<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended June 30, 1997 Commission file number 0-20526
------------------------
ARCADIA FINANCIAL LTD.
(Exact name of registrant as specified in its charter)
MINNESOTA 41-1664848
(State or other jurisdiction (I.R.S. Employer Identification
of incorporation or organization) Number)
7825 WASHINGTON AVENUE SOUTH, MINNEAPOLIS, MN 55439-2435
(Address of principal executive office)
Registrant's telephone number, including area code (612) 942-9880
------------------------
Indicate by checkmark whether the Registrant (1) has filed all reports
required to be filed by section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes _X_ No ____
The number of shares of the Common Stock of the registrant outstanding as of
July 28, 1997 was 38,097,501.
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<PAGE>
FORM 10-Q INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PART I FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements............................... 3
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations......................................... 11
PART II OTHER INFORMATION
Item 1. Legal Proceedings............................................... 22
Item 2. Changes in Securities........................................... 22
Item 3. Defaults Upon Senior Securities................................. 22
Item 4. Submission of Matters to a Vote of Security Holders............. 22
Item 5. Other Information............................................... 24
Item 6. Exhibits and Reports on Form 8-K................................ 24
SIGNATURES................................................................ 27
EXHIBIT INDEX............................................................. 28
</TABLE>
The financial information for the interim periods presented herein is
unaudited. In the opinion of management, all adjustments necessary (which are of
a normal recurring nature) have been included for a fair presentation of the
results of operations. The results of operations for an interim period are not
necessarily indicative of the results that may be expected for a full year or
any other interim period.
SAFE HARBOR STATEMENT UNDER THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This Form 10-Q for quarter ended June 30, 1997 contains certain
forward-looking statements as defined in 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 captions "Management's Discussion
and Analysis of Financial condition and Results of Operations--Cautionary
Statements" herein and "Cautionary Statements" in Exhibit 99.1 to the 1996
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.
2
<PAGE>
ARCADIA FINANCIAL LTD.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(UNAUDITED)
JUNE 30, 1997 DECEMBER 31, 1996
------------- -----------------
<S> <C> <C>
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
ASSETS
Cash and cash equivalents....................................................... $ 28,135 $ 16,057
Due from securitization trust................................................... 168,211 177,076
Auto loans held for sale........................................................ 47,472 36,285
Finance income receivable....................................................... 338,092 362,916
Restricted cash in spread accounts.............................................. 189,643 142,977
Furniture, fixtures and equipment............................................... 16,465 13,630
Other assets.................................................................... 34,576 29,289
------------- --------
Total assets.............................................................. $ 822,594 $ 778,230
------------- --------
------------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
Amounts due under warehouse facilities.......................................... $ 97,722 $ 111,140
Senior term notes............................................................... 291,671 145,000
Subordinated notes.............................................................. 51,742 53,689
Capital lease obligations....................................................... 6,583 7,729
Deferred income taxes........................................................... 11,620 54,387
Accounts payable and accrued liabilities........................................ 27,986 13,192
------------- --------
Total liabilities......................................................... 487,324 385,137
Commitments and contingencies
Shareholders' equity:
Capital stock, $.01 par value, 100,000,000 shares authorized:
Common stock 38,060,023 and 36,416,802 shares issued and outstanding,
respectively.............................................................. 381 364
Additional paid-in capital.................................................... 321,943 310,187
Retained earnings............................................................. 12,946 82,542
------------- --------
Total shareholders' equity................................................ 335,270 393,093
------------- --------
Total liabilities and shareholders' equity................................ $ 822,594 $ 778,230
------------- --------
------------- --------
</TABLE>
See notes to unaudited consolidated financial statements.
3
<PAGE>
ARCADIA FINANCIAL LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------------- -----------------------------
1997 1996 1997 1996
------------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
REVENUES:
Net interest margin............................... $ 19,130 $ 15,085 $ 37,495 $ 27,385
Gain on sale of loans, net of $98.0 million
special charge in March 1997.................... 26,459 25,452 (51,428) 50,681
Servicing fee income.............................. 11,047 6,557 20,525 12,300
Other non-interest income......................... 2,203 2,449 4,384 3,173
------------- ------------- -------------- -------------
Total revenues.................................. 58,839 49,543 10,976 93,539
EXPENSES:
Salaries and benefits............................. 15,115 8,813 29,593 17,910
General and administrative and other operating
expenses........................................ 23,810 11,124 49,975 22,043
------------- ------------- -------------- -------------
Total operating expenses........................ 38,925 19,937 79,568 39,953
Long-term debt and other interest expense......... 10,651 6,433 18,242 11,949
------------- ------------- -------------- -------------
Total expenses.................................. 49,576 26,370 97,810 51,902
------------- ------------- -------------- -------------
Operating income (loss) before income taxes and
extraordinary item.............................. 9,263 23,173 (86,834) 41,637
Income tax expense (benefit)...................... 3,520 8,458 (33,066) 15,844
------------- ------------- -------------- -------------
Income (loss) before extraordinary item........... 5,743 14,715 (53,768) 25,793
Extraordinary item................................ -- -- (15,828) --
------------- ------------- -------------- -------------
Net income (loss)................................. $ 5,743 $ 14,715 $ (69,596) $ 25,793
------------- ------------- -------------- -------------
------------- ------------- -------------- -------------
PRIMARY EARNINGS PER SHARE:
Net income (loss) per common share before
extraordinary item.............................. $ 0.15 $ 0.43 $ (1.37) $ 0.85
Extraordinary item per common share............... -- -- (0.41) --
------------- ------------- -------------- -------------
Net income (loss) per common share................ $ 0.15 $ 0.43 $ (1.78) $ 0.85
------------- ------------- -------------- -------------
------------- ------------- -------------- -------------
FULLY DILUTED EARNINGS PER SHARE:
Net income (loss) per share before extraordinary
item............................................ $ 0.15 $ 0.40 $ (1.37) $ 0.76
Extraordinary item per share...................... -- -- (0.41) --
------------- ------------- -------------- -------------
Net income (loss) per share....................... $ 0.15 $ 0.40 $ (1.78) $ 0.76
------------- ------------- -------------- -------------
------------- ------------- -------------- -------------
Weighted average common and common equivalent shares
outstanding:
Primary........................................... 39,182,748 33,508,215 39,163,325 29,397,320
Fully diluted..................................... 39,182,748 37,205,287 39,239,574 33,981,805
</TABLE>
4
<PAGE>
ARCADIA FINANCIAL LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
----------------------------
1997 1996
------------- -------------
<S> <C> <C>
(DOLLARS IN THOUSANDS)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)................................................................... $ (69,596) $ 25,793
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization..................................................... 3,262 1,858
(Increase) decrease in assets:
Automobile loans held for sale:
Purchases of automobile loans................................................. (1,557,818) (1,291,687)
Sales of automobile loans..................................................... 1,522,135 1,330,262
Repayments of automobile loans................................................ 24,496 27,681
Finance income receivable....................................................... 24,824 (78,465)
Restricted cash in spread accounts.............................................. (46,666) (38,368)
Due from securitization trusts.................................................. 8,865 (151,635)
Advances due to servicer........................................................ 3,390 (1,676)
Servicing fee receivable........................................................ (579) (557)
Prepaid expenses................................................................ 1,048 292
Other assets.................................................................... (4,592) (1,289)
Increase (decrease) in liabilities:
Deferred income taxes........................................................... (42,767) 15,843
Accounts payable and accrued liabilities........................................ 14,794 6,927
------------- -------------
Total cash used in operating activities..................................... (119,204) (155,021)
CASH FLOWS FROM INVESTING ACTIVITIES:
Net purchase of furniture, fixtures and equipment................................... (5,006) (1,451)
Purchase of subordinated certificates............................................... -- (1,219)
Collections on subordinated certificates............................................ 572 539
------------- -------------
Total cash used in investing activities..................................... (4,434) (2,131)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of Common Stock.......................................... 2,485 150,500
Payment of dividends on 8% Convertible Preferred Stock.............................. -- (807)
Proceeds from borrowings under warehouse facilities................................. 1,074,410 952,596
Repayment of borrowings under warehouse facilities.................................. (1,087,828) (961,289)
Subordinated notes, net proceeds (repayments)....................................... (1,947) 39,283
Repayments of long-term debt........................................................ (145,000) --
Proceeds from issuance of Senior Notes.............................................. 300,000 --
Deferred debt issuance cost, net.................................................... (5,127) (664)
Reduction of capital lease obligations.............................................. (1,277) (1,232)
------------- -------------
Total cash provided by financing activities................................. 135,716 178,387
------------- -------------
Net increase in cash and cash equivalents........................................... 12,078 21,235
Cash and cash equivalents at beginning of period.................................... 16,057 1,340
------------- -------------
Cash and cash equivalents at end of period.......................................... $ 28,135 $ 22,575
------------- -------------
------------- -------------
Supplemental disclosures of cash flow information:
Non cash activities:
Additions to capital leases..................................................... $ 132 $ 4,754
Cash paid for:
Interest........................................................................ $ 14,656 $ 16,417
</TABLE>
See notes to unaudited consolidated financial statements
5
<PAGE>
ARCADIA FINANCIAL LTD.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED JUNE 30, 1997
--------------------------------------------------------------
NUMBER OF ADDITIONAL
COMMON COMMON PAR PAID IN RETAINED
SHARES VALUE CAPITAL EARNINGS TOTAL
------------ ----------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
BALANCE, DECEMBER 31, 1996......................... 36,416,802 $ 364 $ 310,187 $ 82,542 $ 393,093
Issuance of options and warrants................... -- -- 8,590 -- 8,590
Exercise of options and warrants................... 1,476,539 15 2,342 -- 2,357
Issuance of Common Stock:
Benefit plans.................................... 166,682 2 125 -- 127
Amortization of deferred compensation.............. -- -- 699 -- 699
Net income......................................... -- -- -- (69,596) (69,596)
------------ ----- ---------- ----------- ----------
BALANCE, JUNE 30, 1997............................. 38,060,023 $ 381 $ 321,943 $ 12,946 $ 335,270
------------ ----- ---------- ----------- ----------
------------ ----- ---------- ----------- ----------
</TABLE>
See notes to unaudited consolidated financial statements.
