the Issuer with certain provisions of the Indenture and
certain past defaults under the Indenture and their consequence. Any such
consent or waiver by the Holder of this Note (or any one of more Predecessor
Notes) shall be conclusive and binding upon such Holders and upon all future
Holders of this Note and of any Note issued upon the registration of transfer
hereof or in exchange hereof or in lieu hereof whether or not notation of such
consent or waiver is made upon this Note. The Indenture also permits the Trustee
to amend or waive certain terms and conditions set forth in the Indenture
without the consent of Holders of the Notes issued thereunder.
Upon surrender for registration of transfer of this Note at the office or
agency of the Issuer to be maintained in The City of New York, the City of
Chicago, Illinois or the City of Minneapolis, Minnesota, the Issuer shall
execute, and the Trustee
<PAGE>
or the Authenticating Agent shall authenticate and make available for
delivery, in the name of the designated transferee or transferees, one or
more new Notes of any authorized denominations and of a like tenor and
aggregate principal amount.
At the option of the Holder, Notes may be exchanged for other Notes of any
authorized denominations and of a like tenor and aggregate principal amount,
upon surrender of the Notes to be exchanged at such office or agency. Whenever
any Notes are so surrendered for exchange, the Issuer shall execute, and the
Trustee or the Authenticating Agent shall authenticate and make available for
delivery, the Notes which the Holder making the exchange is entitled to receive.
Every Note presented or surrendered for registration of transfer or for
exchange shall (if so required by the Issuer or the Trustee) be duly endorsed,
or be accompanied by a written instrument of transfer in form satisfactory to
the Issuer and the Note Registrar duly executed, by the Holder thereof or his
attorney duly authorized in writing with such signature guaranteed by a
commercial bank or trust company located, or having a correspondent located, in
the City of New York or the city in which the Corporate Trust Office is located,
or by a member firm of a national securities exchange, and such other documents
as the Trustee may require.
No service charge shall be made for any registration of transfer or
exchange of Notes, but the Issuer or the Trustee may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any registration of transfer or exchange of Notes, other than
exchanges pursuant to Section 404 or 905 not involving any transfer.
The term "Issuer" as used in this Note includes any successor to the Issuer
under the Indenture.
The Notes are issuable only in registered form in denominations as provided
in the Indenture, subject to certain limitations therein set forth.
THIS NOTE AND THE INDENTURE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS,
AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER AND THEREUNDER
SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Related Documents, neither the Issuer nor any of its agents,
officers, directors, employees, stockholders, incorporators or successors or
assigns shall be
<PAGE>
personally liable for, nor shall recourse be had to any of them for, the
payment of principal of or interest on, or performance of, or omission to
perform, any of the covenants, obligations or indemnifications contained in
this Note or the Indenture. The Holder of this Note by the acceptance hereof
agrees that except as expressly provided in the Related Documents, in the
case of an Event of Default under the Indenture, the Holder shall have no
claim against any of the foregoing for any deficiency, loss or claim
therefrom.
<PAGE>
[FORM OF ASSIGNMENT]
For value received ____________________ hereby sells, assigns and transfers
unto
(Please insert Social Security or Other Identifying Number of
Assignee.)
(Please print or typewrite name and address, including zip code, of
Assignee.)
the within Note and all rights hereunder and does hereby irrevocably constitute
and appoint ____________________ attorney to transfer the said Note on the books
of the said Note Registrar with full power of substitution in the premises.
Dated:
*
- -------------------------
Signature
Signature Guaranteed:
---------------------------
____________________
*NOTE: The signature to this assignment must correspond with the name of
the registered owner as it appears on the face of the within Note in
every particular, without alteration, enlargement or any change
whatsoever.
<PAGE>
EXHIBIT B
<PAGE>
- --------------------------------------------------------------------------------
[LOGO] FINANCIAL GUARANTY
INSURANCE POLICY
OBLIGOR: Arcadia Receivables Conduit Corp. Policy No.: 50528-N
OBLIGATIONS: Up to $300,000,000 Original Principal Date of Issuance: 12/3/96
Amount Floating Rate Automobile
Receivables-Backed Notes
FINANCIAL SECURITY ASSURANCE INC. ("Financial Security"), for
consideration received, hereby UNCONDITIONALLY AND IRREVOCABLY GUARANTEES to
each Holder, subject only to the terms of this Policy (which includes each
endorsement hereto), the full and complete payment by the Obligor of
Scheduled Payments of principal of, and interest on, the Obligations.
For the further protection of each Holder, Financial Security
irrevocably and unconditionally guarantees:
(a) payment of the amount of any distribution of principal of, or
interest on, the Obligations made during the Term of this Policy to such
Holder that is subsequently avoided in whole or in part as a preference
payment under applicable law (such payment to be made by Financial Security
in accordance with Endorsement No. 1 hereto).
(b) payment of any amount required to be paid under this Policy by
Financial Security following Financial Security's receipt of notice as
described in Endorsement No. 1 hereto.
Financial Security shall be subrogated to the rights of each Holder to
receive payments under the Obligations to the extent of any payment by
Financial Security hereunder.
Except to the extent expressly modified by an endorsement hereto, the
following terms have the meanings specified for all purposes of this Policy.
"Holder" means the registered owner of any Obligation as indicated on the
registration books maintained by or on behalf of the Obligor for such purpose
or, if the Obligation is in bearer form, the holder of the Obligation.
"Scheduled Payments" means payments which are scheduled to be made during the
Term of this Policy in accordance with the original terms of the Obligations
when issued and without regard to any amendment or modification of such
Obligations thereafter; payments which become due on an accelerated basis as
a result of (a) a default by the Obligor, (b) an election by the Obligor to
pay principal on an accelerated basis or (c) any other cause, shall not
constitute "Scheduled Payments" unless financial Security shall elect, in its
sole discretion, to pay such principal due upon such acceleration together
with any accrued interest to the date of acceleration. "Term of this Policy"
shall have the meaning set forth in Endorsement No. 1 hereto.
This Policy sets forth in full the undertaking of Financial Security,
and shall not be modified, altered or affected by any other agreement or
instrument, including any modification or amendment thereto, or by the
merger, consolidation or dissolution of the Obligor. Except to the extent
expressly modified by an endorsement hereto, the premiums paid in respect of
this Policy are nonrefundable for any reason whatsoever, including payment,
or provision being made for payment, of the Obligations prior to maturity.
This Policy may not be cancelled or revoked during the Term of this Policy.
THIS POLICY IS NOT COVERED BY THE PROPERTY/CASUALTY INSURANCE SECURITY FUND
SPECIFIED IN ARTICLE 76 OF THE NEW YORK INSURANCE LAW.
In witness whereof, FINANCIAL SECURITY ASSURANCE INC. has caused this
Policy to be executed on its behalf by its Authorized Officer.
FINANCIAL SECURITY ASSURANCE INC.
By /s/ [Illegible]
------------------------------
Authorized Officer
A subsidiary of Financial Security Assurance Holdings Ltd.
350 Park Avenue, New York, N.Y. 10022-6022 (212) 826-0100
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------
INSURANCE AND INDEMNITY AGREEMENT
among
FINANCIAL SECURITY ASSURANCE INC.,
OLYMPIC FINANCIAL LTD.,
OLYMPIC RECEIVABLES FINANCE CORP.,
and
ARCADIA RECEIVABLES CONDUIT CORP.
Dated as of December 3, 1996,
Floating Rate Automobile
Receivables-Backed Notes
- --------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS; LIMITED RECOURSE
Section 1.01. Definitions . . . . . . . . . . . . . . . . . . . . 1
Section 1.02. Certain Obligations Not Recourse to OFL and ORFC. . 2
Section 1.03. Limited Recourse to Issuer. . . . . . . . . . . . . 2
ARTICLE II
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 2.01. Representations and Warranties of OFL and ORFC. . . 2
Section 2.02. Affirmative Covenants of OFL and ORFC . . . . . . . 7
Section 2.03. Negative Covenants of OFL and ORFC. . . . . . . . . 13
Section 2.04. Representations and Warranties of OFL and the
Issuer. . . . . . . . . . . . . . . . . . . . . . . 16
Section 2.05. Affirmative Covenants of OFL and the Issuer . . . . 20
Section 2.06. Negative Covenants of OFL and the Issuer. . . . . . 25
ARTICLE III
THE POLICY; REIMBURSEMENT; INDEMNIFICATION
Section 3.01. Issuance of the Policy. . . . . . . . . . . . . . . 27
Section 3.02. Payment of Fees and Premium . . . . . . . . . . . . 27
Section 3.03. Reimbursement and Additional Payment Obligation . . 28
Section 3.04. Indemnification . . . . . . . . . . . . . . . . . . 29
Section 3.05. Subrogation . . . . . . . . . . . . . . . . . . . . 30
ARTICLE IV
FURTHER AGREEMENTS
Section 4.01. Effective Date; Term of Agreement . . . . . . . . . 31
Section 4.02. Obligations Absolute. . . . . . . . . . . . . . . . 31
Section 4.03. Assignments; Reinsurance; Third-Party Rights. . . . 32
Section 4.04. Liability of Financial Security . . . . . . . . . . 33
ARTICLE V
EVENTS OF DEFAULT; REMEDIES
<PAGE>
Section 5.01. Events of Default . . . . . . . . . . . . . . . . . 33
Section 5.02. Remedies; Waivers . . . . . . . . . . . . . . . . . 34
ARTICLE VI
MISCELLANEOUS
Section 6.01. Amendments, Etc . . . . . . . . . . . . . . . . . . 36
Section 6.02. Notices . . . . . . . . . . . . . . . . . . . . . . 36
Section 6.03. Payment Procedure . . . . . . . . . . . . . . . . . 37
Section 6.04. Severability. . . . . . . . . . . . . . . . . . . . 37
Section 6.05. Governing Law . . . . . . . . . . . . . . . . . . . 37
Section 6.06. Consent to Jurisdiction . . . . . . . . . . . . . . 37
Section 6.07. Consent of Financial Security . . . . . . . . . . . 38
Section 6.08. Counterparts. . . . . . . . . . . . . . . . . . . . 38
Section 6.09. Trial by Jury Waived. . . . . . . . . . . . . . . . 38
Section 6.10. Limited Liability . . . . . . . . . . . . . . . . . 39
Section 6.11. Entire Agreement. . . . . . . . . . . . . . . . . . 39
Appendix I--Definitions
Appendix A--Conditions Precedent to Issuance of the Policy
Annex I--Form of Policy
ii
<PAGE>
INSURANCE AND INDEMNITY AGREEMENT
INSURANCE AND INDEMNITY AGREEMENT dated as of December 3, 1996,
among FINANCIAL SECURITY ASSURANCE INC. ("FINANCIAL SECURITY"), OLYMPIC
FINANCIAL LTD. ("OFL"), OLYMPIC RECEIVABLES FINANCE CORP. ("ORFC") and
ARCADIA RECEIVABLES CONDUIT CORP. (the "ISSUER").
INTRODUCTORY STATEMENTS
1. ORFC has agreed from time to time to purchase from OFL, and OFL has
agreed from time to time to sell and assign to ORFC, Receivables pursuant to
the Receivables Purchase Agreement and Assignment.
2. ORFC proposes to transfer Receivables to the Issuer against the
transfer of funds by the Issuer, with a simultaneous agreement by the Issuer
to transfer to ORFC such Receivables at a future date, in accordance with the
terms of the Repurchase Agreement.
3. The Issuer will issue Securities pursuant to the Indenture. Each
Security will be secured by the Receivables and other collateral.
4. The Issuer has requested that Financial Security issue a financial
guaranty insurance policy guarantying scheduled payments of interest and
ultimate payment of principal on the Securities (including any such payments
subsequently avoided as a preference under applicable bankruptcy law) upon
the terms and subject to the conditions provided herein.
5. The parties hereto desire to specify the conditions precedent to
the issuance of the Policy by Financial Security, the payment of premium in
respect of the Policy, the indemnity and reimbursement to be provided to
Financial Security in respect of certain amounts paid by Financial Security
under the Policy or otherwise and certain other matters.
In consideration of the premises and of the agreements herein contained,
Financial Security, OFL, ORFC and the Issuer hereby agree as follows:
ARTICLE I
DEFINITIONS; LIMITED RECOURSE
Section 1.01. DEFINITIONS. Capitalized terms used herein shall have
the meanings provided in Appendix I hereto, or the meanings given such terms
in the Servicing Agreement, unless the context otherwise requires.
1
<PAGE>
Section 1.02. CERTAIN OBLIGATIONS NOT RECOURSE TO OFL AND ORFC.
Notwithstanding any provision of this Agreement to the contrary, the payment
obligations provided in Section 3.03(a) and (d), in each case, to the extent
that such payment obligations do not arise from any failure or default in the
performance by OFL or ORFC of any of its obligations under the Transaction
Documents, and any interest on the foregoing in accordance with Section
3.03(c), shall be non-recourse obligations with respect to OFL and ORFC,
respectively, and shall be payable only from monies available for such
payment in accordance with the provisions of the Servicing Agreement.
Section 1.03. LIMITED RECOURSE TO ISSUER. Financial Security agrees
that the obligations of the Issuer under this Agreement are solely the
corporate obligations of the Issuer. No recourse shall be had for the
payment of any amount owing in respect of the Issuer's obligations hereunder
or for any payment obligation or claim arising out of or based upon this
Agreement against any stockholder, employee, officer, director or
incorporator of the Issuer or against any agent, stockholder, employee,
officer, director, incorporator or affiliate thereof, and Financial Security
shall not look to any property or assets of the Issuer, other than amounts
paid to the Issuer under the Transaction Documents and to amounts payable to
Financial Security pursuant to the Transaction Documents in respect of the
Issuer's obligations hereunder. To the extent that such funds are
insufficient, any payment obligation or claim arising hereunder shall not
constitute a claim against the Issuer.
ARTICLE II
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 2.01. REPRESENTATIONS AND WARRANTIES OF OFL AND ORFC. OFL and
ORFC jointly and severally represent, warrant and covenant, as of the date
hereof and as of the Date of Issuance, as follows:
(a) DUE ORGANIZATION AND QUALIFICATION. Each of OFL and ORFC is a
corporation duly organized, validly existing and in good standing under
the laws of the State of Minnesota or the laws of the State of Delaware,
respectively, with power and authority to own its properties and conduct
its business. Each of OFL and ORFC 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 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 any Receivable unenforceable 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. Each of OFL and ORFC has all necessary
corporate power and authority to conduct its business as currently
conducted, 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 Transaction Document and has
2
<PAGE>
full power and authority to sell and assign the Receivables as
contemplated by the Transaction Documents and to consummate the
Transaction.
(c) DUE AUTHORIZATION. The execution, delivery and performance by
each of OFL and ORFC of this Agreement and each other Transaction
Document to which it is a party have been duly authorized by all
necessary corporate action and do 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, the
stockholders of OFL or the stockholder of ORFC.
(d) NONCONTRAVENTION. Neither the execution nor delivery of this
agreement and each other Transaction Document to which OFL or ORFC is a
party, nor the consummation of the Transaction nor the satisfaction of
the terms and conditions of this agreement and each other Transaction
Documents to which OFL or ORFC is a party,
(i) conflicts with or results, or will conflict with or result,
in any breach or violation of any provision of the Certificate of
Incorporation or Bylaws of OFL or ORFC or any law, rule, regulation,
order, writ, judgment, injunction, decree, determination or award
currently in effect having applicability to OFL or ORFC, or any of
their respective properties,
(ii) constitutes or will constitute a default by OFL or ORFC
under or a breach of any provision of any loan agreement, mortgage,
indenture or other agreement or instrument to which OFL or ORFC or any
of their respective 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, or will result in or require,
the creation of any Lien upon or in respect of any of the assets of
OFL or ORFC or any of their respective Subsidiaries except as
otherwise expressly contemplated by the Transaction Documents.
(e) LEGAL PROCEEDINGS. There is no action, proceeding or
investigation pending, or to the best knowledge of OFL and ORFC after
reasonable inquiry, threatened by or before any court, regulatory body,
governmental or administrative agency or arbitrator against or affecting
OFL or ORFC, or any properties or rights of OFL or ORFC, including
without limitation, the Receivables: (A) asserting the invalidity of
this Agreement or any other Transaction Document to which the OFL or
ORFC is a party, (B) seeking to prevent the issuance of the Securities
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 or ORFC is a party or (D) which might result in a Material
Adverse Change with respect to OFL or ORFC.
(f) VALID AND BINDING OBLIGATIONS. Each of the Transaction
Documents to which either OFL or ORFC is a party, when executed and
delivered by it, and assuming
3
<PAGE>
due authorization, execution and delivery by the other parties thereto,
will constitute the legal, valid and binding obligations of such Person,
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 Securities 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 Issuer, enforceable in accordance with their 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 or ORFC of this Agreement or
of any other Transaction Document to which it 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 OFL or ORFC in the conduct of
their respective businesses violates any law, regulation, judgment,
agreement, order or decree applicable to it which, if enforced, would
result in a Material Adverse Change with respect to such Person.
(i) GOOD TITLE; VALID TRANSFER; ABSENCE OF LIENS; SECURITY INTEREST.
(i) Immediately prior to the transfer of any Receivables and
related Other Conveyed Property to ORFC pursuant to the Receivables
Purchase Agreement and Assignment, OFL was or will have been the
owner of, and had or will have had good and marketable title to,
such Receivables free and clear of all Liens and Restrictions on
Transferability, and had or will have had full right, corporate
power and lawful authority to assign, transfer and pledge such
Receivables and related Other Conveyed Property and immediately
following such transfer ORFC will be the owner of, and have good
and marketable title to, such Receivables and related Other
Conveyed Property free and clear of all Liens and Restrictions on
Transferability. Each such transfer pursuant to the Receivables
Purchase Agreement and Assignment constitutes or will constitute a
valid sale, transfer and assignment of such Receivables and related
Other Conveyed Property to ORFC enforceable against creditors of
and purchasers from OFL. In the event that, in contravention of
the intention of the parties, a transfer of Receivables and related
Other Conveyed Property by OFL to ORFC is characterized as other
than a sale, such transfer shall be characterized as a secured
financing, and ORFC shall have a valid and perfected first priority
security interest in such Receivables and related Other Conveyed
Property free and clear of all Liens and Restrictions on
Transferability, subject to the provisions of the Repurchase
Agreement.
4
<PAGE>
(ii) Immediately prior to the transfer of any Receivables and
related Other Conveyed Property to the Issuer pursuant to the
Repurchase Agreement, ORFC was or will have been the owner of, and
had good and marketable title to, such property free and clear of
all Liens and Restrictions on Transferability, and had or will have
had full right, corporate power and lawful authority to assign,
transfer and pledge such Receivables. In the event that a transfer
of the Receivables and related Other Conveyed Property by ORFC to
the Issuer is characterized as other than a sale, such transfer
shall be characterized as a secured financing, and the Issuer shall
have a valid and perfected first priority security interest in such
Receivables and related Other Conveyed Property free and clear of
all Liens and Restrictions on Transferability, other than the Lien
of the Security Agreement in favor of the Collateral Agent.
(j) ACCURACY OF INFORMATION. None of the Transaction Documents
nor any of the other Provided Documents provided by OFL or ORFC contain
any statement of a material fact with respect to OFL or ORFC or the
Transaction that was untrue or misleading in any material respect when
made (except insofar as any such Document was connected or superseded by
a subsequent Provided Document and Financial Security has not
detrimentally relied on the original Provided Document). There is no
fact known to OFL or ORFC which has a material possibility of causing a
Material Adverse Change with respect to either of them or which has a
material possibility of impairing the value or marketability of the
Receivables, taken as a whole, or decreasing the possibility that
amounts due in respect of the Receivables will be collected as due.
Since the furnishing of the Provided Documents, there has been no
change, or any development or event involving a prospective change known
to OFL or ORFC that would render any representation or warranty or other
statement made by either of them in any of the Provided Documents untrue
or misleading in any material respect.
(k) FINANCIAL STATEMENTS. The Financial Statements of each of OFL
and ORFC, 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 such Person as of the dates and
for the periods indicated and (iii) have been prepared in accordance
with generally accepted accounting principles consistently applied,
except as noted therein (subject as to interim statements to normal
year-end adjustments). Since the date of the most recent Financial
Statements with respect to such Person, there has been no material
adverse change in such financial condition or results of operations of
such Person. Except as disclosed in the Financial Statements, neither
OFL nor ORFC is subject to any contingent liabilities or commitments
that, individually or in the aggregate, have a material possibility of
causing a Material Adverse Change in respect of OFL or ORFC.
(l) ERISA. OFL is in compliance with ERISA in all material
respects and has not incurred and does not reasonably expect to incur
any material 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.
5
<PAGE>
(m) COMPLIANCE WITH SECURITIES LAWS. ORFC is not required to be
registered as an "investment company" under the Investment Company Act
and is not subject to the information reporting requirements of the
Exchange Act.
(n) TRANSACTION DOCUMENTS. Each of the representations and
warranties of OFL and ORFC contained in the Transaction Documents is
true and correct in all material respects and each of OFL and ORFC
hereby makes each such representation and warranty made by it to, and
for the benefit of, Financial Security as if the same were set forth in
full herein.
(o) SPECIAL PURPOSE ENTITY.
(i) The capital of ORFC is adequate for the business and
undertakings of ORFC.
(ii) Other than with respect to the ownership by OFL of the
stock of ORFC and as provided in this Agreement and the Receivables
Purchase Agreement and Assignment, the Servicing Agreement, the
Security Agreement and the Spread Account Agreement, and in
connection with the Term Transactions, ORFC is not engaged in any
business transactions with OFL or any affiliate of OFL.
(iii) At least one director of ORFC 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 funds and assets of ORFC are not, and will not be,
commingled with the funds of any other person.
(v) The bylaws of ORFC 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.
(p) SOLVENCY; FRAUDULENT CONVEYANCE. Each of OFL and ORFC is
solvent and will not be rendered insolvent by the Transaction and, after
giving effect to the Transaction, neither OFL nor ORFC will be left with
an unreasonably small amount of capital with which to engage in its
business. Neither OFL nor ORFC intends to incur, or believes that it has
incurred, debts beyond its ability to pay such debts as they mature.
Neither OFL nor ORFC 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 OFL or ORFC or any of its assets. The amount of
consideration being received by ORFC upon the transfer of Receivables
and related Other Conveyed Property to the Issuer constitutes reasonably
equivalent value and fair consideration for the Receivables and such
Other Conveyed Property. The amount of consideration being received by
OFL upon the sale of the Receivables and related Other Conveyed Property
to ORFC constitutes reasonably equivalent value and fair consideration
for the Receivables and such Other Conveyed Property. Neither OFL nor
6
<PAGE>
ORFC is entering into the Transaction Documents or consummating the
transactions contemplated thereby with any intent to hinder, delay or
defraud any of the Issuer's creditors.
(q) TAXES. Each of OFL and ORFC has, and each member of the
respective affiliated groups of corporations of which such Person is a
member has, filed all federal and state tax returns which are required
to be filed and paid all taxes, including any assessments received by
such Person, to the extent that such taxes have become due other than
taxes that such Person shall currently be contesting the validity
thereof in good faith by appropriate proceedings and shall have set
aside on its books adequate reserves with respect thereto. Any taxes,
fees and other governmental charges payable by OFL or ORFC in connection
with the Transaction, the execution and delivery of the Transaction
Documents and the issuance of the Securities have been paid or shall
have been paid at or prior to the Date of Issuance.
(r) PLEDGE OF SHARES. The shares of stock of the ORFC which have
been pledged pursuant to the Stock Pledge Agreement constitute all of
the issued and outstanding shares of ORFC.
(s) PERFECTION OF LIENS AND SECURITY INTEREST. The Lien and
security interest in favor of the Collateral Agent with respect to the
Receivables and Other Conveyed Property will be perfected by the filing
of financing statements on Form UCC-1 on or prior to the Date of
Issuance 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 Note Distribution Account and the Spread 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 Receivables and Other
Conveyed Property as against any third parties.
(t) SECURITY INTEREST IN ACCOUNTS. Assuming the retention of
funds in the Collection Account, the Note Distribution Account and the
Spread Account and the acquisition of Eligible Investments, in each
case, 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
Financial Security and the Trustee for the benefit of the Noteholders.
Section 2.02. AFFIRMATIVE COVENANTS OF OFL AND ORFC. OFL and ORFC
jointly and severally hereby agree, during the Term of this Agreement, unless
Financial Security shall otherwise expressly consent in writing, as follows:
(a) COMPLIANCE WITH AGREEMENTS AND APPLICABLE LAWS. Each of OFL
and ORFC shall perform each of its respective obligations under the
Transaction Documents and shall comply with all material requirements of
any law, rule or regulation applicable to it or thereto, or that are
required in connection with its performance under any of the
7
<PAGE>
Transaction Documents. Neither OFL nor ORFC will 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. Neither OFL nor ORFC shall take any action or fail
to take any action that would interfere with the enforcement of any
rights under the Transaction Documents.
(b) FINANCIAL STATEMENTS; ACCOUNTANTS' REPORTS; OTHER INFORMATION.
Each of OFL and ORFC shall keep or cause to be kept in reasonable detail
books and records of account of its assets and business. Each of OFL
and ORFC shall 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 or ORFC, the audited balance sheets of OFL or ORFC, as the case
may be, as of the end of such fiscal year and the audited
statements of income, changes in shareholders' equity and cash
flows of OFL or ORFC, as the case may be, 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 independent accountants (which shall be a nationally
recognized firm or otherwise acceptable to Financial Security) for
OFL or ORFC, as the case may be, 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 OFL or ORFC, as the
case may be, the unaudited balance sheets of OFL or ORFC, as the
case may be, as of the end of such quarter and the unaudited
statements of income, changes in shareholders' equity and cash
flows of OFL or ORFC, as the case may be, 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 if such certificate
is required to be provided pursuant to such Section.
(iii) ACCOUNTANTS' REPORTS. If a Special Event specified in
clauses (a) or (d) of the definition thereof or clause (b) or (c)
of the definition thereof with respect to OFL or ORFC has occurred,
copies of any reports submitted to OFL or ORFC by their respective
independent accountants in connection with any examination of the
financial statements of OFL or ORFC promptly upon receipt thereof.
8
<PAGE>
(iv) OTHER INFORMATION. Promptly upon receipt thereof,
copies of all reports, statements, certifications, schedules, or
other similar items delivered to or by OFL or ORFC pursuant to the
terms of the Transaction Documents and, promptly upon request, such
other data as Financial Security may reasonably request; PROVIDED,
HOWEVER, that neither OFL nor ORFC shall be required to deliver any
such items if provision by some other party to Financial Security
is required under the Transaction Documents unless such other party
wrongfully fails to deliver such item. OFL and ORFC shall, upon
the request of Financial Security, permit Financial Security and
its authorized agents (A) to inspect its books, records and
operations as they may relate to the Securities, the Receivables,
the obligations of OFL or ORFC under the Transaction Documents, the
Transaction and OFL's business; (B) to discuss the affairs,
finances and accounts of OFL and ORFC with its Chief Operating
Officer and Chief Financial Officer upon Financial Security's
reasonable request; and (C) to discuss the affairs, finances and
accounts of OFL and ORFC with their respective independent
accountants, PROVIDED that an officer of such Person shall have the
right to be present during such discussions. Such inspections and
discussions shall be conducted during normal business hours and
shall not unreasonably disrupt the business of such Person. The
fees and expenses of any such authorized agents of Financial
Security shall be for the account of OFL. In addition, OFL and
ORFC shall promptly (but in no case more than 30 days following
issuance or receipt by a 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 Reportable
Event or the underfunded status, termination or possible
termination of a Plan or a Multiemployer Plan. The books and
records of OFL and ORFC with respect to the Receivables will be
maintained at the National Servicing Center, 10033 West 70th
Street, Eden Prairie, Minnesota, unless OFL or ORFC shall otherwise
advise the parties hereto in writing.
(v) OFL shall provide or cause to be provided to Financial
Security an executed original copy of each document executed in
connection with the Transaction within 30 days after the date of
closing.
(c) COMPLIANCE CERTIFICATE. Each of OFL and ORFC shall deliver to
Financial Security concurrently with the delivery of the financial
statements required pursuant to Section 2.02(b)(i) hereof (and
concurrently with the delivery of the financial statements required
pursuant to Section 2.02(b)(ii) hereof, if a Special Event specified in
clauses (a) or (d) of the definition thereof or clause (b) or (c) of the
definition thereof with respect to OFL or ORFC has occurred), a
certificate signed by its Chief Financial Officer stating that:
(i) a review of such Person's performance under the
Transaction Documents during such period has been made under such
officer's supervision;
9
<PAGE>
(ii) to the best of such officer's knowledge following
reasonable inquiry, no Special Event, Default or Event of Default
has occurred with respect to such Person, or if a Special Event,
Default or Event of Default has occurred with respect to such
Person, specifying the nature thereof and, if such Person has a
right to cure any such Default or Event of Default pursuant to
Section 5.01, stating in reasonable detail the steps, if any, being
taken by such Person to cure such Default or Event of Default or to
otherwise comply with the terms of the agreement to which such
Default or Event of Default relates; and
(iii) the attached 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 OFL or ORFC, as
the case may be, 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) NOTICE OF MATERIAL EVENTS. OFL and ORFC 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 or ORFC involving potential damages or
penalties in an uninsured amount in excess of $5,000 in any one
instance or $25,000 in the aggregate with respect to ORFC and in
excess of $10,000 in any one instance or $25,000 in the aggregate
with respect to OFL;
(ii) any change in the location of such Person's principal
office or any change in the location of the books and records of
OFL or ORFC;
(iii) the occurrence of any Default or Special Event
(which notice shall also be delivered to the Rating Agencies);
(iv) 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 ORFC or any of their assets;
(v) the receipt of notice that (A) OFL or ORFC is being
placed under regulatory supervision, (B) any license, permit,
charter, registration or approval necessary for the conduct of
OFL's or ORFC's business is to be, or may be, suspended or revoked,
or (C) OFL or ORFC is to cease and desist any practice, procedure
or policy employed by OFL or ORFC in the conduct of its business,
and such cessation may result in a Material Adverse Change with
respect to OFL or ORFC; or
10
<PAGE>
(vi) any other event, circumstance or condition that has
resulted, or which such Person reasonably believes might result, in
a Material Adverse Change in respect of OFL or ORFC.
(e) FURTHER ASSURANCES. Each of OFL and ORFC 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 on and security interest
in, and all rights of the Collateral Agent, for the benefit of the
Trustee for the Noteholders and Financial Security, with respect to, the
Receivables, the Collection Account, the Note Distribution Account and
the Spread Account. In addition, each of OFL and ORFC shall, upon the
request of Financial Security, from time to time, execute, acknowledge
and deliver, or cause to be executed, acknowledged and delivered, within
thirty (30) days of such request, such amendments hereto and such
further instruments and take such further action as may be reasonably
necessary to effectuate the intention, performance and provisions of the
Transaction Documents or to protect the interest of the Collateral
Agent, for the benefit of the Trustee for Noteholders and Financial
Security, in the Receivables, the Collection Account, the Note
Distribution Account and the Spread Account, free and clear of all Liens
and Restrictions on Transferability except the Restrictions on
Transferability imposed by the Transaction Documents. In addition, each
of OFL and ORFC agrees to cooperate with S&P and Moody's in connection
with any review of the Transaction which may be undertaken by S&P and
Moody's after the date hereof.
(f) THIRD-PARTY BENEFICIARY. Each of OFL and ORFC agrees that
Financial Security shall have all rights of a third-party beneficiary in
respect of the Servicing Agreement and hereby incorporates and restates
its representations, warranties and covenants as set forth therein for
the benefit of Financial Security.
(g) CORPORATE EXISTENCE. Each of OFL and ORFC shall maintain its
corporate existence and shall at all times continue to be duly organized
under the laws of the State of Minnesota or laws of the State of
Delaware, respectively, and duly qualified and duly authorized (as
described in Sections 2.01(a), (b) and (c) hereof) and shall conduct its
business in accordance with the terms of its Certificate of
Incorporation and Bylaws.
(h) SPECIAL PURPOSE ENTITY.
(i) ORFC 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. It particularly will use its best efforts to avoid the
appearance of conducting business on behalf of OFL or any affiliate
of OFL and to avoid the appearance that the assets of ORFC 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 ORFC.
11
<PAGE>
(ii) ORFC shall maintain corporate records and books of
account separate from those of OFL and the affiliates thereof.
ORFC's books and records shall clearly reflect the transfer of the
Receivables to the Issuer.
(iii) ORFC shall obtain proper authorization from its
Board of Directors of all corporate action requiring such
authorization, meetings of the board of directors of ORFC 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) ORFC shall obtain proper authorization from its
shareholders of all corporate action requiring shareholder
approval, meetings of the shareholders of ORFC 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 ORFC have been
paid by OFL, operating expenses and liabilities of ORFC shall be
paid from its own funds. If OFL transfers funds to ORFC which
funds ORFC applies to the satisfaction of an obligation under the
Transaction Documents, such transfer shall be characterized by ORFC
and OFL as a loan recourse only to amounts available for payment to
OFL pursuant to Section 2.08 of the Spread Account Agreement, shall
be pursuant to documentation substantially in the form set forth as
Exhibit C to the Servicing Agreement, and ORFC's obligation to OFL
with respect to such loan shall be limited to the amounts so
available; ORFC and OFL covenant and agree that any such available
amounts shall be applied to the satisfaction of any amounts
outstanding under any such loan, prior to distribution by ORFC on
or in respect of the capital stock of ORFC.
(vi) The annual financial statements of ORFC shall disclose
the effects of its transactions in accordance with generally
accepted accounting principles and shall disclose that the assets
of ORFC are not available to pay creditors of OFL or any affiliate
of OFL.
(vii) The resolutions, agreements and other instruments of
ORFC underlying the transactions described in this Agreement and in
the other Transaction Documents shall be continuously maintained by
ORFC as official records of ORFC separately identified and held
apart from the records of OFL and each affiliate of OFL.
(viii) ORFC shall maintain an arm's-length relationship
with OFL and the affiliates thereof and will not hold itself out as
being liable for the debts of OFL or any of OFL's affiliates.
12
<PAGE>
(ix) ORFC shall keep its assets and liabilities wholly
separate from those of all other entities, including, but not
limited to, OFL and its affiliates.
(x) The books and records of ORFC will be maintained at the
National Servicing Center, 10033 West 70th Street, Eden Prairie,
Minnesota, unless it shall otherwise advise the parties hereto in
writing. ORFC shall, upon the request of Financial Security,
permit Financial Security or its authorized agents to inspect its
books and records.
(i) MAINTENANCE OF LICENSES. Each of OFL and ORFC shall maintain
all licenses, permits, charters and registrations which are material to
the performance by it of its obligations under this Insurance Agreement
and each other Transaction Document to which is a party or by which it
is bound.
(j) MAINTENANCE OF WAREHOUSING FACILITIES. OFL and its
Subsidiaries shall at all times have warehousing facilities (other than
that contemplated by the Transaction) under which the amount of credit
available (including amounts outstanding) to finance the purchase of
automobile receivables originated by OFL, together with the sum of the
amount of unrestricted cash on OFL's balance sheet and the aggregate
principal balance of automobile receivables eligible to be pledged by
OFL (but not pledged) under the Transaction or such warehouse facilities
as of the end of the immediately preceding calendar quarter, at least
equal to $250,000,000.
(k) PROVISION OF INFORMATION ORFC shall provide the Independent
Accountants with such information as is necessary to conduct the review
required by Section 2.18 of the Servicing Agreement.
(l) CLOSING DOCUMENTS. OFL shall provide or cause to be provided
to Financial Security an executed original copy of each document
executed in connection with the Transaction within 30 days after the
Closing Date, except that OFL shall cause a copy of the Repurchase
Agreement, the Servicing Agreement, the Purchase Agreement, the
Indenture, and each Transaction Document to which Financial Security is
a party to be provided to Financial Security on the Closing Date.
(m) INCORPORATION OF COVENANTS. Each of OFL and ORFC agrees to
comply with their respective covenants 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 OFL AND ORFC. OFL and ORFC hereby
jointly and severally agree, during the Term of the Agreement, unless
Financial Security shall otherwise expressly consent in writing, as follows:
(a) RESTRICTIONS ON LIENS. Neither OFL nor ORFC shall (i) 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
13
<PAGE>
or existence of any Lien or Restriction on Transferability of the
Receivables and related Other Conveyed Property except for (w) the Liens
imposed by the Transaction Documents, and (x) Liens for taxes if such taxes
shall not at the time be due and payable or if the Issuer shall currently
be contesting the validity thereof in good faith by appropriate proceedings
and shall have set aside on its books adequate reserves with respect
thereto, and (y) the Restrictions on Transferability imposed by the
Transaction Documents, or (ii) sign or file under the Uniform Commercial
Code of any jurisdiction any financing statement which names either OFL,
ORFC or the Issuer as a debtor, or sign any security agreement authorizing
any secured party thereunder to file such financing statement, with respect
to the Receivables, except in each case any such instrument solely securing
the rights and preserving the Lien of the Issuer or of the Collateral Agent
for the benefit of the Trustee for the Noteholders and Financial Security.
(b) IMPAIRMENT OF RIGHTS. Neither OFL nor ORFC shall take any
action, or fail to take any action, if such action or failure to take
action may (i) interfere with the enforcement of any rights under the
Transaction Documents that are material to the rights, benefits or
obligations of the Trustee, the Noteholders or Financial Security, (ii)
result in a Material Adverse Change in respect of the Receivables or (iii)
impair the ability of OFL or ORFC to perform their respective obligations
under the Transaction Documents.
(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 Other Conveyed 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. Neither OFL nor ORFC shall waive,
modify, amend, supplement or consent to any waiver, modification or
amendment of, any of the provisions of any of the Transaction Documents or
the certificate of incorporation or by-
14
<PAGE>
laws of ORFC (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.
(e) SUCCESSORS. Neither OFL nor ORFC shall terminate or designate,
or consent to the termination or designation of, the servicer, back-up
servicer or collateral agent or any successor thereto without the prior
approval of Financial Security.
(f) CREATION OF INDEBTEDNESS; GUARANTEES. ORFC shall not create,
incur, assume or suffer to exist any Indebtedness, other than in connection
with Term Transactions, the Repurchase Agreement, Indebtedness permitted by
Section 2.02(j) hereof and any other Indebtedness guaranteed or approved in
writing by Financial Security. Without the prior written consent in
writing by Financial Security, ORFC shall not 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.
(g) SUBSIDIARIES. ORFC shall not form, or cause to be formed, any
Subsidiaries.
(h) ISSUANCE OF STOCK. ORFC shall not issue any shares of capital
stock or rights, warrants or options in respect of capital stock or
securities convertible into or exchangeable for capital stock.
(i) NO MERGERS. ORFC shall not consolidate with or merge into any
Person or (except as contemplated in the Transaction Documents) transfer
all or any material amount of its assets to any Person or liquidate or
dissolve.
(j) ERISA. (A) 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
15
<PAGE>
(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.
(B) ORFC shall not contribute or incur any obligation to contribute to
any Multiemployer Plan.
(k) OTHER ACTIVITIES. ORFC shall not:
(i) sell, transfer, exchange or otherwise dispose of any of its
assets except as permitted under the Transaction Documents and the
Term Transactions; or
(ii) engage in any business or activity other than in connection
with the Servicing Agreement, the Repurchase Agreement, the Security
Agreement, the Spread Account Agreement, the Receivables Purchase
Agreement and Assignment and the Term Transactions, and as permitted
by its certificate of incorporation.
(l) INSOLVENCY. Neither OFL nor ORFC shall commence with respect to
ORFC or the Issuer, as the case may be, any case, proceeding or other
action (A) under any existing or future law of any jurisdiction, domestic
or foreign, relating to the 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, corporation 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. Neither OFL nor ORFC
shall take any action in furtherance of, or indicating the consent to,
approval of, or acquiescence in any of the acts set forth above. ORFC
shall not admit in writing its inability to pay its debts.
(m) DIVIDENDS. ORFC 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 ORFC under
any Transaction Document is then due and owing but unpaid.
Section 2.04. REPRESENTATIONS AND WARRANTIES OF OFL AND THE ISSUER. Each
of OFL and the Issuer represent and warrant as of the date hereof and as of the
Date of Issuance, as follows:
(a) DUE ORGANIZATION AND QUALIFICATION. The Issuer is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware, with power and authority to own its properties and
conduct its business. The Issuer is duly qualified to do business, is in
good standing and has obtained all necessary licenses,
16
<PAGE>
permits, charters, registrations and approvals (together, "APPROVALS")
necessary for the conduct of its business as currently conducted 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 any Receivable unenforceable 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 Issuer has all necessary corporate
power and authority to conduct its business as currently conducted, 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 Document and has full power and authority to sell and
assign the Receivables as contemplated by the Transaction Documents and to
consummate the Transaction.
(c) DUE AUTHORIZATION. The execution, delivery and performance by
the Issuer of this Agreement and each other Transaction Document to which
it is a party have been duly authorized by all necessary corporate action
and do 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 the stockholders of the Issuer.
(d) NONCONTRAVENTION. Neither the execution nor delivery of this
agreement and each other Transaction Document to which the Issuer is a
party, nor the consummation of the Transaction nor the satisfaction of the
terms and conditions of this agreement and each other Transaction Documents
to which the Issuer is a party,
(i) conflicts with or results, or will conflict with or result,
in any breach or violation of any provision of the Certificate of
Incorporation or Bylaws of the Issuer or any law, rule, regulation,
order, writ, judgment, injunction, decree, determination or award
currently in effect having applicability to the Issuer, or any of its
properties, agency or other governmental authority having supervisory
powers over the Issuer,
(ii) constitutes or will constitute a default by the Issuer under
or a breach of any provision of any loan agreement, mortgage,
indenture or other agreement or instrument to which the Issuer 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, or will result in or require,
the creation of any Lien upon or in respect of any of the assets of
the Issuer except as otherwise expressly contemplated by the
Transaction Documents.
(e) LEGAL PROCEEDINGS. There is no action, proceeding or
investigation pending, or to the best knowledge of the Issuer after
reasonable inquiry, threatened by or before any court, regulatory body,
governmental or administrative agency or arbitrator against or affecting
the Issuer, or any properties or rights of the Issuer, including without
limitation, the Receivables: (A) asserting the invalidity of this
Agreement or any other
17
<PAGE>
Transaction Document to which the Issuer is a party, (B) seeking
to prevent the issuance of the Securities or the consummation
of the Transaction, (C) seeking any determination or ruling that might
materially and adversely affect to the validity or enforceability of this
Agreement or any other Transaction Document to which the Issuer is a party
or (D) which might result in a Material Adverse Change with respect to the
Issuer.
(f) VALID AND BINDING OBLIGATIONS. Each of the Transaction Documents
to which the Issuer is a party, when executed and delivered by it, and
assuming due authorization, execution and delivery by the other parties
thereto, will constitute the legal, valid and binding obligations of such
Person, 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 Securities, when executed, authenticated
and delivered in accordance with the Indenture, will be validly issued and
outstanding and entitled to the benefits of the Indenture, 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 the Issuer of this Agreement or of any other
Transaction Document to which it 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 Issuer in the conduct of its
business violates any law, regulation, judgment, agreement, order or decree
applicable to it which, if enforced, would result in a Material Adverse
Change with respect to the Issuer.
(i) ACCURACY OF INFORMATION. None of the Provided Documents contain
any statement of a material fact with respect to the Issuer or the
Transaction that was untrue or misleading in any material respect when made
(except insofar as any such Document was connected or superseded by a
subsequent Provided Document). There is no fact known to OFL or the Issuer
which has a material possibility of causing a Material Adverse Change with
respect to either of them or which has a material possibility of impairing
the value or marketability of the Receivables and related Other Conveyed
Property, taken as a whole, or decreasing the profitability that amounts
due in respect of the Receivables and related Other Conveyed Property will
be collected as due. Since the furnishing of the Provided Documents, there
has been no change, or any development or event involving a prospective
change known to OFL or the Issuer that would render any representation or
warranty or other statement made by either of them in any of the Provided
Documents untrue or misleading in any material respect.
18
<PAGE>
(j) ERISA. The Issuer 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.
(k) COMPLIANCE WITH SECURITIES LAWS. The Issuer is not required to
be registered as an "investment company" under the Investment Company Act
and is not subject to the information reporting requirements of the
Exchange Act.
(l) TRANSACTION DOCUMENTS. Each of the representations and
warranties of the Issuer contained in the Transaction Documents is true and
correct in all material respects and the Issuer hereby makes each such
representation and warranty made by it to, and for the benefit of,
Financial Security as if the same were set forth in full herein.
(m) SPECIAL PURPOSE ENTITY.
(i) The capital of the Issuer is adequate for the business and
undertakings of the Issuer.
(ii) Other than as provided in this Agreement, the Indenture, the
Repurchase Agreement, the Servicing Agreement, the Security Agreement
and the Guaranty, the Issuer is not engaged in any business
transactions with OFL or any affiliate of OFL.
(iii) At least one director of the Issuer 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 Issuer'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 bylaws of the Issuer 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 Issuer is solvent and will
not be rendered insolvent by the Transaction and, after giving effect to
the Transaction, the Issuer will not be left with an unreasonably small
amount of capital with which to engage in its business. The Issuer does
not intend to incur, or believe that it has incurred, debts beyond its
ability to pay such debts as they mature. The Issuer 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 Issuer or any of its assets.
The Issuer is not entering into the Transaction Documents or consummating
the transactions contemplated thereby with any intent to hinder, delay or
defraud any of the Issuer's creditors.
19
<PAGE>
(o) TAXES. The Issuer has, and each member of the affiliated groups
of corporations of which such Person is a member has, filed all federal and
state tax returns which are required to be filed and paid all taxes,
including any assessments received by such Person, to the extent that such
taxes have become due other than taxes that such Person shall currently be
contesting the validity thereof in good faith by appropriate proceedings
and shall have set aside on its books adequate reserves with respect
thereto. Any taxes, fees and other governmental charges payable by the
Issuer in connection with the Transaction, the execution and delivery of
the Transaction Documents and the issuance of the Securities have been paid
or shall have been paid at or prior to the Date of Issuance.
(p) NO PRIOR ACTIVITIES. The Issuer has not engaged in any
activities or entered into any agreements prior to this Transaction.
(q) PLEDGE OF SHARES. The shares of stock of the Issuer which have
been pledged pursuant to the Stock Pledge Agreement constitute all of the
issued and outstanding shares of the Issuer.
Section 2.05. AFFIRMATIVE COVENANTS OF OFL AND THE ISSUER. Each of OFL
and the Issuer hereby agree that during the Term of this Agreement, unless
Financial Security shall otherwise expressly consent in writing, as follows:
(a) COMPLIANCE WITH AGREEMENTS AND APPLICABLE LAWS. The Issuer shall
perform each of its respective obligations under the Transaction Documents
and shall comply with all material requirements of, and the Securities
shall be offered and sold in accordance with, any law, rule or regulation
applicable to it or thereto, or that are required in connection with its
performance under any of the Transaction Documents. The Issuer 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 Issuer shall not take any action or fail to take
any action that would interfere with the enforcement of any rights under
the Transaction Documents.
(b) FINANCIAL STATEMENTS; ACCOUNTANTS' REPORTS; OTHER INFORMATION.
The Issuer shall keep or cause to be kept in reasonable detail books and
records of account of its assets and business. The Issuer shall 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 the
Issuer, the audited balance sheets of the Issuer as of the end of such
fiscal year and the audited statements of income, changes in
shareholders' equity and cash flows of the Issuer for such fiscal
year, all in reasonable detail and stating in comparative form the
20
<PAGE>
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 independent accountants (which shall be a nationally
recognized firm or otherwise acceptable to Financial Security) for the
Issuer and by the certificate specified in Section 2.05(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 Issuer the unaudited balance
sheets of the Issuer as of the end of such quarter and the unaudited
statements of income, changes in shareholders' equity and cash flows
of the Issuer 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
2.05(c) hereof if such certificate is required to be provided pursuant
to such Section.
(iii) ACCOUNTANTS' REPORTS. If a Special Event has occurred,
copies of any reports submitted to the Issuer by its independent
accountants in connection with any examination of the financial
statements of the Issuer promptly upon receipt thereof.
(iv) OTHER INFORMATION. Promptly upon receipt thereof, copies of
all reports, statements, certifications, schedules, or other similar
items delivered to or by the Issuer pursuant to the terms of the
Transaction Documents and, promptly upon request, such other data as
Financial Security may reasonably request; PROVIDED, HOWEVER, that the
Issuer shall not be required to deliver any such items if provision by
some other party to Financial Security is required under the
Transaction Documents unless such other party wrongfully fails to
deliver such item. The Issuer shall, upon the request of Financial
Security, permit Financial Security or its authorized agents (A) to
inspect its books and records as they may relate to the Securities,
the Receivables, the obligations of the Issuer under the Transaction
Documents, the Transaction; (B) to discuss the affairs, finances and
accounts of the Issuer with its officers upon Financial Security's
reasonable request; and (C) upon the occurrence of a Special Event, to
discuss the affairs, finances and accounts of the Issuer with its
independent accountants, PROVIDED that an officer of the Issuer shall
have the right to be present during such discussions. Such
inspections and discussions shall be conducted during normal business
hours and shall not unreasonably disrupt the business of such Person.
The books and records of the Issuer will be maintained at the National
Servicing Center, 10033 West 70th Street, Eden Prairie, Minnesota,
unless such Person shall otherwise advise the parties hereto in
writing.
21
<PAGE>
(v) The Issuer shall provide or cause to be provided to
Financial Security an executed original copy of each document executed
in connection with the Transaction within 30 days after the date of
closing.
(c) COMPLIANCE CERTIFICATE. The Issuer shall deliver to Financial
Security concurrently with the delivery of the financial statements
required pursuant to Section 2.05(b)(i) hereof (and concurrently with the
delivery of the financial statements required pursuant to Section
2.05(b)(ii) hereof, if a Special Event has occurred), a certificate signed
by a President, Vice President or duly authorized agent stating that:
(i) a review of the Issuer's performance under the Transaction
Documents during such period has been made under such officer's
supervision;
(ii) to the best of such officer's knowledge following reasonable
inquiry, no Special Event, Default or Event of Default has occurred
with respect to such Person, or if a Special Event, Default or Event
of Default has occurred with respect to such Person, specifying the
nature thereof and, if such Person has a right to cure any such
Default or Event of Default pursuant to Section 5.01, stating in
reasonable detail the steps, if any, being taken by such Person to
cure such Default or Event of Default or to otherwise comply with the
terms of the agreement to which such Default or Event of Default
relates; and
(iii) the attached financial reports submitted in accordance with
Section 2.05(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 Issuer 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) NOTICE OF MATERIAL EVENTS. The Issuer 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 (A)
against the Issuer pertaining to the Receivables in general, (B) with
respect to a material portion of the Receivables or (C) in which a
request has been made for certification as a class action (or
equivalent relief) that would involve a material portion of the
Receivables;
(ii) any change in the location of such Person's principal office
or any change in the location of the books and records of the Issuer;
(iii) the occurrence of any Default or Special Event (which
notice shall also be delivered to the Rating Agencies);
22
<PAGE>
(iv) the commencement of any proceedings by or against the Issuer
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 Issuer or any of its assets;
(v) the receipt of notice that (A) the Issuer is being placed
under regulatory supervision, (B) any license, permit, charter,
registration or approval necessary for the conduct of the Issuer's
business is to be, or may be, suspended or revoked, or (C) the Issuer
is to cease and desist any practice, procedure or policy employed by
the Issuer in the conduct of its business, and such cessation may
result in a Material Adverse Change with respect to the Issuer; or
(vi) any other event, circumstance or condition that has
resulted, or which such Person reasonably believes might result, in a
Material Adverse Change in respect of the Issuer.
(e) FURTHER ASSURANCES. The Issuer 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 on and security interest in, and all rights of the
Collateral Agent, for the benefit of the Trustee for the Noteholders and
Financial Security, with respect to, the Receivables, the Collection
Account and the Note Distribution Account. In addition, the Issuer shall,
upon the request of Financial Security, from time to time, execute,
acknowledge and deliver, or cause to be executed, acknowledged and
delivered, within thirty (30) days of such request, such amendments hereto
and such further instruments and take such further action as may be
reasonably necessary to effectuate the intention, performance and
provisions of the Transaction Documents or to protect the interest of the
Collateral Agent, for the benefit of the Trustee for the Noteholders and
Financial Security, in the Receivables, free and clear of all Liens and
Restrictions on Transferability, except the Restrictions on Transferability
imposed by the Transaction Documents. In addition, the Issuer 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.
(f) REDEMPTION OF SECURITIES. The Issuer shall, upon the repayment
of outstanding Advances and termination of the Issuer's obligation to make
further Advances pursuant to the Repurchase Agreement or otherwise, furnish
to Financial Security a notice of such repayment and termination, and, upon
payment of all of the Securities and the expiration of the term of the
Policy, surrender the Policy to Financial Security for cancellation.
(g) THIRD-PARTY BENEFICIARY. The Issuer agrees that Financial
Security shall have all rights of a third-party beneficiary in respect of
the Servicing Agreement and hereby incorporates and restates its
representations, warranties and covenants as set forth therein for the
benefit of Financial Security.
23
<PAGE>
(h) CORPORATE EXISTENCE. The Issuer shall maintain its corporate
existence and shall at all times continue to be duly organized under the
laws of the State of Delaware and duly qualified and duly authorized (as
described in Sections 2.04(a), (b) and (c) hereof) and shall conduct its
business in accordance with the terms of its Certificate of Incorporation
and Bylaws.
(i) DISCLOSURE DOCUMENT. Any Offering Document delivered with
respect to the Securities shall clearly disclose that the Policy is not
covered by the property/casualty Insurance Security Fund specified in
Article 76 of the New York Insurance Law. In addition, any Offering
Document delivered with respect to the Securities which includes financial
statements of Financial Security prepared in accordance with generally
accepted accounting principles shall include the following statement
immediately preceding such financial statements:
The New York State Insurance Department recognizes only
statutory account 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 where 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 Issuer 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. It particularly will use its best efforts to avoid the
appearance of conducting business on behalf of OFL or any affiliate
thereof or and to avoid the appearance that the assets of the Issuer
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 Issuer.
(ii) The Issuer shall maintain corporate records and books of
account separate from those of OFL and any affiliate thereof. The
Issuer's books and records shall clearly reflect the transfer of the
Receivables and related Other Conveyed Property to the Issuer.
(iii) The Issuer shall obtain proper authorization from its
Board of Directors of all corporate action requiring such
authorization, meetings of the board of directors of the Issuer shall
be held not less frequently than one time per
24
<PAGE>
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 Issuer shall obtain proper authorization from its
shareholders of all corporate action requiring shareholder approval,
meetings of the shareholders of the Issuer 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 Issuer have been
paid by OFL, operating expenses and liabilities of the Issuer shall be
paid from its own funds.
(vi) The annual financial statements of the Issuer shall disclose
the effects of its transactions in accordance with generally accepted
accounting principles and shall disclose that the assets of the Issuer
are not available to pay creditors of OFL or any affiliate thereof.
(vii) The resolutions, agreements and other instruments of
the Issuer underlying the transactions described in this Agreement and
in the other Transaction Documents shall be continuously maintained by
the Issuer as official records of the Issuer separately identified and
held apart from the records of OFL and each affiliate thereof.
(viii) The Issuer shall maintain an arm's-length relationship
with OFL and the affiliates thereof and will not hold itself out as
being liable for the debts of OFL or any affiliate thereof.
(ix) The Issuer shall keep its assets and liabilities wholly
separate from those of all other entities, including, but not limited
to, OFL and the affiliates thereof.
(x) The books and records of the Issuer will be maintained at
the National Servicing Center, 10033 West 70th Street, Eden Prairie,
Minnesota, unless it shall otherwise advise the parties hereto in
writing. The Issuer shall, upon the request of Financial Security,
permit Financial Security or its authorized agents to inspect its
books and records.
(k) MAINTENANCE OF LICENSES. The Issuer shall maintain all licenses,
permits, charters and registrations which are material to the performance
by of its obligations under this Insurance Agreement and each other
Transaction Document to which is a party or by which it is bound.
25
<PAGE>
(l) INCORPORATION OF COVENANTS. The Issuer agrees to comply with
each of the Issuer's covenants set forth in the Transaction Documents and
hereby incorporates such covenants by reference as if each were set forth
herein.
Section 2.06. NEGATIVE COVENANTS OF OFL AND THE ISSUER. Each of OFL and
the Issuer hereby agree that during the Term of this Agreement, unless Financial
Security shall otherwise expressly consent in writing, as follows:
(a) RESTRICTIONS ON LIENS. The Issuer shall not (i) 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 of the Receivables except for (w) the Lien in favor of
the Collateral Agent, for the benefit of the Trustee for the Noteholders
and Financial Security, (x) Liens for taxes if such taxes shall not at the
time be due and payable or if the Issuer shall currently be contesting the
validity thereof in good faith by appropriate proceedings and shall have
set aside on its books adequate reserves with respect thereto, and (y) the
Restrictions on Transferability imposed by the Transaction Documents or
(ii) sign or file under the Uniform Commercial Code of any jurisdiction any
financing statement which names the Issuer as a debtor, or sign any
security agreement authorizing any secured party thereunder to file such
financing statement, with respect to the Receivables, except in each case
any such instrument solely securing the rights and preserving the Lien of
the Collateral Agent, for the benefit of the Trustee for the Noteholders
and Financial Security.
(b) IMPAIRMENT OF RIGHTS. The Issuer shall not take any action, or
fail to take any action, if such action or failure to take action may (i)
interfere with the enforcement of any rights under the Transaction
Documents that are material to the rights, benefits or obligations of the
Trustee, the Noteholders or Financial Security, (ii) result in a Material
Adverse Change in respect of the Receivables or (iii) impair the ability of
the Issuer to perform its obligations under the Transaction Documents,
including any consolidation, merger with any Person or any transfer of all
or any material amount of the assets of the Issuer to any other Person if
such consolidation, merger or transfer would materially impair the net
worth of the Issuer or any successor Person obligated, after such event, to
perform such Person's obligations under the Transaction Documents.
(c) WAIVER, AMENDMENTS, ETC. The Issuer shall not waive, modify or
amend, or consent to any waiver, modification or amendment of, any of the
provisions of any of the Transaction Documents or the Certificate of
incorporation or by-laws of the Issuer unless (i) if no Insurer Default
shall have occurred and be continuing Financial Security shall have
occurred and be continuing Financial Security shall have consented thereto
in writing or (ii) if an Issuer Default shall have occurred and be
continuing which would adversely affect the interests of Financial
Security.
(d) SUCCESSORS. The Issuer shall not terminate or designate, or
consent to the termination or designation of, the servicer, back-up
servicer or collateral agent or any successor thereto without the prior
approval of Financial Security.
26
<PAGE>
(e) OTHER ACTIVITIES. The Issuer shall not issue securities other
than the Securities or create, incur, assume or suffer to exist any
Indebtedness or sell, transfer, exchange or otherwise dispose of any of its
assets, or engage in any business or activity, except for the Transaction
and otherwise only if the following conditions are met: (i) no other
securities of the Issuer will be downgraded or listed for credit review for
possible downgrade by reason of such transaction, (ii) the shadow rating of
the Securities is not reduced by reason of such transaction, (iii) all
parties to such transaction enter into agreements with the Issuer (and
satisfactory to Financial Security), with Financial Security as a named
third-party beneficiary, not to commence a bankruptcy, reorganization or
similar proceeding against the Issuer.
(f) SUBSIDIARIES. The Issuer shall not form, or cause to be formed,
any Subsidiaries.
(g) ISSUANCE OF STOCK. The Issuer shall not issue any shares of
capital stock or rights, warrants or options in respect of capital stock or
securities convertible into or exchangeable for capital stock, other than
the shares of common stock which have been pledged to Financial Security
under the Stock Pledge Agreement.
(h) NO MERGERS. The Issuer shall not consolidate with or merger into
any Person or transfer all or any material amount of its assets to any
Person or liquidate or dissolve.
(i) INSOLVENCY. The Issuer shall not commence with respect to ORFC
any case, proceeding or other action (A) under any existing or future law
of any jurisdiction, domestic or foreign, relating to the 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, corporation
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. Neither OFL nor the Issuer shall take any action
in furtherance of, or indicating the consent to, approval of, or
acquiescence in any of the acts set forth above. The Issuer shall not
admit in writing its inability to pay its debts.
ARTICLE III
THE POLICY; REIMBURSEMENT; INDEMNIFICATION
Section 3.01. ISSUANCE OF THE POLICY. Financial Security agrees to issue
the Policy subject to satisfaction of each and all of the conditions precedent
set forth in Appendix A hereto.
27
<PAGE>
Section 3.02. PAYMENT OF FEES AND PREMIUM.
(a) INDUCEMENT LETTER FEES AND EXPENSES. On the Date of Issuance,
OFL shall pay or cause to be paid the amounts specified with respect to
fees, expenses and disbursements in the Inducement Letter, unless otherwise
agreed between OFL and Financial Security.
(b) LEGAL FEES. On the Date of Issuance, OFL shall pay or cause to
be paid legal fees and disbursements incurred by Financial Security in
connection with the issuance of the Policy, unless otherwise agreed between
OFL and Financial Security.
(c) RATING AGENCY FEES. The initial fees of S&P and Moody's with
respect to the Securities and the Transaction shall be paid by OFL in full
on the Date of Issuance, or otherwise provided for to the satisfaction of
Financial Security. All periodic and subsequent fees of S&P or Moody's
with respect to, and directly allocable to, the Securities and the
Transaction shall be for the account of, and shall be billed to, 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 determining a capital
charge with respect to the Policy by Financial Security, in which case the
cost for such agency shall be paid by OFL.
(d) AUDITORS' FEES. OFL shall pay on demand any fees of Financial
Security's auditors payable in respect of any Offering Document that are
incurred after the Date of Issuance. It is understood that Financial
Security's auditors shall not incur any additional fees in respect of
future Offering Documents except at the request of or with the consent of
OFL.
(e) PREMIUM. In consideration of the issuance by Financial Security
of the Policy, Financial Security shall be entitled to receive the Premium
as and when due in accordance with the terms of the Premium Letter. The
Premium paid hereunder or under the Servicing Agreement shall be
nonrefundable without regard to whether Financial Security makes any
payment under the Policy or any other circumstances relating to the
Securities or provision being made for payment of the Securities prior to
maturity.
Section 3.03. REIMBURSEMENT AND ADDITIONAL PAYMENT OBLIGATION. OFL agrees
to pay to Financial Security the following amounts as and when incurred:
(a) a sum equal to the total of all amounts paid by Financial
Security under the Policy;
(b) any and all out-of-pocket 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)
in the event of payments under the Policy, any accounts established to
facilitate payments under the Policy, to the extent Financial Security has
not been immediately reimbursed on the date that any amount is paid by
Financial Security under the Policy, or other administrative expenses
relating to
28
<PAGE>
such payments under the Policy, (ii) the enforcement, defense
or preservation of any rights in respect of any of the Transaction
Documents, including defending, monitoring or participating in any
litigation or proceeding (including any insolvency or bankruptcy proceeding
in respect of any Transaction participant or any affiliate thereof)
relating to any of the Transaction Documents, any party to any of the
Transaction Documents or the Transaction, (iii) any amendment, waiver or
other action with respect to, or related to, any Transaction Document
whether or not executed or completed, or (iv) any review or investigation
made by Financial Security in those circumstances where its approval or
consent is sought under any of the Transaction Documents;
(c) interest on any and all amounts described in Section 3.03(a) or
(b) or Section 3.02(e) from the date due to Financial Security pursuant to
the provisions hereof until payment thereof in full, 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, OFL, in its capacity as Servicer, or the Trustee, including, without
limitation, any amounts payable by OFL, in its capacity as Servicer, or the
Trustee pursuant to the Securities or any other Transaction Documents; and
any payments made by Financial Security as, or in lieu of, any servicing,
management, trustee, custodial or administrative fees payable, in the sole
discretion of Financial Security to third parties in connection with the
Transaction.
Section 3.04. 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 hereby 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 transactions contemplated by the Transaction Documents by
reason of:
(i) the negligence, bad faith, willful misconduct, misfeasance,
malfeasance or theft committed by any director, officer, employee or
agent of OFL, ORFC or the Issuer;
(ii) the breach by OFL, ORFC or the Issuer of any representation,
warranty or covenant under any of the Transaction Documents or the
occurrence, in respect of OFL, ORFC or the Issuer under any of the
Transaction Documents of any "event of default" or any event which,
with the giving of notice or the lapse of time or both, would
constitute any "event of default"; or
29
<PAGE>
(iii) any untrue statement or alleged untrue statement of a
material fact contained in any Offering Document 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 in information included in an
Offering Document and furnished by Financial Security in writing
expressly for use therein (all such information so furnished by
Financial Security being referred to herein as "FINANCIAL SECURITY
INFORMATION").
(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 (the
"INDEMNIFYING PARTY") hereunder, Financial Security shall promptly notify
the Indemnifying Party in writing, and the Indemnifying Party shall assume
the defense thereof, including the employment of counsel satisfactory to
Financial Security and the payment of all expenses. An 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 only be at the expense of the Indemnifying Party if (i) the
Indemnifying Party has agreed to pay such fees and expenses, (ii) the
Indemnifying Party 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 Indemnifying Party, and the Indemnified Party shall have been
advised by counsel that (A) there may be one or more legal defenses
available to it which are different from or additional to those available
to the Indemnifying Party and (B) the representation of the Indemnifying
Party and the Indemnified Party by the same counsel would be inappropriate
or contrary to prudent practice (in which case, if the Indemnified Party
notifies the Indemnifying Party in writing that it elects to employ
separate counsel at the expense of the Indemnifying Party, the Indemnifying
Party 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 the Indemnifying Party 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). The Indemnifying Party shall not be liable for any settlement
of any such action or proceeding effected without its written consent 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 the
Indemnifying Party shall have received notice in accordance with this
subsection (b), the Indemnifying Party agrees to indemnify and hold the
Indemnified Parties harmless from and against any loss or liability by
reason of such settlement or judgment.
30
<PAGE>
(c) CONTRIBUTION. To provide for just and equitable contribution if
the indemnification provided by the Indemnifying Party is determined to be
unavailable for any Indemnified Party (other than due to application of
this Section), the Indemnifying Party shall contribute to the losses
incurred by the Indemnified Party on the basis of the relative fault of the
Indemnifying Party, on the one hand, and the Indemnified Party, on the
other hand.
Section 3.05. SUBROGATION. Subject only to the priority of payment
provisions of the Indenture and the Security Agreement, each of the parties
hereto acknowledges that, to the extent of any payment made by Financial
Security pursuant to the Policy, 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 to any moneys paid or payable in respect of the
Securities under the Transaction Documents or otherwise. Each of the parties
hereto 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 moneys paid or payable in respect of the
Securities under the Transaction Documents or otherwise.
ARTICLE IV
FURTHER AGREEMENTS
Section 4.01. EFFECTIVE DATE; TERM OF AGREEMENT. This Agreement shall
take effect on the Date of Issuance and shall remain in effect until the later
of (a) such time as Financial Security is no longer subject to a claim under the
Policy and the Policy shall have been surrendered to Financial Security for
cancellation and (b) all amounts payable to Financial Security and the
Noteholders under the Transaction Documents and under the Securities have been
paid in full; PROVIDED, HOWEVER, that the provisions of Sections 3.02, 3.03 and
3.04 hereof shall survive any termination of this Agreement.
Section 4.02. OBLIGATIONS ABSOLUTE. (a) The payment obligations of OFL,
ORFC and the Issuer hereunder shall be absolute and unconditional, and shall be
paid 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 Securities or the Policy; (ii) any exchange or release of any
other obligations hereunder; (iii) the existence of any claim, setoff, defense,
reduction, abatement or other right which OFL, ORFC or the Issuer may have at
any time against Financial Security or any other Person; (iv) any document
presented in connection with the Policy proving to be forged, fraudulent,
invalid or insufficient in any respect, including any failure to strictly comply
with the terms of the Policy, or any statement therein being untrue or
inaccurate in any respect; (v) any failure of the Issuer to receive the proceeds
from the sale of the Securities; (vi) any breach by OFL, ORFC or the Issuer of
any representation, warranty or covenant contained in any of the Transaction
Documents; or (vii) any other circumstances, other than payment in full, which
might otherwise constitute a defense available to, or discharge of, OFL, ORFC or
the Issuer in respect of any Transaction Document.
31
<PAGE>
(b) OFL, ORFC and the Issuer and any and all others who are now or may
become liable for all or part of the obligations of such Persons 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,
if any, 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; (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 OFL, ORFC or the Issuer; (v) 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; (vi) 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
(vii) 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 OFL, ORFC or the
Issuer from pursuing any rights or remedies it may have against any Person other
than Financial Security in a separate legal proceeding.
Section 4.03. 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. None of OFL, ORFC nor the Issuer 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 Policy 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 Policy.
(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.
32
<PAGE>
(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, other than
Financial Security, against OFL, ORFC or the Issuer, 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 nor any Noteholder shall have any right
to payment from any premiums paid or payable hereunder or from any other amounts
paid by OFL or the Issuer pursuant to Section 3.02, 3.03 or 3.04 hereof.