6
<PAGE>
ARCADIA FINANCIAL LTD.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE QUARTER ENDED JUNE 30, 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION. The interim financial statements have been prepared
by the Company pursuant to the rules and regulations of the Securities and
Exchange Commission applicable to quarterly reports on Form 10-Q. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations, although management
believes that the disclosures present fairly the financial position of the
Company and its subsidiaries for the periods presented. These financial
statements should be read in conjunction with the audited consolidated financial
statements and related notes and schedules included in the Company's 1996 Annual
Report filed on Form 10-K filed February 10, 1997.
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated.
Certain reclassifications have been made to the June 30, 1996 balances to
conform to current period presentation.
FINANCE INCOME RECEIVABLE. In April 1997, the Company changed its
accounting policy with respect to valuation of repossessed vehicles. This policy
requires the Company to record the estimated realizable value of repossessed
vehicles at amounts which approximate that which is expected to be achieved
through wholesale disposition. See Management's Discussion and Analysis--SPECIAL
CHARGES for additional discussion.
Effective January 1, 1997 the Company is required to account for gains on
sale of loans in accordance with Statement of Financial Accounting Standards No.
125, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishment of Liabilities" ("SFAS 125"). The Company's implementation of
SFAS 125 incorporates the change in accounting policy discussed above in
determining the fair value of assets retained by the Company. In addition, the
Company has applied a discount rate in determining the present value of
estimated future cash flows that reflects its revised estimates of the yields
required by purchasers of similar financial instruments. Exclusive of the effect
of the change in accounting policy discussed above, the implementation of SFAS
125 did not have a significant effect on the Company's accounting for gains on
sale of loans.
EARNINGS PER SHARE. In February 1997, the Financial Accounting Standards
Board issued Statement No. 128, "Earnings per Share," ("SFAS 128") which is
required to be adopted on December 31, 1997. At that time, the Company will be
required to change the method currently used to compute earnings per share and
to restate all prior periods. Under the new requirements for calculating primary
earnings per share, the dilutive effect of common stock equivalents will be
excluded. Primary and fully-diluted earnings per share, if computed under SFAS
128, for the three and six months ended June 30, 1997 and 1996, is presented
below:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------- --------------------
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Primary................................................. $ 0.15 $ 0.46 $ (1.80) $ 0.92
Fully-diluted........................................... $ 0.15 $ 0.40 $ (1.78) $ 0.76
</TABLE>
7
<PAGE>
ARCADIA FINANCIAL LTD.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE QUARTER ENDED JUNE 30, 1997 (CONTINUED)
2. FINANCE INCOME RECEIVABLE
The following table sets forth the components of finance income receivable.
<TABLE>
<CAPTION>
AT AT
JUNE 30, DECEMBER 31,
1997 1996
-------------- ------------
<S> <C> <C>
(DOLLARS IN THOUSANDS)
Estimated cash flows on loans sold, net of estimated prepayments......... $ 657,319 $ 549,876
Deferred servicing income................................................ (77,308) (59,473)
Reserve for loan losses.................................................. (209,638) (95,005)
-------------- ------------
Undiscounted cash flows on loans sold, net of estimated prepayments...... 370,373 395,398
Discount to present value................................................ (32,281) (32,482)
-------------- ------------
$ 338,092 $ 362,916
-------------- ------------
-------------- ------------
Reserve for loan losses as a percentage of servicing portfolio........... 4.64% 2.51%
</TABLE>
The following represents the roll-forward of the finance income receivable
balance:
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C>
BALANCE, DECEMBER 31, 1996........................................................ $ 362,916
Excess cash flows on loans sold, net of estimated prepayments................... 118,944
Recognition of present value effect of discounted cash flows.................... 10,932
Less:
Excess cash flows deposited to spread accounts (1)............................ (56,700)
Change in estimate of future recovery rates (2)............................... (98,000)
--------
BALANCE, JUNE 30, 1997............................................................ $ 338,092
--------
--------
</TABLE>
- ------------------------
(1) Includes approximately $1.3 million of cash released to the Company from
remaining spread account balances associated with two securitization
transactions initiated in 1993 and closed out during the first quarter of
1997.
(2) Refer to Management's Discussion and Analysis--SPECIAL CHARGES.
3. RESTRICTED CASH IN SPREAD ACCOUNTS
The following represents the roll-forward of restricted cash in spread
accounts:
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C>
BALANCE, DECEMBER 31, 1996........................................................ $ 142,977
Excess cash flows deposited to spread accounts.................................. 56,700
Initial spread account deposits................................................. 19,375
Interest earned on spread accounts.............................................. 4,302
Less:
Excess cash flows released to the Company..................................... (33,711)
--------
BALANCE, JUNE 30, 1996............................................................ $ 189,643
--------
--------
</TABLE>
8
<PAGE>
ARCADIA FINANCIAL LTD.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE QUARTER ENDED JUNE 30, 1997 (CONTINUED)
4. OTHER ASSETS
<TABLE>
<CAPTION>
AT AT
JUNE 30, 1997 DECEMBER 31, 1996
------------- -----------------
<S> <C> <C>
(DOLLARS IN THOUSANDS)
Advances due to servicer........................................................ $ 4,749 $ 8,140
Deferred debt issuance costs.................................................... 9,593 4,438
Investment in subordinated certificates......................................... 3,757 4,329
Servicing fee receivable........................................................ 3,700 3,121
Prepaid expenses................................................................ 1,707 2,755
Servicing assets................................................................ 2,472 --
Other assets.................................................................... 8,598 6,506
------------- -------
$ 34,576 $ 29,289
------------- -------
------------- -------
</TABLE>
5. SUBORDINATED NOTES
<TABLE>
<CAPTION>
AT AT
JUNE 30, 1997 DECEMBER 31, 1996
------------- -----------------
<S> <C> <C>
(DOLLARS IN THOUSANDS)
Senior subordinated notes, Series 1996-A........................................ $ 30,000 $ 30,000
Junior subordinated notes....................................................... 21,742 23,689
------------- -------
$ 51,742 $ 53,689
------------- -------
------------- -------
</TABLE>
6. SENIOR NOTES
In March 1997, the Company sold to the public $300.0 million aggregate
principal amount of 11.50% Senior Notes, due 2007 (the "Senior Notes") and
received net proceeds of approximately $291.2 million. Each note includes a
detachable Warrant, and such warrant when exercised entitle the holders to
acquire an aggregate of 2,052,000 shares of the Company's common stock. Interest
on the Senior Notes is payable semi-annually on March 15 and September 15 of
each year, beginning September 15, 1997. The Notes may not be redeemed prior to
March 15, 2002. At any time on such date or thereafter, the Company may at its
option elect to redeem the Senior Notes, in whole or in part, at a premium
ranging from 105.75% to 101.92% of the principal amount of Senior Notes redeemed
between the years 2002-2004, respectively, or 100% thereof on or after March 15,
2005, plus accrued interest to and including the redemption date. The Notes are
general, unsecured obligations of the Company and will rank pari passu in right
of payment to all existing and future Senior Debt (as defined in the indenture
governing the Senior Notes). Approximately $173.5 million of the net proceeds
from the issuance of the Senior Notes was used to repurchase and covenant
defease the Company's 13% Senior Term Notes (including a prepayment premium and
accrued interest) and the remainder is available for working capital. The
premium paid for the early extinguishment of debt (approximately $20.3 million)
and the charge-off of remaining capitalized debt financing costs (approximately
$3.2 million) were recognized and accounted for as an extraordinary item.
7. SHAREHOLDERS' EQUITY
As discussed in Note No. 6 above, the Company issued Warrants to purchase an
aggregate of 2,052,000 shares of the Company's common stock in connection with
its issuance of Senior Notes. The Warrants are exercisable one year from the
date of issue at an exercise price of $11.00 per share. The fair
9
<PAGE>
ARCADIA FINANCIAL LTD.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE QUARTER ENDED JUNE 30, 1997 (CONTINUED)
7. SHAREHOLDERS' EQUITY (CONTINUED)
value of the Warrants on the date of issue, as determined by the Company, has
been recognized as a component of additional paid-in capital.
8. EMPLOYEE BENEFITS AND STOCK INCENTIVE PLANS
The Company applies APB No. 25 "Accounting for Stock Issued to Employees,"
in accounting for its stock incentive plans. Accordingly, no compensation cost
has been recognized for such plans during the periods reported. Had compensation
costs for the Company's stock incentive plans been determined as prescribed by
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation," the Company's net income and earnings per share would have been
equal to the amounts listed below.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------- ---------------------
1997 1996 1997 1996
--------- --------- ---------- ---------
<S> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Pro-forma net income (loss).......................................... $ 5,731 $ 14,315 $ (69,762) $ 25,179
Pro-forma earnings (loss) per share:
Primary............................................................ $ 0.15 $ 0.40 $ (1.78) $ 0.82
Fully diluted...................................................... $ 0.15 $ 0.38 $ (1.78) $ 0.74
</TABLE>
The fair value of the options was estimated at date of grant using a
Black-Scholes option pricing model with a weighted average risk free interest
rate of 6.7% for 1997 and 1996, volatility factor of the expected market price
of the Company's common stock of .73 and an option life of five or ten years.
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
Substantially all of the Company's earnings are derived from the purchase,
securitization and servicing of consumer automobile loans originated primarily
by car dealers affiliated with major foreign and domestic manufacturers. As of
June 30, 1997, the Company had entered into dealer agreements with more than
8,800 dealers in 42 states, a substantial majority of which have sold loans to
the Company during the past six months. Loans are purchased through 18 regional
buying centers serving as "hubs," supplemented by a network of dealer
development representatives ("DDRs"). DDRs generate loans in "hubs" or "spokes"
(a market outside the specific area of a "hub"), while credit approval and loan
processing, are generally performed at the "hub" or at the Company's
headquarters in Minneapolis, Minnesota. The Company services loans through its
regional buying centers, national customer service center and four regional
collection centers.
THREE AND SIX MONTHS ENDED JUNE 30, 1997 AND 1996
RESULTS OF OPERATIONS
SPECIAL CHARGES. Included in the Company's financial results during the six
month period ended June 30, 1997 are two special charges taken in March 1997.
These charges include a non-cash after-tax charge of approximately $63.9
million, due to a change in accounting estimate and modifications to the
Company's retail disposition strategy, and an extraordinary charge of
approximately $15.8 million, net of tax, due to the early extinguishment of the
Company's 13% Senior Term Notes, due 2000 (see Management's Discussion and
Analysis--EXTRAORDINARY ITEM).
Approximately $60.8 million of the $63.9 million after-tax charge is due to
(i) a change in estimated recovery rates on current repossessed inventory and
anticipated future inventory arising from existing securitization transactions,
and (ii) a change in the Company's accounting policy with respect to the
estimated recovery rate realized upon disposition of repossessed inventory. The
remaining $3.1 million after-tax charge relates to various litigation and
severance charges (see Management's Discussion and Analysis--OPERATING
EXPENSES).
The recovery rate on repossessed inventory is measured by the liquidation
amount realized on the repossessed vehicles as a percentage of the outstanding
principal balance of the charged-off loans associated with the repossessed
vehicles. The Company's change in estimated recovery rates was based, in part,
on a decline in the weighted average recovery rate experienced by the Company
during the first three months of 1997. During the first quarter of 1997, the
weighted average recovery rate on repossessed vehicles declined to approximately
70% from approximately 83% for the year ended December 31, 1996. This reduction
in recovery rates primarily reflects increased liquidation of repossessed
inventory through wholesale auctions. The Company increased its use of wholesale
auctions after a review by the Company's new chief executive officer and other
members of management conducted in mid-March 1997 indicated that based on the
number of retail dispositions during the first half of March 1997 the Company's
current retail distribution channels were not sufficient to liquidate vehicles
at a pace satisfactory to management and would not, in the foreseeable future,
be adequate to exceed the number of additional repossessions expected each
month. In order to reduce the Company's repossessed inventory to a level more
acceptable to management, the Company sold a significantly increased number of
repossessed vehicles at wholesale auctions during the last half of March 1997.
As a result, the Company sold approximately 35% of first quarter sales of
repossessed vehicles through wholesale auctions, as compared with 30% during the
calendar year 1996. The Company's recovery rates were also affected during the
first quarter of 1997 due to lower pricing of repossessed vehicles sold through
the Company's retail distribution channels in an attempt to accelerate the
liquidation of repossessed vehicles while maintaining consistent credit quality.
11
<PAGE>
Estimated recovery rates are also determined by an analysis of anticipated
recovery trends in future periods. Based on its evaluation of certain events
occurring late in the first quarter of 1997, the Company believes that recovery
rates are not likely to increase above the level experienced during the first
quarter of 1997 and that certain events may cause a further decline in these
rates in future periods. As explained above, the Company does not believe that
it has sufficient capacity to sell an increasing number of repossessed vehicles
through its current network of retail consignment dealers. Accordingly, the
Company expects to control the size of its repossessed inventory by continuing
to increase the use of wholesale auctions to dispose of repossessed vehicles. In
April 1997, the Company's new chief executive officer completed a review of the
Company's retail disposition strategy. Consequently, based on the recommendation
of the new chief executive officer, the Company adopted modifications to its
retail disposition strategy that are intended to reduce liquidity requirements
of this strategy and establish more efficient operating procedures. The
Company's retail disposition strategy generally requires it to hold a
repossessed vehicle in inventory for a longer period of time than would a
wholesale disposition strategy, and as a consequence delays the receipt of
excess cash flows from securitization trusts following default of a loan. In
light of this, the Company has established a policy that limits the length of
time a repossessed vehicle may be held for resale through retail channels. The
limitation on the length of time a repossessed vehicle is held for sale is
intended to reduce delays in cash flow, but may reduce overall recovery rates
due to an increased use of wholesale auctions. Under the modified retail
disposition strategy, the Company intends to measure the effectiveness of the
strategy by the program's profitability as compared to a wholesale disposition
strategy. Management of the retail disposition program will be accountable for
optimizing the recovery rates on the repossessed inventory and achieving
acceptable profitability levels. As a result, it is expected that managers
responsible for the modified retail disposition program will increase the use of
wholesale auctions to control inventory size and the costs associated with the
operation of the program. The Company's retail disposition strategy, as
modified, is relatively new and evolving, and therefore, the Company's
management has concluded that recoveries under the program are uncertain and may
be subject to further change.
In addition, the Company anticipates a continued softening of the used car
market and therefore lower retail and wholesale prices. Factors contributing to
this market softening include the recent start-up of superstore competition and
forecasted levels of used lease vehicles that will be available in the market.
Further, the Company considered the risk of potentially higher interest rates
which have a direct impact on pricing of vehicles. The Company concluded that,
for the reasons described above, future recovery rates (after giving effect to
related costs) will be lower for the foreseeable future than those reflected in
the Company's prior accounting estimates. In light of these items, the Company
elected to record an after-tax charge of approximately $45.3 million in March
1997 which reflected an adjustment of current inventory and estimated reduction
to future cash flows due to lower expected recovery rates on future inventory
arising from existing securitization trusts.
At the same time as the Company changed its estimated recovery rates, the
Company also deemed it appropriate to review its accounting policy concerning
the valuation of repossessed vehicles in light of the modifications to its
retail disposition strategy and other factors. As a result of this review, the
Company has decided to change its accounting policy concerning the valuation of
repossessed vehicles. This change in policy requires the Company to record all
current and expected repossessed vehicles at recovery rates that reflect
expected values to be achieved through wholesale auctions (which the company
currently believes to be approximately 60% of principal balance outstanding),
regardless of the specific asset disposition strategy to be employed. To the
extent actual results are more favorable than estimates, greater recoveries are
reflected in current period earnings when the vehicles are liquidated. As a
consequence of this policy change, the Company's results of operations will
depend, in part, on sales prices for used vehicles in wholesale auctions.
Decline in wholesale recovery rates may adversely effect the Company's results
unless offset by higher retail recovery rates during the period. The Company
believes that the revised accounting policy will better reflect its modified
retail disposition strategy and, accommodate a better understanding by users of
the Company's financial statements. Moreover, the Company believes this change
in accounting policy provides a financial presentation that is more comparable
to other consumer finance companies and
12
<PAGE>
responds to recent events in the consumer finance industry which, the Company
believes, provides further evidence that lower estimated recovery rates are
appropriate. For these reasons, the Company believes the change in accounting
policy adopted in April 1997 reflects a preferable application of generally
accepted accounting principles. Because the change in policy is inseparable from
the estimation process referred to above, it is appropriate to reflect the
effect of the change in accounting policy of approximately $15.5 million
after-tax, as a reduction to current period earnings.
NET INTEREST MARGIN. The components of net interest margin for each of the
three and six months ended June 30 were:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------- --------------------
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Interest income on loans, net of interest expense on
warehouse facilities...................................... $ 8,961 $ 7,434 $ 17,131 $ 12,640
Interest income on short-term investments, spread accounts
and other cash accounts................................... 5,609 3,589 10,266 7,035
Recognition of present value discount....................... 4,736 4,212 10,932 7,953
Provision for credit losses on loans held for sale.......... (176) (150) (834) (243)
--------- --------- --------- ---------
Net interest margin....................................... $ 19,130 $ 15,085 $ 37,495 $ 27,385
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
Net interest margin increased 27% and 37% during the three and six months
ended June 30, 1997, respectively, compared with the same periods in 1996. The
rise in net interest margin is primarily due to (i) growth in the average
balance of loans held for sale pending securitization, (ii) wider net interest
rate spreads earned on loans held for sale and (iii) interest earned on spread
accounts and other securitization related cash accounts.
The Company's loan purchasing volume for each of the three and six months
ended June 30 are set forth in the table below.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30, SIX MONTHS ENDED JUNE 30,
---------------------- --------------------------
1997 1996 1997 1996
---------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Premier............................................ $ 358,543 $ 430,205 $ 761,738 $ 923,393
Classic............................................ 379,959 227,678 758,636 367,996
---------- ---------- ------------ ------------
Total loans purchased.............................. $ 738,502 $ 657,883 $ 1,520,374 $ 1,291,389
---------- ---------- ------------ ------------
---------- ---------- ------------ ------------
</TABLE>
The rise in loan purchasing volume and timing of securitization transactions
during the three and six months ended June 30, 1997 resulted in an increase in
the average monthly balance of loans held for sale, on which the Company earns
interest income until such loans are securitized, to $255.0 million and $246.0
million, respectively, up from $217.2 million and $210.7 million in the same
periods of 1996, respectively. During the three and six months ended June 30,
1997, the weighted average net interest rate spread earned on loans held for
sale pending securitization rose to 9.82% and 9.93% respectively, compared with
8.75% and 8.18%, respectively, during the same periods in 1996. The rise in net
interest rate spread is principally due to an increase in the average annual
percentage rates ("APR") paid by obligors due to the Company's continued
expansion of its Classic loan program and general rate increases reflecting
changes in the consumer lending market.