Section 4.04. 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 Policy by the Trustee or for any acts
or omissions of the 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 Policy, 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 had 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 the Policy;
(b) any representation or warranty made by OFL, ORFC or the Issuer
under any of the Transaction Documents, or in any certificate or report
furnished under any of the Transaction Documents, shall prove to be untrue
or incorrect in any material respect; PROVIDED, HOWEVER, that if OFL, ORFC
or the Issuer effectively cures any such defect in any representation or
warranty under any Transaction Document, or certificate or report furnished
under any Transaction Document, within the time period specified in the
relevant Transaction Document as the cure period therefor, such defect
shall not in and of itself constitute an Event of Default hereunder;
(c) (i) OFL, ORFC or the Issuer shall fail to pay when due any amount
payable by it, shall fail to effect any purchase or repurchase required to
be made by it, in each case, hereunder or under any of the Transaction
Documents unless such amounts are paid in full within any applicable cure
period explicitly provided for under the relevant Transaction Document;
(ii) OFL, ORFC or the Issuer shall have asserted that any material
provision 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
33
<PAGE>
jurisdiction over any of the parties to any of the Transaction Documents
or any 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) OFL, ORFC or the Issuer shall fail to perform or observe any
other covenant or agreement contained in any of the Transaction Documents
(except for the obligations described under clause (c) above) and such
failure shall continue beyond any applicable cure period explicitly
provided for under the relevant Transaction Document;
(e) any of OFL, ORFC or the Issuer 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 it
insolvent or seeking a liquidation, or shall take advantage of any
insolvency act, or shall commence a case or other proceeding naming it as
debtor under the United States Bankruptcy Code or similar law, domestic or
foreign, or a case or other proceeding shall be commenced against any of
OFL, ORFC or the Issuer under the United States Bankruptcy Code or similar
law, domestic or foreign, or any proceeding shall be instituted against any
of OFL, ORFC or the Issuer seeking liquidation of its assets and such
Person shall fail to take appropriate action resulting in the withdrawal or
dismissal of such proceeding within 30 days or there shall be appointed or
any of OFL, ORFC or the Issuer shall consent to, or acquiesce in, the
appointment of a receiver, liquidator, conservator, trustee or similar
official in respect of such Person or the whole or any substantial part of
its properties or assets or such Person shall take any corporate action in
furtherance of any of the foregoing;
(f) the occurrence of an Insurance Agreement Event of Default with
respect to any Term Transaction, which Insurance Agreement Event of Default
is not defined as a "Portfolio Performance Event of Default" in the related
Insurance Agreement;
(g) ORFC shall fail to make a deposit with respect to any WAC
Deficiency Amount in accordance with the provisions of Section 3.1(f) of
the Servicing Agreement, and such failure shall continue for one Business
Day;
(h) it shall be determined on any Determination Date that the
Collateral Test shall fail to have been satisfied as of the immediately
preceding Accounting Date, after taking into account any deposit made by
ORFC to the Collection Account on such Determination Date and such failure
shall continue for one Business Day;
(i) a Servicer Termination Event shall occur; or
(j) the occurrence of an "Event of Default" under the Repurchase
Agreement and either (x) the Repurchase Date (as defined in the Repurchase
Agreement) shall have been deemed to automatically occur or (y) the Issuer
shall have exercised its option to have the Repurchase Date immediately
occur pursuant to Section 8(a) of the Repurchase Agreement.
34
<PAGE>
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 the Noteholders in respect of the Securities; or
(iii) take whatever action at law or in equity may appear
necessary or desirable in its judgment to enforce performance of any
obligation of OFL, ORFC or the Issuer under the Transaction Documents.
(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, other than such notice as may be expressly required in this
Article.
(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 OFL, ORFC and the Issuer. 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.
(e) Upon the declaration of an Event of Default by Financial Security,
Financial Security shall provide written notice of such Event of Default to the
Rating Agencies.
35
<PAGE>
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 personally delivered
or telecopied to the recipient as follows:
(a) To Financial Security: Financial Security Assurance Inc.
350 Park Avenue
New York, NY 10022
Attention: Surveillance Department
Re: Arcadia Receivables Conduit Corp.,
Floating Rate Automobile Receivables-
Backed Notes/Olympic Structured
Warehouse Facility
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 the 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 OFL: Olympic Financial Ltd.
Olympic Place
7825 Washington Avenue South
Minneapolis, MN 55439-2444
Attention: Treasurer
(c) To ORFC: Olympic Receivables Finance Corp.
Olympic Place
7825 Washington Avenue South
Minneapolis, MN 55439-2444
Attention: Treasurer
36
<PAGE>
(d) To the Issuer: Arcadia Receivables Conduit Corp.
Olympic Place
7825 Washington Avenue South
Minneapolis, MN 55439-2444
Attention: Treasurer
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. PAYMENT PROCEDURE. In the event of any payment by Financial
Security for which it is entitled to be reimbursed or indemnified as provided
herein, each party obligated hereunder to make such reimbursement or provide
such indemnification 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 due to the date paid.
Section 6.04. 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 6.05. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
Section 6.06. CONSENT TO JURISDICTION. (a) THE PARTIES HERETO 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 TRANSACTIONS CONTEMPLATED THEREUNDER OR
FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND THE PARTIES HERETO HEREBY
IRREVOCABLY AND UNCONDITIONALLY AGREE
37
<PAGE>
THAT ALL CLAIMS IN RESPECT OF ANY SUCH 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. 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 TRANSACTION 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 OFL, ORFC and the Issuer 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 OFL, ORFC and the Issuer 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
OFL, ORFC or the Issuer or its property in the courts of any jurisdiction.
Section 6.07. 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 6.08. COUNTERPARTS. This Agreement may be executed in
counterparts by the parties hereto, and all such counterparts shall constitute
one and the same instrument.
Section 6.09. 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 ANY OF THE TRANSACTIONS CONTEMPLATED
THEREUNDER. 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
38
<PAGE>
(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 Securities or the Policy, 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. ENTIRE AGREEMENT. This Agreement, the Premium Letter and
the Policy 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.
39
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Agreement, all as of the day and year first above written.
FINANCIAL SECURITY ASSURANCE INC.
By: ________________________________
Authorized Officer
OLYMPIC FINANCIAL LTD.
By: ________________________________
Title: ________________________________
OLYMPIC RECEIVABLES FINANCE CORP.
By: ________________________________
Title: ________________________________
ARCADIA RECEIVABLES CONDUIT CORP.
By: ________________________________
Title: ________________________________
40
<PAGE>
APPENDIX I
DEFINITIONS
"ACCUMULATED FUNDING DEFICIENCY" shall have the meaning provided in Section
412 of the Code and Section 302 of ERISA, whether or not waived.
"ASSIGNMENT AGREEMENT" means, with respect to any Receivables, the
assignment agreement between OFL and ORFC pursuant to which OFL sells and
assigns Receivables to ORFC, in such form as is attached to the Receivables
Purchase Agreement and Assignment as Exhibit A.
"BUSINESS DAY" means any day other than (a) a Saturday or Sunday or (b) a
day on which banking institutions in the City of New York, New York or the City
of Minneapolis, Minnesota are authorized or obligated by law or executive order
to be closed.
"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 ORFC or the Issuer and each entity,
whether or not incorporated, which is affiliated with such Person pursuant to
Section 414(b), (c), (m) or (o) of the Code.
"CUSTODIAN AGREEMENT" means any Custodian Agreement as defined in the
Servicing Agreement.
"DATE OF ISSUANCE" means the date on which the Policy is issued as
specified therein.
"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.
"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
the Insurance Agreement.
"EXPIRATION DATE" means the final date of the Term of the Policy, as
specified in the Policy.
"FINANCIAL SECURITY" means Financial Security Assurance Inc., a New York
stock insurance company, its successors and assigns.
41
<PAGE>
"FINANCIAL STATEMENTS" means with respect to each of OFL and ORFC the
balance sheets as of December 31, 1995 and the statements of income, retained
earnings and cash flows for the 12-month period then ended and the notes thereto
and the balance sheets as of September 30, 1996 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 Policy.
"INDEBTEDNESS" of any Person means at any date, without duplication, (i)
all obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (iii)
all obligations of such Person to pay the deferred purchase price of property or
services, except trade accounts payable arising in the ordinary course of
business, (iv) all obligations of such Person as lessee under any capital
leases, (v) all Indebtedness of others secured by a Lien on any asset of such
Person, whether or not such Indebtedness is assumed by such Person, (vi) all
Indebtedness of others guaranteed by such Person or with respect to which such
Person shall agree to become directly or contingently liable by, and (vii) all
obligations of such Person in connection with the repurchase of motor vehicle
retail installment sales contracts.
"INDENTURE" means the Indenture dated as of the date hereof between the
Issuer and the Trustee, pursuant to which the Issuer issues the Securities, as
the same may be amended from time to time.
"INSURANCE AGREEMENT" means this Insurance and Indemnity Agreement, as the
same may be amended from time to time, and, with respect to a Term Transaction,
any Insurance and Indemnity Agreement entered into in connection with such Term
Transaction.
"INSURANCE AGREEMENT EVENT OF DEFAULT" means an "Event of Default" under
any Insurance and Indemnity Agreement among Financial Security, OFL and Olympic
Receivables Finance Corp. entered into with respect to a Term Transaction.
"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.
"LATE PAYMENT RATE" means the lesser of (a) the greater of (i) the per
annum rate of interest, publicly announced from time to time by Chemical Bank at
its principal office in the City of New York, as its prime or base lending rate
(any change in such rate of interest to be effective on the date such change is
announced by Chemical Bank) plus 3%, and (ii) the then applicable highest rate
of interest on the Securities and (b) the maximum rate permissible under
applicable usury or similar laws limiting interest rates. The Late Payment Rate
shall be computed on the basis of the actual number of days elapsed over the
actual number of days in the current calendar year.
42
<PAGE>
"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.
"LOCKBOX AGREEMENT" means the Lockbox Agreement, as defined in the
Servicing Agreement.
"MATERIAL ADVERSE CHANGE" means, (a) in respect of any Person, a material
adverse change in (i) the business, financial condition, results of operations
or properties of such Person or any of its Subsidiaries or (ii) the ability of
such Person to perform its obligations under any of the Transaction Documents to
which it is a party and (b) in respect of the Receivables, a material adverse
change in (i) the value or marketability of the Receivables, taken as a whole,
or (ii) the probability that amounts now or hereafter due in respect of a
material portion of the Receivables will be collected on a timely basis.
"MOODY'S" means Moody's Investors Service, Inc., a Delaware corporation,
and any successor thereto, and, if such corporation shall for any reason no
longer perform the functions of a securities rating agency, "Moody's" shall be
deemed to refer to any other nationally recognized rating agency designated by
Financial Security.
"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.
"NOTEHOLDERS" means registered holders of the Securities.
"NOTICE OF CLAIM" means a Notice of Claim and Certificate in the form
attached as Exhibit A to Endorsement No. 1 to the Policy.
"OFFERING DOCUMENT" means any offering document in respect of the
Securities that makes reference to the Policy.
"OTHER CONVEYED PROPERTY" has the meaning provided in the Receivables
Purchase Agreement and Assignment.
"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.
43
<PAGE>
"PERSON" means an individual, joint stock company, trust, unincorporated
association, joint venture, corporation, business or owner trust, partnership or
other organization or entity (whether governmental or private).
"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.
"POLICY" means the financial guaranty insurance policy, including any
endorsements thereto, issued by Financial Security with respect to the
Securities, substantially in the form attached as Annex I to this Agreement.
"PREMIUM" means the premium payable in accordance with Section 3.02 of the
Insurance Agreement and the Premium Supplement, if any.
"PREMIUM LETTER" means the side letter between Financial Security, OFL,
ORFC, the Issuer and the Trustee dated December 3, 1996, in respect of the
premium payable by OFL in consideration of the issuance of the Policy.
"PREMIUM SUPPLEMENT" means a non-refundable premium, in addition to the
premium payable in accordance with Section 3.02 of the Insurance Agreement,
payable to Financial Security in monthly installments commencing on the Premium
Supplement Commencement Date and on each monthly anniversary thereof in
accordance with the terms set forth in the Premium Letter.
"PROVIDED DOCUMENTS" means the Transaction Documents and any documents,
agreements, instruments, schedules, certificates, statements, cash flow
schedules, number runs or other writings or data furnished to Financial Security
by or on behalf of OFL, ORFC or the Issuer with respect to themselves, their
Subsidiaries or the Transaction.
"RECEIVABLE" has the meaning provided in the Servicing Agreement.
"RECEIVABLES PURCHASE AGREEMENT AND ASSIGNMENT" means the Receivables
Purchase Agreement and Assignment dated as of the date hereof between ORFC and
OFL, as the same may be amended from time to time.
"REPORTABLE EVENT" means any of the events set forth in Section 4043(b) of
ERISA or the regulations thereunder.
"REPURCHASE AGREEMENT" means the Repurchase Agreement dated as of the date
hereof among the Issuer, as Buyer, and ORFC, as Seller, as the same may be
amended from time to time.
"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 non-consensual or arises by contract, operation of
law, legal process or otherwise, any material
44
<PAGE>
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.
"SECURITIES" means the Issuer's Floating Rate Automobile Receivables-Backed
Notes, issued in one or more series pursuant to the Indenture, in an aggregate
principal amount at any one time outstanding not exceeding $300 million.
"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.
"SECURITY AGREEMENT" means the Security Agreement dated as of the date
hereof among OFL, ORFC, the Issuer, Financial Security, Bank of America National
Trust and Savings Association, as agent, and the Trustee, as Trustee and as
Collateral Agent, as the same may be amended from time to time.
"SERVICING AGREEMENT" means the Servicing Agreement dated as of the date
hereof among the Issuer, ORFC, OFL and the Trustee, as Backup Servicer,
Collateral Agent and Indenture Trustee, as the same may be amended from time to
time.
"S&P" means Standard & Poor's Ratings Group, a division of McGraw-Hill,
Inc., and any successor thereto, and, if such entity shall for any reason no
longer perform the functions of a securities rating agency, "S&P" shall be
deemed to refer to any other nationally recognized rating agency designated by
Financial Security.
"SPECIAL EVENT" means the occurrence of any one of the following: (a) an
Event of Default under the Insurance Agreement has occurred and is continuing,
(b) any legal proceeding or binding arbitration is instituted with respect to
the Transaction or with respect to OFL, ORFC or the Issuer that would result in
a Material Adverse Change in respect of OFL, ORFC, the Issuer or the
Receivables, (c) any governmental or administrative investigation, action or
proceeding is instituted that would, if adversely decided, result in a Material
Adverse Change in respect of ORFC, the Issuer or the Receivables, or
(d) Financial Security pays a claim under the Policy.
"SPREAD ACCOUNT AGREEMENT" means the Spread Account Agreement, dated as of
March 26, 1993, as amended and restated as of December 3, 1996 among ORFC, OFL,
the Collateral Agent named therein and the trustees specified therein, as the
same may be further amended, supplemented or otherwise modified in accordance
with the terms thereof.
"STOCK PLEDGE AGREEMENT" means the Stock Pledge Agreement, as amended and
restated, dated as of December 3, 1996, among Financial Security, OFL and the
Collateral Agent named therein, as the same may be amended from time to time.
45
<PAGE>
"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 AGREEMENT" shall be determined as provided in Section 4.01 of
the Insurance Agreement.
"TERM OF THE POLICY" has the meaning provided in the Policy.
"TERM TRANSACTION" means any transaction other than the Transaction in
connection with which Financial Security has issued a financial guaranty
insurance policy to guarantee principal and/or interest on certificates or notes
representing an interest in receivables originated by OFL.
"TRANSACTION" means the transactions contemplated by the Transaction
Documents.
"TRANSACTION DOCUMENTS" means the Insurance Agreement, the Indenture, the
Servicing Agreement, the Repurchase Agreement, the Receivables Purchase
Agreement and Assignment (with respect to the Receivables), any Assignment
Agreement (with respect to the Receivables), any Custodian Agreement, the
Security Agreement, the Premium Letter, the Stock Pledge Agreement, the Lockbox
Agreement and the Spread Account Agreement.
"TRUSTEE" means Norwest Bank Minnesota, National Association, a national
banking association, as trustee under the Indenture, and any successor thereto
as trustee under the Indenture.
"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.
46
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Agreement, all as of the day and year first above written.
FINANCIAL SECURITY ASSURANCE INC.
By: /s/ Roger K. Taylor
________________________________
Authorized Officer
OLYMPIC FINANCIAL LTD.
By: /s/ illegible
________________________________
Title: ________________________________
OLYMPIC RECEIVABLES FINANCE CORP.
By: /s/ illegible
________________________________
Title: ________________________________
ARCADIA RECEIVABLES CONDUIT CORP.
By: /s/ illegible
________________________________
Title: ________________________________
<PAGE>
APPENDIX A
TO INSURANCE AND INDEMNITY AGREEMENT
CONDITIONS PRECEDENT TO ISSUANCE OF THE POLICY
(a) PAYMENT OF INITIAL PREMIUM AND EXPENSES; PREMIUM LETTER. Financial
Security shall have been paid, by or on behalf of OFL and ORFC, a nonrefundable
Premium and shall have been reimbursed, by or on behalf of OFL and ORFC, for
other fees and expenses identified in Section 3.02 of the Insurance Agreement as
payable at closing and Financial Security shall have received a fully executed
copy of the Premium Letter.
(b) TRANSACTION DOCUMENTS. Financial Security shall have received a copy
of each of the Transaction Documents (other than the Policy), in form and
substance satisfactory to Financial Security, duly authorized, executed and
delivered by each party thereto. Without limiting the foregoing, the provisions
of the Servicing Agreement and the Indenture relating to the payment to
Financial Security of Premium due on the Policy and the reimbursement to
Financial Security of amounts paid under the Policy shall be in form and
substance acceptable to Financial Security in its sole discretion.
(c) CERTIFIED DOCUMENTS AND RESOLUTIONS. Financial Security shall have
received a copy of (i) the certificate of incorporation and bylaws of each of
OFL, ORFC and the Issuer and (ii) the resolutions of the Board of Directors of
each of OFL, ORFC and the Issuer authorizing the execution, delivery and
performance by OFL, ORFC and the Issuer of the Transaction Documents to which it
is a party and the transactions contemplated thereby, including, as to the
Issuer, the authorization of the issuance of the Securities, certified by the
Secretary or an Assistant Secretary of OFL, ORFC or the Issuer, as the case may
be (which certificate shall state that such certificate of incorporation, bylaws
and resolutions are in full force and effect without modification on December 3,
1996.
(d) INCUMBENCY CERTIFICATE. Financial Security shall have received a
certificate of the Secretary or an Assistant Secretary of each of OFL, ORFC and
the Issuer certifying the name and signatures of the officers of OFL, ORFC or
the Issuer, as the case may be, authorized to execute and deliver the
Transaction Documents and, if applicable, that shareholder consent to the
execution and delivery of such documents is not necessary or has been obtained.
(e) REPRESENTATIONS AND WARRANTIES; CERTIFICATE. The representations and
warranties of OFL, ORFC or the Issuer, as the case may be, in the Insurance
Agreement shall be true and correct as of the Date of Issuance with respect to
such Person as if made on the Date of Issuance and Financial Security shall have
received a certificate of appropriate officers of OFL, ORFC or the Issuer, as
the case may be, to that effect.
(f) OPINIONS OF COUNSEL. Financial Security shall have received opinions
of counsel addressed to Financial Security, Moody's and S&P in respect of OFL,
ORFC, the Issuer, the other parties to the Transaction Documents and the
Transaction in form and substance satisfactory to Financial Security, addressing
such matters as Financial Security may reasonably request, and
A-1
<PAGE>
the counsel providing each such opinion shall have been instructed by its
client to deliver such opinion to the addressees thereof.
(g) APPROVALS, ETC. Financial Security shall have received true and
correct copies of all approvals, licenses and consents, if any, including,
without limitation, the approval of the shareholders of OFL, ORFC and the
Issuer, required in connection with the Transaction.
(h) 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.
(i) 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.
(j) ISSUANCE OF RATINGS. Financial Security shall have received
confirmation that the risk secured by the Policy constitutes an investment grade
risk by S&P and an insurable risk by Moody's.
(k) NO DEFAULT. No Default or Event of Default shall have occurred.
(l) ADDITIONAL ITEMS. Financial Security shall have received such other
documents, instruments, approvals or opinions requested by Financial Security as
may be reasonably necessary to effect the Transaction, including but not limited
to evidence satisfactory to Financial Security that all conditions precedent, if
any, in the Transaction Documents have been satisfied.
A-2
<PAGE>
ANNEX I
TO
INSURANCE AND INDEMNITY AGREEMENT
FORM OF FINANCIAL GUARANTY INSURANCE POLICY
<PAGE>
[LOGO] FINANCIAL FINANCIAL GUARANTY
SECURITY INSURANCE POLICY
ASSURANCE
OBLIGOR: Arcadia Receivables Conduit Corp. Policy No.: 50528-N
OBLIGATIONS: Up to $300,000,000 Original Principal Date of Issuance: 12/3/96
Amount Floating Rate Automobile
Receivables-Backed Notes
FINANCIAL SECURITY ASSURANCE INC. ("Financial Security"), for
consideration received, hereby UNCONDITIONALLY AND IRREVOCABLY GUARANTEES to
each Holder, subject only to the terms of this Policy (which includes each
endorsement hereto), the full and complete payment by the Obligor of
Scheduled Payments of principal of, and interest on, the Obligations.
For the further protection of each Holder, Financial Security
irrevocably and unconditionally guarantees:
(a) payment of the amount of any distribution of principal of, or
interest on, the Obligations made during the Term of this Policy to such
Holder that is subsequently avoided in whole or in part as a preference
payment under applicable law (such payment to be made by Financial
Security in accordance with Endorsement No. 1 hereto).
(b) payment of any amount required to be paid under this Policy by
Financial Security following Financial Security's receipt of notice as
described in Endorsement No. 1 hereto.
Financial Security shall be subrogated to the rights of each Holder to
receive payments under the Obligations to the extent of any payment by
Financial Security hereunder.
Except to the extent expressly modified by an endorsement hereto, the
following terms shall have the meanings specified for all purposes of this
Policy. "Holder" means the registered owner of any Obligation as indicated on
the registration books maintained by or on behalf of the Obligor for such
purpose or, if the Obligation is in bearer form, the holder of the
Obligation. "Scheduled Payments" means payments which are scheduled to be
made during the Term of this Policy in accordance with the original terms of
the Obligations when issued and without regard to any amendment or
modification of such Obligations thereafter; payments which become due on an
accelerated basis as a result of (a) a default by the Obligor, (b) an
election by the Obligor to pay principal on an accelerated basis or (c) any
other cause, shall not constitute "Scheduled Payments" unless Financial
Security shall elect, in its sole discretion, to pay such principal due upon
such acceleration together with any accrued interest to the date of
acceleration. "Term of this Policy" shall have the meaning set forth in
Endorsement No. 1 hereto.
This Policy sets forth in full the undertaking of Financial Security,
and shall not be modified, altered or affected by any other agreement or
instrument, including any modification or amendment thereto, or by the
merger, consolidation or dissolution of the Obligor. Except to the extent
expressly modified by an endorsement hereto, the premiums paid in respect of
this Policy are nonrefundable for any reason whatsoever, including payment,
or provision being made for payment, of the Obligations prior to maturity.
This Policy may not be cancelled or revoked during the Term of this Policy.
THIS POLICY IS NOT COVERED BY THE PROPERTY/CASUALTY INSURANCE SECURITY FUND
SPECIFIED IN ARTICLE 76 OF THE NEW YORK INSURANCE LAW.
In witness whereof, FINANCIAL SECURITY ASSURANCE INC. has caused this
Policy to be executed on its behalf by its Authorized Officer.
FINANCIAL SECURITY ASSURANCE INC.
By /s/ Roger K. Taylor
---------------------------------
Authorized Officer
A subsidiary of Financial Security Assurance Holdings Ltd.
350 Park Avenue, New York, N.Y. 10022-6022 (212) 826-0100
<PAGE>
EXECUTION COPY
ARCADIA RECEIVABLES CONDUIT CORP.
U.S. $300,000,000 FLOATING RATE
FSA INSURED
AUTOMOBILE RECEIVABLES-BACKED NOTES
NOTE PURCHASE AGREEMENT
DATED AS OF DECEMBER 3, 1996
<PAGE>
TABLE OF CONTENTS
Page
----
Section 1. The Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2. Sale and Purchase of the Notes. . . . . . . . . . . . . . . . . 3
Section 3. Delivery and Payment. . . . . . . . . . . . . . . . . . . . . . 3
Section 4. Issuer's Representations, Warranties and Covenants. . . . . . . 4
Section 5. Purchaser Representations . . . . . . . . . . . . . . . . . . . 6
Section 6. Conditions of Purchaser's Obligations.. . . . . . . . . . . . . 8
Section 7. Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 8. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . .10
Section 9. Successors and Assigns. . . . . . . . . . . . . . . . . . . . .11
Section 10. Indemnification . . . . . . . . . . . . . . . . . . . . . . . .11
Section 11. Increased Costs . . . . . . . . . . . . . . . . . . . . . . . .12
Section 12. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
Section 13. Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . .14
Section 14. Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . .14
Section 15. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . .14
Section 16. Severability of Provisions. . . . . . . . . . . . . . . . . . .14
Section 17. Survival. . . . . . . . . . . . . . . . . . . . . . . . . . . .15
Section 18. Limited Recourse. . . . . . . . . . . . . . . . . . . . . . . .15
Section 19. No Proceedings. . . . . . . . . . . . . . . . . . . . . . . . .15
Section 20. Trial By Jury Waived. . . . . . . . . . . . . . . . . . . . . .15
<PAGE>
OLYMPIC FINANCIAL, LTD.
7825 Washington Avenue South
Minneapolis, Minnesota 55439
ARCADIA RECEIVABLES CONDUIT CORP.
7825 Washington Avenue South
Minneapolis, Minnesota 55439
--------------------------------------------------
NOTE PURCHASE AGREEMENT
--------------------------------------------------
Dated as of December 3, 1996
Receivables Capital Corporation
c/o Bank of America National Trust
and Savings Association
as Administrator
Asset Securitization Group
231 South LaSalle Street
Chicago, Illinois 60697
Bank of America National Trust
and Savings Association
as Administrator of Receivables
Capital Corporation and as Agent
to the Liquidity Purchasers
Asset Securitization Group
231 South LaSalle Street
Chicago, Illinois 60697
Ladies and Gentlemen:
The undersigned, Arcadia Receivables Finance Corp., a Delaware
corporation (the "ISSUER"), and Olympic Financial Ltd., a Minnesota
corporation ("OLYMPIC"), hereby agree with you as follows:
SECTION 1. THE NOTES. The Issuer proposes to sell to
Receivables Capital Corporation (the "PURCHASER"), from time to time during
the Purchase Period, Floating Rate Automobile Receivables-Backed Notes (the
"NOTES"), in a maximum authorized amount to be outstanding at any time (the
"MAXIMUM AUTHORIZED AMOUNT") of U.S. $300,000,000, issued
<PAGE>
by the Issuer pursuant to the Indenture, dated as of December 3, 1996 (as
from time to time amended, supplemented or modified, the "INDENTURE"),
between the Issuer and Norwest Bank Minnesota, National Association, as
trustee (in such capacity, the "TRUSTEE") and as Collateral Agent (as defined
in the Indenture). Each Note: (i) bears interest (subject to conversion to a
fixed rate at the option of the Agent upon the occurrence of an Amortization
Event) at a fluctuating rate per annum equal to the "APPLICABLE RATE" plus
the "APPLICABLE MARGIN"; (ii) is issuable in denominations of $5,000,000 and
any higher amount, in the form of fully registered securities in certificated
form (as contemplated by Article VIII of the New York Uniform Commercial
Code) and (iii) is subject to prepayment at the option of the Issuer as
provided in the Indenture.
The Notes are secured by a revolving pool of automobile receivables
originated by Olympic and sold by Olympic to its wholly-owned subsidiary,
Olympic Receivables Finance Corp. ("ORFC"), and by ORFC to the Issuer, and by
collections received in respect thereof. Payment of principal and interest
on the entire Maximum Authorized Amount of Notes is insured by Financial
Security Assurance Inc. ("FSA") under a financial guaranty insurance policy
(the "POLICY") dated December 3, 1996.
The Issuer, the Agent, Olympic, ORFC and the Trustee have entered
into a Servicing Agreement, dated as of December 3, 1996 (as from time to
time amended, supplemented or modified, the "SERVICING AGREEMENT"), to
provide for the servicing of the receivables and certain other matters.
SECTION 2. SALE AND PURCHASE OF THE NOTES. During the Purchase
Period and subject to the terms and conditions of, and in reliance upon the
representations, warranties and covenants set forth in, this Agreement, the
Issuer agrees to sell to the Purchaser, and the Purchaser agrees to purchase
from the Issuer, from time to time on the date of issuance thereof (each, a
"PURCHASE DATE") the Notes issued on such date up to an aggregate principal
amount at any time outstanding for all Notes purchased hereunder not to
exceed the Maximum Authorized Amount, at a purchase price equal to 100% of
such principal amount (the "PURCHASE PRICE").
SECTION 3. DELIVERY AND PAYMENT. The Issuer will provide the
Agent with written notice of each Purchase Date and of the aggregate
principal amount of Notes to be purchased on such Purchase Date no later than
12:00 noon (New York City time) one Business Day prior to the proposed
Purchase Date; PROVIDED, that if the Purchase Price for the Notes on a
Purchase Date is less than or equal to $15,000,000, then such notice may be
made no later than 11:00 a.m., New York City time on such Purchase Date;
PROVIDED FURTHER, that if such notice is given on a Purchase Date, the
Purchaser will not be obligated to purchase the Notes on such Purchase Date
unless the Purchaser is able to issue and sell its Commercial Paper Notes in
an amount sufficient to fund such purchase, and Olympic and the Issuer agree
to hold harmless the Purchaser for failing to effect a purchase on such
Purchase Date. Delivery of the Notes shall be made on each Purchase Date at
the offices of the Agent at 10:00 a.m. New York City time (or at such other
place and time as the parties hereto shall mutually agree). On each Purchase
Date, the Issuer will deliver to the Agent one or more duly executed and
authenticated Notes dated such Purchase Date, registered in the Purchaser's
name (or in such name as the Agent shall have notified Issuer prior to such
2
<PAGE>
Purchase Date). The delivery of the Notes to the Agent shall be made against
payment by wire transfer of immediately available funds to the account of
Norwest Bank Minnesota, National Association as Trustee for Arcadia
Receivables Conduit Warehouse, Account # 3651742, Harris Trust and Savings
Bank, ABA # 071000288, in the amount of the Purchase Price.
SECTION 4. ISSUER'S REPRESENTATIONS, WARRANTIES AND COVENANTS.
The Issuer represents and warrants to, and agrees with, the Purchaser and the
Agent, as of the date hereof and as of each Purchase Date, as follows:
(a) The Issuer is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its formation.
(b) The Issuer has all requisite power (corporate and other) and
authority necessary to enter into this Agreement and the Basic Agreements, to
offer, sell and deliver the Notes and to perform its obligations hereunder
and thereunder; the Issuer has taken all corporate action required to
authorize the execution and delivery of this Agreement, the Basic Agreements
and the Notes, the offer, sale and delivery of the Notes and the performance
of all obligations to be performed by it hereunder and under the Basic
Agreements and the Notes; this Agreement and the Basic Agreements to which
the Issuer is a party have been duly authorized, executed and delivered by
the Issuer and constitute, and each Note when purchased by the Purchaser will
have been duly authorized, executed and delivered and will constitute, the
legal, valid and binding obligation of the Issuer, enforceable against the
Issuer in accordance with its terms, subject to (i) limitations on
enforceability imposed by bankruptcy, insolvency, reorganization,
arrangement, moratorium or other similar laws relating to or affecting the
enforcement of creditors' rights generally, and (ii) general principles of
equity, regardless of whether such enforceability is considered in a
proceeding in equity or at law.
(c) Neither the authorization, execution, sale, delivery or
performance of the Notes or the authorization, execution, delivery or
performance of this Agreement or the Basic Agreements to which the Issuer is
a party, nor the consummation of any of the transactions contemplated herein
or therein, nor the execution, delivery or performance of the terms of this
Agreement, the Notes or any Basic Agreement, will result in the breach of any
term or provision of the certificate of incorporation or by-laws of the
Issuer, or conflict with, result in a breach or violation of, or the
acceleration of, indebtedness under, or constitute a default under, the terms
of any indenture or other agreement, instrument or arrangement to which the
Issuer is a party or by which it is bound, or any statute or regulation
applicable to the Issuer or any order applicable to it of any court,
regulatory body, administrative agency or governmental body having
jurisdiction over it.
(d) With the exception of applicable blue-sky or state securities
regulations (as to which no representation is made), no consent, approval,
authorization of, registration or filing with, or notice to, any governmental or
regulatory authority, agency, department, commission, board, bureau, body or
instrumentality was or is required for the execution, delivery or performance of
or compliance by the Issuer with this Agreement, the Notes or
3
<PAGE>
any Basic Agreement or the offer, sale, delivery or performance of the Notes,
or the consummation by the Issuer of any other transaction contemplated by
this Agreement, the Notes or any Basic Agreement, or such consent, approval
or authorization has been obtained, or such registration, filing or notice
has been made (and, in either such case, copies thereof delivered to you and
your counsel). No tax, assessment or other governmental charge is or will
become payable as a result of (i) the execution, delivery or performance of
this Agreement or any Basic Agreement, or (ii) the execution, sale, delivery
or performance of any Note, or (iii) except for taxes imposed on the net
income of Purchaser with respect to interest on the Notes, the receipt or
non-receipt of any payment of principal or interest on any Note (or in
respect thereof under the Policy).
(e) There is no action, suit or proceeding pending, or
investigation of, the Issuer, pending or, to the best of the Issuer's
knowledge after due inquiry, threatened, against the Issuer before any court,
administrative agency or other tribunal which, (i) either individually or in
the aggregate, could, if adversely determined, result in any material
adverse change in the business, operations, financial condition, prospects,
properties, or assets of the Issuer or in any impairment of the right or
ability of the Issuer to carry on its business substantially as now
conducted, (ii) asserts the invalidity of this Agreement, any Note or any of
the Basic Agreements, (iii) seeks to prevent the issuance, sale or purchase
of the Notes or the consummation of any of the transactions contemplated by
this Agreement or any of the Basic Agreements or (iv) could materially and
adversely affect the performance by the Issuer of its obligations under, or
the validity or enforceability of, this Agreement, any of the Notes or any of
the Basic Agreements.
(f) The Issuer is not in default in the performance, observance or
fulfillment of any of the obligations, covenants or conditions contained in,
and is not otherwise in default under, (i) any law or statute applicable to
it, or (ii) any judgment, decree, writ, injunction, order, award or other
action of any court or governmental authority or arbitrator or any order,
rule or regulation, of any federal, state, county, municipal or other
governmental or public authority or agency having or asserting jurisdiction
over it or any of its properties, or (iii) (x) any indebtedness or any
instrument or agreement under or pursuant to which any such indebtedness has
been, or could be, issued or incurred, or (y) any other instrument or
agreement to which it is a party or by which it is bound or any of its
properties is affected including, without limitation, the Basic Agreements
which, (A) either individually or in the aggregate, could result in any
material adverse change in the business, operations, financial condition,
prospects, properties, or assets of the Issuer or in any impairment of the
right or ability of the Issuer to carry on its business substantially as now
conducted or (B) could materially and adversely affect the performance by the
Issuer of its obligations under, or the validity or enforceability of, this
Agreement, any of the Notes or any of the Basic Agreements.
(g) Neither the Issuer nor, to the best of the Issuer's knowledge,
anyone acting on behalf of the Issuer, has offered, transferred, pledged,
sold or otherwise disposed of any Note or any interest in any Note to, or
solicited any offer to buy or accept a transfer, pledge or other disposition
of any Note or any interest in any Note from, or otherwise approached or
negotiated with respect to any Note or any interest in any Note with, any
person in any
4
<PAGE>
manner, or made any general solicitation by means of general advertising or
in any other manner, or taken any other action, which would constitute a
public distribution of the Notes under the Securities Act of 1933, as amended
(the "1933 ACT"), or which would render the disposition of any Note a
violation of Section 5 of the 1933 Act or any state securities laws, or
require registration or qualification pursuant thereto or require
registration of the Issuer under the Investment Company Act of 1940, as
amended, nor will the Issuer act, nor has the Issuer authorized or will it
authorize any person to act, in such manner with respect to any Note.
(h) (i) The offer and sale of the Notes from the Issuer to the
Purchaser in the manner contemplated herein are transactions exempt from the
registration requirements of the 1933 Act and (ii) the Indenture is not
required to be qualified under the Trust Indenture Act of 1939, as amended.
The representation by the Issuer with respect to the sale from the Issuer to
the Purchaser in clause (i) of the preceding sentence is made upon and
subject to the accuracy of the representations made by you in Section 5(a)
hereof.
(i) The Issuer is not required, and will not be required as a
result of the offer and sale of the Notes under the circumstances
contemplated by this Agreement or the other transactions contemplated by this
Agreement and the Basic Agreements, to register as an "investment company"
under the Investment Company Act of 1940, as amended (the "1940 ACT"), and
the Issuer is not "controlled" by an "investment company" as defined in the
1940 Act.
(j) Each Note purchased hereunder by the Purchaser will have been
duly authorized, executed and delivered by the Issuer, will be entitled to
the benefit of the security provided for in the Indenture, will bear interest
and mature and be subject to prepayment all as specified in Section 1 hereof
and will, as to both principal and interest, be fully and unconditionally
insured under the Policy.
(k) The Issuer further agrees that it will not permit any
amendment, modification or waiver, which could in any way be materially
adverse to the Noteholders, to any of the provisions of any of the Basic
Agreements without the prior written consent of the Agent, it being agreed
that a waiver of any Event of Default under the Repurchase Agreement or of
any Amortization Event materially adversely affects the Noteholders.
SECTION 5. PURCHASER REPRESENTATIONS.
(a) This Agreement is made with you in reliance upon your
representation to the Issuer, which by your acceptance hereof you confirm,
that you understand that the Notes have not been and will not be registered
under the 1933 Act in reliance upon the exemption provided in Section 4(2) of
the 1933 Act or registered or qualified under the securities or "Blue Sky"
laws of any jurisdiction and may not be resold or otherwise pledged or
transferred except in a transaction which is exempt from the registration
requirements of the 1933 Act (and, in that regard the Purchaser hereby
represents that any Notes purchased by it hereunder will be purchased for its
own account and not with a view to distribution thereof); PROVIDED, that, (i)
the disposition of your property shall at all times be within your
control;
5
<PAGE>
and (ii) it is recognized and agreed that you may transfer your rights and
interests under the Notes and herein to one or more liquidity purchasers
("LIQUIDITY PURCHASERS") under a Liquidity Asset Purchase Agreement dated as
of December 3, 1996 (the "LIQUIDITY ASSET PURCHASE AGREEMENT") among the
Liquidity Purchasers from time to time party thereto, Receivables Capital
Corporation and Bank of America National Trust and Savings Association, as
Administrator and Liquidity Agent. The Purchaser represents that the
Liquidity Purchasers will make the foregoing representations and warranties
with respect to any purchase of the Notes pursuant to the Liquidity Asset
Purchase Agreement.
(b) The Purchaser is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its formation.
(c) The Purchaser has all requisite power (corporate and other) and
authority necessary to enter into this Agreement and to perform its
obligations hereunder; the Purchaser has taken all corporate action required
to authorize the execution and delivery of this Agreement and the performance
of all obligations to be performed by it hereunder; this Agreement has been
duly authorized, executed and delivered by the Purchaser, and constitutes the
legal, valid and binding agreement of the Purchaser, enforceable against the
Purchaser in accordance with its terms, subject to (i) limitations imposed by
bankruptcy, insolvency, reorganization, arrangement, moratorium or other laws
relating to or affecting the enforcement of creditors' rights generally, and
(ii) general principles of equity, regardless of whether such enforceability
is considered in a proceeding in equity or at law.
(d) Neither the purchase of the Notes nor the consummation of any
of the transactions contemplated herein by the Purchaser, nor the execution,
delivery or performance of the terms of this Agreement by the Purchaser, will
result in the breach of any term or provision of the certificate of
incorporation or by-laws of the Purchaser, or conflict with, result in a
breach or violation of or the acceleration of indebtedness under or
constitute a default under, the terms of any indenture or other agreement or
instrument to which the Purchaser is a party or by which it is bound, or any
statute or regulation applicable to the Purchaser or any order applicable to
it of any court, regulatory body, administrative agency or governmental body
having jurisdiction over it which materially and adversely affects, or may in
the future materially and adversely affect, (i) the ability of the Purchaser
to perform its obligations hereunder or (ii) the business, operations,
financial condition, prospects, properties or assets of the Purchaser.
(e) No consent, approval, authorization of, registration or filing
with, or notice to, any governmental or regulatory authority, agency,
department, commission, board, bureau, body or instrumentality was or is
required for the execution, delivery or performance of or compliance by the
Purchaser with this Agreement or the purchase of the Notes by the Purchaser,
or the consummation by the Purchaser of any other transaction contemplated
under this Agreement or such consent, approval or authorization has been
obtained or such registration, filing or notice has been made.
(f) There is no action, suit or proceeding against, or investigation
of, the Purchaser, pending or, to the best of the Purchaser's knowledge,
threatened, before any
6
<PAGE>
court, administrative agency or other tribunal which, either individually or
in the aggregate, (i) may result in any material adverse change in the
business, operations, financial condition, prospects, properties, or assets
of Purchaser or in any impairment of the right or ability of the Purchaser to
carry on its business substantially as now conducted, or (ii) asserts the
invalidity of this Agreement or (iii) seeks to prevent the purchase of the
Notes or the consummation of any of the transactions contemplated by this
Agreement or (iv) could materially and adversely affect the performance by
the Purchaser of its obligations under, or the validity or enforceability of,
this Agreement.
(g) The Purchaser is not required, and will not be required as a
result of the purchase of the Notes under the circumstances contemplated by
this Agreement, to register as an "investment company" under the 1940 Act.
(h) On the Closing Date, the Purchaser's commercial paper notes are
rated A-1+ by Standard & Poor's and P-1 by Moody's.
SECTION 6. CONDITIONS OF PURCHASER'S OBLIGATIONS.
(a) EACH PURCHASE. Your obligation to purchase and pay for any
Notes on any Purchase Date shall be subject to the fact that the conditions
to the initial purchase of Notes hereunder shall have been satisfied and to
the conditions that: (v) no Amortization Event shall have occurred; (w) the
Notes to be purchased shall be in conformity with the description thereof
contained in Section 1 hereof; (x) the Purchase Period shall not have
expired; (y) the representations and warranties that are made on the part of
the Issuer and contained in this Agreement shall be true and correct, on and
as of such Purchase Date, as if made on and as of such Purchase Date; and (z)
the Issuer shall be in continuing compliance, in all material respects, with
all of its obligations hereunder and under the Basic Agreements and that ORFC
and OFL are in continuing compliance in all material respects with their
obligations under the Fee Letter. Your obligation to purchase or pay for any
Notes shall also be subject to the accuracy in all material respects, on and
as of the date of such purchase, of the representations and warranties
contained herein and of the statements made by the Issuer in any certificates
furnished pursuant to the provisions hereof. Each purchase of Notes
hereunder shall constitute a representation and warranty by the Issuer that
all of the above conditions are satisfied on and as of the respective
Purchase Date.
(b) CLOSING DATE. Your obligation to purchase and pay for Notes
commencing on the Closing Date shall be subject to the following additional
conditions:
(i) The Agent shall have received and had an opportunity to review
the Basic Agreements (and the respective appendices and exhibits
thereto) and the form of Notes, and each of such documents shall be in
form and substance satisfactory to you.
(ii) Timely payment, as and when due, of all principal of and
interest on the Notes shall be fully and unconditionally insured under
the Policy.
7
<PAGE>
(iii) The Issuer shall have complied in all material respects with
all the agreements and satisfied all the conditions on its part to be
performed or satisfied by it on or prior to the Closing Date under this
Agreement.
(iv) Each of the Basic Agreements shall have been duly authorized,
executed and delivered by each of the parties thereto, shall be in full
force and effect and shall constitute a legal, valid and binding agreement
of each of the parties thereto, enforceable against each of them in
accordance with its terms, subject, with respect to enforceability, to
bankruptcy, insolvency, reorganization or other similar laws affecting the
enforceability of creditors' rights generally and to general principles of
equity regardless of whether enforcement is sought in a proceeding in
equity or at law, and no event shall have occurred which constitutes or,
with the passage of time or with notice or both, would constitute a default
thereunder, and the Agent shall have received one fully executed copy of
each of the Basic Agreements.
(v) The Agent shall have received opinions of counsel (or reliance
letters with respect to certain opinions previously rendered) to the
Issuer, Olympic, ORFC, FSA and the Trustee, each dated the Closing Date,
and such opinions shall be in form, scope and substance satisfactory to the
Agent.
(vi) All proceedings in connection with the transactions contemplated
by this Agreement and the Basic Agreements and all documents incident
hereto and thereto shall be satisfactory in form and substance to the
Agent, and the Agent shall have received such information, certificates and
documents as the Agent may request.
(vii) The Agent shall have received a certificate from the Issuer
confirming that its representations and warranties contained in the Basic
Agreements are true and correct in all material respects on and as of the
Closing Date.
(viii) The Agent shall have received from each of the Issuer,
Olympic, ORFC, FSA and the Trustee copies of the charter, by-laws, board
resolutions, signature and incumbency and other related corporate matters
of those respective Persons, in form and substance acceptable to the Agent,
together with copies of the Officers' Certificates with respect thereto
delivered on the Closing Date.
(ix) The Indenture shall be in form and substance satisfactory to
you, and you shall have received a true and complete copy thereof.
SECTION 7. EXPENSES. The Issuer and Olympic shall, jointly and
severally, be obligated to pay on demand to (i) the Purchaser and the Agent
all reasonable costs and expenses in connection with the preparation,
execution, and delivery of the Basic Agreements and any other documents to be
delivered in connection therewith, including, without limitation, the
reasonable fees and expenses of counsel for the Purchaser and the Agent, and
(ii) the Purchaser and the Agent all reasonable costs and expenses,
including, without limitation, the reasonable fees and expenses of counsel
for the Purchaser and the Agent, in
8
<PAGE>
connection with the enforcement of any Basic Agreement or any document
delivered in connection therewith.
SECTION 8. DEFINITIONS. For purposes of this Agreement, except
as otherwise expressly provided or unless the context otherwise requires:
(a) the term "AGENT" means Bank of America National Trust and
Savings Association and its successors as Administrator of Receivables
Capital Corporation and as Agent to the Liquidity Purchasers;
(b) the term "APPLICABLE RATE" means the CP Rate or, to the extent
the principal amount of any Notes have been purchased by the Liquidity
Purchasers under the Liquidity Agreement, the Offshore Rate;
(c) the term "BASIC AGREEMENTS" shall mean this Agreement, the
Indenture, the Servicing Agreement, the Repurchase Agreement, the Purchase
Agreement, the Security Agreement, the Lockbox Agreement, the Custodian
Agreement, the Policy, the Spread Account Agreement, the Fee Letter and the
Insurance Agreement;
(d) the term "CP RATE" means for any period and with respect to
any portion of the principal amount of the Notes as to which your funding of
the purchase or carrying thereof is being provided by commercial paper notes,
the rate of interest per annum determined in arrears in good faith by the
Agent to reflect the Purchaser's cost of funding the purchase or carrying of
such portion of the Notes, which shall be equal to the weighted daily average
interest rate payable in respect of such Commercial Paper Notes during such
period (determined in the case of discount commercial paper notes by
converting the discount to an interest bearing equivalent rate per annum),
plus applicable placement fees and commissions, but excluding any other fees
related to such funding;
(e) the term "FEE LETTER" shall mean the Fee Letter dated as of
December 3, 1996 among Olympic, Receivables Capital Corporation and the Agent;
(f) the term "LIQUIDITY PURCHASERS" shall mean each of the
purchasers party to the Liquidity Asset Purchase Agreement;
(g) the term "PROGRAM SUPPORT DOCUMENT" shall mean the Liquidity
Asset Purchase Agreement and any other agreement entered into by any other
Program Support Provider providing for the issuance of one or more letters of
credit for the account of the Purchaser, the issuance of one or more surety
bonds for which the Purchaser is obligated to reimburse the applicable
Program Support Provider of the Notes (or any interest therein) or the making
of loans or other extensions of credit to the Purchaser in connection with
the Purchaser's securitization program, together with any letter of credit,
surety bond or other instrument issued thereunder (but excluding any
discretionary advance facility provided by the Agent as administrator of the
Purchaser);
9
<PAGE>
(h) the term "PURCHASE PERIOD" shall mean the period from the date
of execution hereof to the earliest to occur of (i) December 2, 1999, (ii)
the commencement of the Amortization Period, (iii) the commitment of the
Liquidity Purchasers to purchase Notes from the Purchaser under the Liquidity
Asset Purchase Agreement shall expire and (iv) the date specified by the
Issuer with five Business Day's prior notice to the Agent, the Security
Insurer, the Indenture Trustee and the Rating Agencies;
(i) all capitalized terms used herein and not otherwise defined
shall have the meanings assigned thereto in the Servicing Agreement
(including by way of reference to other documents);
(j) terms defined in this Agreement include the plural as well as
the singular, and the use of any gender herein shall be deemed to include
each other gender;
(k) the words "herein," "hereof," "hereunder" and other words of
similar import refer to this Agreement as a whole and not to any particular
provisions; and
(l) the term "include" or "including" shall mean without limitation
by reason of enumeration.
SECTION 9. SUCCESSORS AND ASSIGNS. This Agreement shall inure
to the benefit of and be binding upon the parties hereto and their respective
successors and assigns; PROVIDED, that the Issuer may not assign any of its
rights or obligations hereunder without the prior written consent of the
Purchaser. No provision of this Agreement shall in any way limit Purchaser's
ability to assign all or any portion of its rights and obligations hereunder
to any Liquidity Purchaser.
SECTION 10. INDEMNIFICATION. (a) Without limiting any other
rights that the Agent or any of its Affiliates, employees, agents,
successors, transfers or assigns (each, an "INDEMNIFIED PARTY") may have
hereunder or under applicable law, the Issuer hereby agrees to indemnify each
Indemnified Party from and against any and all claims, damages, expenses,
losses and liabilities (including fees and expenses of counsel) (all of the
foregoing being collectively referred to as "INDEMNIFIED AMOUNTS") arising
out of or resulting from this Agreement and the Basic Documents (whether
directly or indirectly) or the ownership of the Notes, or any interest
therein, or in respect of any Receivable, excluding, however, (i) Indemnified
Amounts to the extent resulting from gross negligence or willful misconduct
on the part of such Indemnified Party, (ii) any losses arising out of or
relating to any non-payment of any Receivable, or (iii) any overall net
income taxes or franchise taxes imposed on such Indemnified Party by the
jurisdiction under the laws of which such Indemnified Party is organized or
any political subdivision thereof.
(b) Without limiting any other rights that the Indemnified Parties
may have hereunder or under applicable law, Olympic hereby agrees to
indemnify each Indemnified Party from and against any and all Indemnified
Amounts for or on account of or arising from or in connection with any breach
of any representation, warranty or covenant of Olympic in this Note Purchase
Agreement or any Basic Document or in any certificate or other written
10
<PAGE>
material delivered pursuant hereto or thereto, excluding, however, (i)
Indemnified Amounts to the extent resulting from gross negligence or willful
misconduct on the part of such Indemnified Party and (ii) any overall net
income taxes or franchise taxes imposed on such Indemnified Party by the
jurisdiction under the laws of which such Indemnified Party is organized or
any political subdivision thereof.
(c) In order for an Indemnified Party to be entitled to any
indemnification provided for under this Agreement in respect of, arising out
of, or involving a claim made by any Person against the Indemnified Party (a
"THIRD PARTY CLAIM"), such Indemnified Party must notify the Issuer or
Olympic, as applicable, in writing of the Third Party Claim within five
Business Days of receipt of a summons, complaint or other notice of the
commencement of litigation and within ten Business Days after receipt by such
Indemnified Party of any other written notice of the Third Party Claim.
Thereafter, the Indemnified Party shall deliver to the Issuer or Olympic, as
applicable, within a reasonable time after the Indemnified Party's receipt
thereof, copies of all notices and documents (including court papers)
received by the Indemnified Party relating to the Third Party Claim.
(d) If a Third Party Claim is made against an Indemnified Party,
(x) the Issuer or Olympic, as applicable, will be entitled to participate in
the defense thereof and, (y) if either so chooses, to assume the defense
thereof with counsel selected by the Issuer or Olympic, as applicable,
provided that in connection with such assumption (i) such counsel is not
reasonably objected to by the Indemnified Party and (ii) the Issuer or
Olympic, as applicable, first admits in writing its liability to indemnify
the Indemnified Party with respect to all elements of such claim in full.
Should the Issuer or Olympic, as applicable, so elect to assume the defense
of a Third Party Claim, the Issuer or Olympic, as applicable, will not be
liable to the Indemnified Party for any legal expenses subsequently incurred
by the Indemnified Party in connection with the defense thereof. If the
Issuer or Olympic, as applicable, elects to assume the defense of a Third
Party Claim, the Indemnified Party will (i) cooperate in all reasonable
respects with the Issuer or Olympic in connection with such defense and (ii)
not admit any liability with respect to, or settle, compromise or discharge,
such Third Party Claim without the Issuer's or Olympic's prior written
consent, as the case may be. If the Issuer or Olympic, as applicable, shall
assume the defense of any Third Party Claim, the Indemnified Party shall be
entitled to participate in (but not control) such defense with its own
counsel at its own expense. If the Issuer or Olympic, as applicable, does
not assume the defense of any such Third Party Claim, the Indemnified Party
may defend the same in such manner as it may deem appropriate, including
settling such claim or litigation after giving notice to the Issuer or
Olympic, as applicable, of such terms and the Issuer or Olympic, as
applicable, will promptly reimburse the Indemnified Party upon written
request. Anything contained in this Note Purchase Agreement to the contrary
notwithstanding, the Issuer or Olympic, as applicable, shall not be entitled
to assume the defense of any part of a Third Party Claim that seeks an order,
injunction or other equitable relief or relief for other than money damages
against the Indemnified Party.
SECTION 11. INCREASED COSTS. (a) If the Purchaser, any other
Program Support Provider or any of their respective Affiliates (each an
"AFFECTED PERSON") determines that the existence of or compliance with (i) any
law or regulation or any change therein or in
11
<PAGE>
the interpretation or application thereof, in each case adopted, issued or
occurring after the date hereof or (ii) any request, guideline or directive
from any central bank or other Governmental Authority (whether or not having
the force of law) issued or occurring after the date of this Agreement
affects or would affect the amount of capital required or expected to be
maintained by such Affected Person and such Affected Person determines that
the amount of such capital is increased by or based upon the existence of any
commitment to make purchases of or otherwise to maintain the investment in
the Notes or the Liquidity Asset Purchase Agreement or any other Program
Support Document, then, upon demand by such Affected Person (with a copy to
the Agent), the Issuer agrees to immediately pay to the Agent, for the
account of such Affected Person, from time to time as specified by such
Affected Person, additional amounts sufficient to compensate such Affected
Person in the light of such circumstances, to the extent that such Affected
Person reasonably determines such increase in capital to be allocable to the
existence of any of such commitments. A certificate as to such amounts
submitted to the Issuer and the Agent by such Affected Person shall be
conclusive and binding for all purposes, absent manifest error.
(b) If, due to either (i) the introduction of or any change in or
in the interpretation of any law or regulation or (ii) compliance with any
guideline or request from any central bank or other Governmental Authority
(whether or not having the force of law), there shall be any increase in the
cost to any Affected Person of agreeing to purchase or purchasing, or
maintaining the ownership of the Notes in respect of which interest is
computed by reference to the Offshore Rate, then, upon demand by such
Affected Person, the Issuer agrees to immediately pay to such Affected
Person, from time to time as specified, additional amounts sufficient to
compensate such Affected Person for such increased costs. A certificate as
to such amounts submitted to the Issuer by such Affected Person shall be
conclusive and binding for all purposes, absent manifest error.
(c) Before giving any notice to the Issuer under this Section 11,
the Affected Person shall use commercially reasonable efforts to designate a
different office with respect to its purchase of Notes or its provision of
liquidity or credit support under the relevant Program Support Document if
such designation will avoid the need for giving such notice or making such
demand and will not, in the judgment of the Affected Person, be illegal or
otherwise disadvantageous to such Affected Person.
(d) Upon the receipt by the Issuer of a claim for reimbursement or
compensation under this Section 11 related to the ownership of a Note or any
interest therein by an Affected Person, and payment thereof hereunder shall
not be waived by such Affected Person, the Issuer may (i) request the
Affected Person to use its reasonable efforts to obtain a replacement bank,
financial institution or asset-backed commercial paper conduit, as
applicable, satisfactory to the Issuer to acquire and assume all or a
ratable part of all of such Affected Person's Notes or interests therein (a
"REPLACEMENT PURCHASER"), (ii) request one or more of the other Noteholders
or Liquidity Purchasers to acquire and assume all or a part of such Affected
Person's Notes or interests therein; or (iii) designate a Replacement
Purchaser. Any such designation of a Replacement Purchaser under CLAUSE (i)
or (iii) shall be subject to the prior written consent of the Agent (which
consent shall not be unreasonably withheld). Upon notice from the Issuer,
such Affected Person shall assign its Notes or interests therein
12
<PAGE>
and its other rights and obligations (if any) hereunder or a ratable share
thereof to the Replacement Purchaser or Replacement Purchasers designated by
the Issuer for a purchase price equal to the sum of the principal amount of
the Notes or interests therein so assigned and all accrued and unpaid
interest thereon and any other amounts (including fees) to which it is
entitled hereunder or under any Basic Document or other Program Support
Document (including any fee letters entered into in connection therewith);
PROVIDED, that the Issuer shall provide such Affected Person with an
officer's certificate stating that such Replacement Purchaser has advised the
Issuer that it is not subject to, or has agreed not to seek, such increased
amount.
SECTION 12. NOTICES. (a) All communications provided for or
permitted hereunder and under any other Basic Agreement shall be in writing
and shall be delivered, sent by overnight courier or mailed or transmitted by
telecopier and confirmed by a similar mailed writing, if to the Purchaser, or
the Agent, addressed to the Purchaser or the Agent, as applicable, at the
address shown on page 1 of this Agreement, telecopy no. (312) 923-0273, or to
such other address as the Purchaser or the Agent may have designated in
writing to the Issuer, and if to the Issuer, Olympic or the Rating Agencies,
to their respective addresses set forth in the Servicing Agreement, or to
such other address as the Issuer or Olympic may have designated in writing to
the Purchaser.
(b) All such written communications shall, when so sent by
overnight courier, telecopied or mailed, be deemed given when delivered to
the overnight courier, when telephone confirmation of telecopy is received,
or, in the case of communications by mail, on the fourth Business Day
following deposit in the mails. All other written communications shall be
deemed to have been given upon receipt thereof.
SECTION 13. COUNTERPARTS. This Agreement may be executed in
several counterparts, each of which shall constitute an original, but all of
which together shall constitute one instrument notwithstanding that all
parties are not signatories to the same counterparts.
SECTION 14. ENTIRE AGREEMENT. This Agreement constitutes the
entire agreement and understanding of the parties with respect to the matters
and transactions contemplated by this Agreement and supersedes any prior
agreement and understandings with respect to those matters and transactions.
SECTION 15. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REGARD TO THE CONFLICT OF LAW PROVISIONS THEREOF. THE PARTIES HERETO SUBMIT
TO THE NON-EXCLUSIVE JURISDICTION OF ANY NEW YORK STATE OR UNITED STATES
FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN, THE CITY OF NEW YORK, OVER
ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF, OR RELATING TO, THIS
AGREEMENT, ANY NOTE OR ANY BASIC AGREEMENT AND HEREBY WAIVE ANY OBJECTION TO
THE VENUE OF ANY SUCH COURT AS WELL AS ANY CLAIM OF INCONVENIENT FORUM.
SECTION 16. SEVERABILITY OF PROVISIONS. If any one or more of
the covenants, agreements, provisions or terms of this Agreement shall be for
any reason
13
<PAGE>
whatsoever held invalid, the invalidity of any such covenant, agreement,
provision or term of this Agreement shall in no way affect the validity or
enforceability of the other provisions of this Agreement, PROVIDED, HOWEVER,
that if the invalidity of any covenant, agreement or provision shall deprive
any party of the economic benefit intended to be conferred by this Agreement,
the parties shall negotiate in good faith to develop a structure the economic
effect of which is as nearly as possible the same as the economic effect of
this Agreement.
SECTION 17. SURVIVAL. All representations, warranties and
covenants made by the Issuer herein shall be considered to have been relied
upon by you and shall survive the delivery to you of the Notes regardless of
any investigation made by you or on your behalf.
SECTION 18. LIMITED RECOURSE. This Agreement is solely a
corporate obligation of the Issuer, Olympic, the Agent and the Purchaser. No
recourse may be taken, directly or indirectly, under this Purchase Agreement
or any certificate or other writing delivered in connection herewith against
any stockholder, incorporator, employee, officer, director or agent of the
Issuer, Olympic, the Agent or the Purchaser.
SECTION 19. NO PROCEEDINGS. Each of the Issuer and Olympic
hereby agrees that it will not institute or join with others in instituting
against the Purchaser, and the Purchaser hereby agrees that it will not
institute or join with others in instituting against the Issuer, a
bankruptcy, reorganization or analogous proceeding until at least 368 days
after the later of (i) the last maturing commercial paper note issued or to
be issued by the Purchaser matures and (ii) the last maturing Note issued or
to be issued by the Purchaser.
SECTION 20. 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 or any of the transactions
contemplated hereunder.
14
<PAGE>
IN WITNESS WHEREOF, the Purchaser, the Agent, Olympic and the
Issuer have caused their names to be signed hereto by their respective
officers thereunto duly authorized as of the date first above written.
ARCADIA RECEIVABLES CONDUIT CORP.
By: [illegible]
----------------------------------------
Name:
Title:
OLYMPIC FINANCIAL LTD.
By: [illegible]
----------------------------------------
Name:
Title:
The foregoing Agreement
is hereby accepted as of the
3rd day of December, 1996:
RECEIVABLES CAPITAL CORPORATION
By: /s/ Stewart L. Cotter
-------------------------------
Name: Stewart L. Cotter
Title: Vice President
BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION,
as Agent
By: /s/ Erik G. Ford
--------------------------------
Name: Erik G. Ford
Title: as Attorney-in-Fact
[Signature Page to Note Purchase Agreement]
<PAGE>
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
i
<PAGE>
Page
----
Section 4.07. Compensation and Reimbursement. . . . . . . . . . . . . . . 27
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
ii
<PAGE>
Page
----
Section 8.06. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 8.07. Term of this Agreement. . . . . . . . . . . . . . . . . . . 37
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.
<PAGE>
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 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 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:
2
<PAGE>
"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.
"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.
3
<PAGE>
"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 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.
4
<PAGE>
"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.
"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.
5
<PAGE>
"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 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.
6
<PAGE>
"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.
"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.
7
<PAGE>
"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;
(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
8
<PAGE>
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
9
<PAGE>
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
10
<PAGE>
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
11
<PAGE>
or the Noteholders under the Trust Agreement, the Sale and Servicing
Agreement or the Indenture with respect to such Series.
"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
12
<PAGE>
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 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"):
13
<PAGE>
(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;
(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
14
<PAGE>
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.
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.
15
<PAGE>
(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 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.
16
<PAGE>
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 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
17
<PAGE>
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 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,
18
<PAGE>
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 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
19
<PAGE>
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 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.
20
<PAGE>
(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:
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;
21
<PAGE>
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;
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
22
<PAGE>
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 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
23
<PAGE>
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 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
24
<PAGE>
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, 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.
25
<PAGE>
(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 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
26
<PAGE>
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 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
27
<PAGE>
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 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
28
<PAGE>
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 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.
29
<PAGE>
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 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.
30
<PAGE>
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 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
31
<PAGE>
(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.
(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
32
<PAGE>
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 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.
33
<PAGE>
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.
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
34
<PAGE>
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.
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.
35
<PAGE>
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
(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)
36
<PAGE>
(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
(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,
37
<PAGE>
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 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
38
<PAGE>
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 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.
39
<PAGE>
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.
40
<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
------------------------------------------
John A. Witham
Executive Vice President and Chief
Financial Officer
OLYMPIC RECEIVABLES FINANCE CORP.
By
------------------------------------------
John A. Witham
Senior Vice President and Chief Financial
Officer
FINANCIAL SECURITY ASSURANCE INC.
By
------------------------------------------
Authorized Officer
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Trustee
By
------------------------------------------
Thomas D. Wraalstad
Corporate Trust Officer
<PAGE>
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Collateral Agent
By
------------------------------------------
Thomas D. Wraalstad
Corporate Trust Officer
42
<PAGE>
WAREHOUSING SERIES SUPPLEMENT
dated as of December 3, 1996
to
SPREAD ACCOUNT AGREEMENT,
dated as of March 25, 1993,
as amended and restated
as of December 3, 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 . . . . . . . . . . . . . . 3
ARTICLE II
SERIES SUPPLEMENTS; THE COLLATERAL
Section 2.1. Series Supplement . . . . . . . . . . . . . . . . . 3
Section 2.2. Grant of Security Interest by OFL and the Seller . 4
ARTICLE III
SPREAD ACCOUNT
Section 3.1. Establishment of Warehousing Series Spread Account. 5
Section 3.2. Release of Funds Upon Repurchase . . . . . . . . . 5
ARTICLE IV
MISCELLANEOUS
Section 4.1. Further Assurances . . . . . . . . . . . . . . . . . 5
Section 4.2. Governing Law . . . . . . . . . . . . . . . . . . . 5
Section 4.3. Counterparts . . . . . . . . . . . . . . . . . . . . 5
Section 4.4. Headings . . . . . . . . . . . . . . . . . . . . . . 5
<PAGE>
WAREHOUSING SUPPLEMENT
WAREHOUSING SUPPLEMENT, dated as of December 3, 1996 (the "Warehousing
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 capacity as Indenture
Trustee under the Indenture referred to below, for the Noteholders with
respect to the related Series (in each of such capacities, the "Trustee") and
as Collateral Agent hereunder.
R E C I T A L S
1. The parties hereto have previously entered into a Spread Account
Agreement, dated as of March 25, 1993, as amended and restated as of December
3, 1996 (the "Spread Account Agreement"), and, as contemplated by Section
2.02 of the Spread Account Agreement, this Warehousing Series Supplement
constitutes a Series Supplement to the Spread Account Agreement so that
hereafter this Warehousing Series 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. Pursuant to the Repurchase Agreement dated as of December 3, 1996
between Arcadia Receivables Conduit Corp., a Delaware corporation (the
"Issuer"), as Buyer, and the Seller (the "Repurchase Agreement"), the Seller
intends to sell from time to time to the Issuer all of its right, title and
interest in and to Receivables and certain other Seller Conveyed Property (as
defined in the Repurchase Agreement).
3. Pursuant to the Indenture between the Issuer and the Trustee (the
"Warehousing Series Indenture"), the Issuer is issuing the Warehousing Notes.
4. The Seller has requested that Financial Security issue the 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 Warehousing Notes.
5. In partial consideration of the issuance of the Note Policy, the
Seller has agreed that Financial Security shall have certain rights as
Controlling Party, to the extent set forth herein and in the Transaction
Documents.
6. The Seller is a wholly owned special purpose subsidiary of OFL. The
Issuer has agreed to pay the amount earned on the Receivables, net of certain
amounts as set forth in the Servicing Agreement, to the Seller pursuant to
the Repurchase Agreement. The Warehousing Series Insurer Secured Obligations
form part of the consideration to Financial Security for its issuance of the
Note Policy.
1
<PAGE>
7. In order to secure the performance of the Warehousing Series Secured
Obligations, the Seller have agreed to pledge the Warehousing Series
Collateral as Collateral to the Collateral Agent for the benefit of Financial
Security and for the benefit of the Trustee on behalf of the Noteholders,
upon the terms and conditions set forth herein.
A G R E E M E N T S
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
Repurchase Agreement shall have the same meaning with respect to this
Warehousing Series Supplement. The following terms shall have the following
respective meanings:
"COLLECTION ACCOUNT SHORTFALL" means, with respect to the Warehousing
Series, (I) with respect to any Distribution Date prior to the occurrence of
an Amortization Event, the excess, if any, of (A) the amount required to be
distributed on such Distribution Date pursuant to priorities (i) through (vi)
of Section 3.6(a) of the Servicing Agreement over (B) Spread Account
Available Funds with respect to the immediately preceding Deficiency Claim
Date and (II) with respect to any Distribution Date following the occurrence
of an Amortization Event, the excess, if any, of (A) the amount required to
be distributed on such Distribution Date pursuant to priorities (i) through
(vi) of Section 3.6(b) of the Servicing Agreement over (B) the Spread Account
Available Funds with respect to such Distribution Date.
"SPREAD ACCOUNT MAXIMUM AMOUNT," with respect to the Warehousing Series
and any Distribution Date:
(i) if no Insurance Agreement Event of Default with respect
to the Warehousing Series has occurred and is continuing and no Capture
Event has occurred and is continuing as of the related Determination Date,
is equal to one percent of the principal balance of the Purchased
Receivables (as defined in the Repurchase Agreement); or
(ii) if (A) an Insurance Agreement Event of Default with
respect to the Warehousing 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 not be limited.
"WAREHOUSING SERIES COLLATERAL" has the meaning specified in Section
2.3(a) hereof.
2
<PAGE>
"WAREHOUSING SERIES INDENTURE" means the Indenture, dated as of December
3, 1996 between the Issuer and the Trustee.
"WAREHOUSING SERIES NOTE POLICY" means the financial guaranty insurance
policy issued by Financial Security with respect to the Warehousing Series
Notes.
"WAREHOUSING SERIES NOTES" means the Notes issued pursuant to the
Warehousing Series Indenture.