Interest income on short-term investments, spread accounts and other cash
accounts established in connection with securitization transactions increased
56% and 46% for the three and six months ended June 30, 1997, respectively,
compared with the same periods during 1996. This increase is primarily due to
13
<PAGE>
growth in the average balances of spread accounts and other securitization
related cash accounts resulting from 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. Revenues provided from gain on sale of loans
increased 4% during the three months ended June 30, 1997 compared to the same
period of 1996. The rise in gain on sale reflects an 11% increase in loan
securitization volume and a 147 basis point widening of the gross interest rate
spread earned on the loans securitized (see table of gross interest rates below)
partially offset by increased loss rate, servicing cost and discount factor
assumptions utilized in the computation of gain on sale. See Management's
Discussion and Analysis--SPECIAL CHARGES for discussion of change in estimates.
As a result of the change in estimates noted above, gain on sale of loans as a
percentage of loans securitized fell to 3.54% during the second quarter of 1997
compared to 3.77% in the same period a year ago. The Company believes that this
percentage should increase over the next few quarters as interest spreads
continue to widen resulting from a continued expansion of the Classic loan
program and refinement of the Company's pricing strategy. Although management
believes that increased interest rate spreads can be achieved, material factors
affecting interest rate spreads are difficult to estimate and could cause
management's projections to be materially inaccurate. Such factors include
changes in consumer interest rates and demand for automobile securitization
transactions.
Included in gain on sale of loans during the six months ended June 30, 1997
is a non-recurring pretax charge to gain on sale of loans of $98.0 million
resulting in a year-to-date loss on sale of loans of $51.4 million (See
Management's Discussion and Analysis--SPECIAL CHARGES). The Company securitized
$1.5 billion of loans held for sale during the six months ended June 30, 1997,
compared with $1.3 billion in the same period a year ago realizing a gain on
sale of approximately $46.6 million, before the non-recurring charge. The
reduction in gain on sale of loans during the first half of 1997, before the
non-recurring charge, compared with $50.7 million realized during the same
period of 1996 is primarily due to an increase in the loss rate, servicing cost
and discount factor assumptions utilized in the Company's computation of gain on
sale. See Management's Discussion and Analysis--SPECIAL CHARGES for discussion
of change in estimates.
The following table summarizes the Company's gross interest rate spreads for
each of the three and six months ended June 30:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------- --------------------
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Weighted average APR of loans securitized............................. 15.83% 14.40% 15.65% 14.11%
Weighted average securitization rate.................................. 6.50 6.54 6.51 6.19
--------- --------- --------- ---------
Gross interest rate spread (1)........................................ 9.33% 7.86% 9.14% 7.92%
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
- ------------------------
(1) Before gains/losses on hedging transactions.
Any unamortized balance of participations paid to dealers is expensed at the
time the related loans are securitized and recorded as a reduction to gain on
sale. Due to the increased proportion of Classic loan purchases, which generally
require lower participation rates than Premier loans, and a lower maximum
participation rate allowable under the Premier program, participations paid as a
percentage of the principal balance of loans purchased declined to 3.14% and
3.20% during three and six months ended June 30, 1997, compared to 3.41% and
3.62%, respectively, in the same periods a year ago. The reduced dealer
participations resulted in an increase in gain on sale during 1997.
Gain on sale of loans also reflects realized losses on hedging transactions
of $1.6 million and $0.2 million during the three and six months ended June 30,
1997, compared to realized gains of $1.6 million and $3.5 million, respectively,
in the same periods a year ago.
14
<PAGE>
SERVICING FEE INCOME. The Company's servicing fee income increased to $11.0
million during the three months ended June 30, 1997 from $6.6 million in the
same three months in 1996. For the six months ended June 30, 1997, servicing fee
income was $20.5 million compared with $12.3 million for the first half of 1996.
The increase in servicing fee income was directly related to an increase in the
average servicing portfolio outstanding. The following table reflects the growth
in the Company's servicing portfolio from June 30, 1996 to June 30, 1997.
<TABLE>
<CAPTION>
AT JUNE 30,
--------------------------
1997 1996
------------ ------------
<S> <C> <C>
(DOLLARS IN THOUSANDS, EXCEPT AS NOTED)
Principal balance of automobile loans held for sale......................... $ 51,487 $ 51,313
Principal balance of loans serviced under securitizations................... 4,462,522 2,953,393
------------ ------------
Servicing portfolio......................................................... $ 4,514,009 $ 3,004,706
------------ ------------
------------ ------------
Average unpaid principal balance (actual dollars)........................... $ 12,382 $ 12,456
Number of loans serviced.................................................... 364,553 241,230
</TABLE>
OPERATING EXPENSES. During the three and six months ended June 30, 1997,
salary and benefit expenses increased 72% and 65%, respectively, from the same
periods a year ago. The increase in salaries and benefits is primarily
attributable to an increase in the number of employees to 1,544 at June 30, 1997
from 891 at June 30, 1996. Increased staffing has been necessary to accommodate
the rise in loan purchasing volume and the subsequent servicing of such loans
and reflects additional associates hired to staff four new regional collection
centers opened from October through December of 1996. Further, salaries and
benefit expenses have increased due to costs associated with managing the
Company's retail liquidation strategy for repossessed vehicles. The Company
anticipates that such costs will begin to level off or decline in future periods
due to recently adopted changes to its liquidation strategy (see discussion in
Management's Discussion and Analysis--SPECIAL CHARGES).
Other operating costs including administrative, occupancy, depreciation and
amortization, origination, servicing and collection expenses, increased 114% and
127% during the three and six months ended June 30, 1997, respectively, compared
to the same periods of 1996. The rise in other operating costs is primarily due
to the addition of the regional collection centers, continued expansion of the
regional buying centers and growth in loan purchasing. As loan purchasing volume
increases, the Company incurs incremental increases in costs associated with
underwriting, servicing and collecting of such loans. Also included in operating
costs during the first half of 1997 is a one-time pre-tax charge of
approximately $5.0 million recorded in March. This special charge is primarily
related to legal costs associated with defending recently filed litigation
against the Company as well as costs associated with resolving legal issues
involving improper practices at certain of the Company's initial consignment
dealers. The Company has since terminated its business relationship with such
dealers. Also included, in the special charge are severance expenses for certain
former executives of the Company.
LONG-TERM DEBT AND OTHER INTEREST EXPENSE. Long-term debt and other
interest expense increased 65% and 53% during the three and six months ended
June 30, 1997, respectively, compared to the same periods in 1996. These
increases are primarily due to the issuance of $300.0 million of 11.5% Senior
Notes in March 1997, partially offset by the concurrent extinguishment of $145
million of 13% Senior Term Notes.
EXTRAORDINARY ITEM. In March 1997, the Company issued $300.0 million 11.5%
Senior Notes and utilized approximately $173.5 million to repurchase and
covenant defease the Company's $145.0 million 13% Senior Term Notes, including
accrued interest of $7.9 million and a premium of approximately $20.3 million.
These charges and additional professional fees incurred to retire such debt have
been treated as an extraordinary item, net of tax.
15
<PAGE>
FINANCIAL CONDITION
FINANCE INCOME RECEIVABLE. Finance income receivable decreased to $338.1
million at June 30, 1997 from $362.9 million at December 31, 1996. This 7.0%
decrease reflects a non-recurring $98.0 million pre-tax charge during the first
quarter of 1997 (See Management's Discussion and Analysis--SPECIAL CHARGES)
partially offset by amounts capitalized upon completion of the Company's first
and second quarter securitizations related to the present value of estimated
cash flows.
DEFERRED INCOME TAX. Deferred income taxes declined to $11.6 million at
June 30, 1997 from $54.4 million at December 31, 1996. This decrease reflects
the recognition of a tax benefit from the first quarter loss from operations and
extraordinary charge partially offset by the second quarter income tax provision
of $3.5 million.
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES. Accounts payable and accrued
liabilities increased 112% to $28.0 million at June 30, 1997 as compared with
$13.2 million at December 31, 1996. This increase is partly due to increased
accruals for salary, occupancy and various operating expenses reflecting the
continued growth in the Company's staffing, facilities, loan purchases and
servicing portfolio and also reflects an increase in accrued interest expense
related to the 11.5% Senior Notes issued in March 1997. In addition, the Company
recorded accruals during the first quarter of 1997 related to severance
agreements for certain former executives. The severance accruals will be
reversed as payments are made over the term of the severance agreements.
DELINQUENCY, CREDIT LOSS AND REPOSSESSION EXPERIENCE
The following tables describe the Company's delinquency, credit loss and
repossession experience for the periods indicated. A delinquent loan may result
in the repossession and foreclosure of the collateral for the loan. Losses
resulting from repossession and foreclosure of loans are charged against
applicable allowances.