"WAREHOUSING SERIES REPURCHASE AGREEMENT" means the Repurchase
Agreement, dated December 3, 1996, between the Issuer and the Seller.
"WAREHOUSING SERIES SERVICING AGREEMENT" means the Servicing Agreement,
dated as of December 3, 1996, among OFL, in its individual capacity and as
Servicer, the Issuer, the Seller and the Backup Servicer, the Trustee, the
Collateral Agent and Bank of America National Trust and Savings Association
as Agent, as such agreement may be supplemented, amended or modified from
time to time.
"WAREHOUSING SHORTFALL" means, with respect to the Warehousing Series
and any Distribution Date following the occurrence of an Amortization Event,
the sum of (1) the excess, if any, of (A) the amount required to be
distributed on such Distribution Date pursuant to priorities (i) through
(viii) of Section 3.6(b) of the Servicing Agreement over (B) the Warehousing
Shortfall Available Funds with respect to such Distribution Date.
"WAREHOUSING SUPPLEMENT" means this Warehousing Supplement
which constitutes a Series Supplement to the Spread Account Agreement.
Section 1.2. RULES OF INTERPRETATION. The terms "hereof," "herein,"
"hereto" or "hereunder," unless otherwise modified by more specific
reference, shall refer to this Warehousing Series Supplement. Unless
otherwise indicated in context, the terms "Article," "Section," or "Exhibit"
shall refer to an Article or Section of, or Exhibit to, this Warehousing
Series 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 or defined in the Servicing Agreement, shall mean such term as it
relates to the Warehousing Series.
ARTICLE II
SERIES SUPPLEMENTS; THE COLLATERAL
Section 2.1. SERIES SUPPLEMENT. 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 Warehousing Series Supplement with
respect to the Warehousing Series.
3
<PAGE>
Section 2.2. 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 (as defined in the Spread Account Agreement),
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 "Warehousing Series
Collateral"):
(i) all amounts distributable pursuant to Sections 3.6(a)(x)
and 3.6(b)(x) of the Warehousing Series Servicing Agreement (the
"Receivables Income") and all rights and remedies that the Seller may have
to enforce payment of the Receivables Income whether under the Warehousing
Series Servicing Agreement or otherwise;
(ii) the Warehousing Series Spread Account established pursuant
to Section 3.1 of this Series 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 Warehousing Series
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
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 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 a first
priority perfected security interest in all Warehousing Series Collateral
which can be perfected by the filing of a financing statement.
4
<PAGE>
ARTICLE III
SPREAD ACCOUNT
Section 3.1. ESTABLISHMENT OF WAREHOUSING SERIES SPREAD ACCOUNT. On or
prior to the Closing Date relating to the Warehousing Series, the Collateral
Agent shall establish with respect to the Warehousing Series, at its office
or at another depository institution or trust company, an Eligible Account,
designated "Spread Account -- Warehousing Series -- Norwest Bank Minnesota,
National Association, as Collateral Agent for Financial Security Assurance
Inc. and another Secured Party" (the "Warehousing Series Spread Account").
Section 3.2. RELEASE OF FUNDS UPON REPURCHASE. On the Repurchase Date
for any Purchased Receivables in respect of which the Collateral Agent has
received a Notice of Repurchase in the form of Exhibit D to the Repurchase
Agreement for Purchased Recevables with an aggregate principal balance equal
to or greater than $20,000,000 and a corresponding executed reconveyance in
the form of Exhibit E to the Repurchase Agreement pursuant to Section 3(d)
thereof, the Collateral Agent, upon reconveyance of such Purchased
Receivables, shall recalculate the Spread Account Maximum Amount for the
Warehousing Series Spread Account and release funds from the Warehousing
Series Spread Account in excess of the recalculated Spread Account Maximum
Amount to the Seller.
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 Warehousing Series Supplement or to confirm or perfect any transaction
described or contemplated herein.
SECTION 4.2. GOVERNING LAW. THIS WAREHOUSING SERIES 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.
Section 4.3. COUNTERPARTS. This Warehousing Series 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 Warehousing Series Supplement are
provided for convenience only. They form no part of this Warehousing Series
Supplement and shall not affect its construction or interpretation.
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Warehousing
Series Supplement as of the date set forth on the first page hereof.
OLYMPIC FINANCIAL LTD.
By illegible
----------------------------------
Name:
Title:
OLYMPIC RECEIVABLES FINANCE CORP.
By illegible
----------------------------------
Name:
Title:
FINANCIAL SECURITY ASSURANCE INC.
By Claire M. Robinson
----------------------------------
Authorized Officer
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Trustee
By Thomas D. Wraathbert
----------------------------------
Name:
Title:
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Collateral Agent
By Thomas D. Wraathbert
----------------------------------
Name:
Title:
<PAGE>
SERIES 1996-D SUPPLEMENT
dated as of December 12, 1996
to
SPREAD ACCOUNT AGREEMENT
dated as of March 25, 1993,
as amended and restated
as of December 3, 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-D 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-D Spread Account; Initial
Deposit into Series 1996-D 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>
Page 1
SERIES 1996-D SUPPLEMENT
SERIES 1996-D SUPPLEMENT, dated as of December 12, 1996 (the "Series
1996-D 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 December
3, 1996 (the "Spread Account Agreement"), and, as contemplated by Section
2.02 of the Spread Account Agreement, this Series 1996-D Supplement
constitutes a Series Supplement to the Spread Account Agreement so that
hereafter this Series 1996-D 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-D (the "Series 1996-D
Trust") is being formed contemporaneously herewith pursuant to the Series
1996-D Trust Agreement (as defined herein).
3. Pursuant to the Series 1996-D Sale and Servicing Agreement, the
Seller is selling to the Series 1996-D Trust all of its right, title and
interest in and to the Initial Receivables (as defined in the Series 1996-D
Sale and Servicing Agreement) and certain other Trust Property (as defined in
the Series 1996-D Trust Agreement).
4. Pursuant to the Series 1996-D Trust Agreement, the Series 1996-D
Trust is issuing the Series 1996-D Certificates (as defined herein).
Pursuant to the Series 1996-D Indenture, the Series 1996-D Trust is issuing
the Series 1996-D Notes (as defined herein).
5. The Seller has requested that Financial Security issue the Series
1996-D 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-D Notes, and has requested that Financial Security issue the
Series 1996-D Certificate Policy to Mellon Bank (DE), National Association,
as Owner Trustee under the Series
<PAGE>
Page 2
1996-D Trust Agreement, to guarantee payment of the Guaranteed Distributions
(as defined in such Policy) on each Distribution Date in respect of the
Series 1996-D Certificates.
6. In partial consideration of the issuance of the Series 1996-D Note
Policy and the Series 1996-D 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-D
Indenture.
7. The Seller is a wholly owned special purpose subsidiary of OFL. The
Series 1996-D Trust has agreed to pay the Series 1996-D 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-D Insurance Agreement (such obligations forming part of the
Series 1996-D Insurer Secured Obligations as referred to herein). The Series
1996-D Insurer Secured Obligations form part of the consideration to
Financial Security for its issuance of the Series 1996-D Policies.
8. In order to secure the performance of the Series 1996-D Secured
Obligations, to further effect and enforce the subordination provisions to
which the Series 1996-D Credit Enhancement Fee is subject, and in
consideration of the receipt of the Series 1996-D Credit Enhancement Fee, OFL
and the Seller have agreed to pledge the Series 1996-D 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:
DEFINITIONS
Section 1.1 DEFINITIONS. All terms defined in Section 1.1 of the Series
1996-D Sale and Servicing Agreement shall have the same meaning with respect
to this Series 1996-D Supplement. The following terms shall have the
following meanings:
"COLLECTION ACCOUNT SHORTFALL" means, with respect to Series 1996-D and
any Distribution Date, the Deficiency Claim Amount, as defined in the Series
1996-D Sale and Servicing Agreement, with respect to such Distribution Date.
<PAGE>
Page 3
"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-D, 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 which occurs in a
calendar month which is a multiple of three months succeeding the Series
1996-D 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 $730,000,000 with respect to Series
1996-D.
"INITIAL SPREAD ACCOUNT DEPOSIT" means $7,300,000 for Series 1996-D.
"INITIAL SPREAD ACCOUNT MAXIMUM AMOUNT" means, with respect to Series
1996-D and any Distribution Date, an amount equal to the greater of (i) 7% of
the Series 1996-D 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-D BALANCE" means, with respect to Series 1996-D and any
Distribution Date, the sum of the aggregate principal amount of the Series
1996-D Notes and the Certificate Balance with respect to Series 1996-D
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-D CERTIFICATE POLICY" means the financial guaranty insurance
policy issued by Financial Security with respect to the Series 1996-D
Certificates.
"SERIES 1996-D CERTIFICATES" means the Certificates issued on the date
hereof pursuant to the Series 1996-D Trust Agreement.
"SERIES 1996-D COLLATERAL" has the meaning specified in Section 2.3(a)
hereof.
"SERIES 1996-D CREDIT ENHANCEMENT FEE" means the amount distributable on
each Distribution Date pursuant to Section 4.6(viii) and (ix) of the Series
1996-D Sale and Servicing Agreement.
"SERIES 1996-D INDENTURE" means the Indenture, dated as of December 1,
1996, among the Series 1996-D Trust, the Trustee and the Indenture Collateral
Agent.
"SERIES 1996-D NOTE POLICY" means the financial guaranty insurance policy
issued by Financial Security with respect to the Series 1996-D Notes.
"SERIES 1996-D NOTES" means the Class A-1, Class A-2, Class A-3, Class A-4
and
<PAGE>
Page 4
Class A-5 Notes issued pursuant to the Series 1996-D Indenture.
"SERIES 1996-D 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-D Trust Agreement.
"SERIES 1996-D RECEIVABLE" means each Receivable referenced on the
Schedule of Receivables attached to the Series 1996-D Sale and Servicing
Agreement, as supplemented from time to time during the Funding Period by one
or more Subsequent Transfer Agreements.
"SERIES 1996-D RESERVE ACCOUNT" means the Reserve Account established
pursuant to Section 4.1(d) of the Series 1996-D Sale and Servicing Agreement.
"SERIES 1996-D SALE AND SERVICING AGREEMENT" means the Sale and Servicing
Agreement, dated as of December 1, 1996, and attached hereto as Exhibit A,
among the Series 1996-D 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-D SECURED OBLIGATIONS" means the Insurer Secured Obligations
and the Trustee Secured Obligations with respect to Series 1996-D.
"SERIES 1996-D SECURITIES" means the Series 1996-D Notes and the Series
1996-D Certificates, collectively.
"SERIES 1996-D SPREAD ACCOUNT" means the Spread Account established
pursuant to Section 3.1(a) hereof.
"SERIES 1996-D SUPPLEMENT" means this Series 1996-D Supplement which
constitutes a Series Supplement to the Spread Account Agreement.
"SERIES 1996-D TRUST AGREEMENT" means the Trust Agreement, dated as of
December 1, 1996, among the Seller, Olympic First GP Inc., Olympic Second GP
Inc., Financial Security and the Series 1996-D Owner Trustee.
"SPREAD ACCOUNT ADDITIONAL DEPOSIT" means, with respect to Series 1996-D
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-D 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-D Notes and
the Series 1996-D Certificates will be in the highest category by such Rating
Agencies.
"SPREAD ACCOUNT MAXIMUM AMOUNT" means, with respect to Series 1996-D
<PAGE>
Page 5
and any Distribution Date:
(i) if no Insurance Agreement Event of Default with respect to
Series 1996-D 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-D
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-D and such Distribution Date;
(ii) if (A) a Trigger Event with respect to Series 1996-D has
occurred as of the Determination Date or (B) a Trigger Event with respect
to Series 1996-D 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-D 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-D 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-D 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-D 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-D 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-D, and
(B) the Series 1996-D Balance.
"SPREAD ACCOUNT WITHDRAWAL FLOOR" means, with respect to Series 1996-D
and any Determination Date, an amount equal to the Spread Account Minimum
Amount.
"TRIGGER EVENT" means, with respect to Series 1996-D and as of a
Determination Date, the occurrence of any of the following events:
<PAGE>
Page 6
(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-D
Closing Date, (B) 4.76%, with respect to any Determination Date
occurring after the third, and prior to or during the 6th,
calendar month succeeding the Series 1996-D Closing Date, (C)
6.66%, with respect to any Determination Date occurring after the
6th, and prior to or during the 9th, calendar month succeeding
the Series 1996-D Closing Date, (D) 8.22%, with respect to any
Determination Date occurring after the 9th, and prior to or
during the 12th, calendar month succeeding the Series 1996-D
Closing Date, (E) 8.97%, with respect to any Determination Date
occurring after the 12th, and prior to or during the 15th,
calendar month succeeding the Series 1996-D Closing Date, (F)
9.97%, with respect to any Determination Date occurring after the
15th, and prior to or during the 18th, calendar month succeeding
the Series 1996-D Closing Date, (G) 10.87%, with respect to any
Determination Date occurring after the 18th, and prior to or
during the 21st, calendar month succeeding the Series 1996-D
Closing Date, (H) 11.56%, with respect to any Determination Date
occurring after the 21st, and prior to or during the 24th,
calendar month succeeding the Series 1996-D Closing Date, (I)
12.17%, with respect to any Determination Date occurring after
the 24th, and prior to or during the 27th, calendar month
succeeding the Series 1996-D Closing Date, (J) 12.70%, with
respect to any Determination Date occurring after the 27th, and
prior to or during the 30th, calendar month succeeding the Series
1996-D Closing Date, (K) 13.09%, with respect to any
Determination Date occurring after the 30th, and prior to or
during the 33rd, calendar month succeeding the Series 1996-D
Closing Date, (L) 13.39%, with respect to any Determination Date
occurring after the 33rd, and prior to or during the 36th,
calendar month succeeding the Series 1996-D Closing Date, (M)
13.65%, with respect to any Determination Date occurring after
the 36th, and prior to or during the 39th, calendar month
succeeding the Series 1996-D Closing Date, (N) 13.81%, with
respect to any Determination Date occurring after the 39th, and
prior to or during the 42nd, calendar month succeeding the Series
1996-D Closing Date, (O) 13.96%, with respect to any
Determination Date occurring after the 42nd, and prior to or
during the 45th calendar month succeeding the Series 1996-D
Closing Date, (P) 14.08%, with
<PAGE>
Page 7
respect to any Determination Date occurring after the 45th, and
prior to or during the 48th, calendar month succeeding the Series
1996-D Closing Date, (Q) 14.15%, with respect to any Determination
Date occurring after the 48th, and prior to or during the 51st,
calendar month succeeding the Series 1996-D Closing Date, (R)
14.21%, with respect to any Determination Date occurring after the
51st, and prior to or during the 54th, calendar month succeeding
the Series 1996-D Closing Date, (S) 14.25%, with respect to any
Determination Date occurring after the 54th, and prior to or
during the 57th, calendar month succeeding the Series 1996-D
Closing Date, (T) 14.28%, with respect to any Determination Date
occurring after the 57th, and prior to or during the 60th,
calendar month succeeding the Series 1996-D Closing Date, (U)
14.30%, with respect to any Determination Date occurring after
the 60th, and prior to or during the 63rd, calendar month
succeeding the Series 1996-D Closing Date, (V) 14.32%, with
respect to any Determination Date occurring after the 63rd, and
prior to or during the 66th, calendar month succeeding the Series
1996-D Closing Date, (W) 14.33%, with respect to any
Determination Date occurring after the 66th, and prior to or
during the 69th, calendar month succeeding the Series 1996-D
Closing Date, or (X) 14.35%, with respect to any Determination
Date occurring after the 69th calendar month succeeding the
Series 1996-D Closing Date; or
(iii) the Cumulative Net Loss Rate shall be equal to or greater
than (A) 1.34%, with respect to any Determination Date
occurring prior to or during the third calendar month
succeeding the Series 1996-D Closing Date, (B) 2.33%, with
respect to any Determination Date occurring after the third,
and prior to or during the 6th, calendar month succeeding the
Series 1996-D Closing Date, (C) 3.14%, with respect to any
Determination Date occurring after the 6th, and prior to or
during the 9th, calendar month succeeding the Series 1996-D
Closing Date, (D) 3.74%, with respect to any Determination
Date occurring after the 9th, and prior to or during the
12th, calendar month succeeding the Series 1996-D Closing
Date, (E) 4.08%, with respect to any Determination Date
occurring after the 12th, and prior to or during the 15th,
calendar month succeeding the Series 1996-D Closing Date, (F)
4.40%, with respect to any Determination Date occurring after
the 15th, and prior to or during the 18th, calendar month
succeeding the Series 1996-D Closing Date, (G) 4.65%, with
respect to any Determination Date occurring after the 18th,
and prior to or during the 21st, calendar month succeeding
the Series 1996-D Closing Date, (H) 4.85%,
<PAGE>
Page 8
with respect to any Determination Date occurring after the
21st, and prior to or during the 24th, calendar month
succeeding the Series 1996-D Closing Date, (I) 5.01%, with
respect to any Determination Date occurring after the 24th,
and prior to or during the 27th, calendar month succeeding
the Series 1996-D Closing Date, (J) 5.16%, with respect to any
Determination Date occurring after the 27th, and prior to or
during the 30th, calendar month succeeding the Series 1996-D
Closing Date, (K) 5.26%, with respect to any Determination
Date occurring after the 30th, and prior to or during the
33rd, calendar month succeeding the Series 1996-D Closing
Date, (L) 5.36%, with respect to any Determination Date
occurring after the 33rd, and prior to or during the 36th,
calendar month succeeding the Series 1996-D Closing Date,
(M) 5.43%, with respect to any Determination Date occurring
after the 36th, and prior to or during the 39th, calendar
month succeeding the Series 1996-D Closing Date, (N) 5.51%,
with respect to any Determination Date occurring after the
39th, and prior to or during the 42nd, calendar month
succeeding the Series 1996-D Closing Date, (O) 5.58%, with
respect to any Determination Date occurring after the 42nd,
and prior to or during the 45th calendar month succeeding the
Series 1996-D Closing Date, (P) 5.62%, with respect to any
Determination Date occurring after the 45th, and prior to or
during the 48th, calendar month succeeding the Series 1996-D
Closing Date, (Q) 5.65%, with respect to any Determination
Date occurring after the 48th, and prior to or during the
51st, calendar month succeeding the Series 1996-D Closing
Date, (R) 5.68%, with respect to any Determination Date
occurring after the 51st, and prior to or during the 54th,
calendar month succeeding the Series 1996-D Closing Date,
(S) 5.72%, with respect to any Determination Date occurring
after the 54th, and prior to or during the 57th, calendar
month succeeding the Series 1996-D Closing Date, (T) 5.74%,
with respect to any Determination Date occurring after the
57th, and prior to or during the 60th, calendar month
succeeding the Series 1996-D Closing Date, (U) 5.75%, with
respect to any Determination Date occurring after the 60th,
and prior to or during the 63rd, calendar month succeeding
the Series 1996-D Closing Date, (V) 5.77%, with respect to
any Determination Date occurring after the 63rd, and prior to
or during the 66th, calendar month succeeding the Series
1996-D Closing Date, (W) 5.78%, with respect to any
Determination Date occurring after
<PAGE>
Page 9
the 66th, and prior to or during the 69th, calendar month
succeeding the Series 1996-D Closing Date, or (X) 5.80%, with
respect to any Determination Date occurring after the 69th
calendar month succeeding the Series 1996-D 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-D 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-D 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
CREDIT ENHANCEMENT FEE; SERIES SUPPLEMENTS; THE COLLATERAL
Section 2.1 SERIES 1996-D CREDIT ENHANCEMENT FEE. The Series 1996-D
Sale and Servicing Agreement provides for the payment to the Seller of the
Series 1996-D 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-D Credit Enhancement Fee in the manner and subject
to the conditions set forth herein and in the Series 1996-D 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-D) and pursuant to
the Series 1996-D Insurance Agreement. The Seller and OFL hereby agree with
the Trustee and with Financial Security that payment of the Series 1996-D
Credit Enhancement Fee to the Seller is expressly conditioned on
subordination of the Series 1996-D Credit Enhancement Fee to payments on the
Notes (if any) 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-D Collateral is intended to effect and
enforce such subordination and to provide security for the Series 1996-D
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-D Supplement with respect
to the Series 1996-D 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-D Collateral"):
(i) the Series 1996-D Credit Enhancement Fee and all rights
and remedies that the Seller may have to enforce payment of the Series
1996-D Credit Enhancement Fee whether under the Series 1996-D Sale and
Servicing Agreement or otherwise;
(ii) the Series 1996-D Spread Account established pursuant to
Section 3.1 of this Series 1996-D Supplement and Section 3.01 of the Spread
<PAGE>
Page 10
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-D
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-D 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-D 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 a
first priority perfected security interest in all Series 1996-D Collateral which
can be perfected by the filing of a financing statement.
ARTICLE
SPREAD ACCOUNT
Section 3.1 ESTABLISHMENT OF SERIES 1996-D SPREAD ACCOUNT; INITIAL
DEPOSIT INTO SERIES 1996-D SPREAD ACCOUNT.
(a) On or prior to the Closing Date relating to the Series 1996-D
Certificates, the Collateral Agent shall establish with respect to Series
1996-D, at its office or at another depository institution or trust company,
an Eligible Account, designated "Spread Account--Series 1996-D--Norwest Bank
Minnesota, National Association, as Collateral Agent for Financial Security
Assurance Inc. and another Secured Party" (the "Series 1996-D Spread
Account").
(b) On the Closing Date relating to the Series 1996-D, the
Collateral Agent shall deposit the Initial Spread Account Deposit with
respect to Series 1996-D received from the Seller into the Series 1996-D
Spread Account.
Section 3.2 SPREAD ACCOUNT ADDITIONAL DEPOSITS. On each Subsequent
Transfer Date, the Series 1996-D Trust will, pursuant to Section 2.4 of the
Series 1996-D 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
<PAGE>
Page 11
received from the Series 1996-D Trust into the Series 1996-D Spread Account.
ARTICLE
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-D Supplement or to confirm or perfect any transaction
described or contemplated herein.
Section 4.2 GOVERNING LAW. This Series 1996-D 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.
Section 4.3 COUNTERPARTS. This Series 1996-D 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-D Supplement are provided for
convenience only. They form no part of this Series 1996-D Supplement and
shall not affect its construction or interpretation.
<PAGE>
Page 12
IN WITNESS WHEREOF, the parties hereto have executed this Series 1996-D
Supplement as of the date set forth on the first page hereof.
OLYMPIC FINANCIAL LTD.
By
----------------------------------
John A. Witham
Executive Vice President and
Chief Financial Officer
OLYMPIC RECEIVABLES FINANCE CORP.
By
----------------------------------
John A. Witham
Senior Vice President and
Chief Financial Officer
FINANCIAL SECURITY ASSURANCE INC.
By
----------------------------------
Authorized Officer
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Trustee
By
----------------------------------
Thomas D. Wraalstad
Corporate Trust Officer
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Collateral Agent
By
----------------------------------
Thomas D. Wraalstad
Corporate Trust Officer
<PAGE>
AMENDMENT
dated as of January 14, 1997
among
OLYMPIC FINANCIAL LTD.
OLYMPIC RECEIVABLES FINANCE CORP.
FINANCIAL SECURITY ASSURANCE INC.
and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
as Collateral Agent
to
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 December 3, 1996
<PAGE>
Amendment dated as of January 14, 1997 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) the Series 1994-B Supplement dated as of September 23, 1994, 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 that certain Amendment dated as of September 21, 1995
(the "September 1995 Amendment") to certain Series Supplements, that
certain Amendment dated as of December 6, 1995 (the "December 1995
Amendment") to certain Series Supplements and that certain Amendment dated
as of September 12, 1996 (the "September 1996 Amendment") to certain Series
Supplements (as amended, the "Series 1994-B Supplement");
(ii) 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, the December 1995 Amendment and the September 1996 Amendment (as
amended, the "Series 1994-A Supplement");
(iii) 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, the December 1995 Amendment and the September 1996 Amendment (as
amended, the "Series 1993-D Supplement");
(iv) 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, the December 1995 Amendment and the September 1996 Amendment (as
amended, the "Series 1993-C Supplement")
(v) 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, the December 1995 Amendment and the September 1996 Amendment (as
amended, the "Series 1993-B Supplement") (each of the supplements referred
to in (i) through (v) 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 December 3, 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, the parties to the Spread Account Agreement (the "Parties") have
heretofore executed the Series Supplements;
2
<PAGE>
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:
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.
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.
3
<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/ Richard J. Bannerfeld M.D.
------------------------------
Authorized Officer
Richard J. Bannerfeld M.D.
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Collateral Agent
By /s/ Thomas D. Wraalstad
------------------------------
Thomas D. Wraalstad
Corporate Trust Officer
<PAGE>
EXHIBIT A
Series Designation Column I
------------------ ---------
1993-B 5%
1993-C 5%
1993-D 5%
1994-A 5%
1994-B 5%
<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:
Section 1. AMENDMENT TO THE SERIES 1993-A INSURANCE AND INDEMNITY
AGREEMENT AND SERIES 1993-B INSURANCE AND INDEMNITY AGREEMENT.
2
<PAGE>
(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.
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
3
<PAGE>
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.
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
4
<PAGE>
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/
--------------------------------
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
<PAGE>
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
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:
<PAGE>
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/
--------------------------------
Name:
Title:
<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/
--------------------------------
Name:
Title:
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/
--------------------------------
Name:
Title:
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/
--------------------------------
Name:
Title:
<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/
--------------------------------
Name:
Title:
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/
--------------------------------
Name:
Title:
<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/
--------------------------------
Name:
Title:
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/
--------------------------------
Name:
Title:
<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>
- -------------------------------------------------------------------------------
INSURANCE AND INDEMNITY AGREEMENT
among
FINANCIAL SECURITY ASSURANCE INC.,
OLYMPIC AUTOMOBILE RECEIVABLES TRUST, 1996-D,
OLYMPIC FIRST GP INC.,
OLYMPIC SECOND GP INC.,
OLYMPIC RECEIVABLES FINANCE CORP.
and
OLYMPIC FINANCIAL LTD.
Dated as of December 12, 1996
- -------------------------------------------------------------------------------
Olympic Automobile Receivables Trust, 1996-D
5.43% Class A-1 Money Market Automobile Receivables-Backed Notes
5.75% Class A-2 Automobile Receivables-Backed Notes
5.95% Class A-3 Automobile Receivables-Backed Notes
6.05% Class A-4 Automobile Receivables-Backed Notes
6.25% Class A-5 Automobile Receivables-Backed Notes
6.125% Automobile Receivables-Backed Certificates
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
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
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
ARTICLE IV
FURTHER AGREEMENTS; MISCELLANEOUS
Section 4.01. Effective Date; Term of Agreement . . . . . . . . . . . . . . . . . 55
Section 4.02. Further Assurances and Corrective Instruments . . . . . . . . . . . 56
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
</TABLE>
ii
<PAGE>
INSURANCE AND INDEMNITY AGREEMENT
INSURANCE AND INDEMNITY AGREEMENT dated as of December 12, 1996, among
FINANCIAL SECURITY ASSURANCE INC., a New York stock insurance company
("Financial Security"), OLYMPIC AUTOMOBILE RECEIVABLES TRUST, 1996-D, 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 December 3, 1996 among the Seller and Arcadia
Receivables Conduit 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.
<PAGE>
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 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-D. 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.
2
<PAGE>
"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.
"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, the Series 1996-C Demand Notes and the Series
1996-D 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 September 30, 1996 and
September 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.
3
<PAGE>
"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.
"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.
4
<PAGE>
"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.
"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, Olympic
Automobile Receivables Trust, 1996-C 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.
5
<PAGE>
"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 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 December 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.
6
<PAGE>
"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.
"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 DEMAND NOTES" means each of the Demand Notes, dated
September 12, 1996, issued by OFL to the Class GP Certificateholders.
"SERIES 1996-D" means the Series of Certificates and Notes issued on
the date hereof pursuant to the Trust Agreement and the Indenture, respectively.
"SERIES 1996-D DEMAND NOTES" means each of the Demand Notes, dated
December 12, 1996, issued by OFL to the Class GP Certificateholders.
"SERIES OF CERTIFICATES", "SERIES OF NOTES" or "SERIES" means Series
1996-D 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 December 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 December 3, 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 Third Amended and Restated Stock
Pledge Agreement, as amended and restated, dated as of December 3, 1996, 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.
7
<PAGE>
"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 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 December 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 December
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 December 3, 1996 between Arcadia Receivables
Conduit Corp., as the issuer, and Norwest Bank Minnesota, National Association,
as trustee.
8
<PAGE>
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 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,
9
<PAGE>
(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 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.
10
<PAGE>
(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 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.
11
<PAGE>
(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 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
12
<PAGE>
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 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
13
<PAGE>
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:
(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
14
<PAGE>
(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.
(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.
15
<PAGE>
(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.
(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
16
<PAGE>
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-D 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 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.
17
<PAGE>
(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.
(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:
18
<PAGE>
(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, 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
19
<PAGE>
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.
(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
20
<PAGE>
Certificates, the Series 1996-C Class GP Certificates and the Series
1996-D 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 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.
21
<PAGE>
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) 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
22
<PAGE>
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:
(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;
23
<PAGE>
(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.
(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
24
<PAGE>
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 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.
25
<PAGE>
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 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.
26
<PAGE>
(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
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.
27
<PAGE>
(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 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.
28
<PAGE>
(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, 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
29
<PAGE>
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.
(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
30
<PAGE>
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 STATEMENTS; PROSPECTUS. The Seller has filed with
the Securities and Exchange Commission (the "Commission") registration
statements on Form S-3 (Nos. 33-97608 and 333-14983), 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 statements (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 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 Statements" 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 Statements at the
time they 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 Statements and the Prospectus at the time the Registration
Statements 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 Statements 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
31
<PAGE>
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.
(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.
32
<PAGE>
(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:
(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.
33
<PAGE>
(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;
(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
34
<PAGE>
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 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
35
<PAGE>
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 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-D 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.
36
<PAGE>
(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 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.
37
<PAGE>
(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, 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,
38
<PAGE>
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, 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
39
<PAGE>
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 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
40
<PAGE>
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.
(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.
41
<PAGE>
(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;
(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
42
<PAGE>
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;
(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.
43
<PAGE>
(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.
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
44
<PAGE>
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, 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
45
<PAGE>
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, 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
46
<PAGE>
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 (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, as amended, 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
47
<PAGE>
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;
(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
48
<PAGE>
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 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;
49
<PAGE>
(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 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 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;
(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
50
<PAGE>
(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.
(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
51
<PAGE>
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:
(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
52
<PAGE>
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.
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.
53
<PAGE>
(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 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 Statements 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 Statements 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 Statements 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
54
<PAGE>
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.
(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
55
<PAGE>
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
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,
56
<PAGE>
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.
(b) The Trust, each Class GP Certificateholder, the 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
57
<PAGE>
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.
(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
58
<PAGE>
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;
(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
59
<PAGE>
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;
(h) on any Distribution Date, the sum of Available Funds with respect
to such Distribution Date and the amounts available in the Series 1996-D 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
60
<PAGE>
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) 3.73%, with respect to any Determination Date occurring prior to or during
the third calendar month succeeding the Series 1996-D Closing Date, (B) 7.13%,
with respect to any Determination Date occurring after the third, and prior to
or during the 6th, calendar month succeeding the Series 1996-D Closing Date,
(C) 9.99%, with respect to any Determination Date occurring after the 6th, and
prior to or during the 9th, calendar month succeeding the Series 1996-D
Closing Date, (D) 12.33%, with respect to any Determination Date occurring
after the 9th, and prior to or during the 12th, calendar month succeeding the
Series 1996-D Closing Date, (E) 13.46%, with respect to any Determination Date
occurring after the 12th, and prior to or during the 15th, calendar month
succeeding the Series 1996-D Closing Date, (F) 14.95%, with respect to any
Determination Date occurring after the 15th, and prior to or during the 18th,
calendar month succeeding the Series 1996-D Closing Date, (G) 16.31%, with
respect to any Determination Date occurring after the 18th, and prior to or
during the 21st, calendar month succeeding the Series 1996-D Closing Date,
(H) 17.34%, with respect to any Determination Date occurring after the 21st,
and prior to or during the 24th, calendar month succeeding the Series 1996-D
Closing Date, (I) 18.26%, with respect to any Determination Date occurring
after the 24th, and prior to or during the 27th, calendar month succeeding
the Series 1996-D Closing Date, (J) 19.05%, with respect to any Determination
Date occurring after the 27th, and prior to or during the 30th, calendar month
succeeding the Series 1996-D Closing Date, (K) 19.64%, with respect to any
Determination Date occurring after the 30th, and prior to or during the 33rd,
calendar month succeeding the Series 1996-D Closing Date, (L) 20.09%, with
respect to any Determination Date occurring after the 33rd, and prior to or
during the 36th, calendar month succeeding the Series 1996-D Closing Date,
(M) 20.48%, with respect to any Determination Date occurring after the 36th,
and prior to or during the 39th, calendar month succeeding the Series 1996-D
Closing Date, (N) 20.71%, with respect to any Determination Date occurring
after the 39th, and prior to or during the 42nd, calendar month succeeding the
Series 1996-D Closing Date, (O) 20.94%, with respect to any Determination Date
occurring after the 42nd, and prior to or during the 45th calendar month
succeeding the Series 1996-D Closing Date, (P) 21.12%, with respect to any
Determination Date occurring after the 45th, and prior to or during the 48th,
calendar month succeeding the Series 1996-D Closing Date, (Q) 21.22%, with
respect to any Determination Date occurring after the 48th, and prior to or
during the 51st, calendar month succeeding the Series 1996-D Closing Date,
(R) 21.32%, with respect to any Determination Date occurring after the 51st,
and prior to or during the 54th, calendar month succeeding the Series 1996-D
Closing Date, (S) 21.36%, with respect to any Determination Date occurring
after the 54th, and prior to or during the 57th, calendar month succeeding the
Series 1996-D Closing Date, (T) 21.41%, with respect to any Determination Date
occurring after the 57th, and prior to or during the 60th, calendar month
succeeding the Series 1996-D Closing Date, (U) 21.43%, with respect to any
Determination Date occurring after the 60th, and prior to or during the 63rd,
calendar month succeeding the Series
61
<PAGE>
1996-D Closing Date, (V) 21.45%, with respect to any Determination Date
occurring after the 63rd, and prior to or during the 66th, calendar month
succeeding the Series 1996-D Closing Date, (W) 21.47%, with respect to any
Determination Date occurring after the 66th, and prior to or during the 69th,
calendar month succeeding the Series 1996-D Closing Date, or (X) 21.50%, with
respect to any Determination Date occurring after the 69th calendar month
succeeding the Series 1996-D Closing Date;
(l) the Cumulative Net Loss 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-D Closing Date, (B) 4.76%,
with respect to any Determination Date occurring after the third, and prior to
or during the 6th, calendar month succeeding the Series 1996-D Closing Date,
(C) 6.66%, with respect to any Determination Date occurring after the 6th, and
prior to or during the 9th, calendar month succeeding the Series 1996-D Closing
Date, (D) 8.22%, with respect to any Determination Date occurring after the
9th, and prior to or during the 12th, calendar month succeeding the
Series 1996-D Closing Date, (E) 8.97%, with respect to any Determination Date
occurring after the 12th, and prior to or during the 15th, calendar month
succeeding the Series 1996-D Closing Date, (F) 9.97%, with respect to any
Determination Date occurring after the 15th, and prior to or during the 18th,
calendar month succeeding the Series 1996-D Closing Date, (G) 10.87%, with
respect to any Determination Date occurring after the 18th, and prior to or
during the 21st, calendar month succeeding the Series 1996-D Closing Date,
(H) 11.56%, with respect to any Determination Date occurring after the 21st,
and prior to or during the 24th, calendar month succeeding the Series 1996-D
Closing Date, (I) 12.17%, with respect to any Determination Date occurring
after the 24th, and prior to or during the 27th, calendar month succeeding the
Series 1996-D Closing Date, (J) 12.70%, with respect to any Determination Date
occurring after the 27th, and prior to or during the 30th, calendar month
succeeding the Series 1996-D Closing Date, (K) 13.09%, with respect to any
Determination Date occurring after the 30th, and prior to or during the 33rd,
calendar month succeeding the Series 1996-D Closing Date, (L) 13.39%, with
respect to any Determination Date occurring after the 33rd, and prior to or
during the 36th, calendar month succeeding the Series 1996-D Closing Date,
(M) 13.65%, with respect to any Determination Date occurring after the 36th,
and prior to or during the 39th, calendar month succeeding the Series 1996-D
Closing Date, (N) 13.81%, with respect to any Determination Date occurring
after the 39th, and prior to or during the 42nd, calendar month succeeding the
Series 1996-D Closing Date, (O) 13.96%, with respect to any Determination Date
occurring after the 42nd, and prior to or during the 45th calendar month
succeeding the Series 1996-D Closing Date, (P) 14.08%, with respect to any
Determination Date occurring after the 45th, and prior to or during the 48th,
calendar month succeeding the Series 1996-D Closing Date, (Q) 14.15%, with
respect to any Determination Date occurring after the 48th, and prior to or
during the 51st, calendar month succeeding the Series 1996-D Closing Date,
(R) 14.21%, with respect to any Determination Date occurring after the 51st,
and prior to or during the 54th, calendar month succeeding the Series 1996-D
Closing Date, (S) 14.25%, with respect to any Determination Date occurring
after the 54th, and prior to or during the 57th, calendar month succeeding
the Series 1996-D Closing Date, (T) 14.28%, with respect to any Determination
Date occurring after the 57th, and prior to or during the 60th, calendar month
succeeding the Series 1996-D Closing Date, (U) 14.30%, with respect to any
Determination Date occurring after the 60th, and prior to or during the 63rd,
calendar month succeeding the Series
62
<PAGE>
1996-D Closing Date, (V) 14.32%, with respect to any Determination Date
occurring after the 63rd, and prior to or during the 66th, calendar month
succeeding the Series 1996-D Closing Date, (W) 14.33%, with respect to any
Determination Date occurring after the 66th, and prior to or during the 69th,
calendar month succeeding the Series 1996-D Closing Date, or (X) 14.35%, with
respect to any Determination Date occurring after the 69th calendar month
succeeding the Series 1996-D 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 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.
63
<PAGE>
(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.
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
64
<PAGE>
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
65
<PAGE>
(f) To the Trust:
Olympic Automobile Receivables Trust, 1996-D
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
66
<PAGE>
TRANSACTION OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, 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.
67
<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.
68
<PAGE>
FINANCIAL SECURITY ASSURANCE INC.
By:
-----------------------------------
Authorized Officer
OLYMPIC AUTOMOBILE RECEIVABLES
TRUST, 1996-D
By: Mellon Bank (DE), National
Association, not in its individual
capacity, but solely in its
capacity as Owner Trustee under
the Trust Agreement
By:
-----------------------------------
E.D. Renn
Vice President
OLYMPIC FIRST GP INC.
By:
-----------------------------------
John A. Witham
Vice President and Chief Financial
Officer
OLYMPIC SECOND GP INC.
By:
-----------------------------------
John A. Witham
Vice President and Chief Financial
Officer
OLYMPIC FINANCIAL LTD.
By:
-----------------------------------
John A. Witham
Executive Vice President and
Chief Financial Officer
OLYMPIC RECEIVABLES FINANCE CORP.
By:
-----------------------------------
John A. Witham
Senior Vice President and
Chief Financial Officer
<PAGE>
EMPLOYMENT AGREEMENT
THIS AGREEMENT between Olympic Financial Ltd. (the "Company") and
Richard A. Greenawalt (the "Executive") is dated as of this 6th day of January,
1997.
W I T N E S S E T H :
WHEREAS, the Company and the Executive wish to enter into an
agreement setting forth the terms and conditions upon which the Executive shall
be employed by the Company;
NOW, THEREFORE, in consideration of the premises and mutual
covenants herein contained, it is hereby agreed by and between the Company and
the Executive as follows:
1. EFFECTIVE DATE. This Agreement shall govern the terms and
conditions of the Executive's employment, which shall commence as of a date to
be mutually agreed upon between the Company and the Executive (the "Effective
Date").
2. GRANT OF OPTIONS. Not later than the Effective Date, the
Company will grant to the Executive an option to purchase 1,200,000 shares of
the Company's common stock at an exercise price of $14.87 per share, subject to
the terms and conditions of the stock option agreement (the "Option Agreement")
between the Company and the Executive of even date herewith attached hereto as
Exhibit A (the "Option"). The Option will vest in three equal installments on
the first three anniversaries of the date of grant, and will have a maximum term
of 10 years, subject to earlier termination upon termination of employment in
accordance with the terms of options granted to other senior executives of the
Company. The Option grant will not be subject to shareholder approval. The
Company will undertake to file a registration statement on Form S-8 with respect
to the Option shares as soon as practicable after the date of grant. Option
vesting will be accelerated in the event of the Executive's death, Disability
(as herein defined), termination without Cause (as herein defined), termination
for Good Reason (as herein defined), or a Change in Control (as defined in the
Option Agreement).
3. EMPLOYMENT PERIOD. The Company agrees to employ the Executive,
and the Executive agrees to remain in the employ of the Company, for the period
(the "Employment Period") commencing on the Effective Date and ending on the
date of any termination of the Executive's employment in accordance with Section
7 of the Agreement.
<PAGE>
4. POSITION; DUTIES; RESPONSIBILITIES. (a) POSITION AND DUTIES.
During the Employment Period, the Executive shall serve as Chief Executive
Officer of the Company, and shall report directly to the Board or one or more
designated members thereof.
(b) BUSINESS TIME. During the Employment Period, the
Executive shall devote his full business time during normal business hours to
the business and affairs of the Company and use his best efforts to perform
faithfully and efficiently the responsibilities assigned to him hereunder, to
the extent necessary to discharge such responsibilities, except for
(i) reasonable time spent in serving on corporate, civic or
charitable boards or committees of the nature similar to those on
which the Executive served prior to the Effective Date, or otherwise
approved by the Board, in each case only if and to the extent not
substantially interfering with the performance of such
responsibilities, and
(ii) periods of vacation and sick leave to which he is
entitled.
It is expressly understood and agreed that the Executive's continuing to serve
on any boards and committees on which he is serving or with which he is
otherwise associated immediately preceding the Effective Date (other than his
prior employer) shall not be deemed to interfere with the performance of the
Executive's services to the Company.
5. PLACE OF PERFORMANCE. During the Employment Period, the
Executive's principal places of performance will be at the Company's offices in
Minneapolis, Minnesota and at a location to be determined outside of
Philadelphia, Pennsylvania, with the Executive dividing his time between the two
locations on such basis as shall be mutually agreeable to the Executive and the
Company, except for reasonably required travel on behalf of the Company.
6. COMPENSATION AND BENEFITS. (a) BASE SALARY. During the
Employment Period, the Executive shall receive a base salary ("Base Salary") at
an annual rate of not less than $100,000, paid in accordance with the Company's
regular payroll practices. The Base Salary shall be reviewed at least once each
year after the Effective Date, and may be increased (but not decreased) at any
time and from time to time by action of the Board of Directors (the "Board") or
any committee thereof. Neither payment of the Base Salary nor payment of any
increased Base Salary after the Effective Date shall serve to limit or reduce
any other obligation of the Company hereunder. For purposes of the remaining
provisions of this Agreement, the term "Base Salary" shall mean Base Salary as
defined in this
2
<PAGE>
Section 6(a) or, if increased after the Effective Date, the Base Salary as so
increased.
(b) ANNUAL BONUS. (i) In addition to the Base Salary, the
Executive shall be awarded for each fiscal year of the Company ending during the
Employment Period an annual bonus, to be based on reasonable and customary
criteria consistent with the Company's past practices (the "Annual Bonus"), with
a target amount at least equal to $300,000. If a fiscal year of the Company
begins, but does not end, during the Employment Period, the Executive shall
receive an amount with respect to such fiscal year at least equal to the amount
of the Annual Bonus multiplied by a fraction, the numerator of which is the
number of days in such fiscal year occurring during the Employment Period and
the denominator of which is 365. Each amount payable in respect of the
Executive's Annual Bonus shall be paid not later than 90 days after the fiscal
year next following the fiscal year for which the Annual Bonus (or pro-rated
portion) is earned or awarded. Neither the Annual Bonus nor any bonus amount
paid in excess thereof after the Effective Date shall serve to limit or reduce
any other obligation of the Company hereunder.
(ii) The Executive's Annual Bonus shall be applied toward
participation in the Company's 1994-1997 and 1998-2000 Restricted Stock Election
Plans on a basis commensurate with an executive having a base salary of $500,000
(or, if greater, the Executive's annual Base Salary).
(c) FRINGE BENEFITS. During the Employment Period, the Company
shall provide the following fringe benefits to Executive:
(i) HEALTH, DISABILITY AND LIFE INSURANCE. Subject to
satisfaction of the eligibility requirements of such plans and the rules
and regulations applicable thereto, Executive and his family members shall
be entitled to be covered by the Company's group health and dental
insurance plans presently in effect or hereafter adopted by the Company and
applicable to employees of the Company generally and Executive shall be
entitled to be covered by the Company's group disability and life insurance
plans presently in effect or hereafter adopted by the Company and
applicable to the employees of the Company in general or, if more
favorable, plans applicable to the Company's executives. The Company shall
pay the premiums associated with such coverage. In the event Executive
makes a claim against any disability policy provided to Executive by the
Company pursuant to this Section 6(c)(i) and such policy calls for a
waiting period which is applicable to Executive's claim, the Company shall
pay to Executive during such waiting period his monthly base salary due
during such period and shall provide the other benefits due him under this
Section 5(c)(i).
3
<PAGE>
(ii) VACATION. Executive shall be entitled to not less than
four weeks of vacation without loss of compensation or other benefits
pursuant to such general policies and procedures of the Company as are from
time to time adopted by the Company.
(iii) EXPENSE REIMBURSEMENT. Executive shall be reimbursed by
the Company for all reasonable expenses incurred by him in connection with
the conduct of the Company's business for which he furnishes appropriate
documentation in accordance with Company policy.
(iv) AUTOMOBILE. The Company shall at Executive's option
either (A) provide to Executive use of an automobile to be used by
Executive in conducting the Company's business; or (B) pay to Executive a
monthly auto expense not less than Four Hundred Dollars ($400) per month.
In addition, the Company shall reimburse Executive (1) an amount equal to
the cost of insuring and maintaining the automobile used by Executive for
the Company's business and for the Executive's personal use, and (2) the
cost of maintenance and the cost of gasoline and oil used in the automobile
and in the event of a loss under the policies insuring said automobile the
amount of any deductible thereunder applicable to such loss. Such
insurance and the coverage and deductibles thereof shall cover both the
business and personal use of such automobile by Employee, his family and
invitees and shall include such other terms and conditions as are
reasonably acceptable to Executive. Any such reimbursements shall be made
upon the Company's receipt of invoices evidencing incurrence of such
expenses. Executive shall also be paid a monthly amount equal to the
reasonable value of personal use of such automobile, determined in
accordance with applicable federal income tax regulations.
(v) CLUB DUES. The Company shall reimburse Executive the
reasonable cost of the monthly or annual dues, as the case may be, paid by
Executive to maintain his status as a member of the Flagship Athletic Club
or of any other athletic club having equal or lesser membership costs in
lieu of such club. The Company shall also permit Executive and his family
to a membership at Olympic Hills Golf Club and shall reimburse the
Executive for the reasonable cost of the monthly or annual dues, as the
case may be, paid by Executive to maintain such membership. If either such
membership is a corporate membership and is subsequently converted to an
individual membership, the Company shall reimburse Executive for any fees
charged in connection with such conversion.
4
<PAGE>
(vi) OFFICE AND SUPPORT STAFF. During the Employment Period,
the Executive shall be entitled to an office or offices of a size and with
furnishings and other appointments, and to secretarial and other
assistance, at least equal to the most favorable of the foregoing provided
to the Executive by his predecessor employer at any time during the 90-day
period immediately preceding the Effective Date.
7. TERMINATION. (a) DEATH OR DISABILITY. The Executive's
employment shall terminate automatically upon his death. The Company may
terminate Executive's employment during the Employment Period, after having
established the Executive's Disability, by giving the Executive written notice
of its intention to terminate his employment, and his employment with the
Company shall terminate effective on the 90th day after receipt of such notice
if, within 90 days after such receipt, the Executive shall fail to return to
full-time performance of his duties. For purposes of this Agreement,
"Disability" means disability which, after the expiration of more than 26 weeks
after its commencement, is determined to be total and permanent by a physician
selected by the Company or its insurers and acceptable to the Executive or his
legal representatives (such agreement to acceptability not to be withheld
unreasonably).
(b) VOLUNTARY TERMINATION. Notwithstanding anything in this
Agreement to the contrary, the Executive may, upon not less than 15 days'
advance written notice to the Company, voluntarily terminate employment during
the Employment Period for any reason, provided that any termination by the
Executive pursuant to Section 7(d) of this Agreement on account of Good Reason
(as defined therein) shall not be treated as a voluntary termination under this
Section 7(b).
(c) CAUSE. The Company may terminate the Executive's employment
during the Employment Period for Cause. For purposes of this Agreement, "Cause"
means (I) gross misconduct on the Executive's part which is demonstrably willful
and deliberate and which results in material damage to the Company's business or
reputation or (II) repeated material violations by the Executive of his
obligations under Section 4 of this Agreement which violations are demonstrably
willful and deliberate.
(d) GOOD REASON. The Executive may terminate his employment during
the Employment Period for Good Reason. For purposes of this Agreement, "Good
Reason" means
(i) a good faith determination by the Executive that, without
his prior written consent, the Company or any of its officers has taken or
failed to take any action (including, without limitation, (A) exclusion of
the Executive from consideration of material matters within his area of
responsibility, other than an insubstantial or inadvertent exclusion
remedied by the Company promptly after
5
<PAGE>
receipt of notice thereof from the Executive, (B) statements or actions
which undermine the Executive's authority with respect to persons under his
supervision or reduce his standing with his peers, other than an
insubstantial or inadvertent statement or action which is remedied by the
Company promptly after receipt of the notice thereof from the Executive,
(C) a pattern of discrimination against or harassment of the Executive or
persons under his supervision and (D) the subjection of the Executive to
procedures not generally applicable to other similarly situated executives)
which changes the Executive's position (including titles), authority or
responsibilities under Section 4 of this Agreement or reduces the
Executive's ability to carry out his duties and responsibilities under
Section 4 of this Agreement;
(ii) any failure by the Company to comply with any of the
provisions of Section 6 of this Agreement, other than an insubstantial or
inadvertent failure remedied by the Company promptly after receipt of
notice thereof from the Executive;
(iii) the Company's requiring the Executive to perform his
services at any location more than 35 miles from the places of performance
described in Section 5 hereof; or
(iv) any failure by the Company to obtain the assumption of
and agreement to perform this Agreement by a successor as contemplated by
Section 14(b) of this Agreement.
(e) WITHOUT CAUSE. The Company shall give Executive at least 15
days' advance written notice of any termination of Executive's employment which
is not for Cause and not on account of Executive's Disability.
(f) NOTICE OF TERMINATION. Any termination of Executive's
employment by the Company for Cause or by the Executive for Good Reason during
the Employment Period shall be communicated by Notice of Termination to the
other party hereto given in accordance with Section 15(c) of this Agreement.
For purposes of this Agreement, a "Notice of Termination" means a written notice
given, in the case of a termination by the Company for Cause, within 10 business
days of the Company's having actual knowledge of all of the events giving rise
to such termination, and in the case of a termination by Executive for Good
Reason, within 180 days of the Executive's having actual knowledge of the events
giving rise to such termination, and which (I) indicates the specific
termination provision in this Agreement relied upon, (II) sets forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so indicated, and
(III) if the termination date is other than the date of receipt of such notice,
specifies such termination date (which date shall be not
6
<PAGE>
more than 15 days after the giving of such notice). The failure by the Executive
to set forth in the Notice of Termination any fact or circumstance which
contributes to a showing of Good Reason shall not waive any right of the
Executive hereunder or preclude the Executive from asserting such fact or
circumstance in enforcing his rights hereunder.
(g) DATE OF TERMINATION. For purposes of this Agreement, the term
"Date of Termination" means (I) in the case of a termination for which a Notice
of Termination is required, the date of receipt of such Notice of Termination
or, if later, the date specified therein and (II) in all other cases, the actual
date on which the Executive's employment terminates during the Employment
Period.
8. OBLIGATIONS OF THE COMPANY UPON TERMINATION. (a) DEATH. If the
Executive's employment is terminated during the Employment Period by reason of
the Executive's death, this Agreement shall terminate without further
obligations to the Executive's legal representatives under this Agreement other
than those obligations accrued hereunder at the date of his death, including,
for this purpose (I) the Executive's full Base Salary through the Date of
Termination, (II) the product of the Annual Bonus and a fraction, the numerator
of which is the number of days in the current fiscal year of the Company through
the Date of Termination, and the denominator of which is 365 (the "Pro-rated
Bonus Obligation"), (III) any compensation previously deferred by the Executive
(together with any accrued earnings thereon) and not yet paid by the Company,
(IV) any other amounts or benefits owing to the Executive under any of the
Company's incentive compensation plans (including any accrued but unpaid bonus
for prior year(s)), stock option plans, restricted stock plans or other similar
plans and (V) any amounts or benefits owing to the Executive under any of the
Company's employee benefit plans or policies (such amounts specified in clauses
(i), (ii), (iii), (iv) and (v) are hereinafter referred to as "Accrued
Obligations"). Unless otherwise directed by the Executive in writing prior to
his death, all Accrued Obligations shall be paid to the Executive's estate.
(b) DISABILITY. If the Executive's employment is terminated by
reason of the Executive's Disability, the Executive shall receive all Accrued
Obligations and, in addition, from the Date of Termination until the date when
the Employment Period would otherwise have terminated, shall continue to
participate in or be covered under the benefit plans and programs referred to in
Section 6(c)(i) of this Agreement or, at the Company's option, to receive
equivalent benefits by alternate means at least equal to those provided in
accordance with Section 6(c)(i) of this Agreement. Anything in this Agreement
to the contrary notwithstanding, the Executive shall be entitled to receive
disability and other benefits at least equal to the most favorable level of
benefits available to disabled employees of the Company and/or their families in
accordance with the plans,
7
<PAGE>
programs and policies maintained by the Company or its affiliates relating to
disability at any time during the 90-day period immediately preceding the
Effective Date.
(c) CAUSE AND VOLUNTARY TERMINATION. If, during the Employment
Period, the Executive's employment shall be terminated for Cause or voluntarily
terminated by the Executive (other than on account of Good Reason), the
Executive shall receive all Accrued Obligations other than the Pro-rated Bonus
Obligation.
(d) TERMINATION BY COMPANY OTHER THAN FOR CAUSE OR DISABILITY AND
TERMINATION BY EXECUTIVE FOR GOOD REASON. LUMP SUM PAYMENT. If, during the
Employment Period, the Company terminates the Executive's employment other than
for Cause or Disability, or the Executive terminates his employment for Good
Reason, the Executive shall receive all Accrued Obligations. In addition, the
Company shall pay to the Executive in a lump sum, within 15 days after the Date
of Termination, a cash amount equal to two (2) times the sum of the following
amounts:
(1) the Executive's annual Base Salary at the rate specified in
Section 6(a) of this Agreement;
(2) the Annual Bonus;
(3) an amount equal to the average annual amount paid and/or
reimbursed to the Executive pursuant to Section 6(c)(iv) and (v)
hereof during the two calendar years preceding the Date of
Termination; and
(4) the present value, calculated using the annual federal
short-term rate as determined under Section 1274(d) of the Code, of
(without duplication) the annual cost to the Company (based on the
premium rates or other costs to it) of obtaining coverage equivalent
to the coverage under the plans and programs described in Section
6(c)(i) of this Agreement;
provided, however, that with respect to the life and medical insurance
coverage referred to in Section 6(c)(i) of this Agreement, at the
Executive's election made prior to the Date of Termination, the Company
shall use its best efforts to secure conversion coverage and shall pay the
cost of such coverage in lieu of paying the lump sum amount attributable to
such life or medical insurance coverage.
9. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall
prevent or limit the Executive's continuing or future participation in any
benefit, bonus, incentive or other plan or program provided by the Company or
any of its affiliated companies and for which the Executive may qualify, nor
shall anything herein limit or otherwise prejudice such rights as the Executive
may have with respect to awards granted to him during
8
<PAGE>
the Employment Period under any stock option, restricted stock or other plans or
agreements with the Company or any of its affiliated companies including,
without limitation, the Option. Amounts which are vested benefits or which the
Executive is otherwise entitled to receive under any plan or program of the
Company or any of its affiliated companies shall be payable in accordance with
such plan or program.
10. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.
(a) Anything in this Agreement to the contrary notwithstanding, in
the event it shall be determined that any payment, distribution, acceleration
of vesting or other benefit which the Executive receives or becomes entitled
to receive, whether alone or in combination, and whether pursuant to the
terms of this Agreement or any other agreement, plan or arrangement with the
Company or any of its affiliates or any of their respective successors or
assigns, but determined without regard to any additional payments required
under this Section 10 (collectively, the "Payments"), would be subject to the
excise tax imposed by Section 4999 of the Code (or any successor provision),
or any interest or penalties are incurred by the Executive with respect to
such excise tax (such excise tax, together with any such interest and
penalties, are hereinafter collectively referred to as the "Excise Tax"),
then the Executive shall be entitled to receive an additional payment (a
"Gross-Up Payment") in an amount such that after payment by the Executive of
(i) all taxes with respect to the Gross-Up Payment (including any interest or
penalties imposed with respect to such taxes) including, without limitation,
any income and employment taxes (and any interest and penalties imposed with
respect thereto), and (ii) the Excise Tax imposed upon the Gross-Up Payment, the
Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed on the Payments.
(b) Subject to the provisions of Section 10(c), all determinations
required to be made under this Section 10, including whether and when a
Gross-Up Payment is required and the amount of such Gross-Up Payment and the
assumptions to be utilized in arriving at such determination, shall be made
by KPMG Peat Marwick or such other nationally recognized accounting firm then
auditing the accounts of the Company (the "Accounting Firm") which shall
provide detailed supporting calculations both to the Company and the
Executive within 15 business days of the receipt of notice from the Executive
that there has been a Payment, or such earlier time as is requested by the
Company. In the event that the Accounting Firm is unwilling or unable to
perform its obligations pursuant to this Section 10, the Executive shall
appoint another nationally recognized accounting firm to make the
determinations required hereunder (which accounting firm shall then be
referred to as the Accounting Firm hereunder). All fees and expenses of the
Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment,
determined pursuant to this Section 10, shall be paid by the Company to the
9
<PAGE>
Executive within five days of the receipt of the Accounting Firm's
determination. Any determination by the Accounting Firm shall be binding upon
the Company and the Executive. As a result of the potential uncertainty in the
application of Section 4999 of the Code (or any successor provision) at the time
of the initial determination by the Accounting Firm hereunder, it is possible
that Gross-Up Payments which will not have been made by the Company should have
been made ("Underpayment"), consistent with the calculations required to be made
hereunder. In the event that the Company exhausts its remedies pursuant to
Section 10(c) and the Executive thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount of the Underpayment
that has occurred and any such Underpayment shall be promptly paid by the
Company to or for the benefit of the Executive.
(c) The Executive shall notify the company in writing of any claim by
the Internal Revenue Service that, if successful, would require the payment by
the Company of the Gross-Up Payment. Such notification shall be given as soon
as practicable but no later than 20 business days after the Executive is
informed in writing of such claim and shall apprise the Company of the nature of
such claim and the date on which such claim is requested to be paid. The
Executive shall not pay such claim prior to the expiration of the 30-day period
following the date on which he gives such notice to the Company (or such shorter
period ending on the date that any payment of taxes with respect to such claim
is due). If the Company notifies the Executive in writing prior to the
expiration of such period that it desires to contest such claim, the Executive
shall:
(i) give the Company any information reasonably requested by the
Company relating to such claim,
(ii) take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation
with respect to such claim by an attorney reasonably selected by
the Company,
(iii) cooperate with the Company in good faith in order effectively to
contest such claim, and
(iv) permit the Company to participate in any proceedings relating to
such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without
10
<PAGE>
limiting the foregoing provisions of this Section 10(c), the Company shall
control all proceedings taken in connection with such contest and, at its sole
option, may pursue or forgo any and all administrative appeals, proceedings,
hearings and conferences with the taxing authority in respect of such claim and
may, at its sole option, either direct the Executive to pay the tax claimed and
sue for a refund or contest the claim in any permissible manner, and the
Executive agrees to prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as the Company shall determine; provided, however, that if the
Company directs the Executive to pay such claim and sue for a refund, the
Company shall advance the amount of such payment to the Executive, on an
interest-free basis, and shall indemnify and hold the Executive harmless, on an
after-tax basis, from any Excise Tax or income tax (including interest or
penalties with respect thereto) imposed with respect to such advance or with
respect to any imputed income with respect to such advance; and further provided
that any extension of the statute of limitations relating to payment of taxes
for the taxable year of the Executive with respect to which such contested
amount is claimed to be due is limited solely to such contested amount.
Furthermore, the Company's control of the contest shall be limited to issues
with respect to which a Gross-Up Payment would be payable hereunder and the
Executive shall be entitled to settle or contest, as the case may be, any other
issue raised by the Internal Revenue Service or any other taxing authority.
(d) If, after the receipt by the Executive of an amount advanced by
the Company pursuant to Section 10(c), the Executive becomes entitled to receive
any refund with respect to such claim, the Executive shall (subject to the
Company's complying with the requirements of Section 10(c)) promptly pay to the
Company the amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by the Executive
of an amount advanced by the Company pursuant to Section 10(c), a determination
is made that the Executive shall not be entitled to any refund with respect to
such claim and the Company does not notify the Executive in writing of its
intent to contest such denial of refund prior to the expiration of 30 days after
such determination, then such advance shall be forgiven and shall not be
required to be repaid and the amount of such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be paid.
11. FULL SETTLEMENT. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any circumstances, including, without
limitation, any set-off, counterclaim, recoupment, defense or other right which
the Company may have against the Executive or others whether by reason of the
subsequent employment of the Executive or otherwise. In no event shall the
Executive be obligated to seek
11
<PAGE>
other employment by way of mitigation of the amounts payable to the Executive
under any of the provisions of this Agreement, and no amount payable under this
Agreement shall be reduced on account of any compensation received by the
Executive from other employment. In the event that the Executive shall in good
faith give a Notice of Termination for Good Reason and it shall thereafter be
determined by mutual consent of the Executive and the Company or by a tribunal
having jurisdiction over the matter that Good Reason did not exist, the
employment of the Executive shall, unless the Company and the Executive shall
otherwise mutually agree, be deemed to have terminated, at the date of giving
such purported Notice of Termination, by mutual consent of the Company and the
Executive and, except as provided in the last preceding sentence, the Executive
shall be entitled to receive only those payments and benefits which he would
have been entitled to receive at such date otherwise than under this Agreement.
12. DISPUTES; LEGAL FEES AND EXPENSES. (a) Any dispute or
controversy arising under or in connection with this Agreement shall be settled
exclusively and finally by expedited arbitration, conducted before a single
arbitrator in Minneapolis, Minnesota, in accordance with the rules governing
employment disputes then in effect of the American Arbitration Association. The
arbitrator shall be approved by both the Company and the Executive. Judgment
may be entered on the arbitrator's award in any court having jurisdiction.
(b) In the event that any claim by the Executive under this Agreement
is disputed, the Company shall pay all reasonable legal fees and expenses
incurred by the Executive in pursuing such claim, provided that the Executive is
successful as to at least part of the disputed claim by reason of arbitration,
settlement or otherwise.
13. CONFIDENTIAL INFORMATION; NONCOMPETITION. (a) The Executive
shall hold in a fiduciary capacity for the benefit of the Company all secret or
confidential information, knowledge or data relating to the Company or any of
its affiliated companies, and their respective businesses, (I) obtained by the
Executive during his employment by the Company or any of its affiliated
companies and (II) not otherwise public knowledge (other than by reason of an
unauthorized act by the Executive). After termination of the Executive's
employment with the Company, the Executive shall not, without the prior written
consent of the Company, unless compelled pursuant to an order of a court or
other body having jurisdiction over such matter, communicate or divulge any such
information, knowledge or data to anyone other than the Company and those
designated by it.
12
<PAGE>
(b) It is mutually acknowledged that by virtue of the Executive's
positions with the Company and its subsidiaries, he will have become possessed
of certain valuable and confidential information concerning the customers,
business methods, procedures and techniques of the Company and its subsidiaries.
It is further understood that the Executive will be developing contacts among
the customers of the Company and its subsidiaries, and it is mutually understood
and agreed that the customers of the Company and its subsidiaries and the
business methods and procedures and techniques developed by the Company and its
subsidiaries are valuable assets and properties of the Company and its
subsidiaries. Without limitation, it is also specifically acknowledged that
great trust on the part of the Company and its subsidiaries will reside in the
Executive, since his duties will include the management, promotion and
development of the Company's business. Accordingly, the parties deem it
necessary to enter into the protective covenants set forth below, the terms and
conditions of which have been negotiated by and between the parties hereto:
(i) The Executive agrees that during the Employment Period and
until the first anniversary of the Date of Termination, he will not, directly or
indirectly, on his own behalf or on the behalf of any third party, perform
management, accounting, financial, marketing, sales, administrative or executive
duties, in any business conducted within the Territories (as defined below)
which engages in purchasing automobile or truck loans or leases from automobile
or truck dealers, packaging such loans or leases, reselling such loans or leases
or servicing such loans or leases (the "Restricted Activities"). As used in
this Agreement, the term "Territories" means any state in which any loans or
leases acquired by the Company originated (determined by the location of the
dealers from whom the loans or leases were purchased).
(ii) The Executive agrees that during the Employment Period
and until the first anniversary of the Date of Termination, he will not,
directly or indirectly, solicit, divert, take away or attempt to solicit,
divert, or take away from away from the Company, or any subsidiary, any of the
dealers and other sources from which the Company or any subsidiary acquires
loans or leases or from whom the loan or lease packages are received by the
Company or any subsidiary.
(iii) The Executive agrees that during the Employment Period
and until the first anniversary of the Date of Termination, he will not,
directly or indirectly, on his own behalf or in the service or on behalf of
others, solicit, divert or hire away, or in any manner attempt to solicit,
divert or hire away any person employed by the Company or any subsidiary,
whether or not such employee is a full-time employee or a temporary employee of
the Company or any subsidiary, and whether or not such employment was pursuant
to a written or oral contract of
13
<PAGE>
employment and whether or not such employment was for a determined period or was
at will.
(c) The Executive acknowledges that the provisions of this Section
13 constitute a material inducement to the Company to enter into this Agreement.
The Executive further acknowledges that the Company's remedy at law for a breach
by him of the provisions of this Section 13 will be inadequate. Accordingly, in
the event of a breach or threatened breach by the Executive of any provision of
this Section 13, the Company will be entitled to any provision of this Section
13, the Company will be entitled to injunctive relief in addition to any other
remedy it may have. If any of the provisions of, or covenants contained in,
this Section 13 are hereafter construed to be invalid or unenforceable in any
jurisdiction, the same will not affect the remainder of the provisions or the
enforceability thereof in any other jurisdiction, which will be given full
effect, without regard to the invalidity or unenforceability in such other
jurisdiction. If any of the provisions of, or covenants contained in, this
Section 13 are held to be unenforceable in any jurisdiction because of the
duration or geographical scope thereof, the parties agree that the court making
such determination will have the power to reduce the duration or geographical
scope of such provision or covenant and, in its reduced form, such provision or
covenant will be enforceable; provided, however, that the determination of such
court will not affect the enforceability of this Section 13 in any other
jurisdiction.
(d) In no event shall an asserted violation of the provisions of
this Section 13 constitute a basis for deferring or withholding any amounts
otherwise payable to the Executive under this Agreement or under any other
agreement, plan or arrangement.
14. SUCCESSORS. (a) This Agreement is personal to the Executive
and, without the prior written consent of the Company, shall not be assignable
by the Executive otherwise than by will or the laws of descent and distribution.
This agreement shall inure to the benefit of and be enforceable by the
Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be binding
upon the Company and its successors. The Company shall require any successor to
all or substantially all of the business and/or assets of the Company, whether
direct or indirect, by purchase, merger, consolidation, acquisition of stock, or
otherwise, by an agreement in form and substance satisfactory to the Executive,
expressly to assume and agree to perform this Agreement in the same manner and
to the same extent as the Company would be required to perform if no such
succession had taken place.
15. MISCELLANEOUS. (a) APPLICABLE LAW. This Agreement shall be
governed by and construed in accordance with the laws of the State of Minnesota,
applied without reference to principles of conflict of laws.
14
<PAGE>
(b) AMENDMENTS. This Agreement may not be amended or modified
otherwise than by a written agreement executed by the parties hereto or their
respective successors and legal representatives.
(c) NOTICES. All notices and other communications hereunder shall
be in writing and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to the Executive: Richard A. Greenawalt
8800 Montgomery Avenue
Wyndmoor, PA 19038
If to the Company: Olympic Financial Ltd.
7825 Washington Avenue South
Minneapolis, MN 55439
Attention: Secretary
(with a copy to the attention
of the General Counsel)
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notices and communications shall be effective
when actually received by the addressee.
(d) TAX WITHHOLDING. The Company may withhold from any amounts
payable under this Agreement such Federal, State or local taxes as shall be
required to be withheld pursuant to any applicable law or regulation.
(e) SEVERABILITY. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement.
(f) CAPTIONS. The captions of this Agreement are not part of the
provisions hereof and shall have no force or effect.
15
<PAGE>
IN WITNESS WHEREOF, the Executive has hereunto set his hand and the
Company has caused this Agreement to be executed in its name on its behalf, all
as of the day and year first above written.
OLYMPIC FINANCIAL LTD.
By /s/ Warren Kantor
-------------------------------------
Name: Warren Kantor
Title: Chairman
/s/ Richard A. Greenawalt
---------------------------------------
Richard A. Greenawalt
16
<PAGE>
AMENDMENT
OF
EMPLOYMENT AGREEMENT
THIS AGREEMENT made as of the 20th day of December, 1995 by and between
Olympic Financial Ltd. (the "Company") and Jeffrey C. Mack ("Associate").
WHEREAS, the Company and Associate entered into that certain Employment and
Non-Compete Agreement dated as of August 1, 1991, pursuant to which the Company
employed Associate as its Chief Executive Officer/President. Such agreement
together with subsequent amendments thereto, are hereinafter referred to as the
"Employment Agreement"; and
WHEREAS, the Board of Directors and the Compensation Committee of the
Company have approved an increase in Associate's base salary as of January 1,
1996.
NOW THEREFORE, in consideration of the mutual covenants contained herein,
the Company and Associate agree as follows:
1. BASE SALARY. Associate's base salary for fiscal 1996 shall be
$495,000 commencing January 1, 1996.
2. RATIFICATION. The Employment Agreement as amended hereby is ratified
and affirmed.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
OLYMPIC FINANCIAL LTD.
By: /s/ Scott H. Anderson
---------------------------------
Scott H. Anderson
Its: Vice Chairman
ASSOCIATE:
/s/ Jeffrey C. Mack
---------------------------------
Jeffrey C. Mack
<PAGE>
JEFFREY C. MACK
SEVERANCE PACKAGE
SUBJECT PROPOSAL
1. Employment Contract - Effective immediately, Jeffrey C.
Mack ("Employee") shall resign his
position as Chief Executive Officer,
President and member of the Board of
Directors of Olympic Financial
Limited (the "Company"), and his
existing employment contract shall be
canceled by mutual consent of the
parties. Employee will continue as an
"employee-consultant" of the Company
for 2 years.
- Cash payments equal to Employee's
current annual base salary shall be
paid by the Company in periodic
installments on the same basis as
currently paid to Employee for 2
years.
- Employee's participation in the
Company's benefit plans (retirement,
health, disability and group life
insurance) shall be continued for 2
years in accordance with the terms of
such Plans.
2. 1990 Stock Option Plan - If a "change in control" occurs
within the next 2 years, all
outstanding unvested stock options
(194,928 options with a current value
of $1,274,116 at $17/share) will
become immediately vested and
exercisable.
- If a "change in control" does not
occur within 2 years, outstanding
unvested stock options will vest as
follows:
DATE EXERCISE VALUE@
SHARES VESTED PRICE $17/SHARE
-------------------------------------
33,333 12/19/96 $16.19 $ 27,000
19,500 01/01/97 $ 4.63 $241,215
2,187 01/01/97 $ 4.38 $ 27,600
33,333 12/19/97 $16.19 $ 27,000
22,779 01/01/98 $ 4.38 $287,471
3. 1994-1997 TARSAP - If a "change in control" occurs
within the next 2 years, all unvested
restricted stock (51,248 shares with
a current value of $874,276 at $17
per share) will become immediately
vested.
- If a "change in control" does not
occur within 2 years, unvested
restricted stock will vest as
follows:
DATE EXERCISE VALUE@
SHARES VESTED PRICE $17/SHARE
-------------------------------------
25,714 12/31/96 $ 0 $437,138
25,714 12/31/97 $ 0 $437,138
<PAGE>
4. 1998-2000 TARSAP - If a "change in control" occurs within the
next 2 years, all unvested restricted stock
(55,042 shares with a current value of
$935,714 at $17/share) will become
immediately vested.
- if a "change in control" does not occur
within 2 years, none of the unvested
restricted shares will become vested.
5. D&O Coverage; - D&O coverage for 2 years.
Indemnification Indemnification in By-Laws to continue for 2
years.
6. Split-Dollar Life - Company will continue to pay Split-Dollar
Insurance Plan Life Insurance Plan premiums for the next 2
years. If a "change in control" occurs
within 2 years, Company will continue to pay
premiums as provided in Split-Dollar Life
Insurance Plan (until the 10th anniversary of
the effective date).
7. Noncompete - Employee to sign noncompete agreement for 2
years.
8. No Disparagement - Parties to agree to language in press release
concerning resignation and agree to refrain
from making any negative statements about the
other.
OLYMPIC FINANCIAL LTD.
BY: ITS BOARD OF DIRECTORS
/s/ Warren Kantor
------------------
Warren Kantor
Chairman of the Executive
Committee of the Board of Directors
Agreed and Accepted this
26th day of August, 1996
/s/ Jeffrey C. Mack
- --------------------------
Jeffrey C. Mack
<PAGE>
JEFFREY C. MACK
UNVESTED STOCK VALUATIONS
PLAN VALUATION
---- ---------
1. 1990 Stock Option Plan - If a "change in control" occurs within
Value at $30/Share the next 2 years, all outstanding
unvested stock options (194,928 options
with a value of $3,808,180 at $30/share)
will become immediately vested and
exercisable.
If a "change in control" does not occur
within 2 years, outstanding unvested
stock options will vest as follows:
DATE EXERCISE VALUE @
SHARES VESTED PRICE $30/SHARE
----------------------------------------
33,333 12/19/96 $16.19 $460,329
19,500 01/01/97 $ 4.63 $494,715
2,187 01/01/97 $ 4.38 $ 56,031
33,333 12/19/97 $16.19 $460,329
22,779 01/01/98 $ 4.38 $583,598
2. 1994-1997 TARSAP - If a "change in control" occurs within
Value at $30/Share the next 2 years, all unvested
restricted stock (51,248 shares with a
value of $1,537,440 at $30 per share)
will become immediately vested.
- If a "change in control" does not occur
within 2 years, unvested restricted
stock will vest as follows:
DATE EXERCISE VALUE @
SHARES VESTED PRICE $30/SHARE
----------------------------------------
25,714 12/31/96 $ 0 $768,720
25,714 12/31/97 $ 0 $768,720
3. 1998-2000 TARSAP - If a "change in control" occurs within
the next 2 years, all unvested
Value at $30/Share restricted stock (55,042 shares with a
value of $1,651,260 at $30/share) will
become immediately vested.
- If a "change in control" does not occur
within 2 years, none of the unvested
restricted shares will become vested.
4. TOTAL VALUES - If a "change of control" occurs within 2
years: $6,996,880 at $30/share.
- If a "change in control" does not occur
within 2 years: $3,592,442 at
$30/share.
<PAGE>
ADDENDUM TO AGREEMENT
BETWEEN OLYMPIC FINANCIAL LTD. AND
JEFFREY C. MACK
This ADDENDUM dated November 11, 1996 (the "Addendum") sets forth
additional agreements and covenants between Olympic Financial Ltd. (the
"Company") and Jeffrey C. Mack ("Employee") with regard to his resignation from
the position of Chief Executive Officer, President and member of the Board of
Directors of the Company on August 26, 1996 (the "Resignation").
WHEREAS, the Company and Employee have entered into an agreement
regarding the Resignation dated August 26, 1996, pursuant to which Employee will
continue as an employee-consultant of the Company until August 26, 1998 (the
"Agreement"), and
WHEREAS, since entering into the Agreement, the Company and Employee
have agreed on certain additional terms, and wish to clarify certain covenants
set forth in the Agreement.
NOW, THEREFORE, the parties hereby agree as follows:
1. LEGAL FEES. The Company will pay Employee $10,000 as partial
reimbursement for legal fees incurred by him in connection with the Resignation.
2. CIRCUMSTANCES OF RESIGNATION. The Company and Employee hereby
acknowledge that, other than the press release issued on August 26, 1996, they
have not, and agree that they will not at any time, issue internal or external
communications concerning the Resignation, whether written or verbal, including
interviews.
3. SERVICES; CONTACT WITH COMPANY EMPLOYEES.
(a) During the term of the Agreement, Employee shall render
such services and perform such duties as may reasonably be directed by the
Company from time to time.
(b) Employee will refrain from contacting any employees of
the Company at the Company's offices during normal business hours, whether by
telephone, facsimile or otherwise, except to the extent that such contact is
<PAGE>
necessitated by the services he renders at the Company's direction. This
covenant will not preclude Employee from contacting or socializing with Company
employees outside of the Company's offices during non-business hours.
4. FORWARDING OF MAIL. The Company will forward to Employee all
personal messages, and all mail sent to Employee at the Company's offices which
is marked "personal" or "confidential" or is hand addressed. Mail which is not
marked "personal" or "confidential" will be reviewed by Company personnel and,
if such mail involves Company business which is not related to any services
being provided by the Employee, will be retained by the Company. Mail which
does not involve Company business will also be forwarded to Employee. Messages
will be faxed to Employee at the following number: (612) 934-0440, or at such
other number as Employee advises the Company in writing. Personal mail will be
sent to Employee at the following address: 18453 Nicklaus Way, Eden Prairie, MN
55347 or to such other address as Employee advises the Company in writing.
5. CAR PAYMENTS. The Company will either make, or reimburse
Employee for the cost of, loan payments with respect to his current BMW
automobile until August 26, 1998, and will either make, or reimburse Employee
for the cost of, lease payments through the end of the term of Employee's
existing lease on his current Jaguar automobile. The Company will also pay, or
reimburse Employee for the cost of, insurance premiums for such automobiles.
All other expenses relating to the automobiles, including maintenance, repairs
and gas, shall be the responsibility of Employee.
6. CLUB DUES. Until August 26, 1998, the Company will either
pay, or reimburse Employee for the cost or, club dues and assessments (but
not personal disbursements) for Employee for the following clubs in
accordance with its past practices:
* Olympic Hills Golf Club;
* Bear Path Golf Club;
* Flagship.
To the extent that such amounts are not paid directly and are
incurred by Employee, the Company will reimburse Employee for such amounts
within fifteen days of Employee's presentment of proper documentation therefor.
7. D&O COVERAGE; INDEMNIFICATION. The provisions of Section 5 of
the Agreement notwithstanding, the Company will continue to maintain for
Employee Director
2
<PAGE>
& Officer Liability Coverage, and continue to provide him with indemnification
under its bylaws, until August 26, 2002.
8. NONCOMPETITION. (a) It is mutually acknowledged that by
virtue of Employee's former positions with the Company and its subsidiaries, he
has become possessed of certain valuable and confidential information concerning
the customers, business methods, procedures and techniques of the Company and
its subsidiaries. It is further understood that Employee has developed contacts
among the customers of the Company and its subsidiaries, and it is mutually
understood and agreed that the customers of the Company and its subsidiaries and
the business methods and procedures and techniques developed by the Company and
its subsidiaries are valuable assets and properties of the Company and its
subsidiaries. Without limitation, it is also specifically acknowledged that
great trust on the part of the Company and its subsidiaries has resided in
Employee, since Employee's former duties have included involvement in the
management, promotion and development of the Company's business. Accordingly,
the parties deem it necessary to enter into the protective covenants set forth
below, the terms and conditions of which have been negotiated by and between the
parties hereto:
(i) Employee agrees that until August 26, 1998, he
will not, directly or indirectly, on his own behalf or on the behalf of any
third party, perform management, accounting, financial, marketing, sales,
administrative or executive duties, in any business conducted within the
Territories (as defined below) which engages in originating automobile or
truck loans or leases, purchasing automobile or truck loans or leases from
automobile or truck dealers, packaging such loans or leases, reselling such
loans or leases or servicing such loans or leases (the "Restricted
Activities"). As used in this Addendum, the term "Territories" means any
state in which any such loans or leases originated (determined by the
location of the dealers from whom the loans or leases were purchased or, in
the case of loans or leases originated by the Company, the location of the
borrowers or lessees).
(ii) Employee agrees that until August 26, 1998, he
will not, directly or indirectly, solicit, divert, take away or attempt to
solicit, divert, or take away from the Company, or any subsidiary, any of the
dealers and other sources from which the Company or any subsidiary acquires
loans or leases or from whom the loan or lease packages are received by the
Company or any subsidiary.
(iii) Employee agrees that until August 26, 1998, he
will not, directly or indirectly, on his own behalf
3
<PAGE>
or in the service or on behalf of others, solicit, divert or hire away, or in
any manner attempt to solicit, divert or hire away any person employed by the
Company or any subsidiary, whether or not such employee is a full-time
employee or a temporary employee of the Company or any subsidiary, and
whether or not such employment was pursuant to a written or oral contract of
employment and whether or not such employment was for a determined period or
was at will.
(b) Employee acknowledges that the provisions of this Section 8
constitute a material inducement to the Company to enter into the Agreement and
this Addendum. Employee further acknowledges that the Company's remedy at law
for a breach by him of the provisions of this Section 8 will be inadequate.
Accordingly, in the event of a breach or threatened breach by Employee of any
provision of this Section 8, the Company will be entitled to injunctive relief
in addition to any other remedy it may have. If any of the provisions of, or
covenants contained in, this Section 8 are hereafter construed to be invalid or
unenforceable in any jurisdiction, the same will not affect the remainder of the
provisions or the enforceability thereof in any other jurisdiction, which will
be given full effect, without regard to the invalidity or unenforceability in
such other jurisdiction. If any of the provisions of, or covenants contained
in, this Section 8 are held to be unenforceable in any jurisdiction because of
the duration or geographical scope thereof, the parties agree that the court
making such determination will have the power to reduce the duration or
geographical scope of such provision or covenant and, in its reduced form, such
provision or covenant will be enforceable; provided, however, that the
determination of such court will not affect the enforceability of this Section 8
in any other jurisdiction.
9. SPLIT-DOLLAR LIFE INSURANCE PLAN. Employee's rights
under the Split-Dollar Life Insurance Plan shall be governed by the terms of
that Plan consistent with his status as an employee of the Company through
August 26, 1998.
10. OPTIONS; RESTRICTED STOCK. Sections 2 and 4 of the
Agreement notwithstanding, upon termination of Employee's employment under
the Agreement on August 26, 1998, and provided that a "change in control" has
not occurred prior to such date, (i) all outstanding options to purchase
Company common stock held by the Employee which have not vested as of such
date shall vest and thereafter be exercisable in accordance with the terms
thereof; and (ii) the Employee shall become vested in 12,225 shares of
restricted stock under the Company's 1998-2000 Restricted
4
<PAGE>
Stock Election Plan, and all other shares granted to Employee pursuant to
such plan shall be forfeited.*
11. AGREEMENT STILL IN EFFECT. The parties hereby acknowledge
that the Agreement will continue in effect in accordance with its terms,
except to the extent that such terms have been specifically modified or
clarified by this Addendum. The Agreement, as so modified and clarified,
supercedes all prior agreements between the Company and Employee relating to
his employment including, without limitation, Employee's Employment Agreement
with the Company dated August 1, 1991, as amended (the "Employment
Agreement").
12. WITHHOLDING. The Company will withhold from amounts payable to
Employee hereunder and under the Agreement any federal, state and local income
and employment taxes which are required to be so withheld.
13. RELEASE OF CLAIMS. The Company and Employee agree that this
Addendum and the Agreement represent the full agreement of the parties with
respect to the Resignation and any events or circumstances relating thereto.
Accordingly, the Company, on its own behalf and on behalf of its successors
and assigns, and Employee, on his own behalf and on behalf of his marital
community, heirs, successors and assigns, each do hereby fully and forever
release, discharge, and acquit the other and the other's respective
successors, assigns, affiliates, shareholders, officers, employees, agents,
directors, and attorneys, from any and all actions, causes of action,
liabilities, claims, debts, attorneys' fees, costs of suit, and other
obligations whatsoever (i) which arise out of, or which concern in any way,
the Resignation or any events or circumstances relating thereto, or (ii)
which arise out of, or which concern in any way, the Employment Agreement.
Each of the Company and Employee represent that they have not commenced, and
covenant that they shall not hereafter commence, against the other, any legal
proceedings of any kind, including, but not limited to, administrative
proceedings, which arise out of, or which concern in any way, the
Resignation, any events or circumstances relating thereto, or the Employment
Agreement.
14. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original but all of which
together will constitute one and the same instrument.
* All of Employees Rights to pursue common shares of the Company under the
Company's's 1994-1997 Restricted Stock Election Plan shall vest according
to the terms of that plan.
5
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Addendum
effective as of the date first above written.
OLYMPIC FINANCIAL LTD.
By: /s/ Scott H. Anderson V.C.
-----------------------------
Name: Scott H. Anderson
Title: Vice-Chairman
/s/ Jeffrey C. Mack
--------------------------------
Jeffrey C. Mack
6
<PAGE>
AMENDMENT
OF
EMPLOYMENT AGREEMENT
THIS AGREEMENT made as of the 20th day of December, 1995 by and between
Olympic Financial Ltd. (the "Company") and Scott H. Anderson ("Associate").
WHEREAS, the Company and Associate entered into that certain Employment and
Non-Compete Agreement dated as of April 1, 1991, pursuant to which the Company
employed Associate as its Executive Vice President/Chief Credit Officer. Such
agreement together with subsequent amendments thereto, if any, are hereinafter
referred to as the "Employment Agreement"; and
WHEREAS, the Board of Directors and the Compensation Committee of the
Company have approved a promotion of Associate and an increase in Associate's
base salary as hereinafter set forth.
NOW THEREFORE, in consideration of the mutual covenants contained herein,
the Company and Associate agree as follows:
1. PROMOTION. During the term of the Employment Agreement Associate
shall perform the duties of Vice Chairman in charge of Credit and Operations.
2. BASE SALARY. Associate's base salary for the fiscal 1996 shall be
$310,000 commencing January 1, 1996.
3. GOLF CLUB MEMBERSHIP. The Company shall pay the cost of Associate and
his family joining Bear Path Golf Course and shall reimburse Associate the
reasonable cost of the monthly or annual dues as the case may be paid by
Associate to maintain his and his family members' status as members of the Bear
Path Golf Club.
4. RATIFICATION. The Employment Agreement as amended hereby is ratified
and affirmed.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
OLYMPIC FINANCIAL, LTD.
By: /s/ Jeffrey C. Mack
-----------------------------------
Its:
-------------------------------
ASSOCIATE:
/s/ Scott H. Anderson
----------------------------------------
Scott H. Anderson
<PAGE>
EMPLOYMENT RETENTION AGREEMENT
THIS AGREEMENT between Olympic Financial Ltd. (the "Company") and
Scott H. Anderson (the "Executive") is dated as of this 7 day of November,
1996.
WITNESSETH:
WHEREAS, the Company and the Executive have agreed to enter into an
agreement providing the Company and the Executive with certain rights to assure
the Company of continuity of management;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is hereby agreed by and between the Company and the
Executive as follows:
1 . EFFECTIVE DATE; TERM. This Agreement shall govern the terms and
conditions of Executive's employment commencing as of the date hereof (the
"Effective Date").
2. PRIOR EMPLOYMENT AGREEMENT. As of the Effective Date, this
Agreement shall supersede the Executive's Employment Agreement with the Company
dated April 1, 1991, as amended.
3. RETENTION PERIOD. The Company agrees to continue the Executive
in its employ, and the Executive agrees to remain in the employ of the Company,
for the period (the "Retention Period") commencing on the Effective Date and
ending on the date of any termination of the Executive's employment in
accordance with Section 6 of this Agreement.
4. POSITION AND DUTIES. (a) NO REDUCTION IN POSITION. During the
Retention Period, the Executive's position (including titles), authority and
responsibilities shall be at least commensurate with the highest of those held
or exercised by him at any time during the 90-day period immediately preceding
the Effective Date.
(b) BUSINESS TIME. During the Retention Period, the Executive
shall devote his full business time during normal business hours to the business
and affairs of the Company and use his best efforts to perform faithfully and
efficiently the responsibilities assigned to him hereunder, to the extent
necessary to discharge such responsibilities, except for
(i) reasonable time spent in serving on corporate, civic or
charitable boards or committees of the nature similar to those on
which the Executive served prior to the Change of Control, or
otherwise approved by the Board, in each case only if and to the
extent not substantially interfering with the performance of such
responsibilities, and
(ii) periods of vacation and sick leave to which he is
entitled.
<PAGE>
It is expressly understood and agreed that the Executive's continuing to serve
on any boards and committees on which he is serving or with which he is
otherwise associated immediately preceding the Effective Date shall not be
deemed to interfere with the performance of the Executive's services to the
Company.
5. COMPENSATION AND BENEFITS. (a) BASE SALARY. During the Retention
Period, the Executive shall receive a base salary ("Base Salary") at a monthly
rate at least equal to the monthly salary paid to the Executive by the Company
and any of its affiliated companies immediately prior to the Effective Date.
The Base Salary shall be reviewed at least once each year after the Effective
Date, and may be increased (but not decreased) at any time and from time to time
by action of the Board or any committee thereof or any individual having
authority to take such action in accordance with the Company's regular
practices. Neither payment of the Base Salary nor payment of any increased Base
Salary after the Effective Date shall serve to limit or reduce any other
obligation of the Company hereunder. For purposes of the remaining provisions
of this Agreement, the term "Base Salary" shall mean Base Salary as defined in
this Section 5(a) or, if increased after the Effective Date, the Base Salary as
so increased.
(b) ANNUAL BONUS. In addition to the Base Salary, the Executive
shall be awarded for each fiscal year of the Company ending during the Retention
Period an annual bonus, to be based on reasonable and customary criteria
consistent with the Company's past practices (the "Annual Bonus"), with a target
amount at least equal to 50% of his Base Salary (I.E., that percentage of the
Executive's Base Salary designated by the Company's Compensation Committee for
purposes of Section 4.1 of the Company's 1998-2000 Restricted Stock Election
Plan). If a fiscal year of the Company begins, but does not end, during the
Retention Period, the Executive shall receive an amount with respect to such
fiscal year at least equal to the amount of the Annual Bonus multiplied by a
fraction, the numerator of which is the number of days in such fiscal year
occurring during the Retention Period and the denominator of which is 365. Each
amount payable in respect of the Executive's Annual Bonus shall be paid not
later than 90 days after the fiscal year next following the fiscal year for
which the Annual Bonus (or pro-rated portion) is earned or awarded. Neither the
Annual Bonus nor any bonus amount paid in excess thereof after the Effective
Date shall serve to limit or reduce any other obligation of the Company
hereunder.
(c) FRINGE BENEFITS. During the Retention Period, the Company
shall provide the following fringe benefits to Executive:
(i) HEALTH, DISABILITY AND LIFE INSURANCE. Subject to
satisfaction of the eligibility requirements of such plans and the
rules and regulations applicable thereto, Executive and his family
members shall be entitled to be covered by the Company's group health
and dental insurance plans presently in effect or hereafter adopted
by the Company and applicable to employees of the Company generally
and Executive shall be entitled to be covered by the Company's group
disability and life insurance plans presently in effect or hereafter
adopted by the Company and applicable to the employees of the Company
in general. The Company shall pay the premiums associated with such
2
<PAGE>
coverage. In the event Executive makes a claim against any disability
policy provided to Executive by the Company pursuant to this Section
5(c)(i) and such policy calls for a waiting period which is applicable
to Executive's claim, the Company shall pay to Executive during such
waiting period his monthly base salary due during such period and
shall provide the other benefits due him under this Section 5(c)(i).
(ii) VACATION. Executive shall be entitled to four weeks
of vacation without loss of compensation or other benefits pursuant to
such general policies and procedures of the Company as are from time
to time adopted by the Company.
(iii) EXPENSE REIMBURSEMENT. Executive shall be reimbursed
by the Company for all reasonable expenses incurred by him in
connection with the conduct of the Company's business for which he
furnishes appropriate documentation.
(iv) AUTOMOBILE. In the event the Company shall institute a
Company car policy, Executive shall receive the benefits thereunder in
keeping with his position with the Company. During any period that
the Company has not instituted a Company car policy, the Company shall
provide to Executive use of an automobile reasonably acceptable to
Executive to be used by Executive in conducting the Company's
business. In addition, the Company shall during such period reimburse
Executive (1) an amount equal to the reasonable cost of insuring and
maintaining the automobile used by Executive for the Company's
business, and (2) the cost of maintenance and the cost of gasoline and
oil used in the automobile and in the event of a loss under the
policies insuring said automobile, the amount of any deductible
thereunder applicable to such loss. Such insurance and the coverage
and deductibles thereof shall cover both the business and personal use
of such automobile by Employee, his family and invitee and shall
include such other terms and conditions as are reasonably acceptable
to Executive. Any such reimbursements shall be made upon the
Company's receipt of invoices evidencing incurrence of such expenses.
Executive shall also be paid a monthly amount equal to the reasonable
value of personal use of such automobile, determined in accordance
with applicable federal income tax regulations.
(v) CLUB DUES. The Company shall reimburse Executive the
reasonable cost of the monthly or annual dues, as the case may be,
paid by Executive to maintain his status as a member of the Flagship
Athletic Club or of any other athletic club having equal or lesser
membership costs in lieu of such club. The Company shall also provide
to Executive and his family a membership at Bearpath Golf Club and
shall reimburse the Executive for the reasonable cost of the monthly
or annual dues, as the case may be, paid by Executive to maintain such
membership. If either such membership is a corporate membership and
is subsequently converted to an individual membership, the Company
shall reimburse Executive for any fees charged in connection with such
conversion.
(vi) OFFICE AND SUPPORT STAFF. During the Retention Period,
the Executive shall be entitled to an office or offices of a size and
with furnishings and other
3
<PAGE>
appointments, and to secretarial and other assistance, at least equal to
the most favorable of the foregoing provided to the Executive at any time
during the 90-day period immediately preceding the Effective Date.
6. TERMINATION. (a) DEATH OR DISABILITY. The Executive's employment
shall terminate automatically upon his death. The Company may terminate
Executive's employment during the Retention Period, after having established the
Executive's Disability, by giving the Executive written notice of its intention
to terminate his employment, and his employment with the Company shall
terminate effective on the 90th day after receipt of such notice if, within 90
days after such receipt, the Executive shall fail to return to full-time
performance of his duties. For purposes of this Agreement, "Disability" means
disability which, after the expiration of more than 26 weeks after its
commencement, is determined to be total and permanent by a physician selected by
the Company or its insurers and acceptable to the Executive or his legal
representatives (such agreement to acceptability not to be withheld
unreasonably).
(b) VOLUNTARY TERMINATION. Notwithstanding anything in this
Agreement to the contrary, the Executive may, upon not less than 15 days'
advance written notice to the Company, voluntarily terminate employment
during the Retention Period for any reason, provided that any termination by
the Executive pursuant to Section 6(d) of this Agreement on account of Good
Reason (as defined therein) shall not be treated as a voluntary termination
under this Section 6(b).
(c) CAUSE. The Company may terminate the Executive's employment
during the Retention Period for Cause. For purposes of this Agreement, "Cause"
means (i) gross misconduct on the Executive's part which is demonstrably willful
and deliberate and which results in material damage to the Company's business or
reputation or (ii) repeated material violations by the Executive of his
obligations under Section 4 of this Agreement which violations are demonstrably
willful and deliberate.
(d) GOOD REASON. The Executive may terminate his employment during
the Retention Period for Good Reason. For purposes of this Agreement, "Good
Reason" means
(i) a good faith determination by the Executive that,
without his prior written consent, the Company or any of its officers
has taken or failed to take any action (including, without limitation,
(A) exclusion of the Executive from consideration of material matters
within his area of responsibility, other than an insubstantial or
inadvertent exclusion remedied by the Company promptly after receipt of
notice thereof from the Executive, (B) statements or actions which
undermine the Executive's authority with respect to persons under his
supervision or reduce his standing with his peers, other than an
insubstantial or inadvertent statement or action which is remedied by
the Company promptly after receipt of the notice thereof from the
Executive, (C) a pattern of discrimination against or harassment of the
Executive or persons under his supervision and (D) the subjection of the
Executive to procedures not generally applicable to other similarly
situated executives) which changes the Executive's position (including
titles),
4
<PAGE>
authority or responsibilities under Section 4 of this Agreement or reduces
the Executive's ability to carry out his duties and responsibilities under
Section 4 of this Agreement;
(ii) any failure by the Company to comply with any of the
provisions of Section 5 of this Agreement, other than an insubstantial
or inadvertent failure remedied by the Company promptly after receipt of
notice thereof from the Executive;
(iii) the Company's requiring the Executive to be employed at
any location more than 35 miles further from his principal residence
than the location at which the Executive was employed immediately
preceding the Effective Date; or
(iv) any failure by the Company to obtain the assumption of
and agreement to perform this Agreement by a successor as contemplated
by Section 13(b) of this Agreement.
(e) WITHOUT CAUSE. The Company shall give Executive at least 15 days'
advance written notice of any termination of Executive's employment which is not
for Cause and not on account of Executive's Disability.
(f) NOTICE OF TERMINATION. Any termination of Executive's employment
by the Company for Cause or by the Executive for Good Reason during the
Retention Period shall be communicated by Notice of Termination to the other
party hereto given in accordance with Section 14(c) of this Agreement. For
purposes of this Agreement, a "Notice of Termination" means a written notice
given, in the case of a termination by the Company for Cause, within 10
business days of the Company's having actual knowledge of all of the events
giving rise to such termination, and in the case of a termination by Executive
for Good Reason, within 180 days of the Executive's having actual knowledge of
the events giving rise to such termination, and which (i) indicates the specific
termination provision in this Agreement relied upon, (ii) sets forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so indicated, and
(iii) if the termination date is other than the date of receipt of such notice,
specifies such termination date (which date shall be not more than 15 days after
the giving of such notice). The failure by the Executive to set forth in the
Notice of Termination any fact or circumstance which contributes to a showing of
Good Reason shall not waive any right of the Executive hereunder or preclude the
Executive from asserting such fact or circumstance in enforcing his rights
hereunder.
(g) DATE OF TERMINATION. For purposes of this Agreement, the term
"Date of Termination" means (i) in the case of a termination for which a Notice
of Termination is required, the date of receipt of such Notice of Termination
or, if later, the date specified therein and (ii) in all other cases, the actual
date on which the Executive's employment terminates during the Retention Period.
7. OBLIGATIONS OF THE COMPANY UPON TERMINATION. (a) DEATH. If the
Executive's employment is terminated during the Retention Period by reason of
the Executive's death, this Agreement shall terminate without further
obligations to the Executive's legal
5
<PAGE>
representatives under this Agreement other than those obligations accrued
hereunder at the date of his death, including, for this purpose (i) the
Executive's full Base Salary through the Date of Termination, (ii) the product
of the Annual Bonus and a fraction, the numerator of which is the number of days
in the current fiscal year of the Company through the Date of Termination, and
the denominator of which is 365 (the "Pro-rated Bonus Obligation"), (iii) any
compensation previously deferred by the Executive (together with any accrued
earnings thereon) and not yet paid by the Company, (iv) any other amounts or
benefits owing to the Executive under any of the Company's incentive
compensation plans, stock option plans, restricted stock plans or other similar
plans and (v) any amounts or benefits owing to the Executive under any of the
Company's employee benefit plans or policies (such amounts specified in clauses
(i), (ii), (iii), (iv) and (v) are hereinafter referred to as "Accrued
Obligations"). Unless otherwise directed by the Executive prior to his death,
all Accrued Obligations shall be paid to the Executive's estate.
(b) DISABILITY. If the Executive's employment is terminated by
reason of the Executive's Disability, the Executive shall receive all Accrued
Obligations and, in addition, from the Date of Termination until the second
anniversary of such date, shall continue to participate in or be covered under
the benefit plans and programs referred to in Section 5(c)(i) of this Agreement
or, at the Company's option, to receive equivalent benefits by alternate means
at least equal to those provided in accordance with Section 5(c)(i) of this
Agreement. Anything in this Agreement to the contrary notwithstanding, the
Executive shall be entitled to receive disability and other benefits at least
equal to the most favorable level of benefits available to disabled employees
and/or their families in accordance with the plans, programs and policies
maintained by the Company or its affiliates relating to disability at any time
during the 90-day period immediately preceding the Effective Date.
(c) CAUSE AND VOLUNTARY TERMINATION. If, during the Retention
Period, the Executive's employment shall be terminated for Cause or voluntarily
terminated by the Executive (other than on account of Good Reason), the
Executive shall receive all Accrued Obligations other than the Pro-rated Bonus
Obligation.
(d) TERMINATION BY COMPANY OTHER THAN FOR CAUSE OR DISABILITY AND
TERMINATION BY EXECUTIVE FOR GOOD REASON. LUMP SUM PAYMENT. If, during the
Retention Period, the Company terminates the Executive's employment other than
for Cause or Disability, or the Executive terminates his employment for Good
Reason, the Executive shall receive all Accrued Obligations. In addition, the
Company shall pay to the Executive in a lump sum, within 15 days after the Date
of Termination, a cash amount equal to two (2) times the sum of the following
amounts:
(1) the Executive's annual Base Salary at the rate
specified in Section 5(a) of this Agreement;
(2) the Annual Bonus;
6
<PAGE>
(3) an amount equal to the average annual amount paid
and/or reimbursed to the Executive pursuant to Section 5(c)(iv) and
(v) hereof during the two calendar years preceding the Date of
Termination; and
(4) the present value, calculated using the annual federal
short-term rate as determined under Section 1274(d) of the Code, of
(without duplication) the annual cost to the Company (based on the
premium rates or other costs to it) of obtaining coverage equivalent
to the coverage under the plans and programs described in Section
5(c)(i) of this Agreement;
provided, however, that with respect to the life and medical insurance
coverage referred to in Section 5(c)(i) of this Agreement, at the
Executive's election made prior to the Date of Termination, the Company
shall use its best efforts to secure conversion coverage and shall pay the
cost of such coverage in lieu of paying the lump sum amount attributable to
such life or medical insurance coverage.
8. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall
prevent or limit the Executive's continuing or future participation in any
benefit, bonus, incentive or other plan or program provided by the Company or
any of its affiliated companies and for which the Executive may qualify, nor
shall anything herein limit or otherwise prejudice such rights as the
Executive may have with respect to awards granted to him prior to or during
the Retention Period under any stock option, restricted stock or other plans
or agreements with the Company or any of its affiliated companies. Amounts
which are vested benefits or which the Executive is otherwise entitled to
receive under any plan or program of the Company or any of its affiliated
companies shall be payable in accordance with such plan or program.
9. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.
(a) Anything in this Agreement to the contrary notwithstanding, in
the event it shall be determined that any payment, distribution, acceleration of
vesting or other benefit which the Executive receives or becomes entitled to
receive, whether alone or in combination, and whether pursuant to the terms of
this Agreement or any other agreement, plan or arrangement with the Company or
any of its affiliates or any of their respective successors or assigns, but
determined without regard to any additional payments required under this Section
9 (collectively, the "Payments"), would be subject to the excise tax imposed by
Section 4999 of the Code (or any successor provision), or any interest or
penalties are incurred by the Executive with respect to such excise tax (such
excise tax, together with any such interest and penalties, are hereinafter
collectively referred to as the "Excise Tax"), then the Executive shall be
entitled to receive an additional payment (a "Gross-Up Payment") in an amount
such that after payment by the Executive of (i) all taxes with respect to the
Gross-Up Payment (including any interest or penalties imposed with respect to
such taxes) including, without limitation, any income taxes (and any interest
and penalties imposed with respect thereto), and (ii) the Excise Tax imposed
upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up
Payment equal to the Excise Tax imposed on the Payments.
7
<PAGE>
(b) Subject to the provisions of Section 9(c), all determinations
required to be made under this Section 9, including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment and the assumptions
to be utilized in arriving at such determination, shall be made by KPMG Peat
Marwick or such other nationally recognized accounting firm then auditing the
accounts of the Company (the "Accounting Firm") which shall provide detailed
supporting calculations both to the Company and the Executive within 15 business
days of the receipt of notice from the Executive that there has been a Payment,
or such earlier time as is requested by the Company. In the event that the
Accounting Firm is unwilling or unable to perform its obligations pursuant to
this Section 9, the Executive shall appoint another nationally recognized
accounting firm to make the determinations required hereunder (which accounting
firm shall then be referred to as the Accounting Firm hereunder). All fees and
expenses of the Accounting Firm shall be borne solely by the Company. Any
Gross-Up Payment, determined pursuant to this Section 9, shall be paid by the
Company to the Executive within five days of the receipt of the Accounting
Firm's determination. Any determination by the Accounting Firm shall be binding
upon the Company and the Executive. As a result of the potential uncertainty in
the application of Section 4999 of the Code (or any successor provision) at the
time of the initial determination by the Accounting Firm hereunder, it is
possible that Gross-Up Payments which will not have been made by the Company
should have been made ("Underpayment"), consistent with the calculations
required to be made hereunder. In the event that the Company exhausts its
remedies pursuant to Section 9(c) and the Executive thereafter is required to
make a payment of any Excise Tax, the Accounting Firm shall determine the amount
of the Underpayment that has occurred and any such Underpayment shall be
promptly paid by the Company to or for the benefit of the Executive.
(c) The Executive shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the payment by
the Company of the Gross-Up Payment. Such notification shall be given as soon
as practicable but no later than 20 business days after the Executive is
informed in writing of such claim and shall apprise the Company of the nature of
such claim and the date on which such claim is requested to be paid. The
Executive shall not pay such claim prior to the expiration of the 30-day period
following the date on which he gives such notice to the Company (or such shorter
period ending on the date that any payment of taxes with respect to such claim
is due). If the Company notifies the Executive in writing prior to the
expiration of such period that it desires to contest such claim, the Executive
shall:
(i) give the Company any information reasonably requested by the
Company relating to such claim,
(ii) take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation
with respect to such claim by an attorney reasonably selected by
the Company,
(iii) cooperate with the Company in good faith in order effectively to
contest such claim, and
8
<PAGE>
(iv) permit the Company to participate in any proceedings relating to
such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limiting the foregoing provisions of
this Section 9(c), the Company shall control all proceedings taken in connection
with such contest and, at its sole option, may pursue or forgo any and all
administrative appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole option, either direct
the Executive to pay the tax claimed and sue for a refund or contest the claim
in any permissible manner, and the Executive agrees to prosecute such contest to
a determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs the Executive to pay
such claim and sue for a refund, the Company shall advance the amount of such
payment to the Executive, on an interest-free basis, and shall indemnify and
hold the Executive harmless, on an after-tax basis, from any Excise Tax or
income tax (including interest or penalties with respect thereto) imposed with
respect to such advance or with respect to any imputed income with respect to
such advance; and further provided that any extension of the statute of
limitations relating to payment of taxes for the taxable year of the Executive
with respect to which such contested amount is claimed to be due is limited
solely to such contested amount. Furthermore, the Company's control of the
contest shall be limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and the Executive shall be entitled to settle or
contest, as the case may be, any other issue raised by the Internal Revenue
Service or any other taxing authority.
(d) If, after the receipt by the Executive of an amount advanced by
the Company pursuant to Section 9(c), the Executive becomes entitled to receive
any refund with respect to such claim, the Executive shall (subject to the
Company's complying with the requirements of Section 9(c)) promptly pay to the
Company the amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by the Executive
of an amount advanced by the Company pursuant to Section 9(c), a determination
is made that the Executive shall not be entitled to any refund with respect to
such claim and the Company does not notify the Executive in writing of its
intent to contest such denial of refund prior to the expiration of 30 days after
such determination, then such advance shall be forgiven and shall not be
required to be repaid and the amount of such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be paid.
10. FULL SETTLEMENT. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any circumstances, including, without
limitation, any set-off, counterclaim, recoupment, defense or other right which
the Company may have against the Executive or others whether by reason of the
subsequent employment of the Executive or otherwise. In no event shall the
Executive be
9
<PAGE>
obligated to seek other employment by way of mitigation of the amounts payable
to the Executive under any of the provisions of this Agreement, and no amount
payable under this Agreement shall be reduced on account of any compensation
received by the Executive from other employment. In the event that the
Executive shall in good faith give a Notice of Termination for Good Reason and
it shall thereafter be determined by mutual consent of the Executive and the
Company or by a tribunal having jurisdiction over the matter that Good Reason
did not exist, the employment of the Executive shall, unless the Company and the
Executive shall otherwise mutually agree, be deemed to have terminated, at the
date of giving such purported Notice of Termination, by mutual consent of the
Company and the Executive and, except as provided in the last preceding
sentence, the Executive shall be entitled to receive only those payments and
benefits which he would have been entitled to receive at such date otherwise
than under this Agreement.
11. DISPUTES; LEGAL FEES AND EXPENSES. (a) Any dispute or
controversy arising under or in connection with this Agreement shall be
settled exclusively and finally by expedited arbitration, conducted before a
single arbitrator in Minneapolis, Minnesota in accordance with the rules
governing employment disputes then in effect of the American Arbitration
Association. The arbitrator shall be approved by both the Company and the
Executive. Judgment may be entered on the arbitrator's award in any court
having jurisdiction.
(b) In the event that any claim by the Executive under this
Agreement is disputed, the Company shall pay all reasonable legal fees and
expenses incurred by the Executive in pursuing such claim, provided that the
Executive is successful as to at least part of the disputed claim by reason of
arbitration, settlement or otherwise.
12. CONFIDENTIAL INFORMATION; NONCOMPETITION. (a) The Executive shall
hold in a fiduciary capacity for the benefit of the Company all secret or
confidential information, knowledge or data relating to the Company or any of
its affiliated companies, and their respective businesses, (i) obtained by the
Executive during his employment by the Company or any of its affiliated
companies and (ii) not otherwise public knowledge (other than by reason of an
unauthorized act by the Executive). After termination of the Executive's
employment with the Company, the Executive shall not, without the prior written
consent of the Company, unless compelled pursuant to an order of a court or
other body having jurisdiction over such matter, communicate or divulge any such
information, knowledge or data to anyone other than the Company and those
designated by it.
(b) It is mutually acknowledged that by virtue of Employee's
former positions with the Company and its subsidiaries, he has become possessed
of certain valuable and confidential information concerning the customers,
business methods, procedures and techniques of the Company and its subsidiaries.
It is further understood that Employee has developed contacts among the
customers of the Company and its subsidiaries, and it is mutually understood and
agreed that the customers of the Company and its subsidiaries and the business
methods and procedures and techniques developed by the Company and its
subsidiaries are valuable assets and properties of the Company and its
subsidiaries. Without limitation, it is also specifically acknowledged that
great trust on the part of the Company and its subsidiaries has resided in
10
<PAGE>
Employee, since Employee's former duties have included involvement in the
management, promotion and development of the Company's business. Accordingly,
the parties deem it necessary to enter into the protective covenants set forth
below, the terms and conditions of which have been negotiated by and between the
parties hereto:
(i) Employee agrees that during the Retention Period and until
the first anniversary of the Date of Termination, he will not, directly or
indirectly, on his own behalf or on the behalf of any third party, perform
management, accounting, financial, marketing, sales, administrative or executive
duties, in any business conducted within the Territories (as defined below)
which engages in originating or purchasing automobile or truck loans or leases
from automobile or truck dealers, packaging such loans or leases, reselling such
loans or leases or servicing such loans or leases (the "Restricted Activities").
As used in this Addendum, the term "Territories" means any state in which any
loans or leases originated or acquired by the Company originated (determined by
the location of the dealers from whom the loans or leases were purchased or, in
the case of loans or leases originated by the Company, where the borrower or
lessee resides).
(ii) Employee agrees that during the Retention Period and until
the first anniversary of the Date of Termination, he will not, directly or
indirectly, solicit, divert, take away or attempt to solicit, divert, or take
away from the Company, or any subsidiary, any of the dealers and other sources
from which the Company or any subsidiary acquires loans or leases or from whom
the loan or lease packages are received by the Company or any subsidiary.
(iii) Employee agrees that during the Retention Period and until
the first anniversary of the Date of Termination, he will not, directly or
indirectly, on his own behalf or in the service or on behalf of others, solicit,
divert or hire away, or in any manner attempt to solicit, divert or hire away
any person employed by the Company or any subsidiary, whether or not such
employee is a full-time employee or a temporary employee of the Company or any
subsidiary, and whether or not such employment was pursuant to a written or oral
contract of employment and whether or not such employment was for a determined
period or was at will.
(c) Employee acknowledges that the provisions of this Section 12
constitute a material inducement to the Company to enter into the Agreement.
Employee further acknowledges that the Company's remedy at law for a breach by
him of the provisions of this Section 12 will be inadequate. Accordingly, in
the event of a breach or threatened breach by Employee of any provision of this
Section 12, the Company will be entitled to injunctive relief in addition to any
other remedy it may have. If any of the provisions of, or covenants contained
in, this Section 12 are hereafter construed to be invalid or unenforceable in
any jurisdiction, the same will not affect the remainder of the provisions or
the enforceability thereof in any other jurisdiction, which will be given full
effect, without regard to the invalidity or unenforceability in such other
jurisdiction. If any of the provisions of, or covenants contained in, this
Section 12 are held to be unenforceable in any jurisdiction because of the
duration or geographical scope thereof, the parties agree that the court making
such determination will have the power to reduce the duration or geographical
scope of such provision or covenant and, in its reduced form, such
11
<PAGE>
provision or covenant will be enforceable; provided, however, that the
determination of such court will not affect the enforceability of this Section
12 in any other jurisdiction.
(d) In no event shall an asserted violation of the provisions of
this Section 12 constitute a basis for deferring or withholding any amounts
otherwise payable to the Executive under this Agreement or under any other
agreement, plan or arrangement.
13. SUCCESSORS. (a) This Agreement is personal to the Executive
and, without the prior written consent of the Company, shall not be assignable
by the Executive otherwise than by will or the laws of descent and distribution.
This Agreement shall inure to the benefit of and be enforceable by the
Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be binding
upon the Company and its successors. The Company shall require any successor to
all or substantially all of the business and/or assets of the Company, whether
direct or indirect, by purchase, merger, consolidation, acquisition of stock, or
otherwise, by an agreement in form and substance satisfactory to the Executive,
expressly to assume and agree to perform this Agreement in the same manner and
to the same extent as the Company would be required to perform if no such
succession had taken place.
14. MISCELLANEOUS. (a) APPLICABLE LAW. This Agreement shall be
governed by and construed in accordance with the laws of the State of Minnesota,
applied without reference to principles of conflict of laws.
(b) AMENDMENTS. This Agreement may not be amended or modified
otherwise than by a written agreement executed by the parties hereto or their
respective successors and legal representatives.
(c) NOTICES. All notices and other communications hereunder shall
be in writing and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to the Executive: Scott H. Anderson
15155 Boulder Point Road
Eden Prairie, MN 55347
If to the Company: Olympic Financial Ltd.
7825 Washington Avenue South
Minneapolis, MN 55439
Attention: Secretary
(with a copy to the attention of the
General Counsel)
12
<PAGE>
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notices and communications shall be effective
when actually received by the addressee.
(d) TAX WITHHOLDING. The Company may withhold from any amounts
payable under this Agreement such Federal, State or local taxes as shall be
required to be withheld pursuant to any applicable law or regulation.
(e) SEVERABILITY. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement.
(f) CAPTIONS. The captions of this Agreement are not part of the
provisions hereof and shall have no force or effect.
(g) POOLING TRANSACTIONS. The parties acknowledge that certain of
the provisions of this Agreement may grant to the Executive benefits in excess
of those granted to the Executive pursuant to the prior employment agreement
(the "Prior Agreement") superseded hereby pursuant to Section 2 hereof. The
parties agree that (i) in the event the grant of any such additional benefit
would, in the opinion of Ernst & Young LLP or such other nationally recognized
accounting firm selected by the Company, prevent the Company from receiving a
pooling of interests treatment under Accounting Principles Board Opinion No. 16,
and (ii) in the further event that such a pooling transaction shall be
consummated by the Company and an acquiring entity; then in such events, the
Executive agrees that the grant of any such additional benefits hereunder shall
be amended as of the day prior to the closing of such pooling transaction to the
extent necessary to enable the Company to gain pooling treatment under
Accounting Principles Board Opinion No. 16 for such transaction; provided such
amendment shall not reduce any such benefit such that it is less than that which
was granted to the Executive under the Prior Agreement.
IN WITNESS WHEREOF, the Executive has hereunto set his hand and the
Company has caused this Agreement to be executed in its name on its behalf, all
as of the day and year first above written.
OLYMPIC FINANCIAL LTD.
By: /s/ Warren Kantor
---------------------------
Name: Warren Kantor
-------------------------
Title: Chairman of the Board
------------------------
/s/ Scott H. Anderson 1/18/96
------------------------------
Scott H. Anderson
13
<PAGE>
EMPLOYMENT RETENTION AGREEMENT
THIS AGREEMENT between Olympic Financial Ltd. (the "Company") and John
A. Witham (the "Executive") is dated as of this 7 day of November, 1996.
W I T N E S S E T H :
WHEREAS, the Company and the Executive have agreed to enter into an
agreement providing the Company and the Executive with certain rights to assure
the Company of continuity of management;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is hereby agreed by and between the Company and the
Executive as follows:
1. EFFECTIVE DATE; TERM. This Agreement shall govern the terms and
conditions of Executive's Employment commencing as of the date hereof (the
"Effective Date").
2. PRIOR EMPLOYMENT AGREEMENT. As of the Effective Date, this
Agreement shall supersede the Executive's Employment Agreement with the Company
dated February 1, 1994, as amended.
3. RETENTION PERIOD. The Company agrees to continue the Executive
in its employ, and the Executive agrees to remain in the employ of the Company,
for the period (the "Retention Period") commencing on the Effective Date and
ending on the date of any termination of the Executive's employment in
accordance with Section 6 of this Agreement.
4. POSITION AND DUTIES. (a) NO REDUCTION IN POSITION. During the
Retention Period, the Executive's position (including titles), authority and
responsibilities shall be at least commensurate with the highest of those held
or exercised by him at any time during the 90-day period immediately preceding
the Effective Date.
(b) BUSINESS TIME. During the Retention Period, the Executive
shall devote his full business time during normal business hours to the business
and affairs of the Company and use his best efforts to perform faithfully and
efficiently the responsibilities assigned to him hereunder, to the extent
necessary to discharge such responsibilities, except for
(i) reasonable time spent in serving on corporate, civic or
charitable boards or committees of the nature similar to those on which the
Executive served prior to the Change of Control, or otherwise approved by
the Board, in each case only if and to the extent not substantially
interfering with the performance of such responsibilities, and
(ii) periods of vacation and sick leave to which he is
entitled.
<PAGE>
It is expressly understood and agreed that the Executive's continuing to serve
on any boards and committees on which he is serving or with which he otherwise
associated preceding the Effective Date shall not be deemed to interfere with
the performance of the Executive's services to the Company.
5. COMPENSATION AND BENEFITS. (a) BASE SALARY. During the Retention
Period, the Executive shall receive a base salary ("Base Salary") at a
monthly rate at least equal to the monthly salary paid to the Executive by
the Company and any of its affiliated companies immediately prior to the
Effective Date. The Base Salary shall be reviewed at least once each year
after the Effective Date, and may be increased (but not decreased) at any
time and from time to time by action of the Board or any committee thereof or
any individual having authority to take such action in accordance with the
Company's regular practices. Neither payment of the Base Salary nor payment
of any increased Base Salary after the Effective Date shall serve to limit or
reduce any other obligation of the Company hereunder. For purposes of the
remaining provisions of this Agreement, the term "Base Salary" shall mean
Base Salary as defined in this Section 5(a) or, if increased after the
Effective Date, the Base Salary as so increased.
(b) ANNUAL BONUS. In addition to the Base Salary, the Executive
shall be awarded for each fiscal year of the Company ending during the Retention
Period an annual bonus, to be based on reasonable and customary criteria
consistent with the Company's past practices (the "Annual Bonus"), with a target
amount at least equal to 40% of his Base Salary (I.E., that percentage of the
Executive's Base Salary designated by the Company's Compensation Committee for
purposes of Section 4.1 of the Company's 1998-2000 Restricted Stock Election
Plan). If a fiscal year of the Company begins, but does not end, during the
Retention Period, the Executive shall receive an amount with respect to such
fiscal year at least equal to the amount of the Annual Bonus multiplied by a
fraction, the numerator of which is the number of days in such fiscal year
occurring during the Retention Period and the denominator of which is 365. Each
amount payable in respect of the Executive's Annual Bonus shall be paid not
later than 90 days after the fiscal year next following the fiscal year for
which the Annual Bonus (or pro-rated portion) is earned or awarded. Neither the
Annual Bonus nor any bonus amount paid in excess thereof after the Effective
Date shall serve to limit or reduce any other obligation of the Company
hereunder.
(c) FRINGE BENEFITS. During the Retention Period, the Company shall
provide the following fringe benefits to Executive:
(i) HEALTH, DISABILITY AND LIFE INSURANCE. Subject to satisfaction
of the eligibility requirements of such plans and the rules and regulations
applicable thereto, Executive and his family members shall be entitled to
be covered by the Company's group health and dental insurance plans
presently in effect or hereafter adopted by the Company and applicable to
employees of the Company generally and Executive shall be entitled to be
covered by the Company's group disability and life insurance plans
presently in effect or hereafter adopted by the Company and applicable to
the employees of the Company in general. The Company shall pay the
premiums associated with such coverage. In the event Executive makes a
claim against any disability policy provided to
2
<PAGE>
Executive by the Company pursuant to this Section 5(c)(i) and such policy calls
for a waiting period which is applicable to Executive's claim, the Company shall
pay to Executive during such waiting period his monthly base salary due during
such period and shall provide the other benefits due him under this Section
5(c)(i).
(ii) VACATION. Executive shall be entitled to four weeks of vacation
without loss of compensation or other benefits pursuant to such general policies
and procedures of the Company as are from time to time adopted by the Company.
(iii) EXPENSE REIMBURSEMENT. Executive shall be reimbursed by the
Company for all reasonable expenses incurred by him in connection with the
conduct of the Company's business for which he furnishes appropriate
documentation.
(iv) AUTOMOBILE. In the event the Company shall institute a Company
car policy, Executive shall receive the benefits thereunder in keeping with
his position with the Company. During any period that the Company has not
instituted a Company car policy, the Company shall provide to Executive use of
an automobile reasonably acceptable to Executive to be used by Executive in
conducting the Company's business. In addition, the Company shall during such
period reimburse Executive (1) an amount equal to the reasonable cost of
insuring and maintaining the automobile used by Executive for the Company's
business, and (2) the cost of maintenance and the cost of gasoline and oil used
in the automobile and in the event of a loss under the policies insuring said
automobile, the amount of any deductible thereunder applicable to such loss.
Such insurance and the coverage and deductibles thereof shall cover both the
business and personal use of such automobile by Employee, his family and
invitees and shall include such other terms and conditions as are reasonably
acceptable to Executive. Any such reimbursements shall be made upon the
Company's receipt of invoices evidencing incurrence of such expenses. Executive
shall also be paid a monthly amount equal to the reasonable value of personal
use of such automobile, determined in accordance with applicable federal income
tax regulations.
(v) CLUB MEMBERSHIPS. The Company shall reimburse Executive the
reasonable cost of the monthly or annual dues, as the case may be, paid by
Executive to maintain his status as a member of the Flagship Athletic Club or of
any other athletic club having equal or lesser membership costs in lieu of such
club. The Company shall also provide to Executive and his family a membership
at Olympic Hills Golf Club and shall reimburse Executive for the reasonable cost
of the monthly or annual dues, as the case may be, paid by Executive to maintain
such membership. If either such membership is a corporate membership, upon
termination of Executive's employment other than for Cause or Death, such
membership shall be converted to an individual membership in Executive's name
and the Company shall pay any fees charged in connection with such conversion.
(vi) OFFICE AND SUPPORT STAFF. During the Retention Period, the
Executive shall be entitled to an office or offices of a size and with
furnishings and other
3
<PAGE>
appointments, and to secretarial and other assistance, at least equal to
the most favorable of the foregoing provided to the Executive at any time
during the 90-day period immediately preceding the Effective Date.
6. TERMINATION. (a) DEATH OR DISABILITY. The Executive's employment
shall terminate automatically upon his death. The Company may terminate
Executive's employment during the Retention Period, after having established the
Executive's Disability, by giving the Executive written notice of its intention
to terminate his employment, and his employment with the Company shall terminate
effective on the 90th day after receipt of such notice if, within 90 days after
such receipt, the Executive shall fail to return to full-time performance of his
duties. For purposes of this Agreement, "Disability" means disability which,
after the expiration of more than 26 weeks after its commencement, is determined
to be total and permanent by a physician selected by the Company or its insurers
and acceptable to the Executive or his legal representatives (such agreement to
acceptability not to be withheld unreasonably).
(b) VOLUNTARY TERMINATION. Notwithstanding anything in this
Agreement to the contrary, the Executive may, upon not less than 15 days'
advance written notice to the Company, voluntarily terminate employment during
the Retention Period for any reason, provided that any termination by the
Executive pursuant to Section 6(d) of this Agreement on account of Good Reason
(as defined therein) shall not be treated as a voluntary termination under this
Section 6(b).
(c) CAUSE. The Company may terminate the Executive's employment
during the Retention Period for Cause. For purposes of this Agreement, "Cause"
means (i) gross misconduct on the Executive's part which is demonstrably willful
and deliberate and which results in material damage to the Company's business or
reputation or (ii) repeated material violations by the Executive of his
obligations under Section 4 of this Agreement which violations are demonstrably
willful and deliberate.
(d) GOOD REASON. The Executive may terminate his employment during
the Retention Period for Good Reason. For purposes of this Agreement, "Good
Reason" means
(i) a good faith determination by the Executive that, without
his prior written consent, the Company or any of its officers has taken or
failed to take any action (including, without limitation, (A) exclusion of
the Executive from consideration of material matters within his area of
responsibility, other than an insubstantial or inadvertent exclusion
remedied by the Company promptly after receipt of notice thereof from the
Executive, (B) statements or actions which undermine the Executive's
authority with respect to persons under his supervision or reduce his
standing with his peers, other than an insubstantial or inadvertent
statement or action which is remedied by the Company promptly after receipt
of the notice thereof from the Executive, (C) a pattern of discrimination
against or harassment of the Executive or persons under his supervision and
(D) the subjection of the Executive to procedures not generally applicable
to other similarly situated executives) which changes the Executive's
position (including titles),
4
<PAGE>
authority or responsibilities under Section 4 of this Agreement or reduces
the Executive's ability to carry out his duties and responsibilities under
Section 4 of this Agreement;
(ii) any failure by the Company to comply with any of the
provisions of Section 5 of this Agreement, other than an insubstantial or
inadvertent failure remedied by the Company promptly after receipt of
notice thereof from the Executive;
(iii) the Company's requiring the Executive to be employed at any
location more than 35 miles further from his principal residence than the
location at which the Executive was employed immediately preceding the
Effective Date; or
(iv) any failure by the Company to obtain the assumption of and
agreement to perform this Agreement by a successor as contemplated by
Section 13(b) of this Agreement.
(e) WITHOUT CAUSE. The Company shall give Executive at least 15
days' advance written notice of any termination of Executive's employment which
is not for Cause and not an account of Executive's Disability.
(f) NOTICE OF TERMINATION. Any termination of Executive's employment
by the Company for Cause or by the Executive for Good Reason during the
Retention Period shall be communicated by Notice of Termination to the other
party hereto given in accordance with Section 14(c) of this Agreement. For
purposes of this Agreement, a "Notice of Termination" means a written notice
given, in the case of a termination by the Company for Cause, within 10 business
days of the Company's having actual knowledge of all of the events giving rise
to such termination, and in the case of a termination by Executive for Good
Reason, within 180 days of the Executive's having actual knowledge of the events
giving rise to such termination, and which (i)indicates the specific termination
provision in this Agreement relied upon, (ii) sets forth in reasonable detail
the facts and circumstances claimed to provide a basis for termination of the
Executive's employment under the provision so indicated, and (iii) if the
termination date is other than the date of receipt of such notice, specifies
such termination date (which date shall be not more than 15 days after the
giving of such notice). The failure by the Executive to set forth in the Notice
of Termination any fact or circumstance which contributes to a showing of Good
Reason shall not waive any right of the Executive hereunder or preclude the
Executive from asserting such fact or circumstance in enforcing his rights
hereunder.
(g) DATE OF TERMINATION. For purposes of this Agreement, the term
"Date of Termination" means (i) in the case of a termination for which a Notice
of Termination is required, the date of receipt of such Notice of Termination
or, if later, the date specified therein and (ii) in all other cases, the actual
date on which the Executive's employment terminates during the Retention Period.
7. OBLIGATIONS OF THE COMPANY UPON TERMINATION. (a) DEATH. If the
Executive's employment is terminated during the Retention Period by reason
of the Executive's death, this Agreement shall terminate without further
obligations to the Executive's legal
5
<PAGE>
representatives under this Agreement other than those obligations accrued
hereunder at the date of his death, including, for this purpose (i) the
Executive's full Base Salary through the Date of Termination, (ii) the product
of the Annual Bonus and a fraction, the numerator of which is the number of days
in the current fiscal year of the Company through the Date of Termination, and
the denominator of which is 365 (the "Pro-rated Bonus Obligation"), (iii) any
compensation previously deferred by the Executive (together with any accrued
earnings thereon) and not yet paid by the Company, (iv) any other amounts or
benefits owing to the Executive under any of the Company's incentive
compensation plans, stock option plans, restricted stock plans or other similar
plans and (v) any amounts or benefits owing to the Executive under any of the
Company's employee benefit plans or policies (such amounts specified in clauses
(i), (ii), (iii), (iv) and (v) are hereinafter referred to as "Accrued
Obligations"). Unless otherwise directed by the Executive prior to his death,
all Accrued Obligations shall be paid to the Executive's estate.
(b) DISABILITY. If the Executive's employment is terminated by
reason of the Executive's Disability, the Executive shall receive all Accrued
Obligations and, in addition, from the Date of Termination until the second
anniversary of such date shall continue to participate in or be covered under
the benefit plans and programs referred to in Section 5(c)(i) of this
Agreement or, at the Company's option, to receive equivalent benefits by
alternate means at least equal to those provided in accordance with Section
5(c)(i) of this Agreement. Anything in this Agreement to the contrary
notwithstanding, the Executive shall be entitled to receive disability and
other benefits at least equal to the most favorable level of benefits
available to disabled employees and/or their families in accordance with the
plans, programs and policies maintained by the Company or its affiliates
relating to disability at any time during the 90-day period immediately
preceding the Effective Date.
(c) CAUSE AND VOLUNTARY TERMINATION. If, during the Retention
Period, the Executive's employment shall be terminated for Cause or voluntarily
terminated by the Executive (other than on account of Good Reason), the
Executive shall receive all Accrued Obligations other than the Pro-rated Bonus
Obligation.
(d) TERMINATION BY COMPANY OTHER THAN FOR CAUSE AND DISABILITY AND
TERMINATION BY EXECUTIVE FOR GOOD REASON. LUMP SUM PAYMENT. If, during the
Retention Period, the Company terminates the Executive's employment other than
for Cause or Disability, or the Executive terminates his employment for Good
Reason, the Executive shall receive all Accrued Obligations. In addition, the
Company shall pay to the Executive in a lump sum, within 15 days after the Date
of Termination, a cash amount equal to two (2) times the sum of the following
amounts:
(1) the Executive's annual Base Salary at the rate
specified in Section 5(a) of this Agreement;
(2) the Annual Bonus;
6
<PAGE>
(3) an amount equal to the average annual amount paid and/or
reimbursed to the Executive pursuant to Section 5(c)(iv) and (v) hereof
during the two calendar years preceding the Date of Termination; and
(4) the present value, calculated using the annual federal short-
term rate as determined under Section 1274(d) of the Code, of (without
duplication) the annual cost to the Company (based on the premium rates or
other costs to it) of obtaining coverage equivalent to the coverage under
the plans and programs described in Section 5(c)(i) of this Agreement;
provided, however, that with respect to the life and medical insurance
coverage referred to in Section 5(c)(i) of this Agreement, at the
Executive's election made prior to the Date of Termination, the Company
shall use its best efforts to secure conversion coverage and shall pay the
cost of such coverage in lieu of paying the lump sum amount attributable to
such life or medical insurance coverage.
8. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall
prevent or limit the Executive's continuing or future participation in any
benefit, bonus, incentive or other plan or program provided by the Company or
any of its affiliated companies and for which the Executive may qualify, nor
shall anything herein limit or otherwise prejudice such rights as the Executive
may have with respect to awards granted to him prior to or during the Retention
Period under any stock option, restricted stock or other plans or agreements
with the Company or any of its affiliated companies. Amounts which are vested
benefits or which the Executive is otherwise entitled to receive under any plan
or program of the Company or any of its affiliated companies shall be payable in
accordance with such plan or program.
9. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.
(a) Anything in this Agreement to the contrary notwithstanding, in
the event it shall be determined that any payment, distribution, acceleration of
vesting or other benefit which the Executive receives or becomes entitled to
receive, whether alone or in combination, and whether pursuant to the terms of
this Agreement or any other agreement, plan or arrangement with the Company or
any of its affiliates or any of their respective successors or assigns, but
determined without regard to any additional payments required under this Section
9 (collectively, the "Payments"), would be subject to the excise tax imposed by
Section 4999 of the Code (or any successor provision), or any interest or
penalties are incurred by the Executive with respect to such excise tax (such
excise tax, together with any such interest and penalties, are hereinafter
collectively referred to as the "Excise Tax"), then the Executive shall be
entitled to receive an additional payment (a "Gross-Up Payment") in an amount
such that after payment by the Executive of (i) all taxes with respect to the
Gross-Up Payment (including any interest or penalties imposed with respect to
such taxes) including, without limitation, any income taxes (and any interest
and penalties imposed with respect thereto), and (ii) the Excise Tax imposed
upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up
Payment equal to the Excise Tax imposed on the Payments.
7
<PAGE>
(b) Subject to the provisions of Section 9(c), all determinations
required to be made under this Section 9, including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment and the assumptions
to be utilized in arriving at such determination, shall be made by KPMG Peat
Marwick or such other nationally recognized accounting firm then auditing the
accounts of the Company (the "Accounting Firm") which shall provide detailed
supporting calculations both to the Company and the Executive within 15 business
days of the receipt of notice from the Executive that there has been a Payment,
or such earlier time as is requested by the Company. In the event that the
Accounting Firm is unwilling or unable to perform its obligations pursuant to
this Section 9, the Executive shall appoint another nationally recognized
accounting firm to make the determinations required hereunder (which accounting
firm shall then be referred to as the Accounting Firm hereunder). All fees and
expenses of the Accounting Firm shall be borne solely by the Company. Any
Gross-Up Payment, determined pursuant to this Section 9, shall be paid by the
Company to the Executive within five days of the receipt of the Accounting
Firm's determination. Any determination by the Accounting Firm shall be binding
upon the Company and the Executive. As a result of the potential uncertainty in
the application of Section 4999 of the Code (or any successor provision) at the
time of the initial determination by the Accounting Firm hereunder, it is
possible that Gross-Up Payments which will not have been made by the Company
should have been made ("Underpayment"), consistent with the calculations
required to be made hereunder. In the event that the Company exhausts its
remedies pursuant to Section 9(c) and the Executive thereafter is required to
make a payment of any Excise Tax, the Accounting Firm shall determine the amount
of the Underpayment that has occurred and any such Underpayment shall be
promptly paid by the Company to or for the benefit of the Executive.
(c) The Executive shall notify the Company in writing of any claim
by the Internal Revenue Service that, if successful, would require the payment
by the Company of the Gross-Up Payment. Such notification shall be given as
soon as practicable but no later than 20 business days after the Executive is
informed in writing of such claim and shall apprise the Company of the nature of
such claim and the date on which such claim is requested to be paid. The
Executive shall not pay such claim prior to the expiration of the 30-day period
following the date on which he gives such notice to the Company (or such shorter
period ending on the date that any payment of taxes with respect to such claim
is due). If the Company notifies the Executive in writing prior to the
expiration of such period that it desires to contest such claim, the Executive
shall:
(i) give the Company any information reasonably requested by
the Company relating to such claim,
(ii) take such action in connection with contesting such
claim as the Company shall reasonably request in writing
from time to time, including, without limitation,
accepting legal representation with respect to such
claim by an attorney reasonably selected by the Company,
(iii) cooperate with the Company in good faith in order
effectively to contest such claim, and
8
<PAGE>
(iv) permit the Company to participate in any proceedings
relating to such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation
and payment of costs and expenses. Without limiting the foregoing provisions
of this Section 9(c), the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or forgo any
and all administrative appeals, proceedings, hearings and conferences with
the taxing authority in respect of such claim and may, at its sole option,
either direct the Executive to pay the tax claimed and sue for a refund or
contest the claim in any permissible manner, and the Executive agrees to
prosecute such contest to a determination before any administrative tribunal,
in a court of initial jurisdiction and in one or more appellate courts, as
the Company shall determine; provided, however, that if the Company directs
the Executive to pay such claim and sue for a refund, the Company shall
advance the amount of such payment to the Executive, on an interest-free
basis, and shall indemnify and hold the Executive harmless, on an after-tax
basis, from any Excise Tax or income tax (including interest or penalties
with respect thereto) imposed with respect to such advance or with respect to
any imputed income with respect to such advance; and further provided that
any extension of the statute of limitations relating to payment of taxes for
the taxable year of the Executive with respect to which such contested amount
is claimed to be due is limited solely to such contested amount.
Furthermore, the Company's control of the contest shall be limited to issues
with respect to which a Gross-Up Payment would be payable hereunder and the
Executive shall be entitled to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or any other taxing
authority.