DELINQUENCY EXPERIENCE (1):
<TABLE>
<CAPTION>
JUNE 30, 1997 DECEMBER 31, 1996
------------------------- -------------------------
NUMBER OF NUMBER OF
LOANS BALANCE LOANS BALANCE
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Servicing portfolio at end of period......................... 364,553 $ 4,514,009 302,450 $ 3,791,857
Delinquencies:
31-60 days................................................. 5,942 $ 73,478 3,884 $ 47,225
61-90 days................................................. 2,069 26,752 1,255 15,877
91 days or more............................................ 1,624 19,963 2,911 37,019
----------- ------------ ----------- ------------
Total automobile loans delinquent 31 or more days............ 9,635 $ 120,193 8,050 $ 100,121
Delinquencies as a percentage of number of loans and amount
outstanding at end of period (2)........................... 2.64% 2.66% 2.66% 2.64%
Amount in repossession (3)................................... 5,334 $ 49,037 4,651 $ 64,929
----------- ------------ ----------- ------------
Total delinquencies and amount in repossession (2)........... 14,969 $ 169,230 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.
16
<PAGE>
CREDIT LOSS/REPOSSESSION EXPERIENCE (1):
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------------- --------------------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Average servicing portfolio outstanding during the
period................................................. $ 4,335.962 $ 2,812,596 $ 4,150,719 $ 2,635,759
Average number of loans outstanding during the period.... 340,143 217,245 324,169 203,846
Number of repossessions.................................. 5,672 3,285 10,365 6,262
Gross charge-offs (2).................................... $ 33,261 $ 9,011 $ 79,671 $ 15,484
Recoveries (3)........................................... 2,533 2,915 4,413 4,528
------------ ------------ ------------ ------------
Net losses............................................... $ 30,728 $ 6,096 $ 75,258 $ 10,956
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Annualized gross charge-offs as a percentage of average
servicing portfolio.................................... 3.07% 1.28% 3.84% 1.17%
Annualized net losses as a percentage of average
servicing portfolio.................................... 2.83% 0.87% 3.63% 0.83%
</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. Anticipated proceeds
are based on an amount which management believes the company can receive
through wholesale distribution channels, currently 60% of the loan value at
date of charge-off. Prior to March 31, 1997, the Company estimated proceeds
based on the anticipated disposition strategy for each vehicle (wholesale or
retail disposition).
(3) Includes post-disposition amounts received on repossessed assets, net of
selling expenses.
The Company's delinquency rate at June 30, 1997, remained relatively flat
compared to December 31, 1996, reflecting the Company's improved servicing and
collection capabilities resulting from the establishment of four new regional
collection centers from October through December 1996. Management anticipates
that delinquency rates will increase during the next several quarters as a
result of the continued expansion of the Classic loan program and seasoning of
the Company's existing servicing portfolio. The number of repossessed vehicles
has increased since December 31, 1996, reflecting a continued rise in defaults
due to growth of the Company's portfolio and seasoning of loans purchased under
the Company's Classic loan program. The net realizable value of the repossessed
inventory has declined due to the Company's revised policy with respect to
inventory valuation (see Management's Discussion and Analysis--SPECIAL CHARGES).
Under its new policy, repossessions are recorded at a value which approximates
that which the Company believes can be achieved through wholesale distribution
channels (regardless of the distribution strategy ultimately utilized). This
change in valuation policy has resulted in significantly higher gross charge-off
and net loss percentages compared with the prior year due to a valuation
adjustment to existing inventory at the time the policy was adopted and the
application of such policy throughout the second quarter of 1997. Second quarter
1997 gross charge-off and net loss percentages have also increased from the
trailing quarter (on a pre-adjusted basis) due to the continued rise in Classic
loan volume and seasoning of the existing portfolio and also the effect of
selling an increased proportion of repossessed vehicles through wholesale
auctions. During the second quarter of 1997, the Company liquidated
approximately 49% of all repossessed vehicles sold through wholesale auctions
compared to 35% in the first quarter of 1997.
17
<PAGE>
LIQUIDITY
The Company's business requires substantial cash to support its operating
activities. The principal cash requirements include (i) amounts necessary to
purchase and finance automobile loans pending securitization, (ii) dealer
participations, (iii) cash held from time to time in restricted spread accounts
to support securitizations and other securitization expenses, (iv) interest
advances to securitization trusts and (v) repossessed 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 from fees earned through servicing of loans held by such trusts. The
Company has operated on a negative operating cash flow basis and expects to
continue to do so in the foreseeable future. The Company has historically
funded, and expects to continue to fund, these negative operating cash flows,
subject to limitations in various debt covenants, principally through borrowings
from financial institutions, sales of equity securities and sales of senior and
subordinated notes, among other resources, although there can be no assurance
that the Company will have access to capital markets in the future or that
financing will be available to satisfy the Company's operating and debt service
requirements or to fund its future growth. See "Capital Resources."
PRINCIPAL USES OF CASH IN OPERATING ACTIVITIES
PURCHASES AND FINANCING OF AUTOMOBILE LOANS. Automobile loan purchases
represent the Company's most significant cash flow requirement. The Company
funds the purchase price of loans primarily through the use of warehouse
facilities. However, because advance rates under the warehouse facilities
generally provide funds from 90% 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 $1.5 billion of loans during the
first six months of 1997 compared to $1.3 billion during the same period in
1996.
DEALER PARTICIPATIONS. Consistent with industry practice, the Company pays
dealers participations for selling loans to the Company. These participations
typically require the Company to advance an up-front amount to dealers.
Participations paid by the Company to dealers during the six months ended June
30, 1997 were $48.7 million, or approximately 3.20% of the principal balance of
loans purchased, compared with $46.9 million, or approximately 3.63% of loans
purchased, during the same period in 1996. The decrease in dealer participation
as a percentage of loans purchased reflects the growth in volume in Classic
loans and a reduction in the maximum allowable participation paid for Premier
loans.
SECURITIZATION OF AUTOMOBILE LOANS. In connection with securitizations, the
Company is required to fund spread accounts related to each transaction. The
Company funds these spread accounts by foregoing receipt of excess cash flow
until these spread accounts exceed predetermined levels. In addition, the
company has been required to provide initial cash deposits into the spread
accounts for certain securitizations. The Company had $189.6 million of
restricted cash in spread accounts at June 30, 1997, compared with $143.0
million at December 31, 1996.
The Company also incurs certain expenses in connection with securitizations,
including underwriting fees, credit enhancement fees, trustee fees and other
costs, which approximate 0.5% per annum of the principal amount of the
asset-backed securities sold into the securitizations
NET INTEREST MARGIN. Although the Company records net interest margin as
earned, the interest income component is generally received in cash from excess
cash flow, while the interest expense component (primarily warehousing interest)
is paid prior to securitization.
ADVANCES DUE TO SERVICER. As the servicer of loans sold in securitizations,
the Company periodically makes interest advances to the securitization trusts to
provide for temporary delays in the receipt of required interest payments by
borrowers. In accordance with servicing agreements, the Company makes advances
only in the event it expects to recover them through the ultimate payments from
the obligor on
18
<PAGE>
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.
REPOSSESSED INVENTORY. At June 30, 1997, repossessed inventory managed or
owned by the Company and held for resale was $49.0 million, compared with $64.9
million at December 31, 1996. The rate of repossessed inventory turnover impacts
cash available for spread accounts under securitization trusts and,
consequently, the excess cash available for distribution to the Company. At June
30, 1997, repossessed inventory was 1.1% of the total servicing portfolio
compared with 1.7% at December 31, 1996. In April 1997, the Company modified its
retail disposition strategy with a goal of increasing its rate of repossessed
inventory turnover (See Management's Discussion and Analysis--Special Charges).
The improvement in excess cash flows due to the increased inventory turnover
rate may be partially reduced by lower recoveries realized through an increased
use of wholesale auctions.
PRINCIPAL SOURCES OF CASH IN OPERATING ACTIVITIES
EXCESS CASH FLOW. The Company receives excess cash flow from securitization
trusts, including the realization of gain on sale, the recovery of dealer
participations, and the recovery of accrued interest receivable earned, but not
yet collected, on loans held for sale. Recovery of dealer participations and
accrued interest receivable, which occur throughout the life of the
securitization, result in a reduction of the finance income receivable and,
because they have been considered in the original determination of the gain on
sale of loans, have no effect on the Company's results of operations in the year
in which the participations and interest are recovered from the securitization
trust. During the first six months of 1997, the Company received $32.4 million
of excess cash flow, compared with $11.8 million during the same six months in
1996. The Company received an additional $1.3 million and $2.5 million of cash
during the first half of 1997 and 1996, respectively, which was released from
spread accounts associated with certain securitization transactions closed-out
during such periods.
SERVICING FEES. The Company also receives servicing fee income with respect
to loans held by securitization trusts equal to 1% per annum of the remaining
principal balance. During the six months ended June 30, 1997 and 1996, the
Company received cash for such servicing in the amount of $20.3 million and
$11.8 million, respectively. Servicing fee income is reflected in the Company's
revenues as earned.
CAPITAL RESOURCES
The Company finances the acquisition of automobile loans primarily through
(i) warehouse facilities.
WAREHOUSE FACILITIES. Automobile loans held for sale are funded primarily
through warehouse facilities. At June 30, 1997, the Company had warehouse
facilities in place with various financial institutions and institutional
lenders with an aggregate capacity of $680.0 million, of which $582.3 million
was available. Proceeds from securitizations, generally received within seven to
ten days following the cut-off date established for the transaction, are applied
to repay amounts outstanding under warehouse facilities.
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
19
<PAGE>
Company's securitization transaction for the six months ended June 30, 1997, all
of which was publicly issued and rated "AAA/Aaa".