(d) If, after the receipt by the Executive of an amount advanced
by the Company pursuant to Section 9(c), the Executive becomes entitled to
receive any refund with respect to such claim, the Executive shall (subject
to the Company's complying with the requirements of Section 9(c)) promptly
pay to the Company the amount of such refund (together with any interest paid
or credited thereon after taxes applicable thereto). If, after the receipt
by the Executive of an amount advanced by the Company pursuant to Section
9(c), a determination is made that the Executive shall not be entitled to any
refund with respect to such claim and the Company does not notify the
Executive in writing of its intent to contest such denial of refund prior to
the expiration of 30 days after such determination, then such advance shall
be forgiven and shall not be required to be repaid and the amount of such
advance shall offset, to the extent thereof, the amount of Gross-Up Payment
required to be paid.
10. FULL SETTLEMENT. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any circumstances, including, without
limitation, any set-off, counterclaim, recoupment, defense or other right which
the Company may have against the Executive or others whether by reason of the
subsequent employment of the Executive or otherwise. In no event shall the
Executive be
9
<PAGE>
obligated to seek other employment by way of mitigation of the amounts payable
to the Executive under any of the provisions of this Agreement, and no amount
payable under this Agreement shall be reduced on account of any compensation
received by the Executive from other employment. In the event that the
Executive shall in good faith give a Notice of Termination for Good Reason and
it shall thereafter be determined by mutual consent of the Executive and the
Company or by a tribunal having jurisdiction over the matter that Good Reason
did not exist, the employment of the Executive shall, unless the Company and the
Executive shall otherwise mutually agree, be deemed to have terminated, at the
date of giving such purported Notice of Termination, by mutual consent of the
Company and the Executive and, except as provided in the last preceding
sentence, the Executive shall be entitled to receive only those payments and
benefits which he would have been entitled to receive at such date otherwise
than under this Agreement.
11. DISPUTES; LEGAL FEES AND EXPENSES. (a) Any dispute or
controversy arising under or in connection with this Agreement shall be settled
exclusively and finally by expedited arbitration, conducted before a single
arbitrator in Minneapolis, Minnesota, in accordance with the rules governing
employment disputes then in effect of the American Arbitration Association. The
arbitrator shall be approved by both the Company and the Executive. Judgment
may be entered on the arbitrator's award in any court having jurisdiction.
(b) In the event that any claim by the Executive under this
Agreement is disputed, the Company shall pay all reasonable legal fees and
expenses incurred by the Executive in pursuing such claim, provided that the
Executive is successful as to at least part of the disputed claim by reason of
arbitration, settlement or otherwise.
12. CONFIDENTIAL INFORMATION; NON-COMPETITION. (a) The Executive
shall hold in a fiduciary capacity for the benefit of the Company all secret
or confidential information, knowledge or data relating to the Company or any
of its affiliated companies, and their respective businesses, (i) obtained by
the Executive during his employment by the Company or any of its affiliated
companies and (ii) not otherwise public knowledge (other than by reason of an
unauthorized act by the Executive). After termination of the Executive's
employment with the Company, the Executive shall not, without the prior
written consent of the Company, unless compelled pursuant to an order of a
court or other body having jurisdiction over such matter, communicate or
divulge any such information, knowledge or data to anyone other than the
Company and those designated by it.
(b) It is mutually acknowledged that by virtue of Employee's former
positions with the Company and its subsidiaries, he has become possessed of
certain valuable and confidential information concerning the customers, business
methods, procedures and techniques of the Company and its subsidiaries. It is
further understood that Employee has developed contacts among the customers of
the Company and its subsidiaries, and it is mutually understood and agreed that
the customers of the Company and its subsidiaries and the business methods and
procedures and techniques developed by the Company and its subsidiaries are
valuable assets and properties of the Company and its subsidiaries. Without
limitation, it is also specifically acknowledged that great trust on the part of
the Company and its subsidiaries has resided in
10
<PAGE>
Employee, since Employee's former duties have included involvement in the
management, promotion and development of the Company's business. Accordingly,
the parties deem it necessary to enter into the protective covenants set forth
below, the terms and conditions of which have been negotiated by and between the
parties hereto:
(i) Employee agrees that during the Retention Period and
until the first anniversary of the Date of Termination, he will not, directly or
indirectly, on his own behalf or on the behalf of any third party, perform
management, accounting, financial, marketing, sales, administrative or executive
duties, in any business conducted within the Territories (as defined below)
which engages in originating or purchasing automobile or truck loans or leases
from automobile or truck dealers, packaging such loans or leases, reselling such
loans or leases or servicing such loans or leases (the "Restricted Activities").
As used in this Addendum, the term "Territories" means any state in which any
loans or leases originated or acquired by the Company originated (determined by
the location of the dealers from whom the loans or leases were purchased or, in
the case of loans or leases originated by the Company, where the borrower or
lessee resides).
(ii) Employee agrees that during the Retention Period and
until the first anniversary of the Date of Termination he will not, directly or
indirectly, solicit, divert, take away or attempt to solicit, divert, or take
away from the Company, or any subsidiary, any of the dealers and other sources
from which the Company or any subsidiary acquires loans or leases or from whom
the loan or lease packages are received by the Company or any subsidiary.
(iii) Employee agrees that during the Retention Period and
until the first anniversary of the Date of Termination, he will not, directly
or indirectly, on his own behalf or in the service or on behalf of others,
solicit, divert or hire away, or in any manner attempt to solicit, divert or
hire away any person employed by the Company or any subsidiary, whether or
not such employee is a full-time employee or a temporary employee of the
Company or any subsidiary, and whether or not such employment was pursuant to
a written or oral contract of employment and whether or not such employment
was for a determined period or was at will.
(c) Employee acknowledges that the provisions of this
Section 12 constitute a material inducement to the Company to enter into the
Agreement. Employee further acknowledges that the Company's remedy at law for a
breach by him of the provisions of this Section 12 will be inadequate.
Accordingly, in the event of a breach or threatened breach by Employee of any
provision of this Section 12, the Company will be entitled to injunctive relief
in addition to any other remedy it may have. If any of the provisions of, or
covenants contained in, this Section 12 are hereafter construed to be invalid or
unenforceable in any jurisdiction, the same will not affect the remainder of the
provisions or the enforceability thereof in any other jurisdiction, which will
be given full effect, without regard to the invalidity or unenforceability in
such other jurisdiction. If any of the provisions of, or covenants contained
in, this Section 12 are held to be unenforceable in any jurisdiction because of
the duration or geographical scope thereof, the parties agree that the court
making such determination will have the power to reduce the duration or
geographical scope of such provision or covenant and, in its reduced form, such
11
<PAGE>
provision or covenant will be enforceable; provided, however, that the
determination of such court will not affect the enforceability of this Section
12 in any other jurisdiction.
(d) In no event shall an asserted violation of the provisions of
this Section 12 constitute a basis for deferring or withholding any amounts
otherwise payable to the Executive under this Agreement or under any other
agreement, plan or arrangement.
13. SUCCESSORS. (a) This Agreement is personal to the Executive
and, without the prior written consent of the Company, shall not be assignable
by the Executive otherwise than by will or the laws of descent and distribution.
This Agreement shall inure to the benefit of and be enforceable by the
Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be binding
upon the Company and its successors. The Company shall require any successor to
all or substantially all of the business and/or assets of the Company, whether
direct or indirect, by purchase, merger, consolidation, acquisition of stock, or
otherwise, by an agreement in form and substance satisfactory to the Executive,
expressly to assume and agree to perform this Agreement in the same manner and
to the same extent as the Company would be required to perform if no such
succession had taken place.
14. MISCELLANEOUS. (a) APPLICABLE LAW. This Agreement shall be
governed by and construed in accordance with the laws of the State of
Minnesota, applied without reference to principles of conflict of laws.
(b) AMENDMENTS. This Agreement may not be amended or modified
otherwise than by a written agreement executed by the parties hereto or their
respective successors and legal representatives.
(c) NOTICES. All notices and other communications hereunder shall
be in writing and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to the Executive: John A. Witham
10456 Purdey Road
Eden Prairie, MN 55347
If to the Company: Olympic Financial Ltd.
7825 Washington Avenue South
Minneapolis, MN 55439
Attention: Secretary
(with a copy to the attention of the General
Counsel)
12
<PAGE>
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notices and communications shall be effective
when actually received by the addressee.
(d) TAX WITHHOLDING. The Company may withhold from any amounts
payable under this Agreement such Federal, State or local taxes as shall be
required to be withheld pursuant to any applicable law or regulation.
(e) SEVERABILITY. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement.
(f) CAPTIONS. The captions of this Agreement are not part of the
provisions hereof and shall have no force or effect.
(g) POOLING TRANSACTIONS. The parties acknowledge that certain
of the provisions of this Agreement may grant to the Executive benefits in
excess of those granted to the Executive pursuant to the prior employment
agreement (the "Prior Agreement") superseded hereby pursuant to Section 2
hereof. The parties agree that (i) in the event the grant of any such
additional benefit would, in the opinion of Ernst & Young LLP or such other
nationally recognized accounting firm selected by the Company, prevent the
Company from receiving a pooling of interests treatment under Accounting
Principles Board Opinion No. 16, and (ii) in the further event that such a
pooling transaction shall be consummated by the Company and an acquiring
entity; then in such events, the Executive agrees that the grant of any such
additional benefits hereunder shall be amended as of the day prior to the
closing of such pooling transaction to the extent necessary to enable the
Company to gain pooling treatment under Accounting Principles Board Opinion
No. 16 for such transaction; provided such amendment shall not reduce any
such benefit such that it is less than that which was granted to the
Executive under the Prior Agreement.
IN WITNESS WHEREOF, the Executive has hereunto set his hand and the
Company has caused this Agreement to be executed in its name on its behalf, all
as of the day and year first above written.
OLYMPIC FINANCIAL LTD.
By: /s/ Warren Kantor
---------------------------
Name:
---------------------------
Title: Chairman of the Board
---------------------------
/s/ John A. Witham
---------------------------
John A. Witham
13
<PAGE>
EMPLOYMENT RETENTION AGREEMENT
THIS AGREEMENT between Olympic Financial Ltd. (the "Company") and A.
Mark Berlin, Jr. (the "Executive") is dated as of this 7 day of November, 1996.
W I T N E S S E T H :
WHEREAS, the Company and the Executive have a agreed to enter into an
agreement providing the Company and the Executive with certain rights to assure
the Company of continuity of management;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is hereby agreed by and between the Company and the
Executive as follows:
1. EFFECTIVE DATE; TERM. This Agreement shall govern the terms and
conditions of Executive's employment commencing as of the date hereof (the
"Effective Date").
2. PRIOR EMPLOYMENT AGREEMENT. As of the Effective Date, this
Agreement shall supersede the Executive's Employment Agreement with the Company
dated December 5, 1994, as amended.
3. RETENTION PERIOD. The Company agrees to continue the Executive
in its employ, and the Executive agrees to remain in the employ of the Company,
for the period (the "Retention Period") commencing on the Effective Date and
ending on the date of any termination of the Executive's employment in
accordance with Section 6 of this Agreement.
4. POSITION AND DUTIES. (a) NO REDUCTION IN POSITION. During the
Retention Period, the Executive's position (including titles), authority and
responsibilities as an officer of the Company shall be at least commensurate
with the highest of those held or exercised by him at any time during the 90-day
period immediately preceding the Effective Date.
(b) BUSINESS TIME. During the Retention Period, the Executive
shall devote his full business time during normal business hours to the business
and affairs of the Company and use his best efforts to perform faithfully and
efficiently the responsibilities assigned to him hereunder, to the extent
necessary to discharge such responsibilities, except for
(i) reasonable time spent in serving on corporate, civic
or charitable boards or committees of the nature similar to those on
which the Executive served prior to the Change of Control, or otherwise
approved by the Board, in each case only if and to the extent not
substantially interfering with the performance of such responsibilities,
and
(ii) periods of vacation and sick leave to which he is
entitled.
<PAGE>
It is expressly understood and agreed that the Executive's continuing to serve
on any boards and committees on which he is serving or with which he is
otherwise associated immediately preceding the Effective Date shall not be
deemed to interfere with the performance of the Executive's services to the
Company.
5. COMPENSATION AND BENEFITS. (a) BASE SALARY. During the Retention
Period, the Executive shall receive a base salary ("Base Salary") at a monthly
rate at least equal to the monthly salary paid to the Executive by the Company
and any of its affiliated companies immediately prior to the Effective Date.
The Base Salary shall be reviewed at least once each year after the Effective
Date, and may be increased (but not decreased) at any time and from time to time
by action of the Board or any committee thereof or any individual having
authority to take such action in accordance with the Company's regular
practices. Neither payment of the Base Salary nor payment of any increased Base
Salary after the Effective Date shall serve to limit or reduce any other
obligation of the Company hereunder. For purposes of the remaining provisions
of this Agreement, the term "Base Salary" shall mean Base Salary as defined in
this Section 5(a) or, if increased after the Effective Date, the Base Salary as
so increased.
(b) ANNUAL BONUS. In addition to the Base Salary, the Executive
shall be awarded for each fiscal year of the Company ending during the Retention
Period an annual bonus, to be based on reasonable and customary criteria
consistent with the Company's past practices (the "Annual Bonus"), with a target
amount at least equal to 40% of his Base Salary (I.E., that percentage of the
Executive's Base Salary designated by the Company's Compensation Committee for
purposes of Section 4.1 of the Company's 1998-2000 Restricted Stock Election
Plan). If a fiscal year of the Company begins, but does not end, during the
Retention Period, the Executive shall receive an amount with respect to such
fiscal year at least equal to the amount of the Annual Bonus multiplied by a
fraction, the numerator of which is the number of days in such fiscal year
occurring during the Retention Period and the denominator of which is 365. Each
amount payable in respect of the Executive's Annual Bonus shall be paid not
later than 90 days after the fiscal year next following the fiscal year for
which the Annual Bonus (or pro-rated portion) is earned or awarded. Neither the
Annual Bonus nor any bonus amount paid in excess thereof after the Effective
Date shall serve to limit or reduce any other obligation of the Company
hereunder.
(c) FRINGE BENEFITS. During the Retention Period, the Company shall
provide the following fringe benefits to Executive:
(i) HEALTH, DISABILITY AND LIFE INSURANCE. Subject to
satisfaction of the eligibility requirements of such plans and the rules
and regulations applicable thereto, Executive and his family members shall
be entitled to be covered by the Company's group health and dental
insurance plans presently in effect or hereafter adopted by the Company and
applicable to employees of the Company generally and Executive shall be
entitled to be covered by the Company's group disability and life insurance
plans presently in effect or hereafter adopted by the Company and
applicable to the employees of the Company in general. The Company shall
pay the premiums associated with such
2
<PAGE>
coverage. In the event Executive makes a claim against any disability
policy provided to Executive by the Company pursuant to this Section
5(c)(i) and such policy calls for a waiting period which is applicable
to Executive's claim, the Company shall pay to Executive during such
waiting period his monthly base salary due during such period and shall
provide the other benefits due him under this Section 5(c)(i).
(ii) VACATION. Executive shall be entitled to four weeks of
vacation without loss of compensation or other benefits pursuant to such
general policies and procedures of the Company as are from time to time
adopted by the Company.
(iii) EXPENSE REIMBURSEMENT. Executive shall be reimbursed
by the Company for all reasonable expenses incurred by him in connection
with the conduct of the Company's business for which he furnishes
appropriate documentation.
(iv) AUTOMOBILE. In the event the Company shall institute a
Company car policy, Executive shall receive the benefits thereunder in
keeping with his position with the Company. During any period that the
Company has not instituted a Company car policy, the Company shall pay to
Executive a monthly auto expense in the amount of not less than Five
Hundred Fifty Dollars ($550) per month.
(v) CLUB DUES. The Company shall reimburse Executive the
reasonable cost of the monthly or annual dues, as the case may be, paid by
Executive to maintain his status as a member of the Flagship Athletic Club
or of any other clubs having equal or lesser aggregate membership costs in
lieu of such club. The Company shall also provide to Executive and his
family a membership at Wayzata Country Club and shall reimburse the
Executive for the reasonable cost of the monthly or annual dues, as the
case may be, paid by Executive to maintain such membership. If either such
membership is a corporate membership and is subsequently converted to an
individual membership, the Company shall reimburse Executive for any fees
charged in connection with such conversion.
(vi) OFFICE AND SUPPORT STAFF. During the Retention Period,
the Executive shall be entitled to an office or offices of a size and with
furnishings and other appointments, and to secretarial and other
assistance, at least equal to the most favorable of the foregoing provided
to the Executive at any time during the 90-day period immediately preceding
the Effective Date.
6. TERMINATION. (a) DEATH OR DISABILITY. The Executive's employment
shall terminate automatically upon his death. The Company may terminate
Executive's employment during the Retention Period, after having established the
Executive's Disability, by giving the Executive written notice of its intention
to terminate his employment, and his employment with the Company shall terminate
effective on the 90th day after receipt of such notice if, within 90 days after
such receipt, the Executive shall fail to return to full-time performance of his
duties. For purposes of this Agreement, "Disability" means disability which,
after the expiration of more than 26 weeks after its commencement, is determined
to be total and permanent by a physician
3
<PAGE>
selected by the Company or its insurers and acceptable to the Executive or his
legal representatives (such agreement to acceptability not to be withheld
unreasonably).
(b) VOLUNTARY TERMINATION. Notwithstanding anything in this
Agreement to the contrary the Executive may, upon not less than 15 days' advance
written notice to the Company, voluntarily terminate employment during the
Retention Period for any reason, provided that any termination by the Executive
pursuant to Section 6(d) of this Agreement on account of Good Reason (as defined
therein) shall not be treated as a voluntary termination under this Section
6(b).
(c) CAUSE. The Company may terminate the Executive's employment
during the Retention Period for Cause. For purposes of this Agreement, "Cause"
means (i) gross misconduct on the Executive's part which is demonstrably willful
and deliberate and which results in material damage to the Company's business or
reputation or (ii) repeated material violations by the Executive of his
obligations under Section 4 of this Agreement which violations are demonstrably
willful and deliberate.
(d) GOOD REASON. The Executive may terminate his employment during
the Retention Period for Good Reason. For purposes of this Agreement, "Good
Reason" means
(i) a good faith determination by the Executive that, without
his prior written consent, the Company or any of its officers has taken or
failed to take any action (including, without limitation, (A) exclusion of
the Executive from consideration of material matters within his area of
responsibility, other than an insubstantial or inadvertent exclusion
remedied by the Company promptly after receipt of notice thereof from the
Executive, (B) statements or actions which undermine the Executive's
authority with respect to persons under his supervision or reduce his
standing with his peers, other than an insubstantial or inadvertent
statement or action which is remedied by the Company promptly after receipt
of the notice thereof from the Executive, (C) a pattern of discrimination
against or harassment of the Executive or persons under his supervision
and (D) the subjection of the Executive to procedures not generally
applicable to other similarly situated executives) which changes the
Executive's position (including titles), authority or responsibilities
under Section 4 of this Agreement or reduces the Executive's ability to
carry out his duties and responsibilities under Section 4 of this
Agreement;
(ii) any failure by the Company to comply with any of the
provisions of Section 5 of this Agreement, other than an insubstantial or
inadvertent failure remedied by the Company promptly after receipt of
notice thereof from the Executive;
(iii) the Company's requiring the Executive to be employed at any
location more than 35 miles further from his principal residence than the
location at which the Executive was employed immediately preceding the
Effective Date; or
4
<PAGE>
(iv) any failure by the Company to obtain the assumption of and
agreement to perform this Agreement by a successor as contemplated by
Section 13(b) of this Agreement.
(e) WITHOUT CAUSE. The Company shall give Executive at least 15
days' advance written notice of any termination of Executive's employment which
is not for Cause and not on account of Executive's Disability.
(f) NOTICE OF TERMINATION. Any termination of Executive's employment
by the Company for Cause or by the Executive for Good Reason during the
Retention Period shall be communicated by Notice of Termination to the other
party hereto given in accordance with Section 14(c) of this Agreement. For
purposes of this Agreement, a "Notice of Termination" means a written notice
given, in the case of a termination by the Company for Cause, within 10 business
days of the Company's having actual knowledge of all of the events giving rise
to such termination, and in the case of a termination by Executive for Good
Reason, within 180 days of the Executive's having actual knowledge of the events
giving rise to such termination, and which (i) indicates the specific
termination provision in this Agreement relied upon, (ii) sets forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so indicated, and
(iii) if the termination date is other than the date of receipt of such notice,
specifies such termination date (which date shall be not more than 15 days after
the giving of such notice). The failure by the Executive to set forth in the
Notice of Termination any fact or circumstance which contributes to a showing of
Good Reason shall not waive any right of the Executive hereunder or preclude the
Executive from asserting such fact or circumstance in enforcing his rights
hereunder.
(g) DATE OF TERMINATION. For purposes of this Agreement, the term
"Date of Termination" means (i) in the case of a termination for which a Notice
of Termination is required, the date of receipt of such Notice of Termination
or, if later, the date specified therein and (ii) in all other cases, the actual
date on which the Executive's employment terminates during the Retention Period.
7. OBLIGATIONS OF THE COMPANY UPON TERMINATION. (a) DEATH. If the
Executive's employment is terminated during the Retention Period by reason of
the Executive's death, this Agreement shall terminate without further
obligations to the Executive's legal representatives under this Agreement other
than those obligations accrued hereunder at the date of his death, including,
for this purpose (i) the Executive's full Base Salary through the Date of
Termination, (ii) the product of the Annual Bonus and a fraction, the numerator
of which is the number of days in the current fiscal year of the Company through
the Date of Termination, and the denominator of which is 365 (the "Pro-rated
Bonus Obligation"), (iii) any compensation previously deferred by the Executive
(together with any accrued earnings thereon) and not yet paid by the Company,
(iv) any other amounts or benefits owing to the Executive under any of the
Company's incentive compensation plans, stock option plans, restricted stock
plans or other similar plans and (v) any amounts or benefits owing to the
Executive under any of the Company's employee benefit plans or policies (such
amounts specified in clauses (i), (ii), (iii),
5
<PAGE>
(iv) and (v) are hereinafter referred to as "Accrued Obligations"). Unless
otherwise directed by the Executive prior to his death, all Accrued Obligations
shall be paid to the Executive's estate.
(b) DISABILITY. If the Executive's employment is terminated by
reason of the Executive's Disability, the Executive shall receive all Accrued
Obligations and, in addition, from the Date of Termination until the second
anniversary of such date, shall continue to participate in or be covered under
the benefit plans and programs referred to in Section 5(c)(i) of this Agreement
or, at the Company's option, to receive equivalent benefits by alternate means
at least equal to those provided in accordance with Section 5(c)(i) of this
Agreement. Anything in this Agreement to the contrary notwithstanding, the
Executive shall be entitled to receive disability and other benefits at least
equal to the most favorable level of benefits available to disabled employees
and/or their families in accordance with the plans, programs and policies
maintained by the Company or its affiliates relating to disability at any time
during the 90-day period immediately preceding the Effective Date.
(c) CAUSE AND VOLUNTARY TERMINATION. If, during the Retention
Period, the Executive's employment shall be terminated for Cause or voluntarily
terminated by the Executive (other than on account of Good Reason), the
Executive shall receive all Accrued Obligations other than the Pro-rated Bonus
Obligation.
(d) TERMINATION BY COMPANY OTHER THAN FOR CAUSE OR DISABILITY AND
TERMINATION BY EXECUTIVE FOR GOOD REASON. LUMP SUM PAYMENT. If, during the
Retention Period, the Company terminates the Executive's employment other than
for Cause or Disability, or the Executive terminates his employment for Good
Reason, the Executive shall receive all Accrued Obligations. In addition, the
Company shall pay to the Executive in a lump sum, within 15 days after the Date
of Termination, a cash amount equal to two (2) times the sum of the following
amounts:
(1) the Executive's annual Base Salary at the rate specified in
Section 5(a) of this Agreement;
(2) the Annual Bonus;
(3) an amount equal to the average annual amount paid and/or
reimbursed to the Executive pursuant to Section 5(c)(iv) and (v) hereof
during the two calendar years preceding the Date of Termination; and
(4) the present value, calculated using the annual federal
short-term rate as determined under Section 1274(d) of the Code, of
(without duplication) the annual cost to the Company (based on the premium
rates or other costs to it) of obtaining coverage equivalent to the
coverage under the plans and programs described in Section 5(c)(i) of this
Agreement;
6
<PAGE>
provided, however, that with respect to the life and medical insurance
coverage referred to in Section 5(c)(i) of this Agreement, at the
Executive's election made prior to the Date of Termination, the Company
shall use its best efforts to secure conversion coverage and shall pay the
cost of such coverage in lieu of paying the lump sum amount attributable to
such life or medical insurance coverage.
8. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall
prevent or limit the Executive's continuing or future participation in any
benefit, bonus, incentive or other plan or program provided by the Company or
any of its affiliated companies and for which the Executive may qualify, nor
shall anything herein limit or otherwise prejudice such rights as the Executive
may have with respect to awards granted to him prior to or during the Retention
Period under any stock option, restricted stock or other plans or agreements
with the Company or any of its affiliated companies. Amounts which are vested
benefits or which the Executive is otherwise entitled to receive under any plan
or program of the Company or any of its affiliated companies shall be payable in
accordance with such plan or program.
9. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.
(a) Anything in this Agreement to the contrary notwithstanding, in
the event it shall be determined that any payment, distribution, acceleration of
vesting or other benefit which the Executive receives or becomes entitled to
receive, whether alone or in combination, and whether pursuant to the terms of
this Agreement or any other agreement, plan or arrangement with the Company or
any of its affiliates or any of their respective successors or assigns, but
determined without regard to any additional payments required under this Section
9 (collectively, the "Payments"), would be subject to the excise tax imposed by
Section 4999 of the Code (or any successor provision), or any interest or
penalties are incurred by the Executive with respect to such excise tax (such
excise tax, together with any such interest and penalties, are hereinafter
collectively referred to as the "Excise Tax"), then the Executive shall be
entitled to receive an additional payment (a "Gross-Up Payment") in an amount
such that after payment by the Executive of (i) all taxes with respect to the
Gross-Up Payment (including any interest or penalties imposed with respect to
such taxes) including, without limitation, any income taxes (and any interest
and penalties imposed with respect thereto), and (ii) the Excise Tax imposed
upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up
Payment equal to the Excise Tax imposed on the Payments.
(b) Subject to the provisions of Section 9(c), all determinations
required to be made under this Section 9, including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment and the assumptions
to be utilized in arriving at such determination, shall be made by KPMG Peat
Marwick or such other nationally recognized accounting firm then auditing the
accounts of the Company (the "Accounting Firm") which shall provide detailed
supporting calculations both to the Company and the Executive within 15 business
days of the receipt of notice from the Executive that there has been a Payment,
or such earlier time as is requested by the Company. In the event that the
Accounting Firm is unwilling or unable to perform its obligations pursuant to
this Section 9, the Executive shall appoint another nationally recognized
accounting firm to make the determinations required hereunder
7
<PAGE>
(which accounting firm shall then be referred to as the Accounting Firm
hereunder). All fees and expenses of the Accounting Firm shall be borne solely
by the Company. Any Gross-Up Payment, determined pursuant to this Section 9,
shall be paid by the Company to the Executive within five days of the receipt of
the Accounting Firm's determination. Any determination by the Accounting Finn
shall be binding upon the Company and the Executive. As a result of the
potential uncertainty in the application of Section 4999 of the Code (or any
successor provision) at the time of the initial determination by the Accounting
Firm hereunder, it is possible that Gross-Up Payments which will not have been
made by the Company should have been made ("Underpayment"), consistent with the
calculations required to be made hereunder. In the event that the Company
exhausts its remedies pursuant to Section 9(c) and the Executive thereafter is
required to make a payment of any Excise Tax, the Accounting Firm shall
determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to or for the benefit of the
Executive.
(c) The Executive shall notify the Company in writing of any claim
by the Internal Revenue Service that, if successful, would require the payment
by the Company of the Gross-Up Payment. Such notification shall be given as
soon as practicable but no later than 20 business days after the Executive is
informed in writing of such claim and shall apprise the Company of the nature of
such claim and the date on which such claim is requested to be paid. The
Executive shall not pay such claim prior to the expiration of the 30-day period
following the date on which he gives such notice to the Company (or such shorter
period ending on the date that any payment of taxes with respect to such claim
is due). If the Company notifies the Executive in writing prior to the
expiration of such period that it desires to contest such claim, the Executive
shall:
(i) give the Company any information reasonably requested by
the Company relating to such claim,
(ii) take such action in connection with contesting such
claim as the Company shall reasonably request in writing
from time to time, including, without limitation,
accepting legal representation with respect to such
claim by an attorney reasonably selected by the Company,
(iii) cooperate with the Company in good faith in order
effectively to contest such claim, and
(iv) permit the Company to participate in any proceedings
relating to such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limiting the foregoing provisions of
this Section 9(c), the Company shall control all proceedings taken in connection
with such
8
<PAGE>
contest and, at its sole option, may pursue or forgo any and all administrative
appeals, proceedings, hearings and conferences with the taxing authority in
respect of such claim and may, at its sole option, either direct the Executive
to pay the tax claimed and sue for a refund or contest the claim in any
permissible manner, and the Executive agrees to prosecute such contest to a
determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs the Executive to pay
such claim and sue for a refund, the Company shall advance the amount of such
payment to the Executive, on an interest-free basis, and shall indemnify and
hold the Executive harmless, on an after-tax basis, from any Excise Tax or
income tax (including interest or penalties with respect thereto) imposed with
respect to such advance or with respect to any imputed income with respect to
such advance; and further provided that any extension of the statute of
limitations relating to payment of taxes for the taxable year of the Executive
with respect to which such contested amount is claimed to be due is limited
solely to such contested amount. Furthermore, the Company's control of the
contest shall be limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and the Executive shall be entitled to settle or
contest, as the case may be, any other issue raised by the Internal Revenue
Service or any other taxing authority.
(d) If, after the receipt by the Executive of an amount advanced by
the Company pursuant to Section 9(c), the Executive becomes entitled to receive
any refund with respect to such claim, the Executive shall (subject to the
Company's complying with the requirements of Section 9(c)) promptly pay to the
Company the amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by the Executive
of an amount advanced by the Company pursuant to Section 9(c), a determination
is made that the Executive shall not be entitled to any refund with respect to
such claim and the Company does not notify the Executive in writing of its
intent to contest such denial of refund prior to the expiration of 30 days after
such determination, then such advance shall be forgiven and shall not be
required to be repaid and the amount of such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be paid.
10. FULL SETTLEMENT. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any circumstances, including, without
limitation, any set-off, counterclaim, recoupment, defense or other right which
the Company may have against the Executive or others whether by reason of the
subsequent employment of the Executive or otherwise. In no event shall the
Executive be obligated to seek other employment by way of mitigation of the
amounts payable to the Executive under any of the provisions of this Agreement,
and no amount payable under this Agreement shall be reduced on account of any
compensation received by the Executive from other employment. In the event that
the Executive shall in good faith give a Notice of Termination for Good Reason
and it shall thereafter be determined by mutual consent of the Executive and the
Company or by a tribunal having jurisdiction over the matter that Good Reason
did not exist, the employment of the Executive shall, unless the Company and the
Executive shall otherwise mutually agree, be deemed to have terminated, at the
date of giving such purported Notice of Termination, by mutual consent of the
Company and the Executive and, except as provided in the last preceding
sentence, the Executive shall be entitled to receive
9
<PAGE>
only those payments and benefits which he would have been entitled to receive at
such date otherwise than under this Agreement.
11. DISPUTES; LEGAL FEES AND EXPENSES. (a) Any dispute or
controversy arising under or in connection with this Agreement shall be settled
exclusively and finally by expedited arbitration, conducted before a single
arbitrator in Minneapolis, Minnesota, in accordance with the rules governing
employment disputes then in effect of the American Arbitration Association. The
arbitrator shall be approved by both the Company and the Executive. Judgment
may be entered on the arbitrator's award in any court having jurisdiction.
(b) In the event that any claim by the Executive under this
Agreement is disputed, the Company shall pay all reasonable legal fees and
expenses incurred by the Executive in pursuing such claim, provided that the
Executive is successful as to at least part of the disputed claim by reason of
arbitration, settlement or otherwise.
12. CONFIDENTIAL INFORMATION; NONCOMPETITION. (a) The Executive
shall hold in a fiduciary capacity for the benefit of the Company all secret
or confidential information, knowledge or data relating to the Company or any
of its affiliated companies and their respective businesses, (i) obtained by
the Executive during his employment by the Company or any of its affiliated
companies and (ii) not otherwise public knowledge (other than by reason of an
unauthorized act by the Executive). After termination of the Executive's
employment with the Company, the Executive shall not, without the prior
written consent of the Company, unless compelled pursuant to an order of a
court or other body having jurisdiction over such matter, communicate or
divulge any such information, knowledge or data to anyone other than the
Company and those designated by it.
(b) It is mutually acknowledged that by virtue of Employee's former
positions with the Company and its subsidiaries, he has become possessed of
certain valuable and confidential information concerning the customers, business
methods, procedures and techniques of the Company and its subsidiaries. It is
further understood that Employee has developed contacts among the customers of
the Company and its subsidiaries, and it is mutually understood and agreed that
the customers of the Company and its subsidiaries and the business methods and
procedures and techniques developed by the Company and its subsidiaries are
valuable assets and properties of the Company and its subsidiaries. Without
limitation, it is also specifically acknowledged that great trust on the part of
the Company and its subsidiaries has resided in Employee, since Employee's
former duties have included involvement in the management, promotion and
development of the Company's business. Accordingly, the parties deem it
necessary to enter into the protective covenants set forth below, the terms and
conditions of which have been negotiated by and between the parties hereto:
(i) Employee agrees that during the Retention Period and until
the first anniversary of the Date of Termination, he will not, directly or
indirectly, on his own behalf or on the behalf of any third party, perform
management, accounting, financial, marketing, sales, administrative or executive
duties, in any business conducted within the Territories (as defined below)
which engages in originating or purchasing automobile or truck loans or leases
from
10
<PAGE>
automobile or truck dealers, packaging such loans or leases, reselling such
loans or leases or servicing such loans or leases (the "Restricted Activities").
As used in this Addendum, the term "Territories" means any state in which any
loans or leases originated or acquired by the Company originated (determined by
the location of the dealers from whom the loans or leases were purchased or, in
the case of loans or leases originated by the Company, where the borrower or
lessee resides).
(ii) Employee agrees that during the Retention Period and until
the first anniversary of the Date of Termination he will not, directly or
indirectly, solicit, divert, take away or attempt to solicit, divert, or take
away from the Company, or any subsidiary, any of the dealers and other sources
from which the Company or any subsidiary acquires loans or leases or from whom
the loan or lease packages are received by the Company or any subsidiary.
(iii) Employee agrees that during the Retention Period and
until the first anniversary of the Date of Termination, he will not, directly or
indirectly, on his own behalf or in the service or on behalf of others, solicit,
divert or hire away, or in any manner attempt to solicit, divert or hire away
any person employed by the Company or any subsidiary, whether or not such
employee is a full-time employee or a temporary employee of the Company or any
subsidiary, and whether or not such employment was pursuant to a written or oral
contract of employment and whether or not such employment was for a determined
period or was at will.
(c) Employee acknowledges that the provisions of this Section 12
constitute a material inducement to the Company to enter into the Agreement.
Employee further acknowledges that the Company's remedy at law for a breach by
him of the provisions of this Section 12 will be inadequate. Accordingly, in
the event of a breach or threatened breach by Employee of any provision of this
Section 12, the Company will be entitled to injunctive relief in addition to any
other remedy it may have. If any of the provisions of, or covenants contained
in, this Section 12 are hereafter construed to be invalid or unenforceable in
any jurisdiction, the same will not affect the remainder of the provisions or
the enforceability thereof in any other jurisdiction, which will be given full
effect, without regard to the invalidity or unenforceability in such other
jurisdiction. If any of the provisions of, or covenants contained in, this
Section 12 are held to be unenforceable in any jurisdiction because of the
duration or geographical scope thereof, the parties agree that the court making
such determination will have the power to reduce the duration or geographical
scope of such provision or covenant and, in its reduced form, such provision or
covenant will be enforceable; provided, however, that the determination of such
court will not affect the enforceability of this Section 12 in any other
jurisdiction.
(d) In no event shall an asserted violation of the provisions of
this Section 12 constitute a basis for deferring or withholding any amounts
otherwise payable to the Executive under this Agreement or under any other
agreement, plan or arrangement.
13. SUCCESSORS. (a) This Agreement is personal to the Executive
and, without the prior written consent of the Company, shall not be assignable
by the Executive otherwise than by will or the laws of descent and distribution.
This Agreement shall inure to the benefit of and be enforceable by the
Executive's legal representatives.
11
<PAGE>
(b) This Agreement shall inure to the benefit of and be binding
upon the Company and its successors. The Company shall require any successor to
all or substantially all of the business and/or assets of the Company, whether
direct or indirect, by purchase, merger, consolidation, acquisition of stock, or
otherwise, by an agreement in form and substance satisfactory to the Executive,
expressly to assume and agree to perform this Agreement in the same manner and
to the same extent as the Company would be required to perform if no such
succession had taken place.
14. MISCELLANEOUS. (a) APPLICABLE LAW. This Agreement shall be
governed by and construed in accordance with the laws of the State of Minnesota,
applied without reference to principles of conflict of laws.
(b) AMENDMENTS. This Agreement may not be amended or modified
otherwise than by a written agreement executed by the parties hereto or their
respective successors and legal representatives.
(c) NOTICES. All notices and other communications hereunder shall
be in writing and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to the Executive: A. Mark Berlin, Jr.
136 Birch Lane West
Wayzata, MN 55391
If to the Company: Olympic Financial Ltd.
7825 Washington Avenue South
Minneapolis, MN 55439
Attention: Secretary
(with a copy to the attention of the
General Counsel)
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notices and communications shall be effective
when actually received by the addressee.
(d) TAX WITHHOLDING. The Company may withhold from any amounts
payable under this Agreement such Federal, State or local taxes as shall be
required to be withheld pursuant to any applicable law or regulation.
(e) SEVERABILITY. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement.
12
<PAGE>
(f) CAPTIONS. The captions of this Agreement are not part of the
provisions hereof and shall have no force or effect.
(g) POOLING TRANSACTIONS. The parties acknowledge that certain of
the provisions of this Agreement may grant to the Executive benefits in excess
of those granted to the Executive pursuant to the prior employment agreement
(the "Prior Agreement") superseded hereby pursuant to Section 2 hereof. The
parties agree that (i) in the event the grant of any such additional benefit
would, in the opinion of Ernst & Young LLP or such other nationally recognized
accounting firm selected by the Company, prevent the Company from receiving a
pooling of interests treatment under Accounting Principles Board Opinion No. 16,
and (ii) in the further event that such a pooling transaction shall be
consummated by the Company and an acquiring entity; then in such events, the
Executive agrees that the grant of any such additional benefits hereunder shall
be amended as of the day prior to the closing of such pooling transaction to the
extent necessary to enable the Company to gain pooling treatment under
Accounting Principles Board Opinion No. 16 for such transaction; provided such
amendment shall not reduce any such benefit such that it is less than that which
was granted to the Executive under the Prior Agreement.
IN WITNESS WHEREOF, the Executive has hereunto set his hand and the
Company has caused this Agreement to be executed in its name on its behalf, all
as of the day and year first above written.
OLYMPIC FINANCIAL LTD.
By: /s/ Warren Kantor
--------------------------
Name:
------------------------
Title: Chairman of the Board
-----------------------
/s/ A. Mark Berlin, Jr.
------------------------------
A. Mark Berlin, Jr.
13
<PAGE>
AMENDMENT
OF
EMPLOYMENT AGREEMENT
THIS AGREEMENT made as of the 20th day of December, 1995 by and between
Olympic Financial Ltd. (the "Company") and James D. Atkinson III ("Associate").
WHEREAS, the Company and Associate entered into that certain Employment and
Non-Compete Agreement dated as of August 29th, 1994 pursuant to which the
Company employed Associate as its Vice President/Corporate Counsel. Such
agreement together with subsequent amendments thereto, if any, are hereinafter
referred to as the "Employment Agreement"; and
WHEREAS, the Board of Directors and the Compensation Committee of the
Company have approved a promotion of Associate and an increase in Associate's
base salary as hereinafter set forth.
NOW THEREFORE, in consideration of the mutual covenants contained herein,
the Company and Associate agree as follows:
1. PROMOTION. During the term of the Employment Agreement Associate
shall perform the duties of Senior Vice President/Corporate Counsel/Secretary.
2. BASE SALARY. Associate's base salary for fiscal 1996 shall be
$175,000 commencing January 1, 1996.
3. RATIFICATION. The Employment Agreement as amended hereby is
ratified and affirmed.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
OLYMPIC FINANCIAL LTD.
By: /s/ Jeffrey Mack
-------------------------------
Its: Chief Executive Officer
---------------------------
/s/ James D. Atkinson III
-----------------------------------
James D. Atkinson III
<PAGE>
EMPLOYMENT RETENTION AGREEMENT
THIS AGREEMENT between Olympic Financial Ltd. (the "Company") and
James D. Atkinson III (the "Executive") is dated as of this 7 day of November,
1996.
WITNESSETH:
WHEREAS, the Company and the Executive have agreed to enter into an
agreement providing the Company and the Executive with certain rights to assure
the Company of continuity of management;
NOW, THEREFORE, in consideration of the premises and mutual
covenants herein contained, it is hereby agreed by and between the Company and
the Executive as follows:
1. EFFECTIVE DATE; TERM. This Agreement shall govern the terms
and conditions of Executive's employment commencing as of the date hereof (the
"Effective Date").
2. PRIOR EMPLOYMENT. As of the Effective Date, this Agreement
shall supersede the Executive's Employment Agreement with the Company dated
September 1, 1994, as amended.
3. RETENTION PERIOD. The Company agrees to continue the Executive
in its employ, and the Executive agrees to remain in the employ of the Company,
for the period (the "Retention Period") commencing on the Effective Date and
ending on the date of any termination of the Executive's employment in
accordance with Section 6 of this Agreement.
4. POSITION AND DUTIES. (a) NO REDUCTION IN POSITION. During the
Retention Period, the Executive's position (including titles), authority and
responsibilities shall be at least commensurate with the highest of those held
or exercised by him at any time during the 90-day period immediately preceding
the Effective Date.
(b) BUSINESS TIME. During the Retention Period, the
Executive shall devote his full business time during normal business hours to
the business and affairs of the Company and use his best efforts to perform
faithfully and efficiently the responsibilities assigned to him hereunder, to
the extent necessary to discharge such responsibilities, except for
(i) reasonable time spent in serving on corporate, civic
or charitable boards or committees of the nature similar to those on which the
Executive served prior to the Change of Control, or otherwise approved by the
Board, in each case only if and to the extent not substantially interfering with
the performance of such responsibilities, and
(ii) periods of vacation and sick leave to which he is
entitled.
<PAGE>
It is expressly understood and agreed that the Executive's continuing to serve
on any boards and committees on which he is serving or with which he is
otherwise associated immediately preceding the Effective Date shall not be
deemed to interfere with the performance of the Executive's services to the
Company.
5. COMPENSATION AND BENEFITS. (a) BASE SALARY. During the Retention
Period, the Executive shall receive a base salary ("Base Salary") at a monthly
rate at least equal to the monthly salary paid to the Executive by the Company
and any of its affiliated companies immediately prior to the Effective Date.
The Base Salary shall be reviewed at least once each year after the Effective
Date, and may be increased (but not decreased) at any time and from time to time
by action of the Board or any committee thereof or any individual having
authority to take such action in accordance with the Company's regular
practices. Neither payment of the Base Salary nor payment of any increased Base
Salary after the Effective Date shall serve to limit or reduce any other
obligation of the Company hereunder. For purposes of the remaining provisions
of this Agreement, the term "Base Salary" shall mean Base Salary as defined in
this Section 5(a) or, if increased after the Effective Date, the Base Salary as
so increased.
(b) ANNUAL BONUS. In addition to the Base Salary, the Executive
shall be awarded for each fiscal year of the Company ending during the Retention
Period an annual bonus, to be based on reasonable and customary criteria
consistent with the Company's past practices (the "Annual Bonus"), with a
target amount at least equal to 35% of his Base Salary (I.E., that percentage of
the Executive's Base Salary designated by the Company's Compensation Committee
for purposes of Section 4.1 of the Company's 1998-2000 Restricted Stock Election
Plan). If a fiscal year of the Company begins, but does not end, during the
Retention Period, the Executive shall receive an amount with respect to such
fiscal year at least equal to the amount of the Annual Bonus multiplied by a
fraction, the numerator of which is the number of days in such fiscal year
occurring during the Retention Period and the denominator of which is 365. Each
amount payable in respect of the Executive's Annual Bonus shall be paid not
later than 90 days after the fiscal year next following the fiscal year for
which the Annual Bonus (or pro-rated portion) is earned or awarded. Neither the
Annual Bonus nor any bonus amount paid in excess thereof after the Effective
Date shall serve to limit or reduce any other obligation of the Company
hereunder.
(c) FRINGE BENEFITS. During the Retention Period, the Company
shall provide the following fringe benefits to Executive:
(i) HEALTH, DISABILITY AND LIFE INSURANCE. Subject to
satisfaction of the eligibility requirements of such plans and the rules and
regulations applicable thereto, Executive and his family members shall be
entitled to be covered by the Company's group health and dental insurance plans
presently in effect or hereafter adopted by the Company and applicable to
employees of the Company generally and Executive shall be entitled to be covered
by the Company's group disability and life insurance plans presently in effect
or hereafter adopted by the Company and applicable to the employees of the
Company in general. The Company shall pay the premiums associated with such
2
<PAGE>
coverage. In the event Executive makes a claim against any disability
policy provided to Executive by the Company pursuant to this Section
5(c)(i) and such policy calls for a waiting period which is applicable to
Executive's claim, the Company shall pay to Executive during such waiting
period his monthly base salary due during such period and shall provide the
other benefits due him under this Section 5(c)(i).
(ii) VACATION. Executive shall be entitled to four weeks of
vacation without loss of compensation or other benefits pursuant to such
general policies and procedures of the Company as are from time to time
adopted by the Company.
(iii) EXPENSE REIMBURSEMENT. Executive shall be reimbursed by the
Company for all reasonable expenses incurred by him in connection with the
conduct of the Company's business for which he furnishes appropriate
documentation.
(iv) AUTOMOBILE. In the event the Company shall instituted a
Company car policy, Executive shall receive the benefits thereunder in
keeping with his position with the Company. During any period that the
Company has not instituted a Company car policy, the Company shall pay to
Executive a monthly auto expense in the amount not less than Four Hundred
Dollars ($400) per month.
(v) CLUB DUES. The Company shall reimburse Executive the
reasonable cost of the monthly or annual dues, as the case may be, paid by
Executive to maintain his status as a member of the Flagship Athletic Club
or of any other athletic club having equal or lesser membership costs in
lieu of such club. If such membership is a corporate membership and is
subsequently converted to an individual membership, the Company shall
reimburse Executive for any fees charged in connection with such
conversion.
(vi) OFFICE AND SUPPORT STAFF. During the Retention Period, the
Executive shall be entitled to an office or offices of a size and with
furnishings and other appointments, and to secretarial and other
assistance, at least equal to the most favorable of the foregoing provided
to the Executive at any time during the 90-day period immediately preceding
the Effective Date.
6. TERMINATION. (a) DEATH OR DISABILITY. The Executive's employment
shall terminate automatically upon his death. The Company may terminate
Executive's employment during the Retention Period, after having established
the Executive's Disability, by giving the Executive written notice of its
intention to terminate his employment, and his employment with the Company
shall terminate effective on the 90th day after receipt of such notice if,
within 90 days after such receipt, the Executive shall fail to return to
full-time performance of his duties. For purposes of this Agreement,
"Disability" means disability which, after the expiration of more than 26
weeks after its commencement, is determined to be total and permanent by a
physician selected by the Company or its insurers and acceptable to the
Executive or his legal representatives (such agreement to acceptability not
to be withheld unreasonably).
3
<PAGE>
(b) VOLUNTARY TERMINATION. Notwithstanding anything in this
Agreement to the contrary, the Executive may, upon not less than 15 days'
advance written notice to the Company, voluntarily terminate employment during
the Retention Period for any reason, provided that any termination by the
Executive pursuant to Section 6(d) of this Agreement on account of Good Reason
(as defined therein) shall not be treated as a voluntary termination under this
Section 6(b).
(c) CAUSE. The Company may terminate the Executive's employment
during the Retention Period for Cause. For purposes of this Agreement, "Cause"
means (I) gross misconduct on the Executive's part which is demonstrably willful
and deliberate and which results in material damage to the Company's business or
reputation or (II) repeated material violations by the Executive of his
obligations under Section 4 of this Agreement which violations are demonstrably
willful and deliberate.
(d) GOOD REASON. The Executive may terminate his employment during
the Retention Period for Good Reason. For purposes of this Agreement, "Good
Reason" means
(i) a good faith determination by the Executive that,
without his prior written consent, the Company or any of its officers has
taken or failed to take any action (including, without limitation, (A)
exclusion of the Executive from consideration of material matters within
his area of responsibility, other than an insubstantial or inadvertent
exclusion remedied by the Company promptly after receipt of notice thereof
from the Executive, (B) statements or actions which undermine the
Executive's authority with respect to persons under his supervision or
reduce his standing with his peers, other than an insubstantial or
inadvertent statement or action which is remedied by the Company promptly
after receipt of the notice thereof from the Executive, (C) a pattern of
discrimination against or harassment of the Executive or persons under his
supervision and (D) the subjection of the Executive to procedures not
generally applicable to other similarly situated executives) which changes
the Executive's position (including titles), authority or responsibilities
under Section 4 of this Agreement or reduces the Executive's ability to
carry out his duties and responsibilities under Section 4 of this
Agreement;
(ii) any failure by the Company to comply with any of the
provisions of Section 5 of this Agreement, other than an insubstantial or
inadvertent failure remedied by the Company promptly after receipt of
notice thereof from the Executive;
(iii) the Company's requiring the Executive to be employed at
any location more than 35 miles further from his principal residence than
the location at which the Executive was employed immediately preceding the
Effective Date; or
(iv) any failure by the Company to obtain the assumption of
and agreement to perform this Agreement by a successor as contemplated by
Section 13(b) of this Agreement.
4
<PAGE>
(e) WITHOUT CAUSE. The Company shall give Executive at least 15
days' advance written notice of any termination of Executive's employment which
is not for Cause and not on account of Executive's Disability.
(f) NOTICE OF TERMINATION. Any termination of Executive's
employment by the Company for Cause or by the Executive for Good Reason during
the Retention Period shall be communicated by Notice of Termination to the other
party hereto given in accordance with Section 14(c) of this Agreement. For
purposes of this Agreement, a "Notice of Termination" means a written notice
given, in the case of a termination by the Company for Cause, within 10 business
days of the Company's having actual knowledge of all of the events giving rise
to such termination, and in the case of a termination by Executive for Good
Reason, within 180 days of the Executive's having actual knowledge of the events
giving rise to such termination, and which (I) indicates the specific
termination provision in this Agreement relied upon, (II) sets forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so indicated, and
(III) if the termination date is other than the date of receipt of such notice,
specifies such termination date (which date shall be not more than 15 days after
the giving of such notice). The failure by the Executive to set forth in the
Notice of Termination any fact or circumstance which contributes to a showing of
Good Reason shall not waive any right of the Executive hereunder or preclude the
Executive from asserting such fact or circumstance in enforcing his rights
hereunder.
(g) DATE OF TERMINATION. For purposes of this Agreement, the term
"Date of Termination" means (I) in the case of a termination for which a Notice
of Termination is required, the date of receipt of such Notice of Termination
or, if later, the date specified therein and (II) in all other cases, the actual
date on which the Executive's employment terminates during the Retention Period.
7. OBLIGATIONS OF THE COMPANY UPON TERMINATION. (a) DEATH. If the
Executive's employment is terminated during the Retention Period by reason of
the Executive's death, this Agreement shall terminate without further
obligations to the Executive's legal representatives under this Agreement other
than those obligations accrued hereunder at the date of his death, including,
for this purpose (I) the Executive's full Base Salary through the Date of
Termination, (II) the product of the Annual Bonus and a fraction, the numerator
of which is the number of days in the current fiscal year of the Company through
the Date of Termination, and the denominator of which is 365 (the "Pro-rated
Bonus Obligation"), (III) any compensation previously deferred by the Executive
(together with any accrued earnings thereon) and not yet paid by the Company,
(IV) any other amounts or benefits owing to the Executive under any of the
Company's incentive compensation plans, stock option plans, restricted stock
plans or other similar plans and (V) any amounts or benefits owing to the
Executive under any of the Company's employee benefit plans or policies (such
amounts specified in clauses (i), (ii), (iii), (iv) and (v) are hereinafter
referred to as "Accrued Obligations"). Unless otherwise directed by the
Executive prior to his death, all Accrued Obligations shall be paid to the
Executive's estate.
(b) DISABILITY. If the Executive's employment is terminated by
reason of the Executive's Disability, the Executive shall receive all Accrued
Obligations and, in addition, from
5
<PAGE>
the Date of Termination until the second anniversary of such date, shall
continue to participate in or be covered under the benefit plans and programs
referred to in Section 5(c)(i) of this Agreement or, at the Company's option, to
receive equivalent benefits by alternate -means at least equal to those provided
in accordance with Section 5(c)(i) of this Agreement. Anything in this
Agreement to the contrary notwithstanding, the Executive shall be entitled to
receive disability and other benefits at least equal to the most favorable level
of benefits available to disabled employees and/or their families in accordance
with the plans, programs and policies maintained by the Company or its
affiliates relating to disability at any time during the 90-day period
immediately preceding the Effective Date.
(c) CAUSE AND VOLUNTARY TERMINATION. If, during the Retention
Period, the Executive's employment shall be terminated for Cause or voluntarily
terminated by the Executive (other than on account of Good Reason), the
Executive shall receive all Accrued Obligations other than the Pro-rated Bonus
Obligation.
(d) TERMINATION BY COMPANY OTHER THAN FOR CAUSE OR DISABILITY AND
TERMINATION BY EXECUTIVE FOR GOOD REASON. LUMP SUM PAYMENT. If, during the
Retention Period, the Company terminates the Executive's employment other than
for Cause or Disability, or the Executive terminates his employment for Good
Reason, the Executive shall receive all Accrued Obligations. In addition, the
Company shall pay to the Executive in a lump sum, within 15 days after the Date
of Termination, a cash amount equal to two (2) times the sum of the following
amounts:
(1) the Executive's annual Base Salary at the rate specified
in Section 5(a) of this Agreement;
(2) the Annual Bonus;
(3) an amount equal to the average annual amount paid and/or
reimbursed to the Executive pursuant to Section 5(c)(iv) and (v)
hereof during the two calendar years preceding the Date of
Termination; and
(4) the present value, calculated using the annual federal
short-term rate as determined under Section 1274(d) of the Code, of
(without duplication) the annual cost to the Company (based on the
premium rates or other costs to it) of obtaining coverage equivalent
to the coverage under the plans and programs described in Section
5(c)(i) of this Agreement;
provided, however, that with respect to the life and medical insurance
coverage referred to in Section 5(c)(i) of this Agreement, at the
Executive's election made prior to the Date of Termination, the Company
shall use its best efforts to secure conversion coverage and shall pay the
cost of such coverage in lieu of paying the lump sum amount attributable to
such life or medical insurance coverage.
6
<PAGE>
8. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall
prevent or limit the Executive's continuing or future participation in any
benefit, bonus, incentive or other plan or program provided by the Company or
any of its affiliated companies and for which the Executive may qualify, nor
shall anything herein limit or otherwise prejudice such rights as the Executive
may have with respect to awards granted to him prior to or during the Retention
Period under any stock option, restricted stock or other plans or agreements
with the Company or any of its affiliated companies. Amounts which are vested
benefits or which the Executive is otherwise entitled to receive under any plan
or program of the Company or any of its affiliated companies shall be payable in
accordance with such plan or program.
9. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.
(a) Anything in this Agreement to the contrary notwithstanding, in
the event it shall be determined that any payment, distribution, acceleration of
vesting or other benefit which the Executive receives or becomes entitled to
receive, whether alone or in combination, and whether pursuant to the terms of
this Agreement or any other agreement, plan or arrangement with the Company or
any of its affiliates or any of their respective successors or assigns, but
determined without regard to any additional payments required under this Section
9 (collectively, the "Payments"), would be subject to the excise tax imposed by
Section 4999 of the Code (or any successor provision), or any interest or
penalties are incurred by the Executive with respect to such excise tax (such
excise tax, together with any such interest and penalties, are hereinafter
collectively referred to as the "Excise Tax"), then the Executive shall be
entitled to receive an additional payment (a "Gross-Up Payment") in an amount
such that after payment by the Executive of (i) all taxes with respect to the
Gross-Up Payment (including any interest or penalties imposed with respect to
such taxes) including, without limitation, any income taxes (and any interest
and penalties imposed with respect thereto), and (ii) the Excise Tax imposed
upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up
Payment equal to the Excise Tax imposed on the Payments.
(b) Subject to the provisions of Section 9(c), all determinations
required to be made under this Section 9, including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment and the assumptions
to be utilized in arriving at such determination, shall be made by KPMG Peat
Marwick or such other nationally recognized accounting firm then auditing the
accounts of the Company (the "Accounting Firm") which shall provide detailed
supporting calculations both to the Company and the Executive within 15 business
days of the receipt of notice from the Executive that there has been a Payment,
or such earlier time as is requested by the Company. In the event that the
Accounting Firm is unwilling or unable to perform its obligations pursuant to
this Section 9, the Executive shall appoint another nationally recognized
accounting firm to make the determinations required hereunder (which accounting
firm shall then be referred to as the Accounting Firm hereunder). All fees and
expenses of the Accounting Firm shall be borne solely by the Company. Any
Gross-Up Payment, determined pursuant to this Section 9, shall be paid by the
Company to the Executive within five days of the receipt of the Accounting
Firm's determination. Any determination by the Accounting Firm shall be binding
upon the Company and the Executive. As a result of the potential uncertainty in
the application of Section 4999 of the Code (or any successor provision)
7
<PAGE>
at the time of the initial determination by the Accounting Firm hereunder, it is
possible that Gross-Up Payments which will not have been made by the Company
should have been made ("Underpayment"), consistent with the calculations
required to be made hereunder. In the event that the Company exhausts its
remedies pursuant to Section 9(c) and the Executive thereafter is required to
make a payment of any Excise Tax, the Accounting Firm shall determine the amount
of the Underpayment that has occurred and any such Underpayment shall be
promptly paid by the Company to or for the benefit of the Executive.
(c) The Executive shall notify the Company in writing of any claim
by the Internal Revenue Service that, if successful would require the payment by
the Company of the Gross-Up Payment. Such notification shall be given as soon
as practicable but no later than 20 business days after the Executive is
informed in writing of such claim and shall apprise the Company of the nature of
such claim and the date on which such claim is requested to be paid. The
Executive shall not pay such claim prior to the expiration of the 30-day period
following the date on which he gives such notice to the Company (or such shorter
period ending on the date that any payment of taxes with respect to such claim
is due). If the Company notifies the Executive in writing prior to the
expiration of such period that it desires to contest such claim, the Executive
shall:
(i) give the Company any information reasonably requested by the
Company relating to such claim,
(ii) take such action in connection with contesting such claim as
the Company shall reasonably request in writing from time to
time, including, without limitation, accepting legal
representation with respect to such claim by an attorney
reasonably selected by the Company,
(iii) cooperate with the Company in good faith in order effectively
to contest such claim, and
(iv) permit the Company to participate in any proceedings relating
to such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limiting the foregoing provisions of
this Section 9(c), the Company shall control all proceedings taken in connection
with such contest and, at its sole option, may pursue or forgo any and all
administrative appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole option, either direct
the Executive to pay the tax claimed and sue for a refund or contest the claim
in any permissible manner, and the Executive agrees to prosecute such contest to
a determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the
8
<PAGE>
Company directs the Executive to pay such claim and sue for a refund, the
Company shall advance the amount of such payment to the Executive, on an
interest-free basis, and shall indemnify and hold the Executive harmless, on an
after-tax basis, from any Excise Tax or income tax (including interest or
penalties with respect thereto) imposed with respect to such advance or with
respect to any imputed income with respect to such advance; and further provided
that any extension of the statute of limitations relating to payment of taxes
for the taxable year of the Executive with respect to which such contested
amount is claimed to be due is limited solely to such contested amount.
Furthermore, the Company's control of the contest shall be limited to issues
with respect to which a Gross-Up Payment would be payable hereunder and the
Executive shall be entitled to settle or contest, as the case may be, any other
issue raised by the Internal Revenue Service or any other taxing authority.
(d) If, after the receipt by the Executive of an amount advanced by
the Company pursuant to Section 9(c), the Executive becomes entitled to receive
any refund with respect to such claim, the Executive shall (subject to the
Company's complying with the requirements of Section 9(c)) promptly pay to the
Company the amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by the Executive
of an amount advanced by the Company pursuant to Section 9(c), a determination
is made that the Executive shall not be entitled to any refund with respect to
such claim and the Company does not notify the Executive in writing of its
intent to contest such denial of refund prior to the expiration of 30 days after
such determination, then such advance shall be forgiven and shall not be
required to be repaid and the amount of such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be paid.
10. FULL SETTLEMENT. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any circumstances, including, without
limitation, any set-off, counterclaim, recoupment, defense or other right which
the Company may have against the Executive or others whether by reason of the
subsequent employment of the Executive or otherwise. In no event shall the
Executive be obligated to seek other employment by way of mitigation of the
amounts payable to the Executive under any of the provisions of this Agreement,
and no amount payable under this Agreement shall be reduced on account of any
compensation received by the Executive from other employment. In the event that
the Executive shall in good faith give a Notice of Termination for Good Reason
and it shall thereafter be determined by mutual consent of the Executive and the
Company or by a tribunal having jurisdiction over the matter that Good Reason
did not exist, the employment of the Executive shall, unless the Company and the
Executive shall otherwise mutually agree, be deemed to have terminated, at the
date of giving such purported Notice of Termination, by mutual consent of the
Company and the Executive and, except as provided in the last preceding
sentence, the Executive shall be entitled to receive only those payments and
benefits which he would have been entitled to receive at such date otherwise
than under this Agreement.
11. DISPUTES; LEGAL FEES AND EXPENSES. (a) Any dispute or
controversy arising under or in connection with this Agreement shall be settled
exclusively and finally by expedited arbitration, conducted before a single
arbitrator in Minneapolis, Minnesota, in accordance with
9
<PAGE>
the rules governing employment disputes then in effect of the American
Arbitration Association. The arbitrator shall be approved by both the Company
and the Executive. Judgment may be entered on the arbitrator's award in any
court having jurisdiction.
(b) In the event that any claim by the Executive under this
Agreement is disputed, the Company shall pay all reasonable legal fees and
expenses incurred by the Executive in pursuing such claim, provided that the
Executive is successful as to at least part of the disputed claim by reason of
arbitration, settlement or otherwise.
12. CONFIDENTIAL INFORMATION; NONCOMPETITION. (a) The Executive
shall hold in a fiduciary capacity for the benefit of the Company all secret or
confidential information, knowledge or data relating to the Company or any of
its affiliated companies, and their respective businesses, (I) obtained by the
Executive during his employment by the Company or any of its affiliated
companies and (II) not otherwise public knowledge (other than by reason of an
unauthorized act by the Executive). After termination of the Executive's
employment with the Company, the Executive shall not, without the prior written
consent of the Company, unless compelled pursuant to an order of a court or
other body having jurisdiction over such matter, communicate or divulge any such
information, knowledge or data to anyone other than the Company and those
designated by it.
(b) It is mutually acknowledged that by virtue of Employee's former
positions with the Company and its subsidiaries, he has become possessed of
certain valuable and confidential information concerning the customers, business
methods, procedures and techniques of the Company and its subsidiaries. It is
further understood that Employee has developed contacts among the customers of
the Company and its subsidiaries, and it is mutually understood and agreed that
the customers of the Company and its subsidiaries and the business methods and
procedures and techniques developed by the Company and its subsidiaries are
valuable assets and properties of the Company and its subsidiaries. Without
limitation, it is also specifically acknowledged that great trust on the part of
the Company and its subsidiaries has resided in Employee, since Employee's
former duties have included involvement in the management, promotion and
development of the Company's business. Accordingly, the parties deem it
necessary to enter into the protective covenants set forth below, the terms and
conditions of which have been negotiated by and between the parties hereto:
(i) Employee agrees that during the Retention Period and
until the first anniversary of the Date of Termination, he will not, directly or
indirectly, on his own behalf or on the behalf of any third party, perform
management, accounting, financial, marketing, sales, administrative or executive
duties, in any business conducted within the Territories (as defined below)
which engages in originating or purchasing automobile or truck loans or leases
from automobile or truck dealers, packaging such loans or leases, reselling such
loans or leases or servicing such loans or leases (the "Restricted Activities").
As used in this Addendum, the term "Territories" means any state in which any
loans or leases originated or acquired by the Company originated (determined by
the location of the dealers from whom the loans or leases were purchased or, in
the case of loans or leases originated by the Company, where the borrower or
lessee resides).
10
<PAGE>
(ii) Employee agrees that during the Retention Period and
until the first anniversary of the Date of Termination, he will not, directly or
indirectly, solicit, divert, take away or attempt to solicit, divert, or take
away from the Company, or any subsidiary, any of the dealers and other sources
from which the Company or any subsidiary acquires loans or leases or from whom
the loan or lease packages are received by the Company or any subsidiary.
(iii) Employee agrees that during the Retention Period and
until the first anniversary of the Date of Termination, he will not, directly or
indirectly, on his own behalf or in the service or on behalf of others, solicit,
divert or hire away, or in any manner attempt to solicit, divert or hire away
any person employed by the Company or any subsidiary, whether or not such
employee is a full-time employee or a temporary employee of the Company or any
subsidiary, and whether or not such employment was pursuant to a written or
oral contract of employment and whether or not such employment was for a
determined period or was at will.
(c) Employee acknowledges that the provisions of this Section 12
constitute a material inducement to the Company to enter into the Agreement.
Employee further acknowledges that the Company's remedy at law for a breach by
him of the provisions of this Section 12 will be inadequate. Accordingly, in
the event of a breach or threatened breach by Employee of any provision of this
Section 12, the Company will be entitled to injunctive relief in addition to any
other remedy it may have. If any of the provisions of, or covenants contained
in, this Section 12 are hereafter construed to be invalid or unenforceable in
any jurisdiction, the same will not affect the remainder of the provisions or
the enforceability thereof in any other jurisdiction, which will be given full
effect, without regard to the invalidity or unenforceability in such other
jurisdiction. If any of the provisions of, or covenants contained in, this
Section 12 are held to be unenforceable in any jurisdiction because of the
duration or geographical scope thereof, the parties agree that the court making
such determination will have the power to reduce the duration or geographical
scope of such provision or covenant and, in its reduced form, such provision or
covenant will be enforceable; provided, however, that the determination of such
court will not affect the enforceability of this Section 12 in any other
jurisdiction.
(d) In no event shall an asserted violation of the provisions of
this Section 12 constitute a basis for deferring or withholding any amounts
otherwise payable to the Executive under this Agreement or under any other
agreement, plan or arrangement.
13. SUCCESSORS. (a) This Agreement is personal to the Executive
and, without the prior written consent of the Company, shall not be assignable
by the Executive otherwise than by will or the laws of descent and distribution.
This Agreement shall inure to the benefit of and be enforceable by the
Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be binding
upon the Company and its successors. The Company shall require any successor to
all or substantially all of the business and/or assets of the Company, whether
direct or indirect, by purchase, merger, consolidation, acquisition of stock, or
otherwise, by an agreement in form and substance satisfactory to the Executive,
expressly to assume and agree to perform this Agreement in the
11
<PAGE>
same manner and to the same extent as the Company would be required to perform
if no such succession had taken place.
14. MISCELLANEOUS. (a) APPLICABLE LAW. This Agreement shall be
governed by and construed in accordance with the laws of the State of Minnesota,
applied without reference to principles of conflict of laws.
(b) AMENDMENTS. This Agreement may not be amended or modified
otherwise than by a written agreement executed by the parties hereto or their
respective successors and legal representatives.
(c) NOTICES. All notices and other communications hereunder shall
be in writing and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to the Executive: James D. Atkinson III
6969 Edgebrook Place
Eden Prairie, MN 55346
If to the Company: Olympic Financial Ltd.
7825 Washington Avenue South
Minneapolis, MN 55439
Attention: Secretary
(with a copy to the attention
of the General Counsel)
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notices and communications shall be effective
when actually received by the addressee.
(d) TAX WITHHOLDING. The Company may withhold from any amounts
payable under this Agreement such Federal, State or local taxes as shall be
required to be withheld pursuant to any applicable law or regulation.
(e) SEVERABILITY. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement.
(g) POOLING TRANSACTIONS. The parties acknowledge that certain of
the provisions of this Agreement may grant to the Executive benefits in excess
of those granted to the Executive pursuant to the prior employment agreement
(the "Prior Agreement") superseded hereby pursuant to Section 2 hereof. The
parties agree that (i) in the event the grant of any such additional benefit
would, in the opinion of Ernst & Young LLP or such other nationally recognized
accounting firm selected by the Company, prevent the Company from receiving a
12
<PAGE>
pooling of interests treatment under Accounting Principles Board Opinion No. 16,
and (ii) in the further event that such a pooling transaction shall be
consummated by the Company and an acquiring entity; then in such events, the
Executive agrees that the grant of any such additional benefits hereunder shall
be amended as of the day prior to the closing of such pooling transaction to
the extent necessary to enable the Company to gain pooling treatment under
Accounting Principles Board Opinion No. 16 for such transaction; provided such
amendment shall not reduce any such benefit such that it is less than that which
was granted to the Executive under the Prior Agreement.
(f) CAPTIONS. The captions of this Agreement are not part of the
provisions hereof and shall have no force or effect.
IN WITNESS WHEREOF, the Executive has hereunto set his hand and the
Company has caused this Agreement to be executed in its name on its behalf, all
as of the day and year first above written.
OLYMPIC FINANCIAL LTD.
By: /s/ Warren Kantor
-------------------------
Name:
-------------------------
Title: Chairman of the Board
-------------------------
/s/ James D. Atkinson III
-----------------------------
James D. Atkinson III
13
<PAGE>
AMENDMENT OF
EMPLOYMENT RETENTION AGREEMENT
THIS AGREEMENT made as of the 31st day of December, 1996 by and between
Olympic Financial Ltd. (the "Company") and James D. Atkinson III ("Associate").
WHEREAS, the Company and Associate entered into that certain Employment
Retention Agreement dated as of November 7, 1996, pursuant to which the Company
employed Associate as its Senior Vice President/Corporate Counsel. Such
agreement is hereinafter referred to as the "Employment Agreement"; and
WHEREAS, the Board of Directors and the Compensation Committee of the
Company have approved the grant of a club membership as hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
the Company and Associate agree to amend the Employment Agreement as follows:
1. AMENDMENT. Section 5(c)(v) of the Employment Agreement is hereby
amended in its entirety to provide as follows:
(v) CLUB MEMBERSHIPS. The Company shall reimburse Executive the
reasonable cost of the monthly or annual dues, as the case may be, paid by
Executive to maintain his status as a member of the Flagship Athletic Club
or of any other athletic club having equal or lesser membership costs in
lieu of such club. The Company shall also provide to Executive and his
family a membership at Olympic Hills Golf Club and shall reimburse
Executive for the reasonable cost of the monthly or annual dues, as the
case may be, paid by Executive to maintain such membership. If either such
membership is a corporate membership, upon termination of Executive's
employment other than for Cause or Death, such membership shall be
converted to an individual membership in Executive's name and the Company
shall pay any fees charged in connection with such conversion.
2. RATIFICATION. The Employment Agreement as amended hereby is
ratified and affirmed.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
OLYMPIC FINANCIAL LTD.
By: /s/ Scott Anderson
---------------------------
Scott Anderson
Its: Vice Chairman
ASSOCIATE:
/s/ James D. Atkinson III
------------------------------
James D. Atkinson III
<PAGE>
AMENDMENT
OF
EMPLOYMENT AGREEMENT
THIS AGREEMENT made as of the 20th day of December, 1995 by and between
Olympic Financial Ltd. (the "Company") and Robert A. Barbee ("Associate").
WHEREAS, the Company and Associate entered into that certain Employment and
Non-Compete Agreement dated as of September 21, 1994, pursuant to which the
Company employed Associate as its Senior Vice President/Sales and Marketing.
Such agreement together with subsequent amendments thereto, if any, are
hereinafter referred to as the "Employment Agreement"; and
WHEREAS, the Board of Directors and the Compensation Committee of the
Company have approved a promotion of Associate and an increase in Associate's
base salary as hereinafter set forth.
NOW THEREFORE, in consideration of the mutual covenants contained herein,
the Company and Associate agree as follows:
1. PROMOTION. During the term of the Employment Agreement Associate
shall perform the duties of Executive Vice President/Sales and Marketing.
2. BASE SALARY. Associate's base salary for the fiscal 1996 shall be
$200,000 commencing January 1, 1996.
3. RATIFICATION. The Employment Agreement as amended hereby is
ratified and affirmed.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
OLYMPIC FINANCIAL LTD.
By: /s/ Jeffrey Mack
---------------------------
Its:
-----------------------
ASSOCIATE:
/s/ Robert A. Barbee
------------------------------
Robert A. Barbee
<PAGE>
EMPLOYMENT RETENTION AGREEMENT
THIS AGREEMENT between Olympic Financial Ltd. (the "Company") and
Robert A. Barbee (the "Executive") is dated as of this 7 day of November, 1996.
WITNESSETH:
WHEREAS, the Company and the Executive have agreed to enter into an
agreement providing the Company and the Executive with certain rights to assure
the Company of continuity of management;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is hereby agreed by and between the Company and the
Executive as follows:
1. EFFECTIVE DATE: TERM. This Agreement shall govern the terms
and conditions of Executive's employment commencing as of the date hereof (the
"Effective Date").
2. PRIOR EMPLOYMENT AGREEMENT. As of the Effective Date, this
Agreement shall supersede the Executive's Employment Agreement with the Company
dated September 21, 1994, as amended.
3. RETENTION PERIOD. The Company agrees to continue the Executive
in its employ, and the Executive agrees to remain in the employ of the Company,
for the period (the "Retention Period") commencing on the Effective Date and
ending on the date of any termination of the Executive's employment in
accordance with Section 6 of this Agreement.
4. POSITION AND DUTIES (a) NO REDUCTION IN POSITION. During the
Retention Period, the Executive's position (including titles), authority and
responsibilities shall be at least commensurate with the highest of those held
or exercised by him at any time during the 90-day period immediately preceding
the Effective Date.
(b) BUSINESS TIME. During the Retention Period, the Executive
shall devote his full business time during normal business hours to the business
and affairs of the Company and use his best efforts to perform faithfully and
efficiently the responsibilities assigned to him hereunder, to the extent
necessary to discharge such responsibilities, except for
(i) reasonable time spent in serving on corporate, civic or
charitable boards or committees of the nature similar to those on which the
Executive served prior to the Change of Control, or otherwise approved by
the Board, in each case only if and to the extent not substantially
interfering with the performance of such responsibilities, and
(ii) periods of vacation and sick leave to which he is
entitled.
<PAGE>
It is expressly understood that the Executive's continuing to serve on any
boards and committees on which he is serving or with which he is otherwise
associated immediately preceding the Effective Date shall not be deemed to
interfere with the performance of the Executive's services to the Company.
5. COMPENSATION AND BENEFITS. (a) BASE SALARY. During the Retention
Period, the Executive shall receive a base salary ("Base Salary") at a monthly
rate at least equal to the monthly salary paid to the Executive by the Company
and any of its affiliated companies immediately prior to the Effective Date.
The Base Salary shall be reviewed at least once each year after the Effective
Date, and may be increased (but not decreased) at any time and from time to time
by action of the Board or any committee thereof or any individual having
authority to take such action in accordance with the Company's regular
practices. Neither payment of the Base Salary nor payment of any increased Base
Salary after the Effective Date shall serve to limit or reduce any other
obligation of the Company hereunder. For purposes of the remaining provisions
of this Agreement, the term "Base Salary" shall mean Base Salary as defined in
this Section 5(a) or, if increased after the Effective Date, the Base Salary as
so increased.
(b) ANNUAL BONUS. In addition to the Base Salary, the Executive
shall be awarded for each fiscal year of the Company ending during the Retention
Period an annual bonus, to be based on reasonable and customary criteria
consistent with the Company's past practices (the "Annual Bonus"), with a target
amount at least equal to 40% of his Base Salary (I.E., that percentage of the
Executive's Base Salary designated by the Company's Compensation Committee for
purposes of Section 4.1 of the Company's 1998-2000 Restricted Stock Election
Plan). If a fiscal year of the Company begins, but does not end, during the
Retention Period, the Executive shall receive an amount with respect to such
fiscal year at least equal to the amount of the Annual Bonus multiplied by a
fraction, the numerator of which is the number of days in such fiscal year
occurring during the Retention Period and the denominator of which is 365. Each
amount payable in respect of the Executive's Annual Bonus shall be paid not
later than 90 days after the fiscal year next following the fiscal year for
which the Annual Bonus (or pro-rated portion) is earned or awarded. Neither the
Annual Bonus nor any bonus amount paid in excess thereof after the Effective
Date shall serve to limit or reduce any other obligation of the Company
hereunder.
(c) FRINGE BENEFITS. During the Retention Period, the Company shall
provide the following fringe benefits to Executive:
(i) HEALTH, DISABILITY AND LIFE INSURANCE. Subject to
satisfaction of the eligibility requirements of such plans and the rules
and regulations applicable thereto, Executive and his family members shall
be entitled to be covered by the Company's group health and dental
insurance plans presently in effect or hereafter adopted by the Company and
applicable to employees of the Company generally and Executive shall be
entitled to be covered by the Company's group disability and life insurance
plans presently in effect or hereafter adopted by the Company and
applicable to the employees of the Company in general. The Company shall
pay the premiums associated with such
2
<PAGE>
coverage. In the event Executive makes a claim against any disability policy
provided to Executive by the Company pursuant to this Section 5(c)(i) and such
policy calls for a waiting period which is applicable to Executive's claim, the
Company shall pay to Executive during such waiting period his monthly base
salary due during such period and shall provide the other benefits due him under
this Section 5(c)(i).
(ii) VACATION. Executive shall be entitled to four weeks
of vacation without loss of compensation or other benefits pursuant to such
general policies and procedures of the Company as are from time to time
adopted by the Company.
(iii) EXPENSE REIMBURSEMENT. Executive shall be reimbursed
by the Company for all reasonable expenses incurred by him in connection
with the conduct of the Company's business for which he furnishes
appropriate documentation.
(iv) AUTOMOBILE. In the event the Company shall institute a
Company car policy, Executive shall receive benefits thereunder in keeping
with his position with the Company. During any period that the Company has
not instituted a Company car policy, the Company shall provide to Executive
use of an automobile reasonably acceptable to Executive to be used by
Executive in conducting the Company's business. In addition, the Company
shall during such period reimburse Executive (1) an amount equal to the
reasonable cost of insuring and maintaining the automobile used by
Executive for the Company's business, and (2) the cost of maintenance and
the cost of gasoline and oil used in the automobile and in the event of a
loss under the policies insuring said automobile, the amount of any
deductible thereunder applicable to such loss. Such insurance and the
coverage and deductibles thereof shall cover both the business and personal
use of such automobile by Employee, his family and invitees and shall
include such other terms and conditions as are reasonably acceptable to
Executive. Any such reimbursements shall be made upon the Company's
receipt of invoices evidencing incurrence of such expenses. Executive
shall also be paid a monthly amount equal to the reasonable value of
personal use of such automobile, determined in accordance with applicable
federal income tax regulations.
(v) CLUB DUES. The Company shall reimburse Executive the
reasonable cost of the monthly or annual dues, as the case may be, paid by
Executive to maintain his status as a member of the Flagship Athletic Club
or of any other athletic club having equal or lesser membership costs in
lieu of such club. The Company shall also provide to Executive and his
family a membership at Olympic Hills Golf Club and shall reimburse the
Executive for the reasonable cost of the monthly or annual dues, as the
case may be, paid by Executive to maintain such membership. If either such
membership is a corporate membership and is subsequently converted to an
individual membership, the Company shall reimburse Executive for any fees
charged in connection with such conversion.
(vi) OFFICE AND SUPPORT STAFF, During the Retention Period,
the Executive shall be entitled to an office or offices of a size and with
furnishings and other
3
<PAGE>
appointments, and to secretarial and other assistance, at least equal to
the most favorable of the foregoing provided to the Executive at any time
during the 90-day period immediately preceding the Effective Date.
6. TERMINATION. (a) DEATH OR DISABILITY. The Executive's employment
shall terminate automatically upon his death. The Company may terminate
Executive's employment during the Retention Period, after having established the
Executive's Disability, by giving the Executive written notice of its intention
to terminate his employment, and his employment with the Company shall terminate
effective on the 90th day after receipt of such notice if, within 90 days after
such receipt, the Executive shall fail to return to full-time performance of his
duties. For purposes of this Agreement, "Disability" means disability which,
after the expiration of more than 26 weeks after its commencement, is determined
to be total and permanent by a physician selected by the Company or its insurers
and acceptable to the Executive or his legal representatives (such agreement to
acceptability not to be withheld unreasonably).
(b) VOLUNTARY TERMINATION. Notwithstanding anything in this
Agreement to the contrary, the Executive may, upon not less than 15 days'
advance written notice to the Company, voluntarily terminate employment during
the Retention Period for any reason, provided that any termination by the
Executive pursuant to Section 6(d) of this Agreement on account of Good Reason
(as defined therein) shall not be treated as a voluntary termination under this
Section 6(b).
(c) CAUSE. The Company may terminate the Executive's employment
during the Retention Period for Cause. For purposes of this Agreement, "Cause"
means (i) gross misconduct on the Executive's part which is demonstrably willful
and deliberate and which results in material damage to the Company's business or
reputation or (ii) repeated material violations by the Executive of his
obligations under Section 4 of this Agreement which violations are demonstrably
willful and deliberate.
(d) GOOD REASON. The Executive may terminate his employment during
the Retention Period for Good Reason. For purposes of this Agreement, "Good
Reason" means
(i) a good faith determination by the Executive that, without
his prior written consent, the Company or any of its officers has taken or
failed to take any action (including, without limitation, (A) exclusion of
the Executive from consideration of material matters within this area of
responsibility, other than an insubstantial or inadvertent exclusion
remedied by the Company promptly after receipt of notice thereof from the
Executive, (B) statements or actions which undermine the Executive's
authority with respect to persons under his supervision or reduce his
standing with his peers, other than an insubstantial or inadvertent
statement or action which is remedied by the Company promptly after receipt
of the notice thereof from the Executive, (C) a pattern of discrimination
against or harassment of the Executive or persons under his supervision and
(D) the subjection of the Executive to procedures not generally applicable
to other similarly situated executives) which changes the Executive's
position (including titles),
4
<PAGE>
authority or responsibilities under Section 4 of this Agreement or reduces
the Executive's ability to carry out his duties and responsibilities under
Section 4 of this Agreement;
(ii) any failure by the Company to comply with any of the
provisions of Section 5 of this Agreement, other than an insubstantial or
inadvertent failure remedied by the Company promptly after receipt of
notice thereof from the Executive;
(iii) the Company's requiring the Executive to be employed at
any location more than 35 miles further from his principal residence than
the location at which the Executive was employed immediately preceding the
Effective Date; or
(iv) any failure by the Company to obtain the assumption of
and agreement to perform this Agreement by a successor as contemplated by
Section 13(b) of this Agreement.
(e) WITHOUT CAUSE. The Company shall give Executive at least 15
days' advance written notice of any termination of Executive's employment which
is not for Cause and not on account of Executive's Disability.
(f) NOTICE OF TERMINATION. Any termination of Executive's
employment by the Company for Cause or by the Executive for Good Reason during
the Retention Period shall be communicated by Notice of Termination to the other
party hereto given in accordance with Section 14(c) of this Agreement. For
purposes of this Agreement, a "Notice of Termination" means a written notice
given, in the case of a termination by the Company for Cause, within 10
business days of the Company's having actual knowledge of all of the events
giving rise to such termination, and in the case of a termination by Executive
for Good Reason, within 180 days of the Executive's having actual knowledge of
the events giving rise to such termination, and which (i) indicates the specific
termination provision in this Agreement relied upon, (ii) sets forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so indicated, and
(iii) if the termination date is other than the date of receipt of such notice,
specifies such termination date (which date shall be not more than 15 days after
the giving of such notice). The failure by the Executive to set forth in the
Notice of Termination any fact or circumstance which contributes to a showing of
Good Reason shall not waive any right of the Executive hereunder or preclude the
Executive from asserting such fact or circumstance in enforcing his rights
hereunder.
(g) DATE OF TERMINATION. For purposes of this Agreement, the term
"Date of Termination" means (i) in the case of a termination for which a Notice
of Termination is required, the date of receipt of such Notice of Termination
or, if later, the date specified therein and (ii) in all other cases, the actual
date on which the Executive's employment terminates during the Retention Period.
7. OBLIGATIONS OF THE COMPANY UPON TERMINATION. (a) DEATH. If the
Executive's employment is terminated during the Retention Period by reason of
the Executive's death, this Agreement shall terminate without further
obligations to the Executive's legal
5
<PAGE>
representatives under this Agreement other than those obligations accrued
hereunder at the date of his death, including, for this purpose (i) the
Executive's full Base Salary through the Date of Termination, (ii) the product
of the Annual Bonus and a fraction, the numerator of which is the number of days
in the current fiscal year of the Company through the Date of Termination, and
the denominator of which is 365 (the "Pro-rated Bonus Obligation"), (iii) any
compensation previously deferred by the Executive (together with any accrued
earnings thereon) and not yet paid by the Company, (iv) any other amounts or
benefits owing to the Executive under any of the Company's incentive
compensation plans, stock option plans, restricted stock plans or other similar
plans and (v) any amounts or benefits owing to the Executive under any of the
Company's employee benefit plans or policies (such amounts specified in clauses
(i), (ii), (iii), (iv) and (v) are hereinafter referred to as "Accrued
Obligations"). Unless otherwise directed by the Executive prior to his death,
all Accrued Obligations shall be paid to the Executive's estate.
(b) DISABILITY. If the Executive's employment is terminated by
reason of the Executive's Disability, the Executive shall receive all Accrued
Obligations and, in addition, from the Date of Termination until second
anniversary of such date, shall continue to participate in or be covered under
the benefit plans and programs referred to in Section 5(c)(i) of this Agreement
or, at the Company's option, to receive equivalent benefits by alternate means
at least equal to those provided in accordance with Section 5(c)(i) of this
Agreement. Anything in this Agreement to the contrary notwithstanding, the
Executive shall be entitled to receive disability and other benefits at least
equal to the most favorable level of benefits available to disabled employees
and/or their families in accordance with the plans, programs and policies
maintained by the Company or its affiliates relating to disability at any time
during the 90-day period immediately preceding the Effective Date.
(c) CAUSE AND VOLUNTARY TERMINATION. If, during the Retention
Period, the Executive's employment shall be terminated for Cause or voluntarily
terminated by the Executive (other than on account of Good Reason), the
Executive shall receive all Accrued Obligations other than the Pro-rated Bonus
Obligation.
(d) TERMINATION BY COMPANY OTHER THAN FOR CAUSE OR DISABILITY AND
TERMINATION BY EXECUTIVE FOR GOOD REASON. LUMP SUM PAYMENT. If, during the
Retention Period, the Company terminates the Executive's employment other than
for Cause or Disability, or the Executive terminates his employment for Good
Reason, the Executive shall receive all Accrued Obligations. In addition, the
Company shall pay to the Executive in a lump sum, within 15 days after the Date
of Termination, a cash amount equal to two (2) times the sum of the following
amounts:
(1) the Executive's annual Base Salary at the rate specified in
Section 5(a) of this Agreement;
(2) the Annual Bonus;
6
<PAGE>
(3) an amount equal to the average annual amount paid and/or
reimbursed to the Executive pursuant to Section 5(c)(iv) and (v)
hereof during the two calendar years preceding the Date of
Termination; and
(4) the present value, calculated using the annual federal
short-term rate as determined under Section 1274(d) of the Code, of
(without duplication) the annual cost to the Company (based on the
premium rates or other costs to it) of obtaining coverage equivalent
to the coverage under the plans and programs described in Section
5(c)(i) of this Agreement;
provided, however, that with respect to the life and medical insurance
coverage referred to in Section 5(c)(i) of this Agreement, at the
Executive's election made prior to the Date of Termination, the Company
shall use its best efforts to secure conversion coverage and shall pay the
cost of such coverage in lieu of paying the lump sum amount attributable
to such life or medical insurance coverage.
8. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall
prevent or limit the Executive's continuing or future participation in any
benefit, bonus, incentive or other plan or program provided by the Company or
any of its affiliated companies and for which the Executive may qualify, nor
shall anything herein limit or otherwise prejudice such rights as the
Executive may have with respect to awards granted to him prior to or during
the Retention Period under any stock option, restricted stock or other plans
or agreements with the Company or any of its affiliated companies. Amounts
which are vested benefits or which the Executive is otherwise entitled to
receive under any plan or program of the Company or any of its affiliated
companies shall be payable in accordance with such plan or program.
9. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.
(a) Anything in this Agreement to the contrary notwithstanding,
in the event it shall be determined that any payment, distribution,
acceleration of vesting or other benefit which the Executive receives or
becomes entitled to receive, whether alone or in combination, and whether
pursuant to the terms of this Agreement or any other agreement, plan or
arrangement with the Company or any of its affiliates or any of their
respective successors or assigns, but determined without regard to any
additional payments required under this Section 9 (collectively, the
"Payments"), would be subject to the excise tax imposed by Section 4999 of
the Code (or any successor provision), or any interest or penalties are
incurred by the Executive with respect to such excise tax (such excise tax,
together with any such interest and penalties, are hereinafter collectively
referred to as the "Excise Tax"), then the Executive shall be entitled to
receive an additional payment (a "Gross-Up Payment") in an amount such that
after payment by the Executive of (i) all taxes with respect to the Gross-Up
Payment (including any interest or penalties imposed with respect to such
taxes) including, without limitation, any income taxes (and any interest and
penalties imposed with respect thereto), and (ii) the Excise Tax imposed upon
the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment
equal to the Excise Tax imposed on the Payments.
7
<PAGE>
(b) Subject to the provisions of Section 9(c), all determinations
required to be made under this Section 9, including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment and the assumptions
to be utilized in arriving at such determination, shall be made by KPMG Peat
Marwick or such other nationally recognized accounting firm then auditing the
accounts of the Company (the "Accounting Firm") which shall provide detailed
supporting calculations both to the Company and the Executive within 15 business
days of the receipt of notice from the Executive that there has been a Payment,
or such earlier time as is requested by the Company. In the event that the
Accounting Firm is unwilling or unable to perform its obligations pursuant to
this Section 9, the Executive shall appoint another nationally recognized
accounting firm to make the determinations required hereunder (which accounting
firm shall then be referred to as the Accounting Firm hereunder). All fees and
expenses of the Accounting Firm shall be borne solely by the Company. Any
Gross-Up Payment, determined pursuant to this Section 9, shall be paid by the
Company to the Executive within five days of the receipt of the Accounting
Firm's determination. Any determination by the Accounting Firm shall be binding
upon the Company and the Executive. As a result of the potential uncertainty in
the application of Section 4999 of the Code (or any successor provision) at the
time of the initial determination by the Accounting Firm hereunder, it is
possible that Gross-Up Payments which will not have been made by the Company
should have been made ("Underpayment"), consistent with the calculations
required to be made hereunder. In the event that the Company exhausts its
remedies pursuant to Section 9(c) and the Executive thereafter is required to
make a payment of any Excise Tax, the Accounting Firm shall determine the amount
of the Underpayment that has occurred and any such Underpayment shall be
promptly paid by the Company to or for the benefit of the Executive.
(c) The Executive shall notify the Company in writing of any claim
by the Internal Revenue Service that, if successful, would require the payment
by the Company of the Gross-Up Payment. Such notification shall be given as
soon as practicable but no later than 20 business days after the Executive is
informed in writing of such claim and shall apprise the Company of the nature of
such claim and the date on which such claim is requested to be paid. The
Executive shall not pay such claim prior to the expiration of the 30-day period
following the date on which he gives such notice to the Company (or such shorter
period ending on the date that any payment of taxes with respect to such claim
is due). If the Company notifies the Executive in writing prior to the
expiration of such period that it desires to contest such claim, the Executive
shall:
(i) give the Company any information reasonably requested by
the Company relating to such claim,
(ii) take such action in connection with contesting such
claim as the Company shall reasonably request in writing
from time to time, including, without limitation,
accepting legal representation with respect to such
claim by an attorney reasonably selected by the Company,
(iii) cooperate with the Company in good faith in order
effectively to contest such claim, and
8
<PAGE>
(iv) permit the Company to participate in any proceedings
relating to such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limiting the foregoing provisions of
this Section 9(c), the Company shall control all proceedings taken in connection
with such contest and, at its sole option, may pursue or forgo any and all
administrative appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole option, either direct
the Executive to pay the tax claimed and sue for a refund or contest the claim
in any permissible manner, and the Executive agrees to prosecute such contest to
a determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs the Executive to pay
such claim and sue for a refund, the Company shall advance the amount of such
payment to the Executive, on an interest-free basis, and shall indemnify and
hold the Executive harmless, on an after-tax basis, from any Excise Tax or
income tax (including interest or penalties with respect thereto) imposed with
respect to such advance or with respect to any imputed income with respect to
such advance; and further provided that any extension of the statute of
limitations relating to payment of taxes for the taxable year of the Executive
with respect to which such contested amount is claimed to be due is limited
solely to such contested amount. Furthermore, the Company's control of the
contest shall be limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and the Executive shall be entitled to settle or
contest, as the case may be, any other issue raised by the Internal Revenue
Service or any other taxing authority.
(d) If, after the receipt by the Executive of an amount advanced by
the Company pursuant to Section 9(c), the Executive becomes entitled to receive
any refund with respect to such claim, the Executive shall (subject to the
Company's complying with the requirements of Section 9(c)) promptly pay to the
Company the amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by the Executive
of an amount advanced by the Company pursuant to Section 9(c), a determination
is made that the Executive shall not be entitled to any refund with respect to
such claim and the Company does not notify the Executive in writing of its
intent to contest such denial of refund prior to the expiration of 30 days after
such determination, then such advance shall be forgiven and shall not be
required to be repaid and the amount of such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be paid.
10. FULL SETTLEMENT. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
thereunder shall not be affected by any circumstances, including, without
limitation, any set-off, counterclaim, recoupment, defense or other right which
the Company may have against the Executive or others whether by reason of the
subsequent employment of the Executive or otherwise. In no event shall the
Executive be
9
<PAGE>
obligated to seek other employment by way of mitigation of the amounts payable
to the Executive under any of the provisions of this Agreement, and no amount
payable under this Agreement shall be reduced on account of any compensation
received by the Executive from other employment. In the event that the
Executive shall in good faith give a Notice of Termination for Good Reason and
it shall thereafter be determined by mutual consent of the Executive and the
Company or by a tribunal having jurisdiction over the matter that Good Reason
did not exist, the employment of the Executive shall, unless the Company and the
Executive shall otherwise mutually agree, be deemed to have terminated, at the
date of giving such purported Notice of Termination, by mutual consent of the
Company and the Executive and, except as provided in the last preceding
sentence, the Executive shall be entitled to receive only those payments and
benefits which he would have been entitled to receive at such date otherwise
than under this Agreement.
11. DISPUTES; LEGAL FEES AND EXPENSES. (a) Any dispute or
controversy arising under or in connection with this Agreement shall be settled
exclusively and finally by expedited arbitration, conducted before a single
arbitrator in Minneapolis, Minnesota, in accordance with the rules governing
employment disputes then in effect of the American Arbitration Association.
The arbitrator shall be approved by both the Company and the Executive.
Judgment may be entered on the arbitrator's award in any court having
jurisdiction.
(b) In the event that any claim by the Executive under this
Agreement is disputed, the Company shall pay all reasonable legal fees
and expenses incurred by the Executive in pursuing such claim, provided that the
Executive is successful as to at least part of the disputed claim by reason of
arbitration, settlement or otherwise.
12. CONFIDENTIAL INFORMATION; NONCOMPETITION. (a) The Executive
shall hold in a fiduciary capacity for the benefit of the Company all secret or
confidential information, knowledge or data relating to the Company or any of
its affiliated companies, and their respective businesses, (I) obtained by the
Executive during his employment by the Company or any of its affiliated
companies and (II) not otherwise public knowledge (other than by reason of an
unauthorized act by the Executive). After termination of the Executive's
employment with the Company, the Executive shall not, without the prior written
consent of the Company, unless compelled pursuant to an order of a court or
other body having jurisdiction over such matter, communicate or divulge any such
information, knowledge or data to anyone other than the Company and those
designated by it.
(b) It is mutually acknowledged that by virtue of Employee's
former positions with the Company and its subsidiaries, he has become possessed
of certain valuable and confidential information concerning the customers,
business methods, procedures and techniques of the Company and its subsidiaries.
It is further understood that Employee has developed contacts among the
customers of the Company and its subsidiaries, and it is mutually understood and
agreed that the customers of the Company and its subsidiaries and the business
methods and procedures and techniques developed by the Company and its
subsidiaries are valuable assets and properties of the Company and its
subsidiaries. Without limitation, it is also specifically acknowledged that
great trust on the part of the Company and its subsidiaries has resided in
10
<PAGE>
Employee, since Employee's former duties have included involvement in the
management, promotion and development of the Company's business. Accordingly,
the parties deem it necessary to enter into the protective covenants set forth
below, the terms and conditions of which have been negotiated by and between the
parties hereto:
(i) Employee agrees that during the Retention Period and
until the first anniversary of the Date of Termination, he will not, directly or
indirectly, on his own behalf or on the behalf of any third party, perform
management, accounting, financial, marketing, sales, administrative or executive
duties, in any business conducted within the Territories (as defined below)
which engages in originating or purchasing automobile or truck loans or leases
from automobile or truck dealers, packaging such loans or leases, reselling such
loans or leases or servicing such loans or leases (the "Restricted Activities").
As used in this Addendum, the term "Territories" means any state in which any
loans or leases originated or acquired by the Company originated (determined by
the location of the dealers from whom the loans or leases were purchased or, in
the case of loans or leases originated by the Company, where the borrower or
lessee resides).
(ii) Employee agrees that during the Retention Period and
until the first anniversary of the Date of Termination, he will not, directly or
indirectly, solicit, divert, take away or attempt to solicit, divert, or take
away from the Company, or any subsidiary, any of the dealers and other sources
from which the Company or any subsidiary acquires loans or leases or from whom
the loan or lease packages are received by the Company or any subsidiary.
(iii) Employee agrees that during the Retention Period and
until the first anniversary of the Date of Termination, he will not, directly or
indirectly, on his own behalf or in the service or on behalf of others, solicit,
divert or hire away, or in any manner attempt to solicit, divert or hire away
any person employed by the Company or any subsidiary, whether or not such
employee is a full-time employee or a temporary employee of the Company or any
subsidiary, and whether or not such employment was pursuant to a written or oral
contract of employment and whether or not such employment was for a determined
period or was at will.
(c) Employee acknowledges that the provisions of this Section 12
constitute a material inducement to the Company to enter into the Agreement.
Employee further acknowledges that the Company's remedy at law for a breach by
him of the provisions of this Section 12 will be inadequate. Accordingly, in
the event of a breach or threatened breach by Employee of any provision of this
Section 12, the Company will be entitled to injunctive relief in addition to any
other remedy it may have. If any of the provisions of, or covenants contained
in, this Section 12 are hereafter construed to be invalid or unenforceable in
any jurisdiction, the same will not affect the remainder of the provisions or
the enforceability thereof in any other jurisdiction, which will be given full
effect, without regard to the invalidity or unenforceability in such other
jurisdiction. If any of the provisions of, or covenants contained in, this
Section 12 are held to be unenforceable in any jurisdiction because of the
duration or geographical scope thereof, the parties agree that the court making
such determination will have the power to reduce the duration or geographical
scope of such provision or covenant and, in its reduced form, such
11
<PAGE>
provision or covenant will be enforceable; provided, however, that the
determination of such court will not affect the enforceability of this Section
12 in any other jurisdiction.
(d) In no event shall an asserted violation of the provisions of
this Section 12 constitute a basis for deferring or withholding any
amounts otherwise payable to the Executive under this Agreement or under any
other agreement, plan or arrangement.
13. SUCCESSORS. (a) This Agreement is personal to the Executive
and, without the prior written consent of the Company, shall not be
assignable by the Executive otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be
enforceable by the Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be binding
upon the Company and its successors. The Company shall require any successor to
all or substantially all of the business and/or assets of the Company, whether
direct or indirect, by purchase, merger, consolidation, acquisition of stock, or
otherwise, by an agreement in form and substance satisfactory to the Executive,
expressly to assume and agree to perform this Agreement in the same manner and
to the same extent as the Company would be required to perform if no such
succession had taken place.
14. MISCELLANEOUS. (a) APPLICABLE LAW. This Agreement shall be
governed by and construed in accordance with the laws of the State of Minnesota,
applied without reference to principles of conflict of laws.
(b) AMENDMENTS. This Agreement may not be amended or modified
otherwise than by a written agreement executed by the parties hereto or their
respective successors and legal representatives.
(c) NOTICES. All notices and other communications hereunder shall
be in writing and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to the Executive: Robert A. Barbee
7446 Cahill Road
Edina, MN 55349
If to the Company: Olympic Financial Ltd.
7825 Washington Avenue South
Minneapolis, MN 55439
Attention: Secretary
(with a copy to the attention of the
General Counsel)
12
<PAGE>
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notices and communications shall be effective
when actually received by the addressee.
(d) TAX WITHHOLDING. The Company may withhold from any amounts
payable under this Agreement such Federal, State or local taxes as shall be
required to be withheld pursuant to any applicable law or regulation.
(e) SEVERABILITY. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement.
(f) CAPTIONS. The captions of this Agreement are not part of the
provisions hereof and shall have no force or effect.
(g) POOLING TRANSACTIONS. The parties acknowledge that certain of
the provisions of this Agreement may grant to the Executive benefits in excess
of those granted to the Executive pursuant to the prior employment agreement
(the "Prior Agreement") superseded hereby pursuant to Section 2 hereof. The
parties agree that (i) in the event the grant of any such additional benefit
would, in the opinion of Ernst & Young LLP or such other nationally recognized
accounting firm selected by the Company, prevent the Company from receiving a
pooling of interests treatment under Accounting Principles Board Opinion No. 16,
and (ii) in the further event that such a pooling transaction shall be
consummated by the Company and an acquiring entity; then in such events, the
Executive agrees that the grant of any such additional benefits hereunder shall
be amended as of the day prior to the closing of such pooling transaction to the
extent necessary to enable the Company to gain pooling treatment under
Accounting Principles Board Opinion No. 16 for such transaction; provided such
amendment shall not reduce any such benefit such that it is less than that which
was granted to the Executive under the Prior Agreement.
IN WITNESS WHEREOF, the Executive has hereunto set his hand and the
Company has caused this Agreement to be executed in its name on its behalf, all
as of the day and year first above written.
OLYMPIC FINANCIAL LTD.
By: /s/ Warren Kantor
--------------------------
Name:
------------------------
Title: Chairman of the Board
-----------------------
/s/ Robert A. Barbee
------------------------------
Robert A. Barbee
13
<PAGE>
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT, herein referred to as "Agreement" made and
entered into as of the 1st day of January, 1996, by and between Olympic
Financial Ltd., a Minnesota corporation (the "Company") and Warren Kantor
("Consultant").
WHEREAS, the Company engages in the sales finance business, and
WHEREAS, the Consultant has numerous years of experience in the
financial services accounting and finance profession, and
WHEREAS, the Company desires to engage Consultant to perform certain
consulting services for the Company, and
WHEREAS, Consultant is seeking such engagement, and
WHEREAS, the parties desire to set forth the terms and conditions of
consulting services to be provided by Consultant to the Company.
NOW, THEREFORE, in consideration of the promises and the mutual benefits
which will accrue to the parties to this Agreement, it is mutually understood
and agreed as follows:
1. DESCRIPTION OF SERVICES. Consultant shall furnish and perform the
consulting services pertinent to the operations of the Company which are
specifically set forth in Exhibit A attached hereto and made a part hereof
(the "Consulting Services"). The Consulting Services shall be provided as
needed by the Company; provided, however, that Consulting Services are not to
exceed one hundred fifty (150) hours. Consultant and the Company may from
time to time agree that additional hours are desired, for which additional
Consulting Services Consultant shall be paid at an hourly rate to be agreed
upon by Consultant and the Company. The terms of this Agreement shall apply
to any such additional hours per year. Such services shall be performed to be
best of the Consultant's ability and in a competent, efficient and
satisfactory manner. The Company acknowledges that Consultant is engaged in
various other substantial business activities, that the Company's request for
Consulting Services hereunder from Consultant shall not unreasonably
interfere with Consultant's other business activities and that Consultant
shall be entitled to engage in other business for other persons or entities
during the term hereof subject to the provisions of paragraph 6 hereof.
2. PAYMENT FOR SERVICES. In consideration of the Consulting Services
to be provided by Consultant to the Company and of other obligations of
Consultant contained herein, the Company shall, concurrent with the execution
hereof, execute and deliver to Consultant a non-statutory stock option in the
form and substance of Exhibit B attached hereto (the "Option Agreement").
Pursuant to the Option Agreement, the Company shall grant to Consultant the
option to purchase up to 40,000 shares of the $.01 par value
1
<PAGE>
common stock of the Company ("Common Stock") at an option price equal to the
fair market value of the Common Stock on the date of this Agreement, subject
to the terms and conditions of the Option Agreement.
3. REIMBURSEMENT OF EXPENSES. Consultant shall be reimbursed for any
and all travel or other expenses borne or expended by Consultant in
connection with the Consulting Services. Any reasonable expenses incurred by
Consultant in performing his duties hereunder shall be reimbursed by the
Company when he furnishes appropriate documentation. Provided however,
Consultant shall not incur any expenses on behalf of the Company in excess of
$1,000.00 per individual expense without the prior written authorization of
the Company.
4. TERM OF ENGAGEMENT. Subject to the terms and conditions hereof,
the term of Consultant's engagement hereunder (the "Consulting Term") shall
commence as of the date of this Agreement and shall continue until December
31, 1996, unless earlier terminated pursuant to paragraph 5.1.
5. TERMINATION.
5.1 Termination. Consultant's engagement hereunder shall terminate upon
the happening of any of the following events:
a. by the mutual written agreement of the Company and Consultant;
b. upon the death of Consultant;
c. upon 14 days' prior written notice from the Company to Consultant
with Cause (as defined below); or
d. upon 14 days' prior written notice from Consultant to the
Company, if the Company shall fail to make any payment to
Consultant required to be made pursuant hereto within 15
days after such payment was due.
As used in this Agreement, the term "Cause" shall mean (i) any fraud,
misappropriation or embezzlement by Consultant in connection with the
business of the Company; (ii) any failure by Consultant to perform the
Consulting Services assigned hereunder, provided that Consultant shall first
have received a written notice from the Company which sets forth in
reasonable detail the manner in which Consultant has failed to perform his
duties, in which case Consultant shall ahve a period of thirty (30) days to
cure the same, unless the same cannot be reasonably cured within said thirty
(30) day period, in which event Consultant shall have up to an additional
ninety (90) days to cure the same; (iii) any material breach by Consultant of
this Agreement, provided that Consultant shall first have received written
notice from the Company which sets forth in reasonable detail the breach by
Consultant and Consultant shall have a period of thirty (30) days after
receipt of such notice to cure such breach, unless the same cannot be
2
<PAGE>
reasonably cured within said thirty (30) day period, in which event
Consultant shall have up to an additional ninety (90) days to cure the same;
(iv) willful destruction of the property or records of the Company; (v)
dishonesty or deliberate falsification of the Company records; or (vi)
harassment (including sexual harassment) of a Company employee. The sole
remedy of the Company in the event of a breach of this Agreement shall be to
terminate this Agreement.
6. PROPRIETARY INFORMATION.
6.1 PROPRIETARY INFORMATION. Except by the prior written permission
from the Company, Consultant shall never disclose or use any proprietary
information ("Proprietary Information") of the Company of which Consultant
becomes or has become informed during his past or future engagement with the
Company or any of its subsidiaries, whether or not developed by Consultant,
except as required by his duties to the Company or any of its subsidiaries.
Proprietary Information shall mean information concerning the Company, its
business or its customers that derives independent economic value, actual or
potential, from not being generally known to, and not being readily
ascertainable by proper means by, other persons who can derive economic value
from its disclosure or use. Proprietary Information includes, but is not
limited to, the following types of information and other information of a
similar nature (whether or not reduced to writing), all of which Consultant
agrees constitutes the valuable trade secrets of the Company; research,
development, know-how, plans and processes, marketing plans and techniques,
existing and contemplated products and services, customer and prospect names
and related information, prices, sales, credit scoring, personnel, computer
programs and related documentation, technical and strategic plans, and
finances. Proprietary Information also includes any information of the
foregoing nature that the Company treats as a proprietary or designates as
Proprietary Information, whether or not owned or developed by the Company.
Information does not lose its Proprietary Information status merely because
it was known by a limited number of other persons or entities or because it
did not entirely originate with the Company. Such nondisclosure and non-use
shall mean, without limiting the generality the generality of the foregoing,
during the Consulting Term and at all times thereafter, the Consultant agrees
to receive, maintain, and use Proprietary Information in the strictest
confidence and, except with the consent of the Company will not directly or
indirectly reveal, report, publish, disclose, or transfer any Proprietary
Information to any person, firm, corporation, or other entity or utilize any
Proprietary Information for the Consultant's own benefit or intended benefit
or for the benefit or intended benefit of any other person, firm, corporation
or other entity.
6.2 DELIVERY OF PROPRIETARY INFORMATION. Upon the request of the
Company or the termination of his engagement, Consultant agrees to deliver to
the Company all materials that include Proprietary Information, including
without limitation customer lists, instruction sheets, manuals, computer
programs (including source codes), letters, financial records, notes,
notebooks, reports and copies thereof, and all other materials which are under
his control and which relate to the business of the Company or its
subsidiaries. Consultant agrees and understands that the Proprietary
Information and all information
3
<PAGE>
contained therein shall be at all times the property of the Company. Further,
upon termination of his engagement, Consultant agrees to make available to
any person designated by the Company all information concerning pending or
preceding transactions or programs which may affect the operation of the
Company or any of its subsidiaries about which Consultant has knowledge. The
obligations of Consultant contained in this paragraph are in addition to the
obligation of Consultant to return to the Company, upon the request of the
Company or the termination of his engagement, all property of the Company
then in his possession.
6.3 NON-COMPETITION. It is mutually acknowledged that by virtue of
Consultant's position as a director of the Company and his engagement
hereunder, the Company has divulged and will divulge or make accessible to
Consultant, and Consultant has and will become possessed of, certain valuable
and confidential information concerning the customers, business methods,
procedures and techniques of the Company. It is further understood that
Consultant, in the course of and because of his position as a director of the
Company and his engagement hereunder, has developed and will develop contacts
among the customers of the Company, and it is mutually understood and agreed
that the customers of the Company and the business methods and procedures and
techniques developed by the Company are valuable assets and properties of the
Company. Without limitation, it is also specifically acknowledged that great
trust on the part of the Company has and will reside in Consultant because
Consultant's duties will include involvement in the promotion and development
of the Company's business. Consultant acknowledges that the restrictions and
covenants set forth below constitute a material inducement to the Company to
enter into this Agreement.
Accordingly, the parties deem it necessary to enter into the protective
agreements set forth below, the terms and conditions of which have been
negotiated by and between the parties hereto:
a. Consultant agrees with the Company and for the benefit of the
Company that through the actual date of termination of Consultant's
engagement, and for a period of one (1) year thereafter (the
"Non-Compete Period"), Consultant will not, in his own behalf or on
the behalf of any third party, engage in, manage, operate, join,
control or participate in the ownership, management operation or
control of, or be connected in any manner with, directly or
indirectly, in any business conducted within the Territories
(as defined below) which competes with the business of the
Company (as such exists during the term of Consultant's engagement);
provided, however, Consultant's relationship with Advanta Corp.,
whether direct or indirect, either during the Consulting Term or the
Non-Compete Period, shall not be prohibited by, and shall not
constitute a breach of, the provisions of this subparagraph 6.3. As
used in this Agreement, the term "Territories" shall mean the States
of Arizona, California, Colorado, Connecticut, Florida, Georgia,
Iowa, Illinois, Kansas, Massachusetts, Minnesota, Missouri, Nebraska,
Nevada, New Mexico, North Carolina, North Dakota,
4
<PAGE>
Oklahoma, Oregon, South Carolina, South Dakota,
Tennessee, Texas, Utah and Washington and any other state
in which at least 5% of the loans acquired by the Company
originated (determined by the location of the dealers from
whom the loans were purchased). Provided, however, the
foregoing restriction shall not prevent Consultant from
owning less than 5% of publicly traded securities of any
company engaged in a business competing with that of the
Company.
b. Consultant agrees that during his engagement by the
Company and for a period of twelve (12) months following
the termination, for whatever reason, of his engagement
by the Company, he will not, either directly or
indirectly, on his own behalf or in the service or on
behalf of others solicit, divert or hire away, or in any
manner attempt to solicit, divert or hire away to any
competitor of the Company, any person employed by the
Company, whether or not such employee is a full-time
employee or a temporary employee of the Company, and
whether or not such employment was pursuant to a written
or oral contract of employment and whether or not such
employment was for a determined period or was at will.
6.4 SEVERABILITY. The covenants of Consultant set forth in this
paragraph 6 are separate and independent covenants for which valuable
consideration has been or will be paid or given, receipt of which is
acknowledged by Consultant, and have also been made by Consultant to induce
the Company to enter into this Agreement. Each of the aforesaid covenants may
be availed of or relied upon by the Company in any court of competent
jurisdiction.
6.5 SPECIFIC ENFORCEMENT. Consultant understands and agrees that a
breach by him of any provisions of this Agreement will cause the Company
irreparable injury and damage which cannot by compensable by receipt of money
damages. Consultant, therefore, expressly agrees that the Company shall be
entitled, in addition to any other remedies legally available, to injunctive
and/or other equitable relief to prevent a breach of this Agreement or any
part thereof.
7. OWNERSHIP OF PROPRIETARY INFORMATION. All Proprietary Information
prepared, created or assembled by Consultant or caused by Consultant to be
prepared, created or assembled in connection with this Agreement, as well as
any copyright, patent and trademark rights related thereto, shall be work
made for hire and shall at all times remain the sole and exclusive property
of the Company.
8. RELATIONSHIP OF PARTIES. Consultant is engaged by the Company only
for the purpose and to the extent set forth in this Agreement, and
Consultant's relationship to the Company shall, during the period covered by
this Agreement, be that of an independent contractor. Consultant shall not be
considered an employee of the Company and shall not be entitled to
participate in any plans, arrangements or distributions by the Company
pertaining to or in connection with any insurance, pension, stock, bonus,
profit
5
<PAGE>
sharing or similar employee benefits given employees of the Company.
Consultant shall be under the control of the Company as to the result of
Consultant's work only and not as to the means by which such result is
accomplished. Consultant shall not represent that Consultant has any power to
bind the Company or to assume or to create any obligation or responsibility,
express or implied, on behalf of the Company or in its name. The Company
shall not be liable for any losses, injuries, damages, or claims of any
nature whatsoever arising out of Consultant's activities or representations
under or in connection with this Agreement.
9. TAXES. Consultant acknowledges and agrees that it shall be the
obligation of Consultant to report as income, all compensation received by
Consultant hereunder and agrees to reimburse, indemnify and to hold and save
the Company harmless to the extent of any obligations imposed by law on the
Company to pay withholding taxes, social security, unemployment or
disability liability insurance or similar items in connection with any
compensation paid to the Consultant.
10. MISCELLANEOUS.
10.1 VALIDITY. Whenever possible, each provision of this Agreement
shall be interpreted so that it is valid under applicable law. In case one or
more of the provisions of this Agreement is to any extent found to be
invalid, illegal or unenforceable in any respect under applicable law, that
provision shall still be effective to the extent it remains valid and the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby. If, moreover,
any one or more of the restrictions contained in this Agreement is for any
reason held excessively broad, it shall be construed or rewritten
(blue-lined) so as to be enforceable to the extent of the greatest protection
to the Company compatible with applicable law.
10.2 APPLICABLE LAW. This Agreement is entered into in the State of
Minnesota and shall be construed, interpreted and enforced according to the
statutes, rules of law and court decisions of said state.
10.3 ENTIRE AGREEMENT; AMENDMENTS. This Agreement and the Option
Agreement constitute the entire agreement of the Company and Consultant with
respect to Consultant's engagement by the Company and supercedes any other
understandings or agreements, whether written or oral. This Agreement may be
amended or superceded only by an agreement in writing by the Company and
Consultant.
10.4 NOTICES. All notices, requests, demands and other communications
provided for by this Agreement shall be in writing and shall be sufficiently
given if and when mailed by registered or certified mail, return receipt
requested, to the Company and its executive office and to Consultant at his
address set forth below or in either case such other address specified by a
party hereto in a written notice hereunder, or when personally delivered.
6
<PAGE>
10.5 BINDING EFFECT. This Agreement shall be binding upon and inure to
the benefit of the Company and its successors and assigns. This Agreement
shall also be binding upon the inure to the benefit of Consultant and his
heirs and representatives. This Agreement may not be assigned by either party
without the prior written consent of the other party.
10.6 RESERVATION OF RIGHTS. Nothing contained herein shall limit any
other rights the Company has at law in connection with Consultant's
obligations to the Company, all of which are preserved.
10.7 SURVIVAL. Notwithstanding any termination of Consultant's
engagement hereunder or any termination of this Agreement, the provisions of
paragraph 6 hereof shall survive termination of this Agreement and
termination of Consultant's engagement hereunder.
10.8 1994 AGREEMENT. The parties' obligations under this Agreement are
in addition to, and not in lieu of, those obligations of the parties under that
certain Consulting Agreement dated December 19, 1994 between the parties.
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed as of the day and year first above written.
Olympic Financial Ltd.
By /s/ Jeffrey C. Mack
- ---------------------------------- -----------------------------
Warren Kantor Jeffrey C. Mack
720 Springmill Road Its Chief Executive Officer
Villanova, PA 19185 7825 Washington Avenue South
Minneapolis, MN 55439-2435.
7
<PAGE>
CONSULTING AGREEMENT
EXHIBIT A
CONSULTANT'S SERVICES. Consultant shall endeavor to promote the interests of
the Company and shall provide to the Company advice as to its manner of doing
business in such of the following areas as are requested by the Company:
long range planning,
tax strategies development, treasury function review,
internal audit function review,
asset liability strategy development,
asset backed securitization development,
asset backed securitization planning,
corporate development (merger, acquisition)
investor relations,
due diligence (re: acquisitions),
financing strategies,
SEC relations,
capital raising strategies,
reserving architecture,
asset quality review, and
note program strategy.
Consultant shall provide advice and services as to such other related areas
of the business of the Company as may be reasonably requested from time to
time by the Chief Executive Officer of the Company. The Company desires to
retain the services of Consultant, even though Consultant may become disabled
or incapacitated. Accordingly, notwithstanding anything to the contrary
contained herein, it is expressly understood that the inability of Consultant
from time to time to render services to the Company by reason of absences, or
temporary, or permanent illness, disability, or incapacity, or for any
other reasonable cause beyond the control of Consultant, shall not constitute
a failure by him to perform, his obligations hereunder and shall not be
deemed a breach or default by him hereunder.
8
<PAGE>
EXHIBIT B
OLYMPIC FINANCIAL LTD.
NON-STATUTORY STOCK OPTION AGREEMENT
Olympic Financial Ltd., a Minnesota corporation (the "Company"), hereby
grants to Warren Kantor (the "Optionee"), an option (the "Option") to
purchase a total of 40,000 shares of the $.01 par value common stock ("Common
Stock") of the Company (the "Shares"), at the price determined as provided
herein, and in all respects subject to the terms, definitions and provisions
hereof. The grant of this Option is subject to the approval thereof by the
shareholders of the Corporation (if such approval is required by applicable
laws or regulations) and by the Board of Directors of the Corporation.
1. NATURE OF THE OPTION. This Non-Statutory Stock Option is not intended
to qualify as an Incentive Stock Option as defined in Section 422A of the Code.
2. EXERCISE PRICE. The exercise price is $16.25 for each share of Common
Stock, which price the Board of Directors of the Company (the "Board") has
determined is not less than the fair market value per share of the Common
Stock on the date of grant.
3. EXERCISE OF OPTION. The Option shall be exercisable during its term
as follows:
(i) RIGHT TO EXERCISE.
(a) Subject to subsections 3(i)(b), (c) and (d) below, this
Option shall be exercisable to the extent of one hundred percent (100%) of
the Shares subject to the Option commencing on December 31, 1996. Provided,
however, as of the date of the occurrence of the first to occur of any of the
following events prior to December 31, 1996, notwithstanding the previous
sentence of this subsection 3(i)(a), this Option shall be exercisable
cumulatively to the extent of one hundred percent (100%) of the Shares
subject to the Option regardless of whether otherwise exercisable by the
Optionee:
x) the termination by the Company of the Consulting
Agreement dated December 31, 1996, by and between the Company
and the Optionee (the "Consulting Agreement") without Cause as
such term is defined in the Consulting Agreement; or
y) a "Change of Control" of the Company. As used herein
the term "Change of Control" shall mean any transaction or
series of transactions by which the Company shall merge with
or consolidate into any other person or lease or sell
substantially all of its and its subsidiaries assets (other
than asset sales in connection with automobile loan
securitization transactions) substantially as an entirety to
any other person or by which any person or group (within the
meaning of Rule 13d-5 under the Securities Exchange Act of
1934) acquires, directly or
1
<PAGE>
indirectly, 51% or more of the Company's outstanding common
stock (calculated on a fully diluted basis).
(b) This Option may not be exercised for a fraction of a
share.
(c) In the event of Optionee's death, disability or other
termination of the Consulting Agreement, the exercisability of the Option is
governed by Section 7, 8 and 9 below, subject to the limitations contained in
subsection 3(i)(d).
(d) In no event may this Option be exercised after the
date of expiration of the term of this Option as set forth in Section 11
below.
(ii) METHOD OF EXERCISE. This Option shall be exercisable by
written notice which shall state the election to exercise the Option, the
number of Shares in respect of which the Option is being exercised, and such
other representations and agreements as to the holder's investment intent with
respect to such shares of Common Stock as may be required by the Company.
Such written notice shall be signed by the Optionee and shall be delivered in
person or by certified mail to the Secretary of the Company. The written
notice shall be accompanied by payment of the exercise price. Until
certificates for the Shares are issued to the Optionee, such Optionee shall
not have any rights as a shareholder of the Company.
No Shares will be issued pursuant to the exercise of an Option unless
such issuance and such exercise shall comply with all relevant provisions of
law and the requirements of any stock exchange upon which the Shares may
then be listed. Assuming such compliance, for income tax purposes the Shares
shall be considered transferred to the Optionee on the date of which the
Option is exercised with respect to such Shares.
4. OPTIONEE'S REPRESENTATIONS. In the event the Shares purchasable
pursuant to the exercise of this Option have not been registered under the
Securities Act of 1933, as amended, at the time this Option is exercised,
Optionee shall, concurrently with the exercise of all or any portion of this
Option, deliver to the Company his Investment Representation Statement in the
form attached hereto as Exhibit A.
5. METHOD OF PAYMENT. Payment of the exercise price shall be by (i)
cash; (ii) check or (iii) if authorized by the Board of Directors of the
Company, the surrender of other shares of Common Stock of the Company which
(A) either have been owned by the Optionee for more than six (6) months on
the date of surrender or were not acquired, directly or indirectly, from the
Company and (B) have a fair market value (as determined by the Board) on the
date of surrender equal to the exercise price of the Shares as to which the
Option is being exercised.
6. RESTRICTIONS ON EXERCISE. This Option may not be exercised if the
issuance of such Shares upon such exercise or the method or payment of
consideration for such shares would constitute a violation of any applicable
federal or state securities or other law or regulation, including any rule
under Part 207 of Title 12 of the Code of Federal Regulations ("Regulation
G") as promulgated by the Federal Reserve Board. As a condition to the
exercise of this Option, the
2
<PAGE>
Company may require Optionee to make any representation and warranty to the
Company as may be required by an applicable law or regulation.
7. TERMINATION OF STATUS AS A DIRECTOR. In the event of termination of
Optionee's status as a member of the Board of Directors of the Company for any
reason other than his death or disability, Optionee may, but only within six
months after the date of such termination (but in no event later than the
date of expiration of the term of this Option as set forth in Section 11
below), exercise this Option to the extent that he was entitled to exercise
it at the date of such termination. To the extent that Optionee was not
entitled to exercise this Option at the date of such termination, or if he
does not exercise this Option within the time specified herein, the Option
shall terminate.
8. DISABILITY OF OPTIONEE. Notwithstanding the provisions of Section 7
above, in the event of termination of Optionee's status as a member of the
Board of Directors of the Company as a result of his disability, he may, but
only within one year from the date of such termination (but in no event later
than the date of expiration of the term of this Option as set forth in
Section 11 below), exercise his Option to the extent he was entitled to
exercise it at the date of such termination. To the extent that Optionee was
not entitled to exercise the Option at the date of termination, or if he does
not exercise such Option (which he was entitled to exercise) within the time
specified herein, the Option shall terminate.
9. DEATH OF OPTIONEE. In the event of the death of Optionee:
(i) during the term of this Option and while a member of the Board
of Directors of the Company and having been a continuous member thereof (as
determined by the Board in its sole discretion) since the date of grant of
the Option, the Option may be exercised, at any time within one (1) year
following the date of death (but in no event later than the date of
expiration of the term of this Option as set forth in Section 11 below), by
Optionee's estate or by a person who acquired the right to exercise the
Option by bequest or inheritance, but only to the extent Optionee was
entitled to exercise the Option at the date of death; or
(ii) within three months after termination of Optionee's status as
a member of the Board of Directors, the Option may be exercised, at any time
within nine (9) months following the date of death (but in no event later than
the date of expiration of the term of this Option as set forth in Section 11
below), by Optionee's estate or by a person who acquired the right to
exercise the Option by bequest or inheritance, but only to the extent of the
right to exercise that had accrued at the date of his status as a member
thereof.
10. NON-TRANSFERABILITY OF OPTION. This Option may not be transferred in
any manner otherwise than by will or by the laws of descent or distribution
and may be exercised during the lifetime of Optionee only by him. The terms
of this Option shall be binding upon the Optionee and his or her personal
representatives, heirs, successors and assigns.
11. TERM OF OPTION. This Option may not be exercised after December 31,
2005, and may be exercised only in accordance with the terms of this Option.
3
<PAGE>
12. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR MERGER. The number of
shares of Common Stock covered by this Option and the exercise price shall be
proportionately adjusted for any increase or decrease in the number of issued
and outstanding shares of Common Stock resulting from a stock split, reverse
stock split, stock dividend, combination or reclassification of the Common
Stock, or any other increase or decrease in the number of issued shares of
Common Stock effected without receipt of consideration by the Company;
provided, however, that conversion of any convertible securities of the
Company shall not be deemed to have been "effected without receipt of
consideration." Such adjustment shall be made by the Board, whose
determination in that respect shall be final, binding and conclusive. Except
as expressly provided herein, no issuance by the Company of shares of stock
of any class, or securities convertible into shares of stock of any class, or
options or rights to purchase shares of stock of any class shall affect, and
no adjustment by reason thereof shall be made with respect to, the number or
price of shares of Common Stock subject to this Option.
In the event of the proposed dissolution or liquidation of the Company,
the Option will terminate immediately prior to the consummation of such
proposed action, unless otherwise provided by the Board. The Board may, in
the exercise of its sole discretion in such instances, declare that the
Option shall terminate as of a date fixed by the Board and give the Optionee
the right to exercise his Option as to all or any part of the Shares. In the
event of a change of control of the Company, the Board shall notify the
Optionee that the Option shall be fully exercisable for a period of ten (10)
days from the date of such notice, and the Option will terminate upon the
expiration of such period.
13. NO RIGHTS AS SHAREHOLDER. The Optionee shall have no rights as a
shareholder with respect to any Shares subject to this Option prior to the
date of issuance to him of a certificate or certificates for such shares.
DATE OF GRANT: January 1, 1996
OLYMPIC FINANCIAL LTD.
By: /s/ Jeffrey C. Mack
-----------------------------------
Jeffrey C. Mack
Title: Chief Executive Officer
4
<PAGE>
OPTIONEE ACKNOWLEDGES RECEIPT OF A COPY OF THE OPTION AGREEMENT AND
CERTAIN INFORMATION RELATED THERETO AND REPRESENTS THAT HE IS FAMILIAR WITH
THE TERMS AND PROVISIONS THEREOF, AND HEREBY ACCEPTS THIS OPTION SUBJECT TO
ALL OF THE TERMS AND PROVISIONS THEREOF. OPTIONEE HAS REVIEWED THIS OPTION IN
ITS ENTIRETY, HAS HAD AN OPPORTUNITY TO OBTAIN THE ADVICE OF COUNSEL PRIOR TO
EXECUTING THIS OPTION AND FULLY UNDERSTANDS ALL PROVISIONS OF THE OPTION.
OPTIONEE HEREBY AGREES TO ACCEPT AS BINDING, CONCLUSIVE AND FINAL ALL
DECISIONS OR INTERPRETATIONS OF THE BOARD UPON ANY QUESTIONS ARISING UNDER
THE OPTION. OPTIONEE FURTHER AGREES TO NOTIFY THE COMPANY UPON ANY CHANGE IN
THE RESIDENCE ADDRESS INDICATED BELOW.
Dated: January 1 , 1996 Optionee:
/s/ Warren Kantor
-------------------------------------
Warren Kantor
Residence Address:
720 Springmill Road
Villanova, PA 19185
5
<PAGE>
EXHIBIT A
INVESTMENT REPRESENTATION STATEMENT
PURCHASER: Warren Kantor
ISSUER: OLYMPIC FINANCIAL LTD.
SECURITY: COMMON STOCK
AMOUNT: 40,000 SHARES
DATE: ,
In connection with the purchase of the Common Stock ("Securities") of OLYMPIC
FINANCIAL LTD. (the "Company"), the undersigned represents to the Company the
following:
(a) I am aware of the Company's business affairs and financial
condition, and have acquired sufficient information about the Company to
reach an informed and knowledgeable decision to acquire the Securities. I am
purchasing these Securities for my own account for investment purposes only
and not with a view to, or for the resale in connection with, any
"distribution" thereof for purposes of the Securities Act of 1933, as amended
(the "Securities Act").
(b) I understand that the Securities have not been registered
under the Securities Act in reliance upon a specific exemption therefrom,
which exemption depends upon, among other things, the bona fide nature of my
investment intent as expressed herein. In this connection, I understand that,
in the view of the Securities and Exchange Commission (the "SEC"), the
statutory basis for such exemption may be unavailable if my representation
was predicated solely upon a present intention to hold these Securities for
the minimum capital gains period specified under tax statutes, for a deferred
sale, for or until an increase or decrease in the market price of the
Securities, or for a period of one year or any other fixed period in the
future.
(c) I further understand that the Securities must be held
indefinitely unless subsequently registered under the Securities Act or
unless an exemption from registration is otherwise available. Moreover, I
understand that the Company is under no obligation to register the
Securities. In addition, I understand that the certificate evidencing the
Securities will be imprinted with a legend which prohibits the transfer of
the Securities unless they are registered or such registration is not
required in the opinion of counsel for the Company.
(d) I am familiar with the provisions of Rule 701 and Rule 144,
each promulgated under the Securities Act, which, in substance, permit
limited public resale of "restricted securities" acquired, directly or
indirectly, from the issuer thereof, in a non-public
6
<PAGE>
offering subject to the satisfaction of certain conditions. Rule 701 provides
that if the issuer qualifies under Rule 701 at the time of issuance of the
Securities, such issuance will be exempt from registration under the
Securities Act. In the event the Company later becomes subject to the
reporting requirements of Section 13 or 15(d) of the Securities Exchange Act
of 1934, ninety (90) days thereafter the securities exempt under Rule 701 may
be resold, subject to the satisfaction of certain of the conditions specified
by Rule 144, including other things: (1) the sale being made through a broker
in an unsolicited "broker's transaction" or in transactions directly with a
market maker (as said term is defined under the Securities Exchange Act of
1934); and, in the case of an affiliate, (2) the availability of certain
public information about the Company, and the amount of securities being sold
during any three month period not exceeding the limitations specified in Rule
144(e), if applicable. Notwithstanding this paragraph (d), I acknowledge and
agree to the restrictions set forth in paragraph (e) hereof.
In the event that the Company does not qualify under Rule 701 at the
time of issuance of the Securities, then the Securities may be resold in
certain limited circumstances subject to the provisions of Rule 144, which
requires among other things: (1) the availability of certain public
information about the Company, (2) the resale occurring not less than two
years after the party has purchased, and made full payment for, within the
meaning of Rule 144, the securities to be sold; and, in the case of an
affiliate, or of a non-affiliate who has held the securities less than three
years, (3) the sale being made through a broker in an unsolicited "broker's
transaction" or in transactions directly with a market maker (as said term is
defined under the Securities Exchange Act of 1934) and the amount of
securities being sold during any three month period not exceeding the
specified limitations stated therein, if applicable.
(e) I further understand that in the event all of the applicable
requirements of Rule 144 or Rule 701 are not satisfied, registration under
the Securities Act, compliance with Regulation A, or some other registration
exemption will be required; and that, notwithstanding the fact Rule 144 and
Rule 701 are not exclusive, the staff of the SEC has expressed its opinion
that persons proposing to sell private placement securities other than in a
registered offering and otherwise than pursuant to Rule 144 or Rule 701 will
have a substantial burden of proof in establishing that an exemption from
registration is available for such offers or sales, and that such persons and
their respective brokers who participate in such transactions do so at their
own risk.
Signature of Purchaser:
/s/ Warren Kantor
---------------------------------------
Warren Kantor
Date: January 1, 1996
7
<PAGE>
[LETTERHEAD]
August 26, 1996
Mr. Warren Kantor
c/o Olympic Financial Ltd.
7825 Washington Avenue South
Minneapolis, MN 55439-2435
Dear Mr. Kantor:
This letter is to confirm the terms pursuant to which you have agreed to
serve as Chairman of the Executive Committee (the "Committee") of the Board of
Directors (the "Board") of Olympic Financial Ltd. (the "Company"), effective as
of August 26, 1996.
You shall serve as Chairman of the Committee until the earliest of:
(i) your removal by the Board, (ii) your resignation from such position, or
(iii) August 14, 1997. During this period you will normally devote two and one
half (2 1/2) days per week to the affairs of the Company, two (2) of which
will normally be spent at the Company's offices in Minneapolis, Minnesota.
It is understood that you have unchangeable commitments approximately one
week per month when you will not be in Minneapolis, Minnesota and you will
only be available by phone. In your capacity as Chairman of the Committee,
you shall serve as neither an employee nor an executive officer of the
Company.
In consideration for your services as Chairman of the Committee, you shall
be entitled to the following compensation:
1. 200,000 options to purchase shares of the Company's common stock at
$17.375 per share (100,000 options to be immediately vested and
exercisable, and the remainder to be proportionately vested and
exercisable on the basis of your tenure as Chairman of the Committee
on and after February 14, 1997 through August 14, 1997). Options to
purchase shares which have not vested on the date your duties as
Chairman of the Committee cease shall be forfeited.
2. A bonus of up to 25,714 shares of the Company's common stock to be
paid as follows: (i) you will receive a bonus of 12,857 shares on
August 26, 1996, and (ii) if your duties as Chairman of the Committee
end on or after February 14, 1997, the number of additional bonus
shares you
<PAGE>
Mr. Warren Kantor
August 26, 1996
Page 2
will be determined by multiplying 12,857 shares by the percentage of
the time that you will serve as Chairman of the Committee for the
period from February 14, 1997 through August 14, 1997. Such
additional shares, if any, will be issued upon the termination of your
service as Chairman.
3. The Company shall provide reimbursement for all reasonable expenses
incurred in connection with the performance of your duties as the
Chairman of the Committee, including expenses for travel, lodging,
telephonic communications and similar items.
If the terms of this letter meet with your approval and understanding,
please so indicate by signing your name as printed below.
OLYMPIC FINANCIAL LTD.
By: The Compensation Committee of its
Board of Directors
/s/ James L. Davis
-----------------------------------
James L. Davis
Agreed and Accepted as of
the date first written above.
/s/ Warren Kantor
- -----------------------------
Warren Kantor
<PAGE>
[LETTERHEAD]
December 18, 1996
Mr. Warren Kantor
c/o Olympic Financial Ltd.
7825 Washington Avenue South
Minneapolis, MN 55439
Re: Letter Agreement dated August 26, 1996
Dear Mr. Kantor:
By letter agreement dated August 26, 1996 (the "Letter Agreement") you and
Olympic Financial Ltd. ("Olympic") set forth the terms and conditions pursuant
to which you would act as Chairman of the Executive Committee of the Board of
Directors of Olympic. On or about such date, you were awarded an option to
purchase 200,000 shares of Olympic Common Stock (with 100,000 of such options
vesting as of such date) and were issued 12,857 shares of such stock. In
addition, it was agreed that Olympic would grant to you a bonus comprised of the
vesting of up to an additional 100,000 of such options and the issuance of up
to an additional 12,857 shares of such stock. The number of bonus option shares
vesting and the number of bonus shares granted was to be dependent upon the days
you served in your capacity of the Chairman of the Executive Committee on and
after February 14, 1997.
In light of the changes in circumstances since the date of the Letter
Agreement including, without limitation, the likelihood that the Company will
not be acquired in the near future, the number of hours you have served in your
capacity as Chairman to date and the likelihood that a Chief Executive Officer
of the Company will be selected in the near future, the Board and the
Compensation Committee have concluded that it is in the best interest of Olympic
that the vesting of the 100,000 bonus options granted on August 26, 1996 be
accelerated to February 14, 1997 in the event you continue to act as the
Chairman of the Executive Committee or Chairman of the Board through such date
and that the additional 12,857 bonus shares of common stock also be issued on
such date if you hold either such position through such date. Notwithstanding
such vesting and issuance, it is the Company's understanding that you will
continue to act in either or both
<PAGE>
Warren Kantor
December 26, 1996
Page 2
such capacities through August 14, 1997 or until such earlier date as the Board
removes you therefrom.
If the above-stated terms are acceptable to you, please so indicate by
signing below and returning this letter to me.
OLYMPIC FINANCIAL LTD.
By: The Compensation Committee of
its Board of Directors
By: /s/James L. Davis
----------------------------
James L. Davis
Its Chairman
Agreed and Accepted as of the
date first above written.