<TABLE>
<CAPTION>
REMAINING
BALANCE AS A CURRENT
REMAINING PERCENTAGE CURRENT WEIGHTED GROSS
BALANCE AS OF WEIGHTED AVERAGE INTEREST
ORIGINAL OF JUNE 30, ORIGINAL AVERAGE SECURITIZATION RATE
DATE BALANCE 1997 BALANCE APR RATE SPREAD
- ----------------------------------- ------------ ------------ ------------ --------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
March 1997......................... $ 775,000 $ 714,052 92.14% 15.56% 6.54% 9.02%
June 1997 (1)...................... 775,000 702,869 90.69% 15.86% 6.50% 9.36%
------------ ------------
$ 1,550,000 $ 1,416,921
------------ ------------
------------ ------------
</TABLE>
- ------------------------
(1) At June 30, 1997, the Company delivered $709.7 million of automobile loans
$65.3 million cash remained in the pre-funded portion of the trust.
OTHER CAPITAL RESOURCES
Historically, the Company has utilized various debt and equity financings to
offset negative operating cash flows and support the continued growth in loan
volume, increased dealer participations, securitizations and general operating
expenses.
In March 1997, the Company sold $300 million 11.50% Senior Notes, due 2007.
Net proceeds received from the offering of the Senior Notes approximated $291.2
million.
CAUTIONARY STATEMENTS
Information or statements provided by the Company from time to time may
contain certain "forward-looking information" including information relating to
anticipated earnings per share, anticipated returns on equity, anticipated
growth in automobile loan purchases, anticipated net interest margins,
anticipated loan securitizations and gain on sale, anticipated operations costs
and employment growth and anticipated delinquency, loan loss and repossession
experience. The cautionary statements provided below are being made pursuant to
the provisions of the Private Securities Litigation Reform Act of 1995 (the
"Act") and with the intention of obtaining the benefits of the "safe harbor"
provisions of the Act for any such forward-looking information. Many of the
following important factors discussed below as well as other factors have also
been discussed in the Company's prior public filings.
The Company cautions readers that any forward-looking information provided
by the Company is not a guarantee of future performance and that actual results
may differ materially from those in the forward-looking information as a result
of various factors, including but not limited to:
- The effects of increased delinquency rates and loan loss rates, including
further write downs of finance income receivable and decreases in cash
flow from securitization trusts in the event certain portfolio performance
tests are violated.
- The effects of "seasoning" of the Company's loan portfolio and increased
use of the Company's Classic loan program, each of which are likely to
adversely affect the Company's level of delinquencies and losses which may
require higher loss reserves and decrease cash flow from securitization
trusts in the event certain portfolio performance tests are violated.
- The effects of the Company's modified retail disposition program which may
result in an increased use of wholesale dispositions for repossessed
inventory and thereby lower recovery rates.
- The effects of interest rate fluctuations on the Company's net interest
margin and the value of its assets and liabilities; the continued legal or
commercial availability of techniques (including interest rate swaps and
similar financial instruments, loan repricing, hedging and other
techniques) used by
20
<PAGE>
the Company to manage the risk of such fluctuations and the continuing
operational viability of those techniques and the accounting and
regulatory treatment of such instruments.
- Difficulties or delays in the securitization of the Company's automobile
loans and the resulting impact on the cost and availability of such
funding. Such difficulties and delays may result from changes in the
availability of credit enhancement in securitizations, the current legal,
regulatory, accounting and tax environment and adverse change in the
performance of the securitized loans.
- Changes in the availability, amount, cost and other terms of warehouse
financing to purchase loans.
- The amount, and rate of growth in, the Company's expenses (including
employee and marketing expenses) as the Company's business develops or
changes and the Company expands into new market areas; the effects of
changes within the Company's organization or in its compensation and
benefit plans; and the impact of unusual items resulting from the
Company's ongoing evaluation of its business strategies, asset valuations
and organizational structures.
- The availability, amount, type and cost of debt or equity financing for
the Company to support negative operating cash flows and any changes to
that financing including any impact from changes in the Company's debt
ratings.
- The effects of changes in economic conditions which may increase the risk
of default on automobile loans, increase the number of customers seeking
protection under bankruptcy laws, reduce demand for automobile loans, and
reduce demand for used cars through retail channels.
- The effects of intense competition from financial institutions, such as
banks, other automobiles finance companies, thrifts, leasing companies and
captive finance companies owned by automobile manufacturers.
- The costs and other effects of legal and administrative cases and
proceedings, settlements and investigations, claims and changes in those
items, developments or assertions by or against the Company or its
subsidiaries; adoptions of new, or changes in existing, accounting
policies and practices and the application of such policies and practices.
21
<PAGE>
PART II--OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On March 4, 1997, a shareholder commenced an action against the Company and
certain named directors and officers of the Company entitled Taran v. Olympic
Financial Ltd. et al. in the United States District Court for the District of
Minnesota. Four similar lawsuits, three of them in the United States District
Court for the District of Minnesota (Frank Dibella, on behalf of himself and all
others similarly situated vs. Olympic Financial Ltd. et al., Michael Diemer vs.
Olympic Financial Ltd. et al. and Howard Pisnoy vs. Olympic Financial Ltd. et
al.) and one in the United States District Court for the Eastern District at New
York (North River Trading, LLC, and Allan Farkas, and All Others Similarly
Situated vs. Olympic Financial Ltd. et al.) have been filed since that time.
Plaintiffs in these lawsuits allege that the defendants, in violation of federal
securities laws, engaged in a scheme that had the effect of artificially
inflating, maintaining and otherwise manipulating the value of the Company's
Common Stock by, among other things, making baseless, false and misleading
statements about the current state and future prospects of the Company,
particularly with respect to the Classic program and the refinancing of
repossessed automobiles. Plaintiffs allege that this scheme included making
false and misleading statements and/or concealing material adverse facts. Each
of the plaintiffs seeks certification of their case as a class action on behalf
of all persons or entities who purchased the Common Stock of the Company during
the relevant, overlapping periods, which range from November 28, 1994 through
March 3, 1997, inclusive. The Company currently expects that these suits will be
consolidated in one suit in the United States District Court for the District of
Minnesota. These suits are in the preliminary stages and the parties have not
begun discovery. The Company has reviewed the complaints and believes that the
suits are without merit and intends to defend each of them vigorously. There
can, however, be no assurance that the Company will prevail in such defense or
that any order, judgment, settlement or decree arising out of this litigation
will not have a material adverse effect on the Company's financial condition or
results of operations.
The nature of the Company's business is such that it is routinely a party or
subject to other items of pending or threatened litigation, including litigation
involving actions against borrowers to collect amounts on loans or to repossess
vehicles and litigation challenging the terms of loans purchased by the Company.
Although the ultimate outcome of certain of these matters cannot be predicted,
management of the Company believes, based upon information currently available
and the advice of counsel, that the resolution of these various matters will not
result in any material adverse effect on the Company or its results of
operations.
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On April 28, 1997, the Company held its annual shareholder's meeting. There
were 38,060,023 shares of common stock outstanding and entitled to vote, and a
total of 33,922,886 shares (89.13%) were represented at the meeting in person or
by proxy. The following summarizes vote results of proposals submitted to the
Company's shareholders.
22
<PAGE>
1. Proposal to elect nine directors, each for a one-year term.
<TABLE>
<CAPTION>
FOR WITHHELD
------------ ----------
<S> <C> <C>
Scott H. Anderson.................................................. 32,962,047 960,839
A. Mark Berlin Jr.................................................. 32,951,872 971,014
Lawerence H. Bistodeau............................................. 32,960,573 962,313
Robert J. Cresci................................................... 32,978,239 944,647
James L. Davis..................................................... 32,961,575 961,311
Richard A. Greenwalt............................................... 32,981,574 941,312
Warren Kantor...................................................... 32,921,225 1,001,661
Robert A. Marshall................................................. 32,947,869 975,017
Frederick W. Zuckerman............................................. 32,892,039 1,030,847
</TABLE>
2. Proposal to approve a resolution to amend the Company's Restated
Articles Incorporation to change the name of the Company from Olympic Financial
Ltd. to Arcadia Financial Ltd.
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN BROKER NON-VOTE
<S> <C> <C> <C>
33,199,605 535,717 187,564 0
</TABLE>
3. Proposal to amend the Company's 1992 Director Stock Option Plan to (i)
increase to 15,000 (from 5,000) the number of options to purchase the Company's
Common Stock granted automatically each year to each outside director commencing
in 1997, and (ii) provide for additional grant to each outside Director of the
Board of Directors as of January 2, 1997 a one-time grant thereunder on such
date of an option to purchase 10,000 shares.
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN BROKER NON-VOTE
<S> <C> <C> <C>
30,267,024 3,303,476 352,386 0
</TABLE>
4. Proposal to amend the Company's 1990 Stock Option Plan to (i) increase
by 3 million (to 5 million) the maximum number of shares which may be issued
upon exercise of options granted under such Plan, (ii) make each option granted
thereunder exerciseable cumulatively to the extent of 100% of the shares subject
to the option, upon the death of the optionee or a Change of Control (as defined
in such Plan) of the Company, and (iii) provide for a per person maximum on the
number of option shares granted thereunder.
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN BROKER NON-VOTE
<S> <C> <C> <C>
13,827,230 3,338,349 465,760 16,291,547
</TABLE>
5. Proposal to approve grants of options to Warren Kantor in the amounts of
125,000 shares on December 18, 1996 and 70,160 shares on January 29, 1997 in
consideration of consulting services to be rendered to the Company by Mr. Kantor
in 1997.
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN BROKER NON-VOTE
<S> <C> <C> <C>
13,812,393 3,224,015 594,931 16,291,547
</TABLE>
6. Proposal to approve an option granted to Richard A. Greenwalt pursuant
to the Employment Agreement dated January 6, 1997 between Mr. Greenwalt and the
Company.
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN BROKER NON-VOTE
<S> <C> <C> <C>
14,197,083 2,872,206 562,050 16,291,547
</TABLE>
7. Proposal to ratify the appointment of Ernst & Young LLP as the company's
independent auditors for the fiscal year ending December 31, 1997.
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN BROKER NON-VOTE
<S> <C> <C> <C>
33,420,827 342,093 159,966 0
</TABLE>
23
<PAGE>
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
The following exhibits are filed in response to Item 601 of Regulation S-K.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ------------- -----------------------------------------------------------------------------------------------------
<C> <S>
3.1 Restated Articles of Incorporation of the Company, as amended (filed herewith).
3.2 Restated Bylaws of the Company, as amended (filed herewith).
4.1 Rights Agreement dated as November 1, 1996, between the Company and Norwest Bank Minnesota, National
Association, as Rights Agent (incorporated by reference to Exhibit 1 to the Company'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 Company and Norwest Bank Minnesota, National Association, as Trustee, relating to the Company'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 the Company's
Registration Statement on Form S-1, File No. 33-81512).
4.3 Indenture, dated as of April 28, 1995, between the Company and Norwest Bank Minnesota, National
Association, as Trustee, relating to the Company's 13% Senior Notes due 2000 (incorporated by
reference to Exhibit 4.5 to the Company'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 Company and Norwest Bank Minnesota, National Association, as Trustee, relating to the
Company's 13% Senior Notes due 2000 (incorporated by reference to Exhibit 4.6 to the Company's
Annual Report on form 10-K for the year ended December 31, 1995).
4.5 Second Supplemental Indenture dated as of March 11, 1997 to Indenture dated as of April 28, 1995
between the Company and Norwest Bank Minnesota, National Association (incorporated by reference to
Exhibit 4.7 to the Company's current report on Form 8-K dated March 12, 1997 and filed March 18,
1997).
4.6 Indenture dated as March 15, 1996, between the Company and Norwest Bank Minnesota, National
Association, as Trustee, relating to the Company's Subordinated Notes, Series 1996-A due 2001
(incorporated by reference to Exhibit 4.5 to the Company's Annual Report on form 10-K for the year
ended December 31, 1996).
4.7 First Supplemental Indenture, dated as of March 15, 1996, to Indenture, dated as of March 15, 1996,
between the Company and Norwest Bank Minnesota, National Association, as Trustee, relating to the
Company's Subordinated Notes, Series 1996-A due 2001 (incorporated by reference to Exhibit 4.6 to
the Company's Annual Report on form 10-K for the year ended December 31, 1996).
4.8 Indenture dated as of March 12, 1997, between the Company and Norwest Bank Minnesota, National
Association, as Trustee (incorporated by reference to Exhibit 4.1 to the Company's current report
on Form 8-K dated March 12, 1997 and filed March 18, 1997).
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ------------- -----------------------------------------------------------------------------------------------------
<C> <S>
4.9 First Supplemental Indenture, dated as of March 12, 1997 between the Company and Norwest Bank
Minnesota, National Association, as Trustee (incorporated by reference to Exhibit 4.2 to the
Company's current report on Form 8-K dated March 12, 1997 and filed March 18, 1997).
4.10 Warrant Agreement, dated as of March 12, 1997 by and between the Company and Norwest Bank Minnesota,
National Association, as Warrant Agent (incorporated by reference to Exhibit 4.3 to the Company's
current report on Form 8-K dated March 12, 1997 and filed March 18, 1997).
4.11 Form of Unit (incorporated by reference to Exhibit 4.4 to the Company's current report on Form 8-K
dated March 12, 1997 and filed March 18, 1997).
4.12 Form of 11.5% Senior Notes due March 15, 2007 (incorporated by reference to Exhibit 4.5 to the
Company's current report on Form 8-K dated March 12, 1997 and filed March 18, 1997).
4.13 Form of Initial Warrant Certificate (incorporated by reference to Exhibit 4.6 to the Company's
current report on Form 8-K dated March 12, 1997 and filed March 18, 1997).
10.1 Spread Account Agreement, dated as of March 25, 1993, as amended and restated as of June 1, 1997
among the Company, Arcadia Receivables Finance Corp., Financial Security Assurance Inc., The Chase
Manhattan Bank, as Trustee, and Norwest Bank Minnesota, National Associate, as Collateral Agent
(filed herewith).
10.2 Series 1997-B Supplement, dated June 19, 1997, to Spread Account Agreement, dated as of March 25,
1993, as amended and restated as of June 1, 1997, among the Company, Arcadia Receivables Finance
Corp., Financial Security Assurance Inc., The Chase Manhattan Bank, as Trustee, and Norwest Bank
Minnesota, National Association, as Collateral Agent (filed herewith).
10.3 Insurance and Indemnity Agreement, dated as of June 19, 1997, among the Company, Financial Security
Assurance Inc., Arcadia Automobile Receivables Trust, 1997-B and Arcadia Receivables Finance Corp.
(filed herewith).
10.4 Employment Agreement, dated as of May 1, 1997, between the Company and Duane E. White (filed
herewith).
10.5 Amendment No. 4 dated as of May 30, 1997 to Sale and Servicing Agreement dated as of December 28,
1995 among Olympic Automobile Receivables Warehouse Trust as Issuer, Olympic Receivables Finance
Corp. II as Seller, Arcadia Financial Ltd. (formerly Olympic Financial Ltd.) in its individual
capacity and as Servicer and Norwest Bank Minnesota National Association as Back-up Servicer (filed
herewith).
10.6 Second Amendment and Consent dated as of May 30, 1997 relating to Note Purchase Agreement and among
Olympic Automobile Receivables Warehouse Trust as Seller, Arcadia Financial Ltd. (formerly 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 (filed herewith).
10.7 Acknowledgement of Reduction of Purchase Commitment and Consent dated June 30, 1997 relating to Note
Purchase Agreement and among Olympic Automobile Receivables Warehouse Trust as Seller, Arcadia
Financial Ltd. (formerly 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 (filed herewith).
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ------------- -----------------------------------------------------------------------------------------------------
<C> <S>
10.8 Third Amendment and Consent dated as of May 30, 1997 relating to Certificate Purchase Agreement among
Olympic Automobile Receivables Warehouse Trust as Seller, Arcadia Financial Ltd. (formerly 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 (filed
herewith).
10.9 Acknowledgement of Reduction of Purchase Commitments dated June 30, 1997 relating to Certificate
Purchase Agreement among Olympic Automobile Receivables Warehouse Trust as Seller, Arcadia
Financial Ltd. (formerly 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 (filed herewith).
10.10 Fourth Amendment and Consent dated as of May 30, 1997 relating to the Asset Purchase Agreement, dated
as of December 28, 1995 among Morgan Guaranty Trust Company of New York (successor to J.P. Morgan
Delaware), as Administrative Agent, and the APA Purchasers who have executed a signature page to
the Agreement or executed an Assignment of Purchase Commitment (filed herewith).
10.11 Fifth Amendment and Consent dated as of June 30, 1997 relating to the Asset Purchase Agreement, dated
as of December 28, 1995 among Morgan Guaranty Trust Company of New York (successor to J.P. Morgan
Delaware), as Administrative Agent, and the APA Purchasers who have executed a signature page to
the Agreement or executed an Assignment of Purchase Commitment (filed herewith).
10.12 Arcadia Financial Ltd. 1990 Stock Option Plan, as amended to date (filed herewith).
10.13 1992 Director Stock Option Plan, as amended to date (filed herewith).
11.1 Computation of Earnings Per Share (filed herewith).
12.1 Computation of Ratio of Earnings to Fixed Changes (filed herewith).
12.2 Computation of Ratio of Earnings to Fixed Charge and Preferred Stock Dividends (filed herewith).
27.1 Financial Data Schedule (filed herewith).
</TABLE>
(b) REPORTS ON FORM 8-K
None
26
<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 report to be signed on
its behalf by the undersigned, thereunto duly authorized.
ARCADIA FINANCIAL LTD.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------------------ ------------------------------------- ------------------
<C> <S> <C>
/s/ RICHARD GREENWALT
------------------------------------------- President, Chief Executive Officer,
Richard Greenwalt and Director August 13, 1997
/s/ JOHN A. WITHAM Executive Vice President and Chief
------------------------------------------- Financial Officer (Principal
John A. Witham Financial Officer) August 13, 1997
/s/ BRIAN S. ANDERSON Senior Vice President, Corporate
------------------------------------------- Controller and Assistant Secretary
Brian S. Anderson (Principal Accounting Officer) August 13, 1997
</TABLE>
27
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE
- ------------- --------------------------------------------------------------------------------------------- ---------
<C> <S> <C>
3.1 Restated Articles of Incorporation of the Company, as amended (filed herewith)...............
3.2 Restated Bylaws of the Company, as amended (filed herewith)..................................
4.1 Rights Agreement dated as November 1, 1996, between the Company and Norwest Bank Minnesota,
National Association, as Rights Agent (incorporated by reference to Exhibit 1 to the
Company'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 Company and Norwest Bank Minnesota, National Association, as Trustee, relating
to the Company'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 the Company's Registration Statement on Form S-1, File No. 33-81512)................
4.3 Indenture, dated as of April 28, 1995, between the Company and Norwest Bank Minnesota,
National Association, as Trustee, relating to the Company's 13% Senior Notes due 2000
(incorporated by reference to Exhibit 4.5 to the Company'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 Company and Norwest Bank Minnesota, National Association, as Trustee,
relating to the Company's 13% Senior Notes due 2000 (incorporated by reference to Exhibit
4.6 to the Company's Annual Report on form 10-K for the year ended December 31, 1995)......