/s/ Warren Kantor
- ----------------------------
Warren Kantor
JDA:mrs
<PAGE>
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT, herein referred to as "Agreement" made and
entered into as of the 1st day of January, 1997, by and between Olympic
Financial Ltd., a Minnesota corporation (the "Company") and Warren Kantor
("Consultant").
WHEREAS, the Company engages in the sales finance business, and
WHEREAS, the Consultant has numerous years of experience in the financial
services accounting and finance profession, and
WHEREAS, the Company desires to engage Consultant to perform certain
consulting services for the Company, and
WHEREAS, Consultant is seeking such engagement, and
WHEREAS, the parties desire to set forth the terms and conditions of
consulting services to be provided by Consultant to the Company.
NOW, THEREFORE, in consideration of the promises and the mutual benefits
which will accrue to the parties to this Agreement, it is mutually understood
and agreed as follows:
1. DESCRIPTION OF SERVICES. Consultant shall furnish and perform the
consulting services pertinent to the operations of the Company which are
specifically set forth in Exhibit A attached hereto and made a part hereof (the
"Consulting Services"). The Consulting Services shall be provided as needed by
the Company; provided, however, that Consulting Services are not to exceed four
hundred fifty (450) hours. Consultant and the Company may from time to time
agree that additional hours are desired, for which additional Consulting
Services Consultant shall be paid at an hourly rate to be agreed upon by
Consultant and the Company. The terms of this Agreement shall apply to any such
additional hours per year. Such services shall be performed to be best of the
Consultant's ability and in a competent, efficient and satisfactory manner. The
Company acknowledges that Consultant is engaged in various other substantial
business activities, that the Company's request for Consulting Services
hereunder from Consultant shall not unreasonably interfere with Consultant's
other business activities and that Consultant shall be entitled to engage in
other business for other persons or entities during the term hereof subject to
the provisions of paragraph 6 hereof.
2. PAYMENT FOR SERVICES. In consideration of the Consulting Services
to be provided by Consultant to the Company and of other obligations of
Consultant contained herein, the Company shall, concurrent with the execution
hereof, execute and deliver to Consultant a non-statutory stock option in the
form and substance of Exhibit B attached hereto (the "Option Agreement").
Pursuant to the Option Agreement, the Company shall grant to Consultant the
option to purchase up to 125,000 shares of the $.01 par value
1
<PAGE>
common stock of the Company ("Common Stock") at an option price equal to the
fair market value of the Common Stock on the date of this Agreement, subject to
the terms and conditions of the Option Agreement.
3. REIMBURSEMENT OF EXPENSES. Consultant shall be reimbursed for any
and all travel or other expenses borne or expended by Consultant in connection
with the Consulting Services. Any reasonable expenses incurred by Consultant in
performing his duties hereunder shall be reimbursed by the Company when he
furnishes appropriate documentation.
4. TERM OF ENGAGEMENT. Subject to the terms and conditions hereof, the
term of Consultant's engagement hereunder (the "Consulting Term") shall commence
as of the date of this Agreement and shall continue until December 31, 1997,
unless earlier terminated pursuant to paragraph 5.1.
5. TERMINATION.
5.1 Termination. Consultant's engagement hereunder shall terminate
upon the happening of any of the following events:
a. by the mutual written agreement of the Company and Consultant;
b. upon the death of Consultant;
c. upon 14 days' prior written notice from the Company to Consultant
with Cause (as defined below); or
d. upon 14 days' prior written notice from Consultant to the Company,
if the Company shall fail to make any payment to Consultant required
to be made pursuant hereto within 15 days after such payment was
due.
As used in this Agreement, the term "Cause" shall mean (i) any fraud,
misappropriation or embezzlement by Consultant in connection with the business
of the Company; (ii) any failure by Consultant to perform the Consulting
Services assigned hereunder, provided that Consultant shall first have received
a written notice from the Company which sets forth in reasonable detail the
manner in which Consultant has failed to perform his duties, in which case
Consultant shall have a period of thirty (30) days to cure the same, unless the
same cannot be reasonably cured within said thirty (30) day period, in which
event Consultant shall have up to an additional ninety (90) days to cure the
same; (iii) any material breach by Consultant of this Agreement, provided that
Consultant shall first have received written notice from the Company which sets
forth in reasonable detail the breach by Consultant and Consultant shall have a
period of thirty (30) days after receipt of such notice to cure such breach,
unless the same cannot be reasonably cured within said thirty (30) day period,
in which event Consultant shall have up to an additional ninety (90) days to
cure the same; (iv) willful destruction of the
2
<PAGE>
property or records of the Company; (v) dishonesty or deliberate falsification
of the Company records; or (vi) harassment (including sexual harassment) of a
Company employee. The sole remedy of the Company in the event of a breach of
this Agreement shall be to terminate this Agreement.
6. PROPRIETARY INFORMATION.
6.1 PROPRIETARY INFORMATION. Except by the prior written permission
from the Company, Consultant shall never disclose or use any proprietary
information ("Proprietary Information") of the Company of which Consultant
becomes or has become informed during his past or future engagement with the
Company or any of its subsidiaries, whether or not developed by Consultant,
except as required by his duties to the Company or any of its subsidiaries.
Proprietary Information shall mean information concerning the Company, its
business or its customers that derives independent economic value, actual or
potential, from not being generally known to, and not being readily
ascertainable by proper means by, other persons who can derive economic value
from its disclosure or use. Proprietary Information includes, but is not
limited to, the following types of information and other information of a
similar nature (whether or not reduced to writing), all of which Consultant
agrees constitutes the valuable trade secrets of the Company; research,
development, know-how, plans and processes, marketing plans and techniques,
existing and contemplated products and services, customer and prospect names and
related information, prices, sales, credit scoring, personnel, computer programs
and related documentation, technical and strategic plans, and finances.
Proprietary Information also includes any information of the foregoing nature
that the Company treats as proprietary or designates as Proprietary Information,
whether or not owned or developed by the Company. Information does not lose its
Proprietary Information status merely because it was known by a limited number
of other persons or entities or because it did not entirely originate with the
Company. Such nondisclosure and non-use shall mean, without limiting the
generality of the foregoing, during the Consulting Term and at all times
thereafter, the Consultant agrees to receive, maintain, and use Proprietary
Information in the strictest confidence and, except with the consent of the
Company will not directly or indirectly reveal, report, publish, disclose, or
transfer any Proprietary Information to any person, firm, corporation, or other
entity or utilize any Proprietary Information for the Consultant's own benefit
or intended benefit or for the benefit or intended benefit of any other person,
firm, corporation or other entity.
6.2 DELIVERY OF PROPRIETARY INFORMATION. Upon the request of the
Company or the termination of his engagement, Consultant agrees to deliver to
the Company all materials that include Proprietary Information, including
without limitation customer lists, instruction sheets, manuals, computer
programs (including source codes), letters, financial records, notes, notebooks,
reports and copies thereof, and all other materials which are under his control
and which relate to the business of the Company or its subsidiaries. Consultant
agrees and understands that the Proprietary Information and all information
contained therein shall be at all times the property of the Company. Further,
upon termination of his engagement, Consultant agrees to make available to any
person
3
<PAGE>
designated by the Company all information concerning pending or preceding
transactions or programs which may affect the operation of the Company or any of
its subsidiaries about which Consultant has knowledge. The obligations of
Consultant contained in this paragraph are in addition to the obligation of
Consultant to return to the Company, upon the request of the Company or the
termination of his engagement, all property of the Company then in his
possession.
6.3 NON-COMPETITION. It is mutually acknowledged that by virtue of
Consultant's position as a director of the Company and his engagement hereunder,
the Company has divulged and will divulge or make accessible to Consultant, and
Consultant has and will become possessed of, certain valuable and confidential
information concerning the customers, business methods, procedures and
techniques of the Company. It is further understood that Consultant, in the
course of and because of his position as a director of the Company and his
engagement hereunder, has developed and will develop contacts among the
customers of the Company, and it is mutually understood and agreed that the
customers of the Company and the business methods and procedures and techniques
developed by the Company are valuable assets and properties of the Company.
Without limitation, it is also specifically acknowledged that great trust on the
part of the Company has and will reside in Consultant because Consultant's
duties will include involvement in the promotion and development of the
Company's business. Consultant acknowledges that the restrictions and covenants
set forth below constitute a material inducement to the Company to enter into
this Agreement.
Accordingly, the parties deem it necessary to enter into the protective
agreements set forth below, the terms and conditions of which have been
negotiated by and between the parties hereto:
a. Consultant agrees with the Company and for the benefit of the Company
that through the actual date of termination of Consultant's
engagement, and for a period of one (1) year thereafter (the
"Non-Compete Period"), Consultant will not, in his own behalf or on
the behalf of any third party, engage in, manage, operate, join,
control or participate in the ownership, management operation or
control of, or be connected in any manner with, directly or
indirectly, in any business conducted within the Territories (as
defined below) which competes with the business of the Company (as
such exists during the term of Consultant's engagement); provided,
however, Consultant's relationship with Advanta Corp., whether direct
or indirect, either during the Consulting Term or the Non-Compete
Period, shall not be prohibited by, and shall not constitute a breach
of, the provisions of this subparagraph 6.3. As used in this
Agreement, the term "Territories" shall mean the any state in which at
least .5% of the loans acquired by the Company originated (determined
by the location of the dealers from whom the loans were purchased).
Provided, however, the foregoing restriction shall not prevent
Consultant from owning less than
4
<PAGE>
5% of publicly traded securities of any company engaged in a business
competing with that of the Company.
b. Consultant agrees that during his engagement by the Company and for a
period of twelve (12) months following the termination, for whatever
reason, of his engagement by the Company, he will not, either directly
or indirectly, on his own behalf or in the service or on behalf of
others solicit, divert or hire away, or in any manner attempt to
solicit, divert or hire away to any competitor of the Company, any
person employed by the Company, whether or not such employee is a
full-time employee or a temporary employee of the Company, and whether
or not such employment was pursuant to a written or oral contract of
employment and whether or not such employment was for a determined
period or was at will.
6.4 SEVERABILITY. The covenants of Consultant set forth in this
paragraph 6 are separate and independent covenants for which valuable
consideration has been or will be paid or given, receipt of which is
acknowledged by Consultant, and have also been made by Consultant to induce
the Company to enter into this Agreement. Each of the aforesaid covenants may
be availed of or relied upon by the Company in any court of competent
jurisdiction.
6.5 SPECIFIC ENFORCEMENT. Consultant understands and agrees that a breach
by him of any provisions of this Agreement will cause the Company irreparable
injury and damage which cannot by compensable by receipt of money damages.
Consultant, therefore, expressly agrees that the Company shall be entitled, in
addition to any other remedies legally available, to injunctive and/or other
equitable relief to prevent a breach of this Agreement or any part thereof.
7. OWNERSHIP OF PROPRIETARY INFORMATION. All Proprietary Information
prepared, created or assembled by Consultant or caused by Consultant to be
prepared, created or assembled in connection with this Agreement, as well as any
copyright, patent and trademark rights related thereto, shall be work made for
hire and shall at all times remain the sole and exclusive property of the
Company.
8. RELATIONSHIP OF PARTIES. Consultant is engaged by the Company only
for the purpose and to the extent set forth in this Agreement, and Consultant's
relationship to the Company shall, during the period covered by this Agreement,
be that of an independent contractor. Consultant shall not be considered an
employee of the Company and shall not be entitled to participate in any plans,
arrangements or distributions by the Company pertaining to or in connection with
any insurance, pension, stock, bonus, profit sharing or similar employee
benefits given employees of the Company. Consultant shall be under the control
of the Company as to the result of Consultant's work only and not as to the
means by which such result is accomplished. Consultant shall not represent that
Consultant has any power to bind the Company or to assume or to create any
obligation or responsibility, express or implied, on behalf of the Company or in
its name. The
5
<PAGE>
Company shall not be liable for any losses, injuries, damages, or claims of any
nature whatsoever arising out of Consultant's activities or representations
under or in connection with this Agreement.
9. TAXES. Consultant acknowledges and agrees that it shall be the
obligation of Consultant to report as income, all compensation received by
Consultant hereunder and agrees to reimburse, indemnify and to hold and save the
Company harmless to the extent of any obligations imposed by law on the Company
to pay withholding taxes, social security, unemployment or disability liability
insurance or similar items in connection with any compensation paid to
Consultant.
10. MISCELLANEOUS.
10.1 VALIDITY. Whenever possible, each provision of this Agreement shall
be interpreted so that it is valid under applicable law. In case any one or
more of the provisions of this Agreement is to any extent found to be invalid,
illegal or unenforceable in any respect under applicable law, that provision
shall still be effective to the extent it remains valid and the validity,
legality and enforceability of the remaining provisions contained herein shall
not in any way be affected or impaired thereby. If, moreover, any one or more
of the restrictions contained in this Agreement is for any reason held
excessively broad, it shall be construed or rewritten (blue-lined) so as to be
enforceable to the extent of the greatest protection to the Company compatible
with applicable law.
10.2 APPLICABLE LAW. This Agreement is entered into in the State of
Minnesota and shall be construed, interpreted and enforced according to the
statutes, rules of law and court decisions of said state.
10.3 ENTIRE AGREEMENT; AMENDMENTS. This Agreement and the Option
Agreement constitute the entire agreement of the Company and Consultant with
respect to Consultant's engagement by the Company and supersedes any other
understandings or agreements, whether written or oral. This Agreement may be
amended or superseded only by an agreement in writing by the Company and
Consultant.
10.4 NOTICES. All notices, requests, demands and other communications
provided for by this Agreement shall be in writing and shall be sufficiently
given if and when mailed by registered or certified mail, return receipt
requested, to the Company and its executive offices and to Consultant at his
address set forth below or in either case such other address specified by a
party hereto in a written notice hereunder, or when personally delivered.
10.5 BINDING EFFECT. This Agreement shall be binding upon and inure to the
benefit of the Company and its successors and assigns. This Agreement shall
also be binding upon the inure to the benefit of Consultant and his heirs and
representatives. This Agreement may not be assigned by either party without the
prior written consent of the other party.
6
<PAGE>
10.6 RESERVATION OF RIGHTS. Nothing contained herein shall limit any other
rights the Company has at law in connection with Consultant's obligations to the
Company, all of which are preserved.
10.7 SURVIVAL. Notwithstanding any termination of Consultant's engagement
hereunder or any termination of this Agreement, the provisions of paragraph 6
hereof shall survive termination of this Agreement and termination of
Consultant's engagement hereunder.
10.8 1994 AGREEMENT. The parties' obligations under this Agreement are in
addition to, and not in lieu of, those obligations of the parties under that
certain Consulting Agreement dated December 19, 1994 between the parties.
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed as of the day and year first above written.
Olympic Financial Ltd.
/s/ Warren Kantor By: /s/ Scott H. Anderson
- ----------------------------- --------------------------------
Warren Kantor Scott H. Anderson
720 Springmill Road Its Vice Chairman
Villanova, PA 19185 7825 Washington Avenue South
Minneapolis, MN 55439-2435
7
<PAGE>
CONSULTING AGREEMENT
EXHIBIT A
CONSULTANT'S SERVICES. Consultant shall endeavor to promote the interests of
the Company and shall provide to the Company advice as to its manner of doing
business in such of the following areas as are requested by the Company:
long range planning,
tax strategies development, treasury function review,
internal audit function review,
asset liability strategy development,
asset backed securitization development,
asset backed securitization planning,
corporate development (merger, acquisition)
investor relations,
due diligence (re: acquisitions),
financing strategies,
SEC relations,
capital raising strategies,
reserving architecture,
asset quality review, and
note program strategy.
Consultant shall provide advice and services as to such other related areas of
the business of the Company as may be reasonably requested from time to time by
the Chief Executive Officer of the Company. The Company desires to retain the
services of Consultant, even though Consultant may become disabled or
incapacitated. Accordingly, notwithstanding anything to the contrary contained
herein, it is expressly understood that the inability of Consultant from time to
time to render services to the Company by reason of absences, or temporary, or
permanent illness, disability, or incapacity, or for any other reasonable cause
beyond the control of Consultant, shall not constitute a failure by him to
perform his obligations hereunder and shall not be deemed a breach or default by
him hereunder.
8
<PAGE>
OLYMPIC FINANCIAL LTD.
NON-STATUTORY STOCK OPTION AGREEMENT
Olympic Financial Ltd., a Minnesota corporation (the "Company"), hereby
grants to Warren Kantor (the "Optionee"), an option (the "Option") to
purchase a total of 200,000 shares of the $.01 par value common stock
("Common Stock") of the Company (the "Shares"), at the price determined as
provided herein, and in all respects subject to the terms, definitions and
provisions hereof. Such option is granted pursuant to the terms and
conditions of a letter agreement between the Company and the Optionee dated
August 26, 1996. Such letter agreement and the Option have been approved by
the Board of Directors at a meeting thereof held August 26, 1996.
1. NATURE OF THE OPTION. This Non-Statutory Stock Option is not
intended to qualify as an Incentive Stock Option as defined in Section 422A
of the Code.
2. EXERCISE PRICE. The exercise price is $17.375 for each share of
Common Stock.
3. EXERCISE OF OPTION. The Option shall be exercisable during its
term as follows:
(i) RIGHT TO EXERCISE.
(a) Subject to subsections 3(i)(b), (c) and (d) below,
this Option shall be exercisable to the extent of (i) one hundred thousand
(100,000) of the Shares subject to the Option commencing on August 26, 1996;
and (ii) that additional number of Shares equal to one hundred thousand
(100,000) times the percentage (but not more than 100%) determined by
dividing (a) the number of days elapsed from February 14, 1997 to the date
the Optionee ceases for any reason to act as the Chairman of the Executive
Committee of the Company (the "Termination Date") or August 14, 1997,
whichever first occurs; by (b) one hundred eighty two (182), commencing on
the earlier of the Termination Date and August 14, 1997. The Option as to
any Shares which are not exercisable as of the Termination Date pursuant to
the previous sentence of this Subsection 3(i) (a) shall lapse and be null and
void as of the Termination Date.
(b) This Option may not be exercised for a fraction of a
share.
(c) In the event of Optionee's death, the exercisability
of the Option is governed by Section 7 below, subject to the limitations
contained in subsection 3(i)(d).
(d) In no event may this Option be exercised after the
date of expiration of the term of this Option as set forth in Section 9 below.
(ii) METHOD OF EXERCISE. This Option shall be exercisable by
written notice which shall state the election to exercise the Option, the
number of Shares in respect of which the Option is being exercised, and such
other representations and agreements as to the holder's
1
<PAGE>
investment intent with respect to such shares of Common Stock as may be
required by the Company. Such written notice shall be signed by the Optionee
and shall be delivered in person or by certified mail to the Secretary of the
Company. The written notice shall be accompanied by payment of the exercise
price. Until certificates for the Shares are issued to the Optionee, such
Optionee shall not have any rights as a shareholder of the Company.
No Shares will be issued pursuant to the exercise of an Option unless
such issuance and such exercise shall comply with all relevant provisions of
law and the requirements of any stock exchange upon which the Shares may then
be listed. Assuming such compliance, for income tax purposes the Shares shall
be considered transferred to the Optionee on the date on which the Option is
exercised with respect to such Shares.
4. OPTIONEE'S REPRESENTATIONS. In the event the Shares purchasable
pursuant to the exercise of this Option have not been registered under the
Securities Act of 1933, as amended, at the time this Option is exercised,
Optionee shall, concurrently with the exercise of all or any portion of this
Option, deliver to the Company his Investment Representation Statement in the
form attached hereto as Exhibit A.
5. METHOD OF PAYMENT. Payment of the exercise price shall be by (i)
cash; (ii) check; or (iii) if authorized by the Board of Directors of the
Company, the surrender of other shares of Common Stock of the Company which
(A) either have been owned by the Optionee for more that six (6) months on
the date of surrender or were not acquired, directly or indirectly, from the
Company and (B) have a fair market value (as determined by the Board) on the
date of surrender equal to the exercise price of the Shares as to which the
Option is being exercised.
6. RESTRICTIONS ON EXERCISE. This Option may not be exercised if
the issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
federal or state securities or other law or regulation, including any rule
under Part 207 of Title 12 of the Code of Federal Regulations ("Regulation
G") as promulgated by the Federal Reserve Board. As a condition to the
exercise of this Option, the Company may require Optionee to make any
representation and warranty to the Company as may be required by any
applicable law or regulation.
7. DEATH OF OPTIONEE. In the event of the death of Optionee during
the term of this Option, the Option may be exercised, at any time within one
(1) year following the date of death (but in no event later than the date of
expiration of the term of this Option as set forth in Section 9 below), by
Optionee's estate or by a person who acquired the right to exercise the
Option by bequest or inheritance, but only to the extent Optionee was
entitled to exercise the Option at the date of death.
8. NON-TRANSFERABILITY OF OPTION. This Option may not be
transferred in any manner otherwise than by will or by the laws of descent or
distribution and may be exercised during the lifetime of Optionee only by
him. The terms of this Option shall be binding upon the Optionee and his or
her personal representatives, heirs, successors and assigns.
2
<PAGE>
9. TERM OF OPTION. This Option may not be exercised after August
26, 2006, and may be exercised only in accordance with the terms of this
Option.
10. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR MERGER. The number
of shares of Common Stock covered by this Option and the exercise price shall
be proportionately adjusted for any increase or decrease in the number of
issued and outstanding shares of Common Stock resulting from a stock split,
reverse stock split, stock dividend, combination or reclassification of the
Common Stock, or any other increase or decrease in the number of issued
shares of Common Stock effected without receipt of consideration by the
Company; provided, however, that conversion of any convertible securities of
the Company shall not be deemed to have been "effected without receipt of
consideration." Such adjustment shall be made by the Board, whose
determination in that respect shall be final, binding and conclusive. Except
as expressly provided herein, no issuance by the Company of shares of stock
of any class, or securities convertible into shares of stock of any class, or
options or rights to purchase shares of stock of any class shall affect, and
no adjustment by reason thereof shall be made with respect to, the number or
price of shares of Common Stock subject to this Option.
In the event of the proposed dissolution or liquidation of the Company,
each Option will terminate immediately prior to the consummation of such
proposed action, unless otherwise provided by the Board. The Board may, in
the exercise of its sole discretion in such instances, declare that any
Option shall terminate as of a date fixed by the Board and give each Optionee
the right to exercise his or her Option as to all or any part of the
Optioned Stock, including Shares as to which the Option would not otherwise
be exercisable. In the event of a proposed sale of all or substantially all
of the assets of the Company, or the merger of the Company with or into
another corporation, the Option shall be assumed or an equivalent option
shall be substituted by such successor corporation or a parent or subsidiary
of such successor corporation.
11. NO RIGHTS AS SHAREHOLDER. The Optionee shall have no rights as a
shareholder with respect to any Shares subject to this Option prior to the
date of issuance to him of a certificate or certificates for such shares.
DATE OF GRANT: August 26, 1996
OLYMPIC FINANCIAL LTD.
By: /s/ Scott H. Anderson
-------------------------------
Scott H. Anderson
Title: Vice Chairman
3
<PAGE>
OPTIONEE ACKNOWLEDGES RECEIPT OF A COPY OF THE OPTION AGREEMENT AND
CERTAIN INFORMATION RELATED THERETO AND REPRESENTS THAT HE IS FAMILIAR WITH
THE TERMS AND PROVISIONS THEREOF, AND HEREBY ACCEPTS THIS OPTION SUBJECT TO
ALL OF THE TERMS AND PROVISIONS THEREOF. OPTIONEE HAS REVIEWED THIS OPTION
IN ITS ENTIRETY, HAS HAD AN OPPORTUNITY TO OBTAIN THE ADVICE OF COUNSEL PRIOR
TO EXECUTING THIS OPTION AND FULLY UNDERSTANDS ALL PROVISIONS OF THE OPTION.
OPTIONEE HEREBY AGREES TO ACCEPT AS BINDING, CONCLUSIVE AND FINAL ALL
DECISIONS OR INTERPRETATIONS OF THE BOARD UPON ANY QUESTIONS ARISING UNDER
THE OPTION. OPTIONEE FURTHER AGREES TO NOTIFY THE COMPANY UPON ANY CHANGE IN
THE RESIDENCE ADDRESS INDICATED BELOW.
Optionee:
Dated: August 26, 1996 /s/ Warren Kantor
------------------------------
Warren Kantor
Residence Address:
720 Springmill Road
Villanova, PA 19185
4
<PAGE>
EXHIBIT A
INVESTMENT REPRESENTATION STATEMENT
PURCHASER: Warren Kantor
ISSUER: OLYMPIC FINANCIAL LTD.
SECURITY: COMMON STOCK
AMOUNT: ______ SHARES
DATE: __________, ____
In connection with the purchase of the Common Stock ("Securities") of OLYMPIC
FINANCIAL LTD. (the "Company"), the undersigned represents to the Company the
following:
(a) I am aware of the Company's business affairs and financial
condition, and have acquired sufficient information about the Company to reach
an informed and knowledgeable decision to acquire the Securities. I am
purchasing these Securities for my own account for investment purposes only and
not with a view to, or for the resale in connection with, any "distribution"
thereof for purposes of the Securities Act of 1933, as amended (the "Securities
Act").
(b) I understand that the Securities have not been registered under
the Securities Act in reliance upon a specific exemption therefrom, which
exemption depends upon, among other things, the bona fide nature of my
investment intent as expressed herein. In this connection, I understand that,
in the view of the Securities and exchange Commission (the "SEC"), the statutory
basis for such exemption may be unavailable if my representation was predicated
solely upon a present intention to hold these Securities for the minimum capital
gains period specified under tax statutes, for a deferred sale, for or until an
increase or decrease in the market price of the Securities, or for a period of
one year or any other fixed period in the future.
(c) I further understand that the Securities must be held
indefinitely unless subsequently registered under the Securities Act or unless
an exemption from registration is otherwise available. Moreover, I understand
that the Company is under no obligation to register the Securities. In
addition, I understand that the certificate evidencing the Securities will be
imprinted with a legend which prohibits the transfer of the Securities unless
they are registered or such registration is not required in the opinion of
counsel for the Company.
(d) I am familiar with the provisions of Rule 701 and Rule 144,
each promulgated under the Securities Act, which, in substance, permit limited
public resale of "restricted securities" acquired, directly or indirectly, from
the issuer thereof, in a non-public
5
<PAGE>
offering subject to the satisfaction of certain conditions. Rule 701 provides
that if the issuer qualifies under Rule 701 at the time of issuance of the
Securities, such issuance will be exempt from registration under the Securities
Act. In the event the Company later becomes subject to the reporting
requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934,
ninety (90) days thereafter the securities exempt under Rule 701 may be resold,
subject to the satisfaction of certain of the conditions specified by Rule 144,
including among other things: (1) the sale being made through a broker in an
unsolicited "broker's transaction" or in transactions directly with a market
maker (as said term is defined under the Securities Exchange Act of 1934); and,
in the case of an affiliate, (2) the availability of certain public information
about the Company, and the amount of securities being sold during any three
month period not exceeding the limitations specified in Rule 144(e), if
applicable. Notwithstanding this paragraph (d), I acknowledge and agree to the
restrictions set forth in paragraph (e) hereof
In the event that the Company does not qualify under Rule 701 at the
time of issuance of the Securities, then the Securities may be resold in certain
limited circumstances subject to the provisions of Rule 144, which requires
among other things: (1) the availability of certain public information about the
Company, (2) the resale occurring not less than two years after the party has
purchased, and made full payment for, within the meaning of Rule 144, the
securities to be sold; and, in the case of an affiliate, or of a non-affiliate
who has held the securities less than three years, (3) the sale being made
through a broker in an unsolicited "broker's transaction" or in transactions
directly with a market maker (as said term is defined under the Securities
Exchange Act of 1934) and the amount of securities being sold during any three
month period not exceeding the specified limitations stated therein, if
applicable.
(e) I further understand that in the event all of the applicable
requirements of Rule 144 or Rule 701 are not satisfied, registration under the
Securities Act, compliance with Regulation A, or some other registration
exemption will be required; and that, notwithstanding the fact Rule 144 and Rule
701 are not exclusive, the staff of the SEC has expressed its opinion that
persons proposing to sell private placement securities other than in a
registered offering and otherwise than pursuant to Rule 144 or Rule 701 will
have a substantial burden of proof in establishing that an exemption from
registration is available for such offers or sales, and that such persons and
their respective brokers who participate in such transactions do so at their own
risk.
Signature of Purchaser:
------------------------------
Warren Kantor
Date: _________ __, 199_
6
<PAGE>
OLYMPIC FINANCIAL LTD.
NON-STATUTORY STOCK OPTION AGREEMENT
Olympic Financial Ltd., a Minnesota corporation (the "Company"), hereby
grants to Warren Kantor (the "Optionee"), an option (the "Option") to
purchase a total of 125,000 shares of the $.01 par value common stock
("Common Stock") of the Company (the "Shares"), at the price determined as
provided herein, and in all respects subject to the terms, definitions and
provisions hereof. The grant of this Option is subject to the approval
thereof by the shareholders of the Corporation (if such approval is required
by applicable laws or regulations) and by the Board of Directors of the
Corporation.
1. NATURE OF THE OPTION. This Non-Statutory Stock Option is not
intended to qualify as an Incentive Stock Option as defined in Section 422A
of the Code.
2. EXERCISE PRICE. The exercise price is $14.87 for each share of
Common Stock, which price the Board of Directors of the Company (the "Board")
has determined is not less than the fair market value per share of the Common
Stock on the date of grant.
3. EXERCISE OF OPTION. The Option shall be exercisable during its term
as follows:
(i) RIGHT TO EXERCISE.
(a) Subject to subsections 3(i)(b),(c) and (d) below, this
Option shall be exercisable to the extent of one hundred percent (100%) of
the Shares subject to the Option commencing on December 31, 1997. Provided,
however, as of the date prior to the date of the occurrence of the first to
occur of any of the following events prior to December 31, 1997,
notwithstanding the previous sentence of this subsection 3(i)(a), this Option
shall be exercisable cumulatively to the extent of one hundred percent (100%)
of the Shares subject to the Option regardless of whether otherwise
exercisable by the Optionee:
x) the death or disability of Optionee; or
y) the termination by the Company of the Consulting
Agreement dated as of December 18, 1996, by and between the Company
and the Optionee (the "Consulting Agreement") without Cause as such
term is defined in the Consulting Agreement; or the termination of
the Consulting Agreement by Optionee due to the material breach
thereof by the Company; or
z) a "Change of Control" of the Company. As used
herein the term "Change of Control" shall mean the closing of any
transaction or series of transactions by which the Company shall
merge with or consolidate into any other person or lease or sell
substantially all of its and its subsidiaries assets (other than
asset sales in connection with automobile loan securitization
transactions)
1
<PAGE>
substantially as an entirety to any other person or by which any
person or group (within the meaning of Rule 13d-5 under the
Securities Exchange Act of 1934) acquires, directly or indirectly,
51% or more of the Company's outstanding common stock (calculated
on a fully diluted basis); or
and, provided further, in the event the Consulting Agreement is terminated
prior to December 18, 1997 by the mutual agreement of the Company and the
Optionee, notwithstanding the previous sentence of this subsection 3(i)(a),
this Option shall be exercisable cumulatively to the extent of that fraction
of the Shares subject to the Option the numerator of which shall be the
number of days elapsed in 1997 as of the date of such termination and the
denominator of which shall be 365, rounded down to the next lower full share
amount.
(b) This Option may not be exercised for a fraction
of a share.
(c) In the event of Optionee's death, disability or
other termination of the Consulting Agreement, the exercisability of the
Option is governed by Sections 7, 8 and 9 below, subject to the limitations
contained in subsection 3(i)(d).
(d) In no event may this Option be exercised after
the date of expiration of the term of this Option as set forth in Section 11
below.
(ii) METHOD OF EXERCISE. This Option shall be exercisable by
written notice which shall state the election to exercise the Option, the
number of Shares in respect of which the Option is being exercised, and such
other representations and agreements as to the holder's investment intent
with respect to such shares of Common Stock as may be required by the
Company. Such written notice shall be signed by the Optionee and shall be
delivered in person or by certified mail to the Secretary of the Company. The
written notice shall be accompanied by payment of the exercise price. Until
certificates for the Shares are issued to the Optionee, such Optionee shall
not have any rights as a shareholder of the Company.
No Shares will be issued pursuant to the exercise of an Option unless
such issuance and such exercise shall comply with all relevant provisions of
law and the requirements of any stock exchange upon which the Shares may then
be listed. Assuming such compliance, for income tax purposes the Shares shall
be considered transferred to the Optionee on the date on which the Option is
exercised with respect to such Shares.
4. OPTIONEE'S REPRESENTATIONS. In the event the Shares purchasable
pursuant to the exercise of this Option have not been registered under the
Securities Act of 1933, as amended, at the time this Option is exercised,
Optionee shall, concurrently with the exercise of all or any portion of this
Option, deliver to the Company his Investment Representation Statement in the
form attached hereto as Exhibit A.
5. METHOD OF PAYMENT. Payment of the exercise price shall be by (i)
cash; (ii) check; or (iii) if authorized by the Board of Directors of the
Company, the surrender of other shares of Common Stock of the Company which
(A) either have been owned by the Optionee for more
2
<PAGE>
that six (6) months on the date of surrender or were not acquired, directly
or indirectly, from the Company and (B) have a fair market value (as
determined by the Board) on the date of surrender equal to the exercise price
of the Shares as to which the Option is being exercised.
6. RESTRICTIONS ON EXERCISE. This Option may not be exercised if the
issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
federal or state securities or other law or regulation, including any rule
under Part 207 of Title 12 of the Code of Federal Regulations ("Regulation
G") as promulgated by the Federal Reserve Board. As a condition to the
exercise of this Option, the Company may require Optionee to make any
representation and warranty to the Company as may be required by any
applicable law or regulation.
7. TERMINATION OF CONSULTING AGREEMENT. In the event of termination of
the Consulting Agreement (i) by Optionee other than due to the material
breach of the terms thereof by the Company or (ii) by the Company for Cause,
the Option shall terminate.
8. DISABILITY OF OPTIONEE. In the event of termination of the
Consulting Agreement, as a result of Optionee's disability, he may, but only
within one year from the date of such termination (but in no event later than
the date of expiration of the term of this Option as set forth in Section 11
below), exercise his Option to the extent he was entitled to exercise it at
the date of such termination. To the extent that Optionee was not entitled to
exercise the Option at the date of termination, or if he does not exercise
such Option (which he was entitled to exercise) within the time specified
herein, the Option shall terminate.
9. DEATH OF OPTIONEE. In the event of the death of Optionee during the
term of this Option, the Option may be exercised, at any time within one (1)
year following the date of death (but in no event later than the date of
expiration of the term of this Option as set forth in Section 11 below), by
Optionee's estate or by a person who acquired the right to exercise the
Option by bequest or inheritance, but only to the extent Optionee was
entitled to exercise the Option at the date of death.
10. NON-TRANSFERABILITY OF OPTION. This Option may not be transferred
in any manner otherwise than by will or by the laws of descent or distribution
and may be exercised during the lifetime of Optionee only by him. The terms
of this Option shall be binding upon the Optionee and his or her personal
representatives, heirs, successors and assigns.
11. TERM OF OPTION. This Option may not be exercised after December
18, 2006, and may be exercised only in accordance with the terms of this
Option.
12. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR MERGER. The number
of shares of Common Stock covered by this Option and the exercise price shall
be proportionately adjusted for any increase or decrease in the number of
issued and outstanding shares of Common Stock resulting from a stock split,
reverse stock split, stock dividend, combination or reclassification of the
Common Stock, or any other increase or decrease in the number of issued
shares of Common Stock effected without receipt of consideration by the
Company; provided, however, that
3
<PAGE>
conversion of any convertible securities of the Company shall not be deemed
to have been "effected without receipt of consideration." Such adjustment
shall be made by the Board, whose determination in that respect shall be
final, binding and conclusive. Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, or options or rights to
purchase shares of stock of any class shall affect, and no adjustment by
reason thereof shall be made with respect to, the number or price of shares
of Common Stock subject to this Option.
In the event of the proposed dissolution or liquidation of the Company,
the Option will terminate immediately prior to the consummation of such
proposed action, unless otherwise provided by the Board. The Board may, in
the exercise of its sole discretion in such instances, declare that the
Option shall terminate as of a date fixed by the Board and give the Optionee
the right to exercise his Option as to all or any part of the Shares. In the
event of a change of control of the Company, the Board shall notify the
Optionee that the Option shall be fully exercisable for a period of ten (10)
days from the date of such notice, and the Option will terminate upon the
expiration of such period.
13. NO RIGHTS AS SHAREHOLDER. The Optionee shall have no rights as a
shareholder with respect to any Shares subject to this Option prior to the
date of issuance to him of a certificate or certificates for such shares.
DATE OF GRANT: December 18, 1996
OLYMPIC FINANCIAL LTD.
By: /s/ Scott H. Anderson
---------------------------------
Scott H. Anderson
Title: Vice Chairman
4
<PAGE>
OPTIONEE ACKNOWLEDGES RECEIPT OF A COPY OF THE OPTION AGREEMENT AND
CERTAIN INFORMATION RELATED THERETO AND REPRESENTS THAT HE IS FAMILIAR WITH
THE TERMS AND PROVISIONS THEREOF, AND HEREBY ACCEPTS THIS OPTION SUBJECT TO
ALL OF THE TERMS AND PROVISIONS THEREOF. OPTIONEE HAS REVIEWED THIS OPTION IN
ITS ENTIRETY, HAS HAD AN OPPORTUNITY TO OBTAIN THE ADVICE OF COUNSEL PRIOR TO
EXECUTING THIS OPTION AND FULLY UNDERSTANDS ALL PROVISIONS OF THE OPTION.
OPTIONEE HEREBY AGREES TO ACCEPT AS BINDING, CONCLUSIVE AND FINAL ALL
DECISIONS OR INTERPRETATIONS OF THE BOARD UPON ANY QUESTIONS ARISING UNDER
THE OPTION. OPTIONEE FURTHER AGREES TO NOTIFY THE COMPANY UPON ANY CHANGE IN
THE RESIDENCE ADDRESS INDICATED BELOW.
Optionee:
Dated: December 18, 1996 /s/ Warren Kantor
----------------------------------
Warren Kantor
Residence Address:
720 Springmill Road
Villanova, PA 19185
5
<PAGE>
EXHIBIT A
INVESTMENT REPRESENTATION STATEMENT
PURCHASER: Warren Kantor
ISSUER: OLYMPIC FINANCIAL LTD.
SECURITY: COMMON STOCK
AMOUNT: 125,000 SHARES
DATE: __________________,_________
In connection with the purchase of the Common Stock ("Securities") of OLYMPIC
FINANCIAL LTD. (the "Company"), the undersigned represents to the Company the
following:
(a) I am aware of the Company's business affairs and financial
condition, and have acquired sufficient information about the Company to
reach an informed and knowledgeable decision to acquire the Securities. I am
purchasing these Securities for my own account for investment purposes only
and not with a view to, or for the resale in connection with, any
"distribution" thereof for purposes of the Securities Act of 1933, as amended
(the "Securities Act").
(b) I understand that the Securities have not been registered under the
Securities Act in reliance upon a specific exemption therefrom, which
exemption depends upon, among other things, the bona fide nature of my
investment intent as expressed herein. In this connection, I understand that,
in the view of the Securities and Exchange Commission (the "SEC"), the
statutory basis for such exemption may be unavailable if my representation
was predicated solely upon a present intention to hold these Securities for
the minimum capital gains period specified under tax statutes, for a deferred
sale, for or until an increase or decrease in the market price of the
Securities, or for a period of one year or any other fixed period in the
future.
(c) I further understand that the Securities must be held indefinitely
unless subsequently registered under the Securities Act or unless an
exemption from registration is otherwise available. Moreover, I understand
that the Company is under no obligation to register the Securities. In
addition, I understand that the certificate evidencing the Securities will be
imprinted with a legend which prohibits the transfer of the Securities unless
they are registered or such registration is not required in the opinion of
counsel for the Company.
(d) I am familiar with the provisions of Rule 701 and Rule 144, each
promulgated under the Securities Act, which, in substance, permit limited
public resale of "restricted securities" acquired, directly or indirectly,
from the issuer thereof, in a non-public
6
<PAGE>
offering subject to the satisfaction of certain conditions. Rule 701 provides
that if the issuer qualifies under Rule 701 at the time of issuance of the
Securities, such issuance will be exempt from registration under the
Securities Act. In the event the Company later becomes subject to the
reporting requirements of Section 13 or 15(d) of the Securities Exchange Act
of 1934, ninety (90) days thereafter the securities exempt under Rule 701 may
be resold, subject to the satisfaction of certain of the conditions specified
by Rule 144, including among other things: (1) the sale being made through a
broker in an unsolicited "broker's transaction" or in transactions directly
with a market maker (as said term is defined under the Securities Exchange
Act of 1934); and, in the case of an affiliate, (2) the availability of
certain public information about the Company, and the amount of securities
being sold during any three month period not exceeding the limitations
specified in Rule 144(e), if applicable. Notwithstanding this paragraph (d),
I acknowledge and agree to the restrictions set forth in paragraph (e) hereof.
In the event that the Company does not qualify under Rule 701 at the
time of issuance of the Securities, then the Securities may be resold in
certain limited circumstances subject to the provisions of Rule 144, which
requires among other things: (1) the availability of certain public
information about the Company, (2) the resale occurring not less than two
years after the party has purchased, and made full payment for, within the
meaning of Rule 144, the securities to be sold; and, in the case of an
affiliate, or of a non-affiliate who has held the securities less than three
years, (3) the sale being made through a broker in an unsolicited "broker's
transaction" or in transactions directly with a market maker (as said term is
defined under the Securities Exchange Act of 1934) and the amount of
securities being sold during any three month period not exceeding the
specified limitations stated therein, if applicable.
(e) I further understand that in the event all of the applicable
requirements of Rule 144 or Rule 701 are not satisfied, registration under
the Securities Act, compliance with Regulation A, or some other registration
exemption will be required; and that, notwithstanding the fact Rule 144 and
Rule 701 are not exclusive, the staff of the SEC has expressed its opinion
that persons proposing to sell private placement securities other than in a
registered offering and otherwise than pursuant to Rule 144 or Rule 701 will
have a substantial burden of proof in establishing that an exemption from
registration is available for such offers or sales, and that such persons and
their respective brokers who participate in such transactions do so at their
own risk.
Signature of Purchaser:
--------------------------------------
Warren Kantor
Date: _________________, 199___
7
<PAGE>
OLYMPIC FINANCIAL LTD.
NON-STATUTORY STOCK OPTION AGREEMENT
Olympic Financial Ltd., a Minnesota corporation (the "Company"), hereby
grants to Warren Kantor (the "Optionee"), an option (the "Option") to purchase a
total of 125,000 shares of the $.01 par value common stock ("Common Stock") of
the Company (the "Shares"), at the price determined as provided herein, and in
all respects subject to the terms, definitions and provisions hereof. The grant
of this Option is subject to the approval thereof by the shareholders of the
Corporation (if such approval is required by applicable laws or regulations) and
by the Board of Directors of the Corporation.
1. NATURE OF THE OPTION. This Non-Statutory Stock Option is not
intended to qualify as an Incentive Stock Option as defined in Section 422A of
the Code.
2. EXERCISE PRICE. The exercise price is $14.87 for each share of
Common Stock, which price the Board of Directors of the Company (the "Board")
has determined is not less than the fair market value per share of the Common
Stock on the date of grant.
3. EXERCISE OF OPTION. The Option shall be exercisable during its term
as follows:
(i) RIGHT TO EXERCISE.
(a) Subject to subsections 3(i)(b), (c) and (d) below, this
Option shall be exercisable to the extent of one hundred percent (100%) of the
Shares subject to the Option commencing on December 31, 1997. Provided,
however, as of the date prior to the date of the occurrence of the first to
occur of any of the following events prior to December 31, 1997, notwithstanding
the previous sentence of this subsection 3(i)(a), this Option shall be
exercisable cumulatively to the extent of one hundred percent (100%) of the
Shares subject to the Option regardless of whether otherwise exercisable by the
Optionee:
x) the death or disability of Optionee; or
y) the termination by the Company of the Consulting
Agreement dated as of January 1, 1997, by and between the Company
and the Optionee (the "Consulting Agreement") without Cause as such
term is defined in the Consulting Agreement; or the termination of
the Consulting Agreement by Optionee due to the material breach
thereof by the Company; or
z) a "Change of Control" of the Company. As used herein
the term "Change of Control" shall mean the closing of any
transaction or series of transactions by which the Company shall
merge with or consolidate into any other person or lease or sell
substantially all of its and its subsidiaries assets (other than
asset sales in connection with automobile loan securitization
transactions)
1
<PAGE>
substantially as an entirety to any other person or by which any
person or group (within the meaning of Rule 13d-5 under the
Securities Exchange Act of 1934) acquires, directly or indirectly,
51% or more of the Company's outstanding common stock (calculated on
a fully diluted basis); or
and, provided further, in the event the Consulting Agreement is terminated prior
to December 31, 1997 by the mutual agreement of the Company and the Optionee,
notwithstanding the previous sentence of this subsection 3(i)(a), this Option
shall be exercisable cumulatively to the extent of that fraction of the Shares
subject to the Option the numerator of which shall be the number of days elapsed
in 1997 as of the date of such termination and the denominator of which shall be
365, rounded down to the next lower full share amount.
(b) This Option may not be exercised for a fraction of a
share.
(c) In the event of Optionee's death, disability or other
termination of the Consulting Agreement, the exercisability of the Option is
governed by Sections 7, 8 and 9 below, subject to the limitations contained in
subsection 3(1)(d).
(d) In no event may this Option be exercised after the date
of expiration of the term of this Option as set forth in Section 11 below.
(ii) METHOD OF EXERCISE. This Option shall be exercisable by
written notice which shall state the election to exercise the Option, the number
of Shares in respect of which the Option is being exercised, and such other
representations and agreements as to the holder's investment intent with respect
to such shares of Common Stock as may be required by the Company. Such written
notice shall be signed by the Optionee and shall be delivered in person or by
certified mail to the Secretary of the Company. The written notice shall be
accompanied by payment of the exercise price. Until certificates for the Shares
are issued to the Optionee, such Optionee shall not have any rights as a
shareholder of the Company.
No Shares will be issued pursuant to the exercise of an Option unless such
issuance and such exercise shall comply with all relevant provisions of law and
the requirements of any stock exchange upon which the Shares may then be listed.
Assuming such compliance, for income tax purposes the Shares shall be considered
transferred to the Optionee on the date on which the Option is exercised with
respect to such Shares.
4. OPTIONEE'S REPRESENTATIONS. In the event the Shares purchasable
pursuant to the exercise of this Option have not been registered under the
Securities Act of 1933, as amended, at the time this Option is exercised,
Optionee shall, concurrently with the exercise of all or any portion of this
Option, deliver to the Company his Investment Representation Statement in the
form attached hereto as Exhibit A.
5. METHOD OF PAYMENT. Payment of the exercise price shall be by (i)
cash; (ii) check; or (iii) if authorized by the Board of Directors of the
Company, the surrender of other shares of Common Stock of the Company which (A)
either have been owned by the Optionee for more
2
<PAGE>
that six (6) months on the date of surrender or were not acquired, directly or
indirectly, from the Company and (B) have a fair market value (as determined by
the Board) on the date of surrender equal to the exercise price of the Shares as
to which the Option is being exercised.
6. RESTRICTIONS ON EXERCISE. This Option may not be exercised if the
issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
federal or state securities or other law or regulation, including any rule under
Part 207 of Title 12 of the Code of Federal Regulations ("Regulation "G") as
promulgated by the Federal Reserve Board. As a condition to the exercise of
this Option, the Company may require Optionee to make any representation and
warranty to the Company as may be required by any applicable law or regulation.
7. TERMINATION OF CONSULTING AGREEMENT. In the event of termination of
the Consulting Agreement (i) by Optionee other than due to the material breach
of the terms thereof Company or (ii) by the Company for Cause, the Option shall
terminate.
8. DISABILITY OF OPTIONEE. In the event of termination of the
Consulting Agreement, as a result of Optionee's disability, he may, but only
within one year from the date of such termination (but in no event later than
the date of expiration of the term of this Option as set forth in Section 11
below), exercise his Option to the extent he was entitled to exercise it at the
date of such termination. To the extent that Optionee was not entitled to
exercise the Option at the date of termination, or if he does not exercise such
Option (which he was entitled to exercise) within the time specified herein, the
Option shall terminate.
9. DEATH OF OPTIONEE. In the event of the death of Optionee during the
term of this Option, the Option may be exercised, at any time within one (1)
year following the date of death (but in no event later than the date of
expiration of the term of this Option as set forth in Section 11 below), by
Optionee's estate or by a person who acquired the right to exercise the Option
by bequest or inheritance, but only to the extent Optionee was entitled to
exercise the Option at the date of death.
10. NON-TRANSFERABILITY OF OPTION. This Option may not be transferred
in any manner otherwise than by will or by the laws of descent or distribution
and may be exercised during the lifetime of Optionee only by him. The terms of
this Option shall be binding upon the Optionee and his or her personal
representatives, heirs, successors and assigns.
11. TERM OF OPTION. This Option may not be exercised after December 31,
2006, and may be exercised only in accordance with the terms of this Option.
12. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR MERGER. The number of
shares of Common Stock covered by this Option and the exercise price shall be
proportionately adjusted for any increase or decrease in the number of issued
and outstanding shares of Common Stock resulting from a stock split, reverse
stock split, stock dividend, combination or reclassification of the Common
Stock, or any other increase or decrease in the number of issued shares of
Common Stock effected without receipt of consideration by the Company; provided,
however, that
3
<PAGE>
conversion of any convertible securities of the Company shall not be deemed to
have been "effected without receipt of consideration." Such adjustment shall be
made by the Board, whose determination in that respect shall be final, binding
and conclusive. Except as expressly provided herein, no issuance by the Company
of shares of stock of any class, or securities convertible into shares of stock
of any class, or options or rights to purchase shares of stock of any class
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to this Option.
In the event of the proposed dissolution or liquidation of the Company, the
Option will terminate immediately prior to the consummation of such proposed
action, unless otherwise provided by the Board. The Board may, in the exercise
of its sole discretion in such instances, declare that the Option shall
terminate as of a date fixed by the Board and give the Optionee the right to
exercise his Option as to all or any part of the Shares. In the event of a
change of control of the Company, the Board shall notify the Optionee that the
Option shall be fully exercisable a period of ten (10) days from the date of
such notice, and the Option will terminate up expiration of such period.
13. NO RIGHTS AS SHAREHOLDER. The Optionee shall have no rights as a
shareholder with respect to any Shares subject to this Option prior to the date
of issuance to him of a certificate or certificates for such shares.
DATE OF GRANT: January 1, 1997
OLYMPIC FINANCIAL LTD.
By: /s/ Scott H. Anderson
---------------------------
Scott H. Anderson
Title: Vice Chairman
4
<PAGE>
OPTIONEE ACKNOWLEDGES RECEIPT OF A COPY OF THE OPTION AGREEMENT AND CERTAIN
INFORMATION RELATED THERETO AND REPRESENTS THAT HE IS FAMILIAR WITH THE TERMS
AND PROVISIONS THEREOF, AND HEREBY ACCEPTS THIS OPTION SUBJECT TO ALL OF THE
TERMS AND PROVISIONS THEREOF. OPTIONEE HAS REVIEWED THIS OPTION IN ITS
ENTIRETY, HAS HAD AN OPPORTUNITY TO OBTAIN THE ADVICE OF COUNSEL PRIOR TO
EXECUTING THIS OPTION AND FULLY UNDERSTANDS ALL PROVISIONS OF THE OPTION.
OPTIONEE HEREBY AGREES TO ACCEPT AS BINDING, CONCLUSIVE AND FINAL ALL DECISIONS
OR INTERPRETATIONS OF THE BOARD UPON ANY QUESTIONS ARISING UNDER THE OPTION.
OPTIONEE FURTHER AGREES TO NOTIFY THE COMPANY UPON ANY CHANGE IN THE RESIDENCE
ADDRESS INDICATED BELOW.
Optionee:
Dated: January 1, 1997 /s/ Warren Kantor
------------------------------
Warren Kantor
Residence Address:
720 Springmill Road
Villanova, PA 19185
5
<PAGE>
EXHIBIT A
INVESTMENT REPRESENTATION STATEMENT
PURCHASER: Warren Kantor
ISSUER: OLYMPIC FINANCIAL LTD.
SECURITY: COMMON STOCK
AMOUNT: 125,000 SHARES
DATE: _____________, ____
In connection with the purchase of the Common Stock ("Securities") of OLYMPIC
FINANCIAL LTD. (the "Company"), the undersigned represents to the Company the
following:
(a) I am aware of the Company's business affairs and financial
condition, and have acquired sufficient information about the Company to reach
an informed and knowledgeable decision to acquire the Securities. I am
purchasing these Securities for my own account for investment purposes only and
not with a view to, or for the resale in connection with, any "distribution"
thereof for purposes of the Securities Act of 1933, as amended (the "Securities
Act").
(b) I understand that the Securities have not been registered under
the Securities Act in reliance upon a specific exemption therefrom, which
exemption depends upon, among other things, the bona fide nature of my
investment intent as expressed herein. In this connection, I understand that,
in the view of the Securities and Exchange Commission (the "SEC"), the statutory
basis for such exemption may be unavailable if my representation was predicated
solely upon a present intention to hold these Securities for the minimum capital
gains period specified under tax statutes, for a deferred sale, for or until an
increase or decrease in the market price of the Securities, or for a period of
one year or any other fixed period in the future.
(c) I further understand that the Securities must be held
indefinitely unless subsequently registered under the Securities Act or unless
an exemption from registration is otherwise available. Moreover, I understand
that the Company is under no obligation to register the Securities. In
addition, I understand that the certificate evidencing the Securities will be
imprinted with a legend which prohibits the transfer of the Securities unless
they are registered or such registration is not required in the opinion of
counsel for the Company.
(d) I am familiar with the provisions of Rule 701 and Rule 144,
each promulgated under the Securities Act, which, in substance, permit limited
public resale of "restricted securities" acquired, directly or indirectly, from
the issuer thereof, in a non-public
6
<PAGE>
offering subject to the satisfaction of certain conditions. Rule 701 provides
that if the issuer qualifies under Rule 701 at the time of issuance of the
Securities, such issuance will be exempt from registration under the Securities
Act. In the event the Company later becomes subject to the reporting
requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934,
ninety (90) days thereafter the securities exempt under Rule 701 may be resold,
subject to the satisfaction of certain of the conditions specified by Rule 144,
including among other things: (1) the sale being made through a broker in an
unsolicited "broker's transaction" or in transactions directly with a market
maker (as said term is defined under the Securities Exchange Act of 1934); and,
in the case of an affiliate, (2) the availability of certain public information
about the Company, and the amount of securities being sold during any three
month period not exceeding the limitations specified in Rule 144(e), if
applicable. Notwithstanding this paragraph (d), I acknowledge and agree to the
restrictions set forth in paragraph (e) hereof.
In the event that the Company does not qualify under Rule 701 at the time
of issuance of the Securities, then the Securities may be resold in certain
limited circumstances subject to the provisions of Rule 144, which requires
among other things: (1) the availability of certain public information about the
Company, (2) the resale occurring not less than two years after the party has
purchased, and made full payment for, within the meaning of Rule 144, the
securities to be sold; and, in the case of an affiliate, or of a non-affiliate
who has held the securities less than three years, (3) the sale being made
through a broker in an unsolicited "broker's transaction" or in transactions
directly with a market maker (as said term is defined under the Securities
Exchange Act of 1934) and the amount of securities being sold during any three
month period not exceeding the specified limitations stated therein, if
applicable.
(e) I further understand that in the event all of the applicable
requirements of Rule 144 or Rule 701 are not satisfied, registration under the
Securities Act, compliance with Regulation A, or some other registration
exemption will be required; and that, notwithstanding the fact Rule 144 and Rule
701 are not exclusive, the staff of the SEC has expressed its opinion that
persons proposing to sell private placement securities other than in a
registered offering and otherwise than pursuant to Rule 144 or Rule 701 will
have a substantial burden of proof in establishing that an exemption from
registration is available for such offers or sales, and that such persons and
their respective brokers who participate in such transactions do so at their own
risk.
Signature of Purchaser:
------------------------------
Warren Kantor
Date: __________ __, 199_
7
<PAGE>
OLYMPIC FINANCIAL LTD.
1990 STOCK OPTION PLAN
(AS AMENDED)
1. PURPOSE
The purpose of this 1990 Stock Option Plan (the "Plan") is to promote the
interests of Olympic Financial, Ltd., a Minnesota corporation (the "Company"),
by providing employees of the Company and certain independent contractors with
an opportunity to acquire a proprietary interest in the Company, and thereby
develop a stronger incentive to contribute to the Company's continued success
and growth. In addition, the opportunity to acquire a proprietary interest in
the Company by the offering and availability of stock options will assist the
Company in attracting and retaining key personnel and consultants of outstanding
ability.
2. DEFINITIONS
Wherever used in the Plan, the following terms have the meanings set forth
below:
2.1 "Board" means the Board of Directors of the Company.
2.2 "Code" means the Internal Revenue Code of 1986, as amended, and the
rules and regulations promulgated thereunder.
2.3 "Committee" means the Committee which may be designated from time to
time by the Board to administer the Plan pursuant to Section 3.5.
2.4 "Incentive Stock Option" or "ISO" means a stock option which is
intended to qualify as an incentive stock option as defined in Section 422A of
the Code.
2.5 "Non-Statutory Stock Option" or "NSO" means a stock option that is
not intended to, or does not, qualify as an incentive stock option as defined in
Section 422A of the Code.
2.6 "Option" means, where required by the context of the Plan, an ISO
and/or NSO granted pursuant to the Plan.
2.7 "Optionee" means a Participant in the Plan who has been granted one
or more Options under the Plan.
<PAGE>
2.8 "Participant" means an individual described in Section 5 of this
Plan who may be granted Options under the Plan.
2.9 "Stock" means the Common Stock, $.01 par value, of the Company.
2.10 "Subsidiary" means any corporation, other than the Company, in an
unbroken chain of corporations beginning with the Company if each of the
corporations other than the last corporation in the unbroken chain owns 50% or
more of the voting stock in one of the other corporations in such chain.
3. ADMINISTRATION
3.1 The Plan shall be administered by the Board, which shall have full
power, subject to the provisions of the Plan, to grant Options, construe and
interpret the Plan, establish rules and regulations with respect to the Plan and
Options granted hereunder, and perform all other acts, including the delegation
of administrative responsibilities, that it believes reasonable and necessary.
3.2 The Board shall have the sole discretion, subject to the provisions
of the Plan, to determine the Participants eligible to receive Options pursuant
to the Plan and the amount, type, and terms of any Options and the terms and
conditions of option agreements relating to any Option.
3.3 The Board may correct any defect, supply any omission, or reconcile
any inconsistency in the Plan or in any Option granted hereunder in the manner
and to the extent it shall deem necessary to carry out the terms of the Plan.
3.4 Any decision made, or action taken, by the Board arising out of or
in connection with the interpretation and administration of the Plan shall be
final, conclusive and binding upon all Optionees.
3.5 The Board may designate a Committee from time to time to administer
the Plan. If designated, the Committee shall be composed of not less than two
persons (who need not be members of the Board) who are appointed from time to
time by the Board. If the Board has appointed a Committee pursuant to this
Section 3.5 of the Plan, then the Committee may administer the Plan and exercise
all of the rights and powers granted to the Board in this Plan, including,
without limitation, the right to grant Options pursuant to the Plan and to
establish the Option price as provided in the Plan.
4. SHARES SUBJECT TO THE PLAN
4.1 NUMBER. The total number of shares of Stock reserved for issuance
upon exercise of Options under the Plan is 2,000,000. Such shares shall consist
of authorized but unissued Stock. If any Option granted under the Plan lapses
or terminates for any reason
2
<PAGE>
before being completely exercised, the shares covered by the unexercised
portion of such Option may again be made subject to Options under the Plan.
4.2 CHANGES IN CAPITALIZATION. In the event of any change in the
outstanding shares of Stock of the Company by reason of any stock dividend,
split, recapitalization, reorganization, merger, consolidation, combination,
exchange of shares, or rights offering to purchase stock at a price
substantially below fair market value, or other similar corporate change, the
aggregate number of shares which may be subject to Options under the Plan and
the terms of any outstanding Option, including the number and kind of shares
subject to such Options and the purchase price per share thereof, shall be
appropriately adjusted by the Board, consistent with such change and in such
manner as the Board, in its sole discretion, may deem equitable to prevent
substantial dilution or enlargement of the rights granted to or available for
Optionees. Notwithstanding the preceding sentence, in no event shall any
fraction of a share of Stock be issued upon the exercise of an Option.
5. ELIGIBLE PARTICIPANTS
The following persons are Participants eligible to participate in the Plan:
5.1 INCENTIVE STOCK OPTIONS. Incentive Stock Options may be granted
only to employees of the Company or any Subsidiary, including officers and
directors who are also employees of the Company or any Subsidiary.
5.2 NON-STATUTORY STOCK OPTIONS. Non-statutory stock options may be
granted to (i) any employee of the Company or any Subsidiary, including any
officer or director who is also an employee of the Company or any Subsidiary;
and (ii) any consultant to, or other independent contractor of, the Company.
6. GRANT OF OPTIONS
Subject to the terms, conditions, and limitations set forth in this Plan,
the Company, by action of its Board, may from time to time grant Options to
purchase shares of the Company's Stock to those eligible Participants as may be
selected by the Board, in such amounts and on such other terms as the Board in
its sole discretion shall determine. Such Options may be (i) "Incentive Stock
Options" so designated by the Board and which, when granted, are intended to
qualify as incentive stock options as defined in Section 422A of the Code; (ii)
"Non-Statutory Stock Options" so designated by the Board and which, when
granted, are not intended to, or do not, qualify as incentive stock options
under Section 422A of the Code; or (iii) a combination of both. The date on
which the Board approves the granting of an Option shall be the date of grant of
such Option, unless a different date is specified by the Board on such date of
approval. Notwithstanding the foregoing, with respect to the grant of any
Incentive Stock Option under the Plan, the aggregate fair market value of Stock
(determined as of the date the Option is granted) with respect to which
incentive stock options are exercisable for the first time by an Optionee in any
calendar year (under all such stock option plans of the Company or Subsidiaries)
shall
3
<PAGE>
not exceed $100,000. Each grant of an Option under the Plan shall be evidenced
by a written stock option agreement between the Company and the Optionee setting
forth the terms and conditions, not inconsistent with the Plan, under which the
Option so granted may be exercised pursuant to the Plan and containing such
other terms with respect to the Option as the Board in its sole discretion may
determine.
7. OPTION PRICE AND FORM OF PAYMENT
7.1 INCENTIVE STOCK OPTIONS. The purchase price for a share of Stock
subject to an Incentive Stock Option granted hereunder shall not be less than
100% of the fair market value of the Stock. Notwithstanding the foregoing, in
the case of an Incentive Stock Option granted to any Optionee then owning more
than 10% of the voting power of all classes of the Company's stock, the purchase
price per share of the Stock subject to such Option shall not be less than 110%
of the fair market value of the Stock on the date of grant of the Incentive
Stock Option, determined as provided in Section 7.3.
7.2 NON-STATUTORY STOCK OPTIONS. The purchase price for a share of
Stock subject to a non-statutory stock option shall be not less than 85% of the
fair market value of the Stock, but in no event less than $6.00 per share.
7.3 DETERMINATION OF FAIR MARKET VALUE. For purposes of this Section 7,
the "fair market value" of the Stock shall be determined as follows:
(a) if the Stock of the Company is listed or admitted to unlisted
trading privileges on a national securities exchange, the fair market value
on any given day shall be the closing sale price for the Stock, or if no
sale is made on such day, the closing bid price for such day on such
exchange;
(b) if the Stock is not listed or admitted to unlisted trading
privileges on a national securities exchange, the fair market value on any
given day shall be the closing sale price for the Stock as reported on the
NASDAQ National Market System on such day, or if no sale is made on such
day, the closing bid price for such day as entered by a market maker for
the Stock;
(c) if the Stock is not listed on a national securities exchange,
is not admitted to unlisted trading privileges on any such exchange, and is
not eligible for inclusion in the NASDAQ National Market System, the fair
market value on any given day shall be the average of the closing
representative bid and asked prices as reported by the National Quotation
Bureau, Inc. or, if the Stock is not quoted on the National Association of
Securities Dealers Automated Quotations System, then as reported in any
publicly available compilation of the bid and asked prices of the Stock in
any over-the-counter market on which the Stock is traded; or
(d) if there exists no public trading market for the Stock, the
fair market value on any given day shall be an amount determined in good
faith by the Board in
4
<PAGE>
such manner as it may reasonably determine in its discretion, provided that
such amount shall not be less than the book value per share as reasonably
determined by the Board as of the date of determination or less than the
par value of the Stock.
7.4 PAYMENT OF PURCHASE PRICE. Except as provided herein, the purchase
price of each share of Stock purchased upon the exercise of any Option shall be
paid:
(a) in United States dollars in cash or by check, bank draft or
money order payable to the order of the Company; or
(b) at the discretion of the Board, through the delivery of shares
of Stock, having initially or as a result of successive exchanges of
shares, an aggregate fair market value (as determined in the manner
provided under this Plan) equal to the aggregate purchase price for the
Stock as to which the Option is being exercised; or
(c) at the discretion of the Board, by a combination of both (a)
and (b) above; or
(d) by such other method as may be permitted in the written stock
option agreement between the Company and the Optionee.
If such form of payment is permitted, the Board shall determine procedures
for tendering Stock as payment upon exercise of an Option and may impose such
additional limitations and prohibitions on the use of Stock as payment upon the
exercise of an Option as it deems appropriate.
If the Board in its sole discretion so agrees, the Company may finance the
amount payable by an Optionee upon exercise of any Option upon such terms and
conditions as the Board may determine at the time such Option is granted under
this Plan.
8. EXERCISE OF OPTIONS
8.1 MANNER OF EXERCISE. An Option, or any portion thereof, shall be
exercised by delivering a written notice of exercise to the Board and paying to
the Company the full purchase price of the Stock to be acquired upon the
exercise of the Option. Until certificates for the Stock acquired upon the
exercise of an Option are issued to an Optionee, such Optionee shall not have
any rights as a shareholder of the Company.
8.2 LIMITATIONS AND CONDITIONS ON EXERCISE OF OPTIONS. In addition to
any other limitations or conditions contained in this Plan or that may be
imposed by the Board from time to time or in the stock option agreement to be
entered into with respect to Options granted hereunder, the following
limitations and conditions shall apply to the exercise of Options granted under
this Plan:
5
<PAGE>
8.2.1 No Incentive Stock Option may be exercisable by its terms
after the expiration of 10 years from the date of the grant thereof.
8.2.2 No Incentive Stock Option granted pursuant to the Plan to an
eligible Participant then owning more than 10% of the voting power of all
classes of the Company's stock may be exercisable by its terms after the
expiration of five years from the date of the grant thereof.
9. INVESTMENT PURPOSES
Unless a registration statement under the Securities Act of 1933 is in
effect with respect to Stock to be purchased upon exercise of Options to be
granted under the Plan, the Company shall require that an Optionee agree with
and represent to the Company in writing that he or she is acquiring such shares
of Stock for the purpose of investment and with no present intention to
transfer, sell or otherwise dispose of such shares of Stock other than by
transfers which may occur by will or by the laws of descent and distribution,
and no shares of Stock may be transferred unless, in the opinion of counsel to
the Company, such transfer would be in compliance with applicable securities
laws. In addition, unless a registration statement under the Securities Act of
1933 is in effect with respect to the Stock to be purchased under the Plan, each
certificate representing any shares of Stock issued to an Optionee hereunder
shall have endorsed thereon a legend in substantially the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED WITHOUT REGISTRATION
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") AND WITHOUT
REGISTRATION UNDER ANY APPLICABLE STATE SECURITIES LAWS, IN RELIANCE UPON
EXEMPTION(S) CONTAINED THEREIN. NO TRANSFER OF THESE SHARES OR ANY
INTEREST THEREIN MAY BE MADE EXCEPT PURSUANT TO EFFECTIVE REGISTRATION
STATEMENTS UNDER SAID LAWS UNLESS THE COMPANY HAS RECEIVED AN OPINION OF
COUNSEL SATISFACTORY TO IT THAT SUCH TRANSFER OR DISPOSITION DOES NOT
REQUIRE REGISTRATION UNDER SAID LAWS AND, FOR ANY SALES UNDER RULE 144 OF
THE ACT, SUCH EVIDENCE AS IT SHALL REQUEST FOR COMPLIANCE WITH THAT RULE,
OR APPLICABLE STATE SECURITIES LAWS.
10. TRANSFERABILITY OF OPTIONS
No Option granted under the Plan shall be transferable by an Optionee
(whether by sale, assignment, hypothecation or otherwise) other than by will or
the laws of descent and distribution, and shall be exercisable during the
Optionee's lifetime only by the Optionee.
6
<PAGE>
11. TERMINATION OF EMPLOYMENT
11.1 GENERALLY. Except as otherwise provided in this Section 11, if an
Optionee's employment with the Company or Subsidiary is terminated (hereinafter
"Termination") other than by death or Disability (as hereinafter defined), the
Optionee may exercise any Option granted under the Plan, to the extent the
Optionee was entitled to exercise the Option at the date of Termination, for a
period of 3 months after the date of Termination or until the term of the Option
has expired, whichever date is earlier.
11.1.1 The Optionee may exercise any Incentive Stock Option
granted under the Plan, to the extent the Optionee was entitled to exercise
the Incentive Stock Option at the date of Termination, for a period of
three (3) months after the date of Termination or until the term of the
Incentive Stock Option has expired, whichever date is earlier.
11.1.2 The Optionee may exercise any Non-Statutory Stock Option
granted under the Plan, to the extent the Optionee was entitled to exercise
the Non-Statutory Stock Option at the date of Termination, for a period of
up to eighteen (18) months after the date of Termination, as determined by
the Committee, or until the term of the Non-Statutory Option has expired,
whichever date is earlier.
11.2 DEATH OR DISABILITY OF OPTIONEE. In the event of the death or
Disability of an Optionee prior to expiration of an Option held by him or her,
the following provisions shall apply:
11.2.1 If the Optionee is at the time of his or her Disability
employed by the Company or a Subsidiary and has been in continuous
employment (as determined by the Board in its sole discretion) since the
date of grant of the Option, then the Option may be exercised by the
Optionee until the earlier of one year following the date of such
Disability or the expiration date of the Option, but only to the extent the
Optionee was entitled to exercise such Option at the time of his or her
Disability. For the purpose of this Section 11, the term "Disability"
shall mean a permanent and total disability as defined in Section 22(e)(3)
of the Code. The determination of whether an Optionee has a Disability
within the meaning of Section 22(e)(3) shall be made by the Board in its
sole discretion.
11.2.2 If the Optionee is at the time of his or her death
employed by the Company or a Subsidiary and has been in continuous
employment (as determined by the Board in its sole discretion) since the
date of grant of the Option, then the Option may be exercised by the
Optionee's estate or by a person who acquired the right to exercise the
Option by will or the laws of descent and distribution, until the earlier
of one year from the date of the Optionee's death or the expiration date of
the Option, but only to the extent the Optionee was entitled to exercise
the Option at the time of death.
7
<PAGE>
11.2.3 If the Optionee dies within three months after
Termination, the Option may be exercised until the earlier of nine months
following the date of death or the expiration date of the Option, by the
Optionee's estate or by a person who acquires the right to exercise the
Option by will or the laws of descent or distribution, but only to the
extent the Optionee was entitled to exercise the Option at the time of
Termination.
11.3 TERMINATION FOR CAUSE. If the employment of an Optionee is
terminated by the Company or a Subsidiary for cause, then the Board shall have
the right to cancel any Options granted to the Optionee under the Plan.
12. AMENDMENT AND TERMINATION OF PLAN
12.1 The Board, may at any time and from time to time suspend or terminate
the Plan in whole or in part or amend it from time to time in such respects as
may be in the best interests of the Company; provided, however, that no such
amendment shall be made without the approval of the shareholders if it would:
(a) materially modify the eligibility requirements for Participants as set forth
in Section 5 hereof; (b) increase the maximum aggregate number of shares of
Stock which may be issued pursuant to Options, except in accordance with Section
4.2 of the Plan; (c) reduce the minimum Option price per share as set forth in
Section 7 of the Plan, except in accordance with Section 4.2 of the Plan; (d)
extend the period of granting Options; or (e) materially increase in any other
way the benefits accruing to Optionees.
12.2 No amendment, suspension or termination of this Plan shall, without
the Optionee's consent, alter or impair any of the rights or obligations under
any Option theretofore granted to him or her under the Plan.
12.3 The Board may amend the Plan, subject to the limitations cited above,
in such manner as it deems necessary to permit the granting of Incentive Stock
Options meeting the requirements of future amendments to the Code.
12.4 Upon the dissolution or liquidation of the Company, or upon a merger,
consolidation, acquisition of property or stock, or reorganization as a result
of which the Company is not the surviving corporation or upon a sale of
substantially all the property or stock of the Company to another corporation,
any option granted hereunder shall terminate and no such event shall cause any
option to be exercisable for any shares other than those as to which it was
exercisable prior to such termination in accordance with its terms; provided,
however, that the Company may in its discretion and immediately prior to any
such transaction, cause a new option to be substituted for such option or cause
such old option to be assumed, by an employer corporation, or a parent or
subsidiary of such corporation; and such new or substituted option shall apply
to all shares issued in addition to or in substitution, replacement or
modification of the shares theretofore covered by such option; provided that:
8
<PAGE>
(a) the excess of the aggregate fair market value of the shares
subject to the option immediately after the substitution or assumption over
the aggregate option price of such shares shall not be more than the excess
of the aggregate fair market value of all shares subject to the option
immediately before such substitution or assumption over the aggregate
option price of such shares,
(b) the new option or the assumption of the existing option shall
not give the optionee additional benefits which he did not have under the
old option or prior to such assumption, and
(c) a propriety adjustment of the original option price shall be
made among original shares subject to the option and any additional share
or shares issued in substitution, replacement or modification thereof.
13. MISCELLANEOUS PROVISIONS
13.1 RIGHT TO CONTINUED EMPLOYMENT. No person shall have any claim or
right to be granted an Option under the Plan, and the grant of an Option under
the Plan shall not be construed as giving an Optionee the right to continued
employment with the Company. The Company further expressly reserves the right
at any time to dismiss an Optionee or reduce an Optionee's compensation with or
without cause, free from any liability, or any claim under the Plan, except as
provided herein or in a stock option agreement.
13.2 WITHHOLDING TAXES. The Company shall have the right to require that
payment or provision for payment of any and all withholding taxes due upon the
grant or exercise of an Option hereunder or the disposition of any Stock or
other property acquired upon exercise of an Option be made by an Optionee. In
connection therewith, the Board shall have the right to establish such rules and
regulations or impose such terms and conditions in any agreement relating to an
Option granted hereunder with respect to such withholding as the Board may deem
necessary and appropriate.
13.3 GOVERNING LAW. The Plan shall be administered in the State of
Minnesota, and the validity, construction, interpretation, and administration of
the Plan and all rights relating to the Plan shall be determined solely in
accordance with the laws of such state, unless controlled by applicable federal
law, if any.
14. EFFECTIVE DATE
The effective date of the Plan is January 18, 1991. No Option may be
granted after January 17, 2001, provided, however, that the Plan and all
outstanding Options shall remain in effect until such outstanding Options have
expired or been canceled.
9
<PAGE>
OLYMPIC FINANCIAL LTD.
1992 DIRECTOR STOCK OPTION PLAN
(As Amended)
1. PURPOSE OF THE PLAN. The purpose of this 1992 Director Stock Option
Plan, initially adopted by the Board on January 7, 1992, is to attract and
retain the best available individuals to serve as Directors of the Company, to
provide additional incentive to the Outside Directors of the Company to serve as
Directors, and to encourage their continued service on the Board.
The Company intends that the options granted hereunder shall not
constitute incentive stock options within the meaning of Section 422 of the
Internal Revenue Code of 1986. The Plan is intended to comply with the
requirements of Rule 16b-3 under the Exchange Act.
2. DEFINITIONS. As used herein, the following definitions shall apply:
(a) "BOARD" shall mean the Board of Directors of the Company.
(b) "COMMON STOCK" shall mean the Common Stock, $.01 par value per
share, of the Company.
(c) "COMPANY" shall mean Olympic Financial Ltd., a Minnesota
corporation.
(d) "COMMITTEE" shall mean a committee of the Board appointed by the
Board to administer the Plan.
(e) "CONTINUOUS SERVICE AS A DIRECTOR" shall mean the absence of any
interruption or termination of service as a Director. Continuous Service
as a Director shall not be considered interrupted in the case of sick
leave, military leave, or any other leave of absence approved by the Board
or Committee.
(f) "DIRECTOR" shall mean a member of the Board.
(g) "EMPLOYEE" shall mean any person, including officers and
Directors, employed by the Company or any Parent or Subsidiary of the
Company. The payment of fees to a Director shall not be sufficient in and
of itself to constitute "employment" by the Company.
(h) "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.
1
<PAGE>
(i) "OPTION" shall mean a stock option granted pursuant to the Plan.
(j) "OPTIONED STOCK" shall mean the Common Stock subject to an
Option.
(k) "OPTIONEE" shall mean an Outside Director who receives an option.
(l) "OUTSIDE DIRECTOR" shall mean a Director who is not an Employee.
(m) "PARENT" shall mean a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Internal Revenue
Code of 1986, as amended.
(n) "PLAN" shall mean this 1992 Director Stock Option Plan.
(o) "SHARE" shall mean a share of Common Stock, as adjusted in
accordance with Section 12 of the Plan.
(p) "SUBSIDIARY" shall mean a "subsidiary corporation," whether now
or hereafter existing, as defined in Section 424(f) of the Internal Revenue
Code of 1986, as amended.
3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Section 12 of
the Plan, the maximum aggregate number of shares which may be optioned and sold
under the Plan is 840,000 shares of Common Stock. The shares may be authorized,
but unissued, or reacquired Common Stock.
If an Option expires or becomes unexercisable for any reason without
having been exercised in full, the unexercised Shares which were subject thereto
shall, unless the Plan has been terminated, become available for future grant
under the Plan. If Shares which were acquired upon exercise of an Option are
subsequently repurchased by the Company, such Shares shall not become available
for future grant under the Plan.
4. AUTOMATIC GRANT OF OPTIONS. All grants of Options hereunder shall be
automatic and non-discretionary and shall be made strictly in accordance with
the following provisions:
(a) No person shall have any discretion to select which Outside
Directors shall be granted Options or to determine the number of Shares to
be covered by Options granted to Outside Directors.
(b) Each Outside Director, including persons who are Outside
Directors on the date of adoption of the Plan, shall be automatically
granted an option to purchase 15,000 Shares (the "First Option") upon the
later to occur of (i) the effective date of the Plan, as determined in
accordance with Section 8 hereof, or (ii) the date on which such person
first becomes an Outside Director, whether through election by the
2
<PAGE>
shareholders of the Company or appointment by the Board to fill a vacancy;
provided, however, commencing with the calendar year 1996 such automatic
grant shall be reduced to an option to purchase 5,000 shares.
(c) Subject to the following, after the First Option has been granted
to an Outside Director, such Outside Director shall thereafter be
automatically granted an Option to purchase 15,000 shares on the first and
each successive anniversary of the grant of the First Option. Commencing
with calendar year 1996 and thereafter such Outside Director shall be
automatically granted an Option to purchase 5,000 shares on each successive
anniversary of the grant of the First Option; provided, however, that in no
event shall an Outside Director be granted options to purchase in the
aggregate more than 120,000 shares pursuant to the Plan.
(d) Notwithstanding the provisions of Sections 4(b) and (c) hereof,
in the event that a grant would cause the number of Shares subject to
outstanding Options to Outside Directors plus Shares previously purchased
upon exercise of Options by Outside Directors to exceed 840,000 Shares,
then each such automatic grant shall be for that number of Shares
determined by dividing the total number of Shares remaining available for
grant by the number of Outside Directors on the automatic grant date. Any
further grants shall then be deferred until such time, if any, as
additional Shares become available for grant under the Plan through action
of the shareholders to increase the number of Shares which may be issued
under the Plan or through cancellation or expiration of Options previously
granted hereunder.
5. OPTION TERMS AND CONDITIONS. The terms and conditions of an Option
granted hereunder shall be as follows:
(a) subject to Sections 12 and 13 hereof, the terms of each Option
granted prior to January 1, 1996 shall be five (5) years and the term of
each Option granted after such date shall be ten (10) years.
(b) the First Option shall become exercisable in full beginning on
the later of (i) the first anniversary of the grant of the Option or (ii)
six (6) months after the date on which the Plan is first approved by the
shareholders of the Company in accordance with Rule 16b-3 under the
Exchange Act and each subsequent Option shall become exercisable in full
beginning on the first anniversary of the grant of such Option, provided in
each case that the Outside Director shall have maintained Continuous
Service as an Outside Director throughout such 12-month period.
(c) the Option shall be exercisable only while the Outside Director
serves as an Outside Director of the Company, and (i) as to Options granted
hereunder prior to January 1, 1996 for a period of six (6) months after
ceasing to be an Outside Director pursuant to section 10(b) hereof, and
(ii) as to Options granted after such date, for a period of two (2) years
after ceasing to be an Outside Director pursuant to Section 10(b) hereof.
3
<PAGE>
(d) the exercise price per Share shall be 100% of the fair market
value per Share on the date of grant of the Option, as determined in
accordance with Section 9(a) hereof.
(e) the effectiveness of any Options granted hereunder is
conditioned upon shareholder approval of the Plan in accordance with Rule
16b-3 under the Exchange Act.
6. ADMINISTRATION OF AND GRANTS OF OPTIONS UNDER THE PLAN.
(a) ADMINISTRATION. Except as otherwise required herein, the Plan
shall be administered by the Board or a Committee.
(b) POWERS OF THE BOARD OR COMMITTEE. Subject to the provisions
and restrictions of the Plan, the Board or Committee shall have the
authority, in its discretion: (i) to determine, upon review of relevant
information and in accordance with Section 9(a) hereof, the fair market
value of the Common Stock; (ii) to interpret the Plan; (iii) to prescribe,
amend and rescind rules and regulations relating to the Plan; (iv) to
authorize any person to execute on behalf of the Company any instrument
required to effectuate the grant of an Option granted hereunder; (v) to
accelerate the exercise date of any Option granted hereunder; and (vi)
to make all other determinations deemed necessary or advisable for the
administration of the Plan.
(c) EFFECT OF BOARD'S DECISION. All decisions, determinations and
interpretations of the Board or Committee shall be final and binding on all
Optionees and any other holders of any Options granted under the Plan.
(d) SUSPENSION OR TERMINATION OF OPTION. If the Board or Committee
reasonably believes that an Optionee has committed an act of misconduct, it
may suspend the Optionee's right to exercise any Option pending a
determination by the Board or Committee (excluding the Outside Director
accused of such misconduct). If the Board or Committee (excluding the
Outside Director accused of such misconduct) determines that an Optionee
has committed an act of embezzlement, fraud, dishonesty, nonpayment of an
obligation owed to the Company, breach of fiduciary duty or deliberate
disregard of the Company's rules resulting in loss, damage or injury to the
Company, or if an Optionee makes an unauthorized disclosure of any Company
trade secret or confidential information, engages in any conduct
constituting unfair competition with respect to the Company, or induces any
party to breach a contract with the Company, neither the Optionee nor the
Optionee's estate shall be entitled to exercise any Option whatsoever. In
making such determination, the Board or Committee (excluding the Outside
Director accused of such misconduct) shall act fairly and shall give the
Optionee an opportunity to appear and present evidence on the Optionee's
behalf at a hearing before the Board or Committee.
4
<PAGE>
(e) DATE OF GRANT OF OPTIONS. The date of grant of an Option
shall, for all purposes, be the date determined in accordance with Section
4 hereof, notwithstanding the fact that an Optionee may not have entered
into an option agreement with the Company on such date. Notice of the
grant of an Option shall be given to the Optionee within a reasonable time
after the date of such grant.
7. ELIGIBILITY. Options may be granted only to Outside Directors.
All options shall be automatically granted in accordance with the terms set
forth in Section 4 hereof. The Plan shall not confer upon any Optionee any
right with respect to continuation of service as a Director or nomination to
serve as a Director, nor shall it interfere in any way with any rights which a
Director or the Company may have to terminate such Director's directorship at
any time.
8. TERM OF PLAN. The effective date of this Plan is January 7, 1992,
the date upon which it was adopted by the Board. The Plan shall continue in
effect for a term of ten (10) years unless terminated sooner under Section 13
hereof.
9. FAIR MARKET VALUE AND FORM OF CONSIDERATION.
(a) FAIR MARKET VALUE. The fair market value per share shall be
determined as follows:
(i) if the Common Stock is listed on a national securities
exchange or admitted to unlisted trading privileges on such
exchange, the fair market value on any given day shall be the
closing sale price for the Common Stock on such day, as reported in
the Wall Street Journal or other newspaper of general circulation;
(ii) if the Common Stock is not listed on a national
securities exchange, the fair market value on any given day shall be
the closing sale price for the Common Stock on the NASDAQ National
Market System on such day, as reported in the Wall Street Journal or
other newspaper of general circulation;
(iii) if the Common Stock is not listed on a national
securities exchange, is not admitted to unlisted trading privileges
on any such exchange, and is not eligible for inclusion on the
NASDAQ National Market System, the fair market value on any given
day shall be the average of the closing representative bid and asked
prices on such day, as reported on the NASDAQ System, and if not
reported on such system, then as reported by the National Quotation
Bureau, Inc. or such other publicly available compilation of the bid
and asked prices of the Common Stock in any over-the-counter market
on which the Common Stock is traded; or
5
<PAGE>
(iv) if there exists no public trading market for the Common
Stock, the fair market value on any given day shall be an amount
determined by the Board or Committee in such manner as it may
reasonably determine in its discretion, provided that such amount
shall not be less than the book value per share as reasonably
determined by the Board or Committee as of the date of
determination nor less than the par value of the Stock.
(b) FORM OF CONSIDERATION. The consideration to be paid for
the Shares to be issued upon exercise of an Option shall consist entirely of
cash or such other form of consideration as the Board or Committee may
determine, in its sole discretion, to be appropriate for payment, including
but not limited to other shares of Common Stock having a fair market value on
the date of surrender equal to the aggregate exercise price of the Shares as
to which the Option is exercised, or any combination of such methods of payment.
10. EXERCISE OF OPTION
(a) PROCEDURE FOR EXERCISE; RIGHTS AS A SHAREHOLDER. Any Option
granted hereunder shall be exercisable at such times as are set forth in Section
5 hereof. An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when a written notice of
such exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may consist of any consideration and method of payment
allowable under Section 9(b) hereof. Until the issuance (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the stock certificate evidencing such Shares, no right
to vote or receive dividends or any other rights as a shareholder shall exist
with respect to the Optioned Stock, notwithstanding the exercise of the Option.
A share certificate for the number of Shares so acquired shall be issued to the
Optionee as soon as practicable after exercise of the Option. No adjustment
will be made for a dividend or other right for which the record date is prior to
the date the stock certificate is issued, except as provided in Section 12
hereof.
Exercise of an Option in any manner shall result in a decrease in the
number of Shares which thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option was exercised.
(b) TERMINATION OF STATUS AS A DIRECTOR. If an Optionee ceases to
serve as a Director, the Optionee may, but (i) as to Options granted hereunder
prior to January 1, 1996, only within six (6) months after the date Optionee
ceases to be an Outside Director and (ii) as to Options granted after such date,
within two (2) years after the date the Optionee ceases to be an Outside
Director of the Company, exercise his or her Option to the extent the
Optionee was entitled to exercise it at the date of such
6
<PAGE>
termination. To the extent that the Optionee was not entitled to exercise an
Option at the date of such termination, or if the Optionee does not exercise
such Option within the time specified herein, the Option shall terminate.
(c) DEATH OF OPTIONEE. In the event of the death of an Optionee
occurring:
(i) during the term of the Option, and provided that the
Optionee was at the time of death a Director of the Company and had
been in Continuous Service as a Director since the date of grant of
the Option, the Option may be exercised, at any time within six (6)
months following the date of death, by the Optionee's estate or by a
person who acquired the right to exercise the Option by bequest or
inheritance, but only to the extent of the right to exercise that
would have accrued had the Optionee continued living and remained in
Continuous Service a Director for six (6) months after the date of
death.
(ii) within thirty (30) days after the termination of Continuous
Service as a Director, the Option may be exercised, at any time within
six (6) months following the date of death, by the Optionee's estate
or by a person who acquired the right to exercise the Option by
bequest or inheritance, but only to the extent of the right to
exercise that had accrued at the date of termination of Continuous
Service as a Director.
11. NON-TRANSFERABILITY OF OPTIONS. The Option may not be sold,
pledged, assigned, hypothecated, transferred, or disposed of in any manner other
than by will or by the laws of descent or distribution and may be exercised,
during the lifetime of the Optionee, only by the Optionee.
12. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR MERGER. The number of
shares of Common Stock covered by each outstanding Option, and the number of
shares of Common Stock which have been authorized for issuance under the Plan
but as to which Options have not yet been granted or which have been returned
to the Plan upon cancellation or expiration of an Option, as well as the
price per share of Common Stock covered by each such outstanding Option,
shall be proportionately adjusted for any increase or decrease in the number
of issued and outstanding shares of Common Stock resulting from a stock
split, reverse stock split, stock dividend, combination or reclassification
of the Common Stock, or any other increase or decrease in the number of
issued shares of Common Stock effected without receipt of consideration by
the Company; provided, however, that conversion of any convertible securities
of the Company shall not be deemed to have been "effected without receipt of
consideration." Such adjustment shall be made by the Board, whose
determination in that respect shall be final, binding and conclusive. Except
as expressly provided herein, no issuance by the Company of shares of stock
of any class, or securities convertible into shares of stock of any class, or
options or rights to purchase shares of stock of any class shall affect, and
no adjustment by reason thereof shall be made with respect to, the number or
price of shares of Common Stock subject to an Option.
7
<PAGE>
In the event of the proposed dissolution or liquidation of the
Company, each Option will terminate immediately prior to the consummation of
such proposed action, unless otherwise provided by the Board. The Board may, in
the exercise of its sole discretion in such instances, declare that any Option
shall terminate as of a date fixed by the Board and give each Optionee the right
to exercise his or her Option as to all or any part of the Optioned Stock,
including Shares as to which the Option would not otherwise be exercisable. In
the event of a proposed sale of all or substantially all of the assets of the
Company, or the merger of the Company with or into another corporation, the
Option shall be assumed or an equivalent option shall be substituted by such
successor corporation or a parent or subsidiary of such successor corporation,
unless the Board determines, in the exercise of its sole discretion and in lieu
of such assumption or substitution, that the Optionee shall have the right to
exercise the Option as to all of the Optioned Stock, including Shares as to
which the Option would not otherwise be exercisable. If the Board makes an
Option fully exercisable in lieu of assumption or substitution in the event of a
merger or sale of assets, the Board shall notify the Optionee that the Option
shall be fully exercisable for a period of ten (10) days from the date of such
notice, and the Option will terminate upon the expiration of such period.
13. AMENDMENT, TERMINATION AND APPROVAL OF THE PLAN. The Board may at any
time amend or terminate the Plan, except that the Board shall not amend the Plan
more than once every six (6) months with respect to the provisions of the Plan
relating to the amount, price, and timing of grants, other than to comply with
changes in the Internal Revenue Code of 1986, the Employee Retirement Income
Security Act of 1974, as amended, or the regulations thereunder. No Option may
be granted after the Plan is terminated. The foregoing provisions of this
Section notwithstanding, no amendment or termination shall, without the consent
of the holder of an Option, alter or impair any rights or obligations under any
Option theretofore granted under the Plan except as is permitted pursuant to
Section 12 of the Plan.
If any amendment to the Plan requires approval by the shareholders of
the Company for continued applicability of Rule 16b-3 under the Exchange Act, or
for initial or continued listing of the Common Stock or other securities of the
Company upon any stock exchange, then such amendment shall be approved by the
holders of a majority of the Company's outstanding capital stock entitled to
vote.
14. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, state securities laws, and the requirements of the NASD or any stock
exchange upon which the Shares may then be listed, and shall be further subject
to the approval of counsel for the Company with respect to such compliance.
As a condition to the exercise of an Option, the Company may require
the person exercising such Option to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or
8
<PAGE>
distribute such Shares, if, in the opinion of counsel for the Company, such a
representation is required by any of the aforementioned relevant provisions of
law. Such Shares may also be issued with appropriate legends on stock
certificates representing such Shares, and the Company may place stop transfer
orders with respect to such Shares.
Inability of the Company to obtain authority from any regulatory body
having jurisdiction, which authority is deemed by the Company's counsel to be
necessary to the lawful issuance and sale of any Shares hereunder, shall relieve
the Company of any liability in respect of the failure to issue or sell such
Shares as to which such requisite authority shall not have been obtained.
15. RESERVATION OF SHARES. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
16. OPTION AGREEMENT. Options shall be evidenced by written option
agreements in substantially the form attached hereto or in such other form as
the Board or Committee shall approve.
17. INFORMATION TO OPTIONEES. The Company shall provide to each
Optionee, during the period for which such Optionee has one or more Options
outstanding, copies of all annual reports and other information which are
provided to all shareholders of the Company.
9
<PAGE>
OLYMPIC FINANCIAL LTD.
1998-2000 RESTRICTED STOCK ELECTION PLAN
ARTICLE I.
PURPOSE
The purpose of this Plan is to reward executive performance and to build
each executive participant's equity interest in the stock of OLYMPIC FINANCIAL
LTD., a Minnesota corporation (the "Company"), by providing long-term incentives
and rewards to officers and other key management associates of the Company and
its subsidiaries who contribute to its continuing success by their management,
innovation, ability, industry, loyalty and exceptional service. This Plan
provides such management associates with an opportunity to acquire Common Stock
of the Company, par value $0.01 per share (the "Common Stock").
ARTICLE II.
DEFINITIONS
2.1 "Active Participant" means a Participant who is employed by the
Company and actively at work.
2.2 "Company" means Olympic Financial Ltd. and its subsidiaries.
2.3 "Board of Directors" means the Board of Directors of Olympic
Financial Ltd.
2.4 "Committee" means the Compensation Committee of the Board of
Directors of the Company.
2.5 "Disability" means the inability of a Participant to perform the
regular duties of his or her normal occupation due to accident or illness
as determined by the Company's long-term disability carrier.
2.6 "Disability Retirement Date" means the date on which a Participant
permanently ceases being an Active Participant by reason of Disability.
2.7 "Eligible Associate" means an officer or other management associate
of the Company determined by the Committee to be eligible to participate in
the Plan pursuant to criteria adopted from time to time by the Committee.
2.8 "Effective Date of Award" means (i) December 20, 1995, as to an
Eligible Associate who received a Restricted Stock Award on such date; (ii)
as to an Eligible Associate who is employed by the Company after December
20, 1995 ("New Associate"), the first day of the New Associate's employment
by the
1
<PAGE>
Company or such later date as determined by the Committee, and (iii) as to
an associate who is not an Eligible Associate on December 20, 1995, the
date of the event or circumstance giving rise to the associate's
eligibility as determined by the Committee. Provided, however, in the
event the New Associate's first day of employment, or the date of the event
or circumstance giving rise to the associate's eligibility occurs during
the last calendar quarter of 1997, 1998 or 1999, notwithstanding the
foregoing, the Effective Date shall be as of January 1, of the next
consecutive year after such quarter. Notwithstanding the foregoing, solely
for purposes of an election under Section 83(b) of the Internal Revenue
Code, the Effective Date of Award shall be the date of grant of a
Restricted Share Award.
2.9 "Normal Retirement Date" means the date of voluntary termination of
employment on or after an associate reaches age fifty-five.
2.10 "Participant" means an Eligible Associate who elects to participate
in the Plan.
2.11 "Plan" means the Olympic Financial Ltd. 1998-2000 Restricted Stock
Election Plan.
2.12 "Plan Year" means the annual period on which the records of the Plan
are kept, that being the fiscal year of the Company. The Plan Years for
the Plan shall be the calendar years 1998, 1999 and 2000.
2.13 "Restricted Stock Award" means an award of the Company's Common
Stock with restrictions as to disposition by the recipient and subject to a
risk of forfeiture until certain conditions described in the Plan have been
met.
2.14 "Restriction Period" means the period from the date of grant of the
Restricted Stock Award until the later of (i) the date five years after the
Effective Date of the Award or (ii) December 31, 2002.
2.15 "Retired Participant" means a participant who has retired under the
provisions of an applicable Company-sponsored retirement plan at Normal or
Disability Retirement Date. Retirement Participant will not, however,
include any Participant who was terminated for cause (as determined by the
Board of Directors or by one or more Section 16 officers) or whose
employment terminated prior to death or Normal or Disability Retirement.
ARTICLE III.
ELIGIBILITY
The Committee will select the officers and other key executive and
management associates to be eligible to participate in the Plan and to receive
Restricted Stock Awards. The Committee shall make this determination for
associates of the Company as of
2
<PAGE>
December 20, 1995 on such date. The Committee may select new and additional
associates for participation subsequent to December 20, 1995.
ARTICLE IV.
RESTRICTED STOCK AWARDS
4.1 TARGET BONUS. The Committee may select Participants who shall be
eligible to receive incentive bonuses for the Plan Years 1998, 1999 and 2000 in
amounts determined by the Committee. The amount of any such bonus which may be
earned by a Participant shall be determined as a percentage of the Participant's
base salary as of the Effective Date or such later date determined by the
Committee. Such Participant's aggregate bonuses for the three Plan Years or a
portion thereof ("Target Bonus") shall be calculated by (i) multiplying the
Participant's base salary as of the Effective Date or such later date determined
by the Committee times his or her bonus percentage as determined by the
Committee; (ii) dividing that product by three hundred sixty-five (365), and
(iii) multiplying that quotient times the number of days from and including the
Effective Date of the Award through and including December 31, 2000. Prior to
the commencement of each Plan Year, the Committee shall establish an annual
performance target for each Participant which target must be achieved by the
Participant as a condition to earning his or her bonus for the relevant Plan
Year.
4.2 ELECTION. Each Participant shall be permitted to make an
irrevocable election that a portion of his/her bonuses for fiscal years 1998-
2000 shall be received in the form of Common Stock. To participate in the Plan,
the Eligible Associate shall execute and submit to the Committee or its
representative an election form no later than thirty (30) days following the
date the Eligible Associate was first informed of his or her eligibility to
participate. The Participant shall irrevocably designate on such election
form the percentage (the "Elected Percentage") of the Target Bonus he or she
elects to receive in the form of Restricted Stock in increments of 0%,
25%, 50%, 75% or 100%.
4.3 ELECTION BY SECTION 16 OFFICERS. All officers of the Company who
are subject to Section 16 of the Securities Exchange Act of 1934 (the "Exchange
Act") as identified by the Board of Directors must elect to apply 100% of their
Target Bonuses to Restricted Stock Awards under this Plan.
4.4 NUMBER OF RESTRICTED SHARES. Subject to the provisions of this
Plan, the Committee may grant a Restricted Stock Award to each Participant who
has elected to participate in the Plan ("Award Recipient"). The Restricted
Stock Award shall be equal to the number of shares of the Company's Common Stock
(rounded down to the nearest whole number) calculated by (i) multiplying the
Target Bonus times the Elected Percentage and (ii) dividing the product thereof
by the market price of the Common Stock as of the Effective Date. Provided,
however, any grants made prior to the approval of the Plan by the Company's
shareholders at the 1996 annual meeting shall be subject to and contingent upon
such approval being given.
3
<PAGE>
4.5 STOCK CERTIFICATES. Restricted shares awarded pursuant to the Plan may
be evidenced by the Stock certificates described in Section 7.3 and such other
written documents (the "Restricted Stock Award Documents") in such form as the
Committee shall approve from time to time. The Company may at its option issue
uncertificated shares until such time as Participants' shares become vested.
When vested, stock certificates shall be issued in the name of the Participant.
Restricted Stock Award Documents shall comply with and be subject to the terms
and conditions of this Plan and such other terms and conditions which the
Committee shall require from time to time which are not inconsistent with the
terms of this Plan. The Committee shall have the right to amend the Restricted
Stock Award Documents issued to an Award Recipient subject to his or her
consent.
4.6 FUTURE AWARDS. At its discretion the Committee may in the future
determine to make Restricted Stock Awards which are in accordance with the terms
of this Plan.
ARTICLE V.
VESTING
5.1 AUTOMATIC LAPSE OF RESTRICTIONS. An Active Participant shall become
fully vested in his/her Restricted Stock Awards upon the lapse of the applicable
Restriction Period.
5.2 ACCELERATED VESTING. As soon as reasonably practical after the end
of 1998, 1999 and 2000, the Committee shall determine whether each Active,
Retired or deceased Participant has achieved his or her annual target
performance goals established by the Committee for the relevant fiscal year.
As of the date the Committee determines that such performance goals for said
year have been achieved, vesting of a portion of the Participant's Restricted
Stock Awards shall be accelerated. For each such Plan Year, an Active
Participant who has achieved his or her performance goals shall vest in the
number of shares determined by multiplying the Participant's total Restricted
Stock Award shares for that year times a fraction, the numerator of which is
the number of days during such year that the Participant was participating in
the Plan and the denominator of which is the total number of days from and
including the Participant's Effective Date to December 31, 2000.
5.3 CONDITIONS RESULTING IN FORFEITURES. In the event that an Active
Participant's employment is terminated and such termination is not by reason of
death, Normal or Disability Retirement or Change of Control, all unvested
Restricted Stock Awards will be forfeited.
5.4 PRO RATA ACCELERATION OF VESTING OF RESTRICTED SHARES IN THE EVENT OF
THE AWARD RECIPIENT'S RETIREMENT, DEATH OR DISABILITY. In the event of the death
or Normal or Disability Retirement of the Award Recipient, at the end of the
fiscal year of the Company in which such event occurred, in the event the
Participant's target performance
4
<PAGE>
goals have been achieved, the Board of Directors or its delegee shall make a
recommendation to the Committee that such Participant is entitled to a
performance bonus. On the basis of that recommendation, the Committee shall
take the following actions:
(a) determine that the Participant vested in a portion of his/her
Restricted Stock Award, and
(b) calculate the number of accelerated vested shares in the portion of
the Restricted Stock Award earned. The vested portion shall be that
proportion of the total shares which could have become vested for that
fiscal year which is equal to the Participant's employment period
during that fiscal year as a proportion of the entire fiscal year.
5.5 ACCELERATION OF VESTING OF RESTRICTED SHARES IN THE EVENT OF CHANGE OF
CONTROL. In the event of, or upon the date set by the Committee to be an
accelerated vesting date in anticipation of, the occurrence of a transaction or
series of related transactions in which (A) the Company is dissolved or
liquidated or sells substantially all of its operating assets, (B) the Company
is party to a merger or consolidation in which the Company is not the surviving
or acquiring entity, or (C) the Company becomes an 80% or more owned subsidiary
of another company (any of such transactions being hereinafter referred to as a
"Change of Control"), the Committee shall direct that vesting with respect to
all Restricted Shares be accelerated and that such Restricted Shares become
fully vested.
ARTICLE VI.
COMMITTEE
6.1 COMPOSITION OF THE COMMITTEE. The Committee shall consist of not
less than two members of the Board. Any grant of Awards to officers who are
subject to Section 16 of the Exchange Act shall be made only by a Committee
of two or more outside directors each of whom is a "disinterested person" as
defined in Rule 16(b)-3(c)(2) of the Exchange Act.
6.2 RULES AND REGULATIONS. The Committee shall adopt such administrative
rules and regulations under this Plan as it may deem appropriate for the
operation of the Plan. The Committee shall also have the power to alter, amend
or revoke any rules or regulations it has adopted.
6.3 AUTHORITY. The Committee shall have full authority to interpret the
Plan and, subject to the provisions herein, to determine when, to whom and the
size of the Restricted Stock Awards to be granted to any Participant, taking
into account the elections made by Participants.
5
<PAGE>
6.4 ACTIONS OF THE COMMITTEE. The Committee shall hold its meetings at
such times and places as it may determine. A majority of the members shall
constitute a quorum. All decisions of the Committee taken in meeting shall be
made on the action of a majority of the members of the Committee. Decisions of
the Committee may be taken by written action without meeting only upon unanimous
vote in favor thereof.
6.5 EXPENSES. All expenses incurred by the Committee in the
administration of this Plan shall be paid by the Company.
ARTICLE VII.
PLAN ADMINISTRATION
7.1 EFFECTIVE DATE. The effective date of this Plan shall be December
20, 1995, provided that the shareholders of the Company have approved or will
approve the Plan within twelve months of that date.
7.2 SHARES AVAILABLE FOR AWARD. Common Stock to be used for Restricted
Stock Awards under the Plan shall be made available at the discretion of the
Board of Directors either from authorized but unissued common shares or from
previously issued common shares reacquired by the Company, including shares
purchased on the open market. The total number of common shares which may be
used in payment of awards under the Plan shall not exceed in the aggregate
600,000 shares, provided, however, that such number of shares shall be
proportionately adjusted for any increase or decrease in the number of
outstanding shares resulting from a stock split or other subdivision or
consolidation of shares or for other capital adjustments or payment of stock
dividends or distributions or other increases or decreases in the outstanding
shares effected without receipt of consideration by the Company. Common shares
awarded under the Plan which are subsequently forfeited shall revert to the Plan
and shall be available for subsequent award to Participants.
7.3 STOCK CERTIFICATES. If issued, the stock certificate(s) evidencing
a Restricted Stock Award shall be registered in the name of the Award Recipient
and shall bear a legend referring to the terms, conditions and restrictions
applicable to such shares. The Committee shall direct the Company to either
retain physical possession or custody of or place into escrow the certificate(s)
evidencing the Restricted Shares until such time as such shares are vested.
Uncertificated shares shall be maintained by the Committee or at its direction.
7.4 DIVIDEND AND VOTING RIGHTS. Subject to Section 7.5 hereof, during
the period from the date a Restricted Stock Award is granted to the date
Restricted Shares are vested, the Award Recipient will be entitled to all rights
of a stockholder of the Company, including the right to vote the shares and
receive dividends declared on such shares, as paid.
6
<PAGE>
7.5 TRANSFER OF RESTRICTED SHARES. No Restricted Shares awarded under
this Plan may be transferred, pledged, or encumbered until such time as any such
shares become vested.
7.6 WITHHOLDING OF TAXES. Whenever Restricted Shares vest or, if
sooner, whenever an Award Recipient must include the Restricted Shares in income
for federal income tax purposes, the Company shall have the right to (a) require
the recipient to remit or otherwise make available to the Company an amount
sufficient to satisfy all federal, state and/or local withholding tax
requirements prior to the delivery or transfer of any certificate or
certificates for such Restricted Shares, or (b) take whatever action it deems
necessary to protect its interests with respect to tax liabilities, including,
without limitation, redeeming a portion of any Restricted Shares otherwise
deliverable pursuant to this Plan with a then fair market value equal to such
tax liabilities. The Company's obligation to make any delivery or transfer of
vested Restricted Shares shall be conditioned on the Award Recipient's
compliance with any withholding requirement to the Company's satisfaction.
ARTICLE VIII.
AMENDMENT AND TERMINATION
8.1 AMENDMENT OF THE PLAN. The Board of Directors of the Company may
amend this Plan from time to time in such manner as they may deem advisable;
provided, however, that only the Committee can make grants and awards. Any
amendment that will result in a grant or an award shall be made only by
disinterested members of the Board of Directors. No amendment to this Plan
shall adversely affect any outstanding Restricted Stock Award without the
consent of the Award Recipient.
8.2 EXPIRATION, SUSPENSION OR TERMINATION OF PLAN. No Restricted Stock
Awards shall be granted after December 31, 2000. However, the Board of
Directors may suspend or terminate this Plan at any time.
ARTICLE IX.
MISCELLANEOUS
9.1 NO CONTINUED EMPLOYMENT. The award of a Restricted Stock Award
pursuant to this Plan shall not be construed to imply or to constitute evidence
of any agreement, express or implied, on the part of the Company or any
subsidiary thereof to retain the Award Recipient in the employ of the Company or
any subsidiary thereof, and each such Award Recipient shall remain subject to
discharge to the same extent as if this Plan had not been adopted.
9.2 CHOICE OF LAW. This Plan shall be operated in accordance with the
laws of the State of Minnesota, to the extent not preempted by federal law.
7
<PAGE>
OLYMPIC FINANCIAL LTD.
COMPUTATION OF EARNINGS PER SHARE
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------
(Dollars in thousands, except per share amounts) 1994 1995 1996
------------- ------------- -------------
<S> <C> <C> <C>
PRIMARY:
Income before extraordinary item and preferred
dividends.............................................. $ 4,185 $ 29,317 $ 60,316
Less preferred dividends................................. (2,300) (2,213) (1,152)
------------- ------------- -------------
Net income before extraordinary item applicable to common
stock.................................................. 1,885 27,104 59,164
Less extraordinary item.................................. -- (3,856) --
------------- ------------- -------------
Net income applicable to common stock.................. $ 1,885 $ 23,248 $ 59,164
------------- ------------- -------------
------------- ------------- -------------
Weighted average number of common shares outstanding..... 9,842,173 17,261,810 30,897,426
Net effect of assumed exercise of stock options and
warrants............................................... 976,735 2,767,959 2,168,047
------------- ------------- -------------
Weighted average primary shares.......................... 10,818,908 20,029,769 33,065,473
------------- ------------- -------------
------------- ------------- -------------
Net income per common share before extraordinary item.... $ 0.17 $ 1.35 $ 1.79
Extraordinary item per common share...................... -- (0.19) --
------------- ------------- -------------
Net income per common share............................ $ 0.17 $ 1.16 $ 1.79
------------- ------------- -------------
------------- ------------- -------------
FULLY DILUTED:
Income before extraordinary item and preferred
dividends.............................................. $ 4,185 $ 29,317 $ 60,316
Less extraordinary item.................................. -- (3,856) --
------------- ------------- -------------
Net income, as adjusted................................ $ 4,185 $ 25,461 $ 60,316
------------- ------------- -------------
------------- ------------- -------------
Weighted average number of common shares outstanding..... 9,842,173 17,261,810 30,897,426
Net effect of assumed exercise of stock options and
warrants............................................... 1,479,907 4,200,896 2,484,195
Net effect of assumed conversion of 8% Cumulative
Convertible Exchangeable Preferred stock............... 5,361,300 4,993,170 3,068,374
------------- ------------- -------------
Weighted average fully diluted shares.................... 16,683,380 26,455,876 36,449,995
------------- ------------- -------------
------------- ------------- -------------
Net income per share before extraordinary item........... $ 0.17 $ 1.11 $ 1.65
Extraordinary item per share............................. -- (0.15) --
------------- ------------- -------------
Net income per share................................... $ 0.17 $ 0.96 $ 1.65
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
- ------------------------
(1) For the year ended December 31, 1994 the computation of fully diluted
earnings per share results in an anti-dilutive earnings per share amount and
is therefore reported equal to primary earnings per share.
<PAGE>
OLYMPIC FINANCIAL LTD.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------
(Dollars in thousands) 1992 1993 1994 1995 1996
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
COMPUTATION OF INCOME:
Income (loss) before income taxes and
extraordinary item........................... $ (1,342) $ 1,395 $ 6,030 $ 48,835 $ 96,004
Capitalized interest........................... -- -- -- -- --
----------- ----------- ----------- ----------- -----------
Income before income taxes and capitalized
interest..................................... (1,342) 1,395 6,030 48,835 96,004
Fixed charges.................................. 878 1,927 5,700 17,784 26,366
----------- ----------- ----------- ----------- -----------
Total income (loss) for computation............ $ (464) $ 3,322 $ 11,730 $ 66,619 $ 122,370
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
COMPUTATION OF FIXED CHARGES:
Portion of rentals deemed representative of
interest (a)................................. $ 68 $ 129 $ 284 $ 614 $ 1,173
INTEREST:
Interest on long-term debt..................... 702 1,648 4,885 15,529 21,153
Interest other than funding of purchase of auto
loans........................................ 70 63 116 945 2,836
Amortization of debt placement................. 38 87 415 696 1,204
Capitalized interest........................... -- -- -- -- --
----------- ----------- ----------- ----------- -----------
Total fixed charges............................ $ 878 $ 1,927 $ 5,700 $ 17,784 $ 26,366
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Ratio of earnings to fixed charges............. -- 1.72x 2.06x 3.75x 4.64x
Deficiency in earnings to fixed charges........ $ (1,342) -- -- -- --
ADDITIONAL INFORMATION:
Net rental expense............................. $ 207 $ 391 $ 861 $ 1,842 $ 3,520
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
</TABLE>
- ------------------------
(a) Portion of rental deemed representative of interest equals one third of
rental expense.
<PAGE>
OLYMPIC FINANCIAL LTD.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------
(Dollars in thousands) 1992 1993 1994 1995 1996
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
COMPUTATION OF INCOME:
Income (loss) before income taxes and
extraordinary item........................... $ (1,342) $ 1,395 $ 6,030 $ 48,835 $ 96,004
Capitalized interest........................... -- -- -- -- --
----------- ----------- ----------- ----------- -----------
Income before income taxes and capitalized
interest..................................... (1,342) 1,395 6,030 48,835 96,004
Fixed charges.................................. 878 1,927 5,700 17,784 26,366
----------- ----------- ----------- ----------- -----------
Total income (loss) for computation............ $ (464) $ 3,322 $ 11,730 $ 66,619 $ 122,370
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
COMPUTATION OF FIXED CHARGES:
Portion of rentals deemed representative of
interest (a)................................. $ 68 $ 129 $ 284 $ 614 $ 1,173
INTEREST:
Interest on long-term debt..................... 702 1,648 4,885 15,529 21,153
Interest other than funding of purchase of auto
loans........................................ 70 63 116 945 2,836
Amortization of debt placement................. 38 87 415 696 1,204
Capitalized interest........................... -- -- -- -- --
----------- ----------- ----------- ----------- -----------
Total fixed charges............................ $ 878 $ 1,927 $ 5,700 $ 17,784 $ 26,366
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Preferred stock dividends on a pre-tax basis... -- 192 3,286 3,688 1,829
Total combined fixed charges and preferred
stock dividends.............................. $ 878 $ 2,119 $ 8,986 $ 21,472 $ 28,195
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Ratio of earnings to combined fixed charges and
preferred stock dividends.................... -- 1.57x 1.31x 3.10x 4.34x
Deficiency in earnings to combined fixed
charges and preferred stock dividends........ $ (1,342) -- -- -- --
ADDITIONAL INFORMATION:
Net rental expense............................. $ 207 $ 391 $ 861 $ 1,842 $ 3,520
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
</TABLE>
- ------------------------
(a) Portion of rental deemed representative of interest equals one third of
rental expense.
<PAGE>
OLYMPIC FINANCIAL LTD.
SUBSIDIARIES
STATE OF NUMBER OF PERCENT OF
INCORPORATION SHARES OWNERSHIP
-------------- --------- ---------
Olympic Receivables Financing Corporation MN 1,000 100%
Olympic Receivables Capital Corp. DE 100 100%
Olympic 1992-B Receivables Capital Corp. DE 100 100%
Olympic Receivables Marketing Corp. MN 1,000 100%
Olympic Receivables Finance Corp. DE 100 100%
Olympic First GP Inc. DE 100 100%
Olympic Second GP Inc. DE 100 100%
Olympic Receivables Finance Corp. II DE 100 100%
Arcadia Receivables Conduit Corp. DE 100 100%
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the following Registration
Statements of Olympic Financial Ltd. and related Prospectuses of our report
dated January 21, 1997, with respect to the consolidated financial statements
of Olympic Financial Ltd., as amended, included in the Annual Report (Form 10-K)
for the year ended December 31, 1996.
Registration
Form Statement No. Purpose
- ---- ------------- -------
S-3 33-94018 Warrants to Purchase Common Stock
S-3 33-98080 Warrants to Purchase Common Stock
S-3 33-81512 Subordianted Extendible and Fixed-Term Notes
S-3 333-18027 Universal Shelf
S-8 33-53670 Olympic Financial Ltd. 1990 Stock Option
Plan, the Olympic Financial Ltd.
1992 Director Stock Option Plan,
and the Employee Stock Purchase Plan
S-8 33-86484 Olympic Financial Ltd. 1994-1997
Restricted Stock Election Plan
S-8 33-94228 Olympic Financial Ltd. 1998-2000
Restricted Stock Election Plan
/s/ Ernst & Young LLP
Minneapolis, Minnesota
January 31, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE 12/31/96
FORM 10-K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 16,057
<SECURITIES> 0
<RECEIVABLES> 719,254
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 29,289
<PP&E> 17,778
<DEPRECIATION> 4,148
<TOTAL-ASSETS> 778,230
<CURRENT-LIABILITIES> 178,719
<BONDS> 206,418
0
0
<COMMON> 364
<OTHER-SE> 392,729
<TOTAL-LIABILITY-AND-EQUITY> 778,230
<SALES> 0
<TOTAL-REVENUES> 213,495
<CGS> 0
<TOTAL-COSTS> 92,298
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 25,193
<INCOME-PRETAX> 96,004
<INCOME-TAX> 35,688
<INCOME-CONTINUING> 60,316
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 60,316
<EPS-PRIMARY> 1.79
<EPS-DILUTED> 1.65
</TABLE>
<PAGE>
CAUTIONARY STATEMENT
OLYMPIC FINANCIAL LTD. (THE "COMPANY"), OR PERSONS ACTING ON BEHALF OF THE
COMPANY, OR OUTSIDE REVIEWERS RETAINED BY THE COMPANY MAKING STATEMENTS ON
BEHALF OF THE COMPANY, OR UNDERWRITERS OF THE COMPANY'S SECURITIES, FROM TIME TO
TIME, MAY MAKE, IN WRITING OR ORALLY, "FORWARD-LOOKING STATEMENTS" AS DEFINED
UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 (THE "ACT"). THIS
CAUTIONARY STATEMENT, WHEN USED IN CONJUNCTION WITH AN IDENTIFIED
FORWARD-LOOKING STATEMENT, IS FOR THE PURPOSE OF QUALIFYING FOR THE "SAFE
HARBOR" PROVISIONS OF THE ACT AND IS INTENDED TO BE A READILY AVAILABLE WRITTEN
DOCUMENT THAT CONTAINS FACTORS WHICH COULD CAUSE RESULTS TO DIFFER MATERIALLY
FROM SUCH FORWARD-LOOKING STATEMENTS. THESE FACTORS ARE IN ADDITION TO ANY OTHER
CAUTIONARY STATEMENTS, WRITTEN OR ORAL, WHICH MAY BE MADE OR REFERRED TO IN
CONNECTION WITH ANY SUCH FORWARD-LOOKING STATEMENT.
THE FOLLOWING MATTERS, AMONG OTHERS, MAY HAVE A MATERIAL ADVERSE EFFECT ON
THE BUSINESS, FINANCIAL CONDITION, LIQUIDITY, RESULTS OF OPERATIONS OR
PROSPECTS, FINANCIAL OR OTHERWISE, OF THE COMPANY. REFERENCE TO THIS CAUTIONARY
STATEMENT IN THE CONTEXT OF A FORWARD-LOOKING STATEMENT OR STATEMENTS SHALL BE
DEEMED TO BE A STATEMENT THAT ANY ONE OR MORE OF THE FOLLOWING FACTORS MAY CAUSE
ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE IN SUCH FORWARD-LOOKING STATEMENT
OR STATEMENTS.
LIQUIDITY AND ACCESS TO CAPITAL RESOURCES
NEGATIVE OPERATING CASH FLOWS. The Company's business requires substantial
cash to support amounts necessary to purchase and finance automobile loans
pending securitization, the payment of dealer participations, cash held from
time to time in restricted spread accounts in connection with securitizations or
warehouse facilities, repossessed inventory, interest advances to securitization
trusts, interest expense and other cash requirements, in addition to debt
service and dividends. These cash requirements increase as the volume of the
Company's loan purchases increases. To the extent that increases in the volume
of loan purchases and securitizations provide income, a substantial portion of
such income is received by the Company in cash over the life of the loans. The
Company has operated historically on a negative operating cash flow basis and
expects to continue to do so for so long as the Company's volume of loan
purchases continues to grow at a significant rate. As a result of the Company's
historical growth rate, the Company has used increasingly larger amounts of cash
than it has generated from its operating activities. The Company has funded
these negative operating cash flows principally through borrowings from
financial institutions, sales of equity securities and sales of senior and
subordinated notes. The Company's ability to execute its growth strategy depends
upon its continued ability to obtain substantial additional long-term debt and
equity capital through access to the capital markets or otherwise. There can be
no assurance that the Company will have access to the capital markets when
needed or will be able to obtain financing upon terms reasonably satisfactory to
the Company. Factors which could affect the Company's access to the capital
markets, or the costs of such capital, include changes in interest rates,
general economic conditions, the perception in the capital markets of the
Company's business, results of operations, leverage, financial condition and
business prospects, and the performance of the Company's securitization trusts.
In addition, covenants with respect to the Company's debt securities and credit
facilities may significantly restrict the Company's ability to incur additional
indebtedness and to issue new classes of preferred stock.
POTENTIAL INABILITY TO REFINANCE EXISTING INDEBTEDNESS. The Company's
ability to repay its outstanding indebtedness at maturity may depend on its
ability to refinance such indebtedness, which could be adversely affected if the
Company does not have access to the capital markets for the sale of additional
debt or equity through public offerings or private placements on terms
reasonably satisfactory to the Company. See "Negative Operating Cash Flows"
above.
DEPENDENCE ON WAREHOUSE FINANCING. The Company depends on warehouse
facilities with financial institutions or institutional lenders to finance its
purchase of loans on a short-term basis pending securitization. At December 31,
1996, the Company had $800.0 million of warehouse facilities through banks and
institutionally managed asset-backed securities conduits, of which $688.9
million was available. These facilities expire at various times in 1997, subject
to renewal or extension. Implementation of the Company's growth strategy
requires continued availability of warehouse facilities and may require
increases in the capacity of warehouse facilities. There can be no assurance
that such financing will be available on terms reasonably satisfactory to the
Company. The inability of the Company to arrange
<PAGE>
additional warehouse facilities or to extend or replace existing facilities when
they expire would have a material adverse effect on the Company's business,
financial condition and results of operations and on the Company's outstanding
securities.
DEPENDENCE ON SECURITIZATION. The Company has relied upon its ability to
aggregate and sell loans as asset-backed securities in the secondary market to
generate cash proceeds for repayment of warehouse facilities and to purchase new
loans from dealers. Through December 31, 1996 the Company had securitized
approximately $5.8 billion of automobile loans, approximately $3.8 billion of
which were outstanding at December 31, 1996. Accordingly, adverse changes in the
Company's asset-backed securities program or in the asset-backed securities
market for automobile receivables generally could materially adversely affect
the Company's ability to purchase and resell loans on a timely basis and upon
terms reasonably satisfactory to the Company. The Company endeavors to effect
public securitizations of its loans on at least a quarterly basis. However,
market and other considerations, including the conformity of loans to insurance
company and rating agency requirements, could affect the timing of such
transactions. Any delay in the sale of loans beyond a quarter-end would
eliminate the related gain on sale in the given quarter and adversely affect the
Company's reported earnings for such quarter. All of the Company's
securitizations from March 1993 through December 31, 1996 and one of the
Company's warehouse facilities have utilized credit enhancement in the form of
financial guaranty insurance policies issued by FSA to achieve "AAA/Aaa" ratings
with respect to the asset-backed securities. The Company believes that financial
guaranty insurance policies reduce the costs of the securitizations and such
warehouse facility relative to alternative forms of credit enhancements
available to the Company. The Company has committed to use FSA for future credit
enhancement on insured securitizations through 1997 in consideration for certain
limitations on FSA insurance premiums. FSA is not required to insure
Company-sponsored securitizations and there can be no assurance that it will
continue to do so or that future Company-sponsored securitizations will be
similarly rated.
LOAN PERFORMANCE RISKS
POTENTIAL NEGATIVE EFFECTS ON FINANCIAL CONDITION, RESULTS OF OPERATIONS AND
LIQUIDITY. The Company's business, financial condition, results of operations
and liquidity depend, to a material extent, on the performance of loans
purchased and sold by the Company. When such loans are sold in securitizations,
the Company recognizes gain on sale. Finance income receivable, the Company's
principal asset, has been calculated using assumptions concerning future default
and prepayment rates on securitized loans that are consistent with the Company's
historical experience and market conditions and present value discount rates
that the Company believes would be requested by an unrelated purchaser of an
identical stream of estimated cash flows. Management believes that the Company's
estimates of excess cash flow were reasonable at the time each gain on sale of
loans was recorded. However, the actual rates of default and/or prepayment on
such loans may exceed those estimated for purposes of calculating the Company's
finance income receivable and consequently may adversely affect anticipated
future excess cash flow. The Company periodically reviews its prepayment and
loss assumptions in relation to current performance of the loans and market
conditions, and, if necessary, writes down the balance of finance income
receivable. The Company's business, financial condition and results of
operations could be materially adversely affected by such adjustments in the
future. No assurance can be given that loan losses and prepayments will not
exceed the Company's estimates or that finance income receivable could be sold
at its stated value on the balance sheet, if at all.
POSSIBLE RESTRICTIONS ON CASH FLOW FROM SECURITIZATIONS. The Company's
future liquidity and financial condition, and its ability to finance the growth
of its business and to repay or refinance its indebtedness, will depend to a
material extent on distributions of excess cash flow from securitization trusts.
The Company's agreements with FSA provide that the Company must maintain in a
spread account for each insured securitization trust specified levels of excess
cash during the life of the trust. These spread accounts are initially funded
out of initial deposits or cash flows from the related trust. Thereafter, during
each month, excess cash flow due to ORFC from all insured securitization trusts
is first used to replenish any
2
<PAGE>
spread account deficiencies and is then distributed to the Company. If excess
cash flow from all insured securitization trusts, plus cash flow from
recoveries, is not sufficient to replenish all such spread accounts, no cash
flow would be available to the Company from ORFC for that month. Each insured
securitization trust has certain portfolio performance tests relating to levels
of delinquency, defaults and net losses on the loans in such trust. If any of
these levels are exceeded, the amount required to be retained in the related
spread account, and not passed through to ORFC, will be increased. Such levels
have historically been exceeded prior to 1996 and the Company has obtained
waivers from FSA to permit distributions of cash from certain spread accounts to
ORFC. There can be no assurance that such levels will not be exceeded in the
future or that, if exceeded, waivers will be available. In certain events with
respect to any series of asset-backed securities insured by FSA, the Company
will be in default under its insurance agreement with FSA and distributions of
cash flow to ORFC from the related securitization trust may be suspended until
the asset-backed securities have been redeemed. Such events include the
cumulative net loss rate, as defined, equaling or exceeding an agreed upon
percentage of the principal balance of loans included in the securitization
trust related to such series. Certain of the Company's securitization trusts
have exceeded such insurance agreement thresholds prior to 1996 and the Company
has obtained waivers from FSA to permit distributions of cash to ORFC. There can
be no assurance that such thresholds will not be exceeded in the future or that,
if exceeded, waivers will be available. In addition, the spread account for each
securitization is cross-collateralized to the spread accounts established in
connection with the Company's other securitization trusts (including one of its
warehouse facilities) such that excess cash flow from a performing
securitization trust may be used to support negative cash flow from, or to
replenish a deficient spread account in connection with, a nonperforming
securitization trust, thereby further restricting excess cash flow available to
ORFC. FSA also has a collateral security interest in the stock of ORFC. If FSA
were to foreclose on such security interest following an event of default under
an insurance agreement with respect to a securitization trust, FSA could
preclude payment of dividends by ORFC to the Company, thereby eliminating the
Company's right to receive distributions of excess cash flow from all the FSA-
insured securitization trusts. The Company's right to service the loans sold in
securitizations insured by FSA is also generally subject to the discretion of
FSA. Accordingly, there can be no assurance that the Company will continue as
servicer for such loans and receive related servicing fees. Any increase in
limitations on the Company's cash flow from securitization trusts or inability
to obtain any necessary waivers from FSA or termination of servicing
arrangements could materially adversely affect the Company's cash flow and
liquidity, and ultimately its business, financial condition and results of
operations and its outstanding securities.
IMPACT OF PORTFOLIO GROWTH AND NEW PRODUCTS. The Company has experienced
rapid growth in its loan servicing portfolio. Historically, the statistical
incidence of delinquencies and defaults in connection with automobile loans
tends to vary over the age of the loan. For example, statistically, loans that
are between six and fourteen months old have had a higher likelihood of being
delinquent or defaulting than loans with similar credit characteristics that are
three months old. Accordingly, to the extent that portfolio growth results in a
servicing portfolio containing disproportionately more loans originated within
the prior six months, the current and historical delinquency and default rates
of loans in the servicing portfolio may understate future delinquency and
default rates. Also, there can be no assurance that the Company's transition
from centralized to regional servicing and collection will not adversely affect
the rate of loan delinquencies and defaults. In addition, to the extent the
Company offers new loan products which involve different underwriting policies,
the delinquency and default rates of the Company's servicing portfolio may
change. The Company has instituted a tiered pricing system and has periodically
increased the authorized amount of loans purchased under its Classic program
involving borrowers who do not meet all of the underwriting standards in the
Company's Premier program and are charged rates of interest higher than those
under the Company's Premier program. As a result of the increases in Classic
loans as a proportion of the Company's portfolio, there has been an increase in
the rates of, and reserves for, delinquency, repossession and loss historically
reported by the Company. To estimate future delinquency, repossession and loss
experience related to Classic loans, the Company uses a combination of factors,
including actual
3
<PAGE>
loan performance experience on Premier loans, adjusted for the estimated effects
of less favorable credit characteristics, and industry experience on loans with
similar credit characteristics. However, there can be no assurance that the
Classic loans will perform under varying economic conditions in the manner
estimated by the Company. Any increase in delinquency, repossession and loss
rates related to Classic loans above the rates estimated by the Company could
have a material adverse effect on the Company's business, financial condition
and results of operations, as well as its liquidity. Furthermore, because loan
default and delinquency rates tend to increase during the six- to fourteen-month
period from loan origination, the impact of increases in the Classic program on
the Company's overall delinquency, repossession and loss rates will not be fully
realized until the amount of Classic loans which have entered this six- to
fourteen-month period is proportionate to the amount of Classic loans being
purchased by the Company relative to Premier loans. In addition, certain of the
Company's loan products which produce higher delinquency, repossession and loss
rates than initially expected may continue to have an impact on the Company's
overall loan performance, even after being discontinued or modified, until the
initially generated loans mature beyond the six- to fourteen-month period. In
March 1996, the Company discontinued a Classic loan product directed at
first-time credits. In 1996, the Company increased the number of loans purchased
to finance the sale of its repossessed inventory in retail markets. Both of
these products have experienced significantly higher than expected delinquency,
repossession and loss rates, which has increased the risk that the Company may
trigger loan performance tests under agreements with FSA or warehouse
facilities. The increase in loans purchased under the Classic program has also
increased the percentage of loans in the Company's servicing portfolio subject
to loan extensions or rewrites, or with obligors under bankruptcy workout
arrangements, which arrangements may have the effect of reducing delinquency,
but may ultimately result in higher defaults and net losses.
POTENTIAL NEGATIVE IMPACT OF COVENANTS UNDER FINANCE AGREEMENTS. Increases
in loan delinquency and loss rates with respect to any securitization trust may
result in the trust's portfolio exceeding the various pool performance levels
established by FSA, thereby restricting or cutting off cash distributions to
ORFC from the securitization spread accounts. See "Cash Flow from
Securitizations" above. In addition, such increases may cause the Company to
exceed certain pool performance tests established in other agreements governing
its indebtedness. Under the terms of the indenture governing the Company's
outstanding Senior Term Notes due 2000 (the "Senior Term Notes"), if at any
month-end the amount of charge-offs (net of recoveries) of automobile loans in
the Company's servicing portfolio during the preceding six-month period, times
two, exceeds 1.65% of the average servicing portfolio in the preceding seven
months ("Portfolio Loss Ratio"), the Company will be prohibited from purchasing
new automobile loans in excess of 20% of the Company's Adjusted Consolidated
Cash Flow (as defined in the indenture governing the Senior Term Notes) plus
proceeds of warehouse facilities and certain other available cash. If the
Portfolio Loss Ratio exceeds 1.65% for two consecutive months, then 50% of such
Adjusted Consolidated Cash Flow (as defined in the indenture governing the
Senior Term Notes) must be used to offer to repurchase Senior Term Notes. Such a
restriction on purchases of new automobile loans could have a material adverse
effect on the Company's business, financial condition and results of operations.
Covenants with respect to a series of Debt Securities may contain similar
restrictions or other covenants relating to portfolio performance. In addition,
if at the end of any month the Portfolio Loss Ratio exceeds 2.5% or the
Company's delinquency level exceeds 3.5%, an event of default will occur under
one of the Company's outstanding warehouse facilities. The delinquency level is
calculated as a percentage of outstanding principal balance of all automobile
loans owned or securitized by the Company as to which a payment is more than
thirty days past due. Upon the occurrence of an event of default under such
warehouse facility, the lending banks under such facility may accelerate the
payment of amounts outstanding thereunder and would have no further obligation
to extend additional credit. Furthermore, any such event of default or
acceleration may trigger cross-defaults under other outstanding indebtedness of
the Company and may result in the acceleration of amounts due thereunder. The
increase in Classic loans during 1996, among other things, has increased the
risk that the Company may trigger its Portfolio Loss Ratio covenants in the
future.
4
<PAGE>
ECONOMIC CONDITIONS
AUTOMOBILE MARKET CONDITIONS. Periods of economic slowdown or recession,
whether general, regional or industry-related, may increase the risk of default
on automobile loans and may have an adverse effect on the Company's business,
financial condition and results of operations. Such periods also may be
accompanied by decreased consumer demand for automobiles, resulting in reduced
demand for automobile loans and declining values of automobiles securing
outstanding loans, thereby weakening collateral coverage and increasing the
possibility of losses in the event of default. The increased proportion of loans
under the Company's Classic program has increased the Company's sensitivity to
changes in economic conditions. Significant increases in the inventory of used
automobiles during recessionary economies may depress the prices at which
repossessed automobiles may be sold or delay the timing of such sales. There can
be no assurance that the used automobile markets will be adequate for the sale
of repossessed automobiles and any material deterioration of such markets could
increase the Company's loan losses or reduce recoveries from the sale of
repossession inventory. In addition, the Company has channeled a significant
portion of its repossession inventory through retail resale markets instead of
wholesale markets, including the financing of such retail sales through its
Classic program, which had the effect of reducing the Company's loan losses
while delaying cash flow recovered from inventory turnover. The Company has
experienced significant growth in its repossesion inventory, which increased
from $17.7 million at December 31, 1995 to $64.9 million at December 31, 1996.
There can be no assurance that the Company will continue to use such retail
resale channels, that it will be able to realize such benefits to loan losses in
the future or that its inventories will not reach levels at which they cannot
readily be liquidated through such channels. Any such event might have an
adverse effect on loan loss levels.
INTEREST RATES. The Company's profitability may be directly affected by the
level of and fluctuations in interest rates, which affect the Company's gross
interest rate spread. The Company monitors the interest rate environment and
employs prefunding or other hedging strategies designed to mitigate the impact
of changes in interest rates on its gross interest rate spread. However, there
can be no assurance that the profitability of the Company would not be adversely
affected during any period of changes in interest rates.
MANAGEMENT OF RAPID GROWTH
The rapid growth of the Company's servicing portfolio has resulted in
increased demands on the Company's personnel and systems. The Company's ability
to support, manage and control continued growth is dependent upon, among other
things, its ability to hire, train, supervise and manage its larger workforce.
Furthermore, the Company's ability to manage portfolio delinquency and loss
rates is dependent upon the maintenance of efficient collection and repossession
procedures and adequate staffing therefor. There can be no assurance that the
Company will have trained personnel and systems adequate to support such growth.
COMPETITION
The business of financing automobiles is highly competitive. Existing and
potential competitors include well-established financial institutions, such as
banks, other automobile finance companies, small loan companies, thrifts,
leasing companies and captive finance companies owned by automobile
manufacturers, such as General Motors Acceptance Corporation, Chrysler Credit
Corp. and Ford Motor Credit Company. Many of these competitors have greater
financial, technical and marketing resources than the Company and from time to
time offer special buyer incentives in the form of below-market interest rates
on certain classes of vehicles. Many of such competitors also have longstanding
relationships with automobile dealers and some of such major competitors provide
other forms of financing to automobile dealers, including dealer floor plan
financing and leasing, which is not provided by the Company. There can be no
assurance that the Company will be able to compete successfully with such
competitors.
5
<PAGE>
REGULATION
The Company's business is subject to numerous federal and state consumer
protection laws and regulations, which, among other things: (i) require the
Company to obtain and maintain certain licenses and qualifications; (ii) limit
the interest rates, fees and other charges the Company is allowed to charge;
(iii) limit or prescribe certain other terms of the Company's automobile loan
contracts; (iv) require specific disclosures; and (v) define the Company's
rights to repossess and sell collateral. The Company believes it is in
substantial compliance with all such laws and regulations, and that such laws
and regulations have had no material effect on the Company's ability to operate
its business. Changes in existing laws or regulations, or in the interpretation
thereof, or the promulgation of any additional laws or regulations, could have a
material adverse effect on the Company's business, financial condition and
results of operations and upon its outstanding securities.
SHARES ELIGIBLE FOR FUTURE SALES
Additional shares of Common Stock may be issued upon the exercise of
outstanding stock options, the conversion of outstanding convertible preferred
stock and the exercise of outstanding warrants. Certain holders thereof have
registration rights with respect to such shares. The Company has registered
pursuant to such rights the sale from time to time of up to 3,871,364 shares of
Common Stock when, as and if issued upon the exercise of outstanding warrants.
Such issuances, or the resale of the Common Stock so acquired, could have an
adverse effect on the market price of the Company's Common Stock.
UNDESIGNATED SHARES; ANTI-TAKEOVER CONSIDERATIONS
The authorized and unissued stock of the Company, other than shares reserved
for issuance pursuant to options and warrants, consists of undesignated shares.
The Board of Directors, without any action by the Company's shareholders, is
authorized to designate and issue the undesignated shares in such classes or
series as it deems appropriate and to establish the rights, preferences and
privileges of such shares, including dividend, liquidation and voting rights.
The Company has adopted a shareholder rights plan to deter a hostile takeover.
Further, certain provisions of the Minnesota Business Corporation Act may
operate to discourage a negotiated acquisition or unsolicited takeover of the
Company. See "Description of Common Stock." Each or any of the foregoing could
have the effect of entrenching the Company's directors, impeding or deterring an
unsolicited tender offer or takeover proposal regarding the Company and thereby
depriving the then current shareholders of the ability to sell their shares at a
premium over the market price, or otherwise adversely affecting the voting
power, dividend, liquidation and other rights of holders of Common Stock.
6