4.5 Second Supplemental Indenture dated as of March 11, 1997 to Indenture dated as of April 28,
1995 between the Company and Norwest Bank Minnesota, National Association (incorporated by
reference to Exhibit 4.7 to the Company's current report on Form 8-K dated March 12, 1997
and filed March 18, 1997)..................................................................
4.6 Indenture dated as March 15, 1996, between the Company and Norwest Bank Minnesota, National
Association, as Trustee, relating to the Company's Subordinated Notes, Series 1996-A due
2001 (incorporated by reference to Exhibit 4.5 to the Company's Annual Report on form 10-K
for the year ended December 31, 1996)......................................................
4.7 First Supplemental Indenture, dated as of March 15, 1996, to Indenture, dated as of March 15,
1996, between the Company and Norwest Bank Minnesota, National Association, as Trustee,
relating to the Company's Subordinated Notes, Series 1996-A due 2001 (incorporated by
reference to Exhibit 4.6 to the Company's Annual Report on form 10-K for the year ended
December 31, 1996).........................................................................
4.8 Indenture dated as of March 12, 1997, between the Company and Norwest Bank Minnesota,
National Association, as Trustee (incorporated by reference to Exhibit 4.1 to the Company's
current report on Form 8-K dated March 12, 1997 and filed March 18, 1997)..................
4.9 First Supplemental Indenture, dated as of March 12, 1997 between the Company and Norwest Bank
Minnesota, National Association, as Trustee (incorporated by reference to Exhibit 4.2 to
the Company's current report on Form 8-K dated March 12, 1997 and filed March 18, 1997)....
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE
- ------------- --------------------------------------------------------------------------------------------- ---------
<C> <S> <C>
4.10 Warrant Agreement, dated as of March 12, 1997 by and between the Company and Norwest Bank
Minnesota, National Association, as Warrant Agent (incorporated by reference to Exhibit 4.3
to the Company's current report on Form 8-K dated March 12, 1997 and filed March 18,
1997)......................................................................................
4.11 Form of Unit (incorporated by reference to Exhibit 4.4 to the Company's current report on
Form 8-K dated March 12, 1997 and filed March 18, 1997)....................................
4.12 Form of 11.5% Senior Notes due March 15, 2007 (incorporated by reference to Exhibit 4.5 to
the Company's current report on Form 8-K dated March 12, 1997 and filed March 18, 1997)....
4.13 Form of Initial Warrant Certificate (incorporated by reference to Exhibit 4.6 to the
Company's current report on Form 8-K dated March 12, 1997 and filed March 18, 1997)........
10.1 Spread Account Agreement, dated as of March 25, 1993, as amended and restated as of June 1,
1997 among the Company, Arcadia Receivables Finance Corp., Financial Security Assurance
Inc., The Chase Manhattan Bank, as Trustee, and Norwest Bank Minnesota, National Associate,
as Collateral Agent (filed herewith).......................................................
10.2 Series 1997-B Supplement, dated June 19, 1997, to Spread Account Agreement, dated as of March
25, 1993, as amended and restated as of June 1, 1997, among the Company, Arcadia
Receivables Finance Corp., Financial Security Assurance Inc., The Chase Manhattan Bank, as
Trustee, and Norwest Bank Minnesota, National Association, as Collateral Agent (filed
herewith)..................................................................................
10.3 Insurance and Indemnity Agreement, dated as of June 19, 1997, among the Company, Financial
Security Assurance Inc., Arcadia Automobile Receivables Trust, 1997-B and Arcadia
Receivables Finance Corp. (filed herewith).................................................
10.4 Employment Agreement, dated as of May 1, 1997, between the Company and Duane E. White (filed
herewith)..................................................................................
10.5 Amendment No. 4 dated as of May 30, 1997 to Sale and Servicing Agremeent dated as of December
28, 1995 among Olympic Automobile Receivables Warehouse Trust as Issuer, Olympic
Receivables Finance Corp. II as Seller, Arcadia Financial Ltd. (formerly Olympic Financial
Ltd.) in its individual capacity and as Servicer and Norwest Bank Minnesota National
Association as Back-up Servicer (filed herewith)...........................................
10.6 Second Amendment and Consent dated as of May 30, 1997 relating to Note Purchase Agreement and
among Olympic Automobile Receivables Warehouse Trust as Seller, Arcadia Financial Ltd.
(formerly 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 (filed herewith)....................
10.7 Acknowledgement of Reduction of Purchase Commitment and Consent dated June 30, 1997 relating
to Note Purchase Agreement and among Olympic Automobile Receivables Warehouse Trust as
Seller, Arcadia Financial Ltd. (formerly 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 (filed
herewith)..................................................................................
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE
- ------------- --------------------------------------------------------------------------------------------- ---------
<C> <S> <C>
10.8 Third Amendment and Consent dated as of May 30, 1997 relating to Certificate Purchase
Agreement among Olympic Automobile Receivables Warehouse Trust as Seller, Arcadia Financial
Ltd. (formerly 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 (filed herewith)..................................................
10.9 Acknowledgement of Reduction of Purchase Commitments dated June 30, 1997 relating to
Certificate Purchase Agreement among Olympic Automobile Receivables Warehouse Trust as
Seller, Arcadia Financial Ltd. (formerly 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 (filed herewith)..........................
10.10 Fourth Amendment and Consent dated as of May 30, 1997 relating to the Asset Purchase
Agreement, dated as of December 28, 1995 among Morgan Guaranty Trust Company of New York
(successor to J.P. Morgan Delaware), as Administrative Agent, and the APA Purchasers who
have executed a signature page to the Agreement or executed an Assignment of Purchase
Commitment (filed herewith)................................................................
10.11 Fifth Amendment and Consent dated as of June 30, 1997 relating to the Asset Purchase
Agreement, dated as of December 28, 1995 among Morgan Guaranty Trust Company of New York
(successor to J.P. Morgan Delaware), as Administrative Agent, and the APA Purchasers who
have executed a signature page to the Agreement or executed an Assignment of Purchase
Commitment (filed herewith)................................................................
10.12 Arcadia Financial Ltd. 1990 Stock Option Plan, as amended to date (filed herewith)...........
10.13 1992 Director Stock Option Plan, as amended to date (filed herewith).........................
11.1 Computation of Earnings Per Share (filed herewith)...........................................
12.1 Computation of Ratio of Earnings to Fixed Changes (filed herewith)...........................
12.2 Computation of Ratio of Earnings to Fixed Charge and Preferred Stock Dividends (filed
herewith)..................................................................................
27.1 Financial Data Schedule (filed herewith).....................................................
</TABLE>
30
<PAGE>
STATE OF MINNESOTA
---------------------
SECRETARY OF STATE
---------------------
CERTIFICATE OF INCORPORATION
I, Joan Anderson Growe, Secretary of State of Minnesota, do certify that:
Articles of Incorporation, duly signed and acknowledged under oath, have been
filed on this date in the Office of the Secretary of State, for the
incorporation of the following corporation, under and in accordance with the
provisions of the chapter of Minnesota Statutes listed below.
This corporation is now legally organized under the laws of Minnesota.
Corporate Name: Olympic Financial, Ltd.
Corporate Charter Number: 6P-396
Chapter Formed Under: 302A
This certificate has been issued on 03/08/1990.
[Seal]
/s/ Joan Anderson Growe
-------------------------
Secretary of State.
<PAGE>
ARTICLES OF INCORPORATION
OF
OLYMPIC FINANCIAL, LTD.
That the undersigned incorporator, being a natural person(s) of full age
of 18 years or more, and desiring to form a body corporate under Chapter 302A
of the laws of the State of Minnesota hereby sign, verify and deliver in
duplicate to the Secretary of State of the State of Minnesota these ARTICLES
OF INCORPORATION.
ARTICLE I
NAME
The name of the corporation shall be Olympic Financial, Ltd.
ARTICLE II
REGISTERED OFFICE AND AGENT
The registered office of the corporation shall be 1031 Mendota Heights
Road, Mendota Heights, Minnesota 55120, and the name of the initial
registered agent at such address is Jeffrey C. Mack. Either the registered
office or the registered agent may be changed in the manner provided by law.
ARTICLE III
INCORPORATORS
The name and address of each incorporator is as follows:
Name Address
James D. Atkinson III 1031 Mendota Heights Road
Mendota Heights, MN 55120
ARTICLE IV
CAPITAL
The aggregate number of shares which this corporation shall have the
authority to issue is twenty-five thousand (25,000) shares each with $.01 par
value, which shares shall be designated common stock. No share shall be
issued until it has been paid for, and it shall thereafter be non-assessable.
<PAGE>
ARTICLE V
INITIAL BOARD OF DIRECTORS
The initial board of directors of the corporation shall consist of four
directors, and the names and addresses of the persons who shall serve as
directors until the first annual meeting of shareholders or until their
successors are elected and shall qualify are as follows:
NAME ADDRESS
Jeffrey C. Mack 5001 Harriet Avenue South
Minneapolis, MN 55419
Walter L. Bush, Jr. 5704 Camelback Drive
Edina, MN 55436
Dennis E. Hecker 1880 Buckskin Drive
Medina, MN 55391
Douglas B. Tempas 10005 Amsden Way
Eden Prairie, MN 55347
ARTICLE VI
LIMITATION OF DIRECTOR LIABILITY
To the fullest extent permitted by the Minnesota Business Corporation
Act, as the same exists or may hereafter be amended, a director of this
corporation shall not be personally liable to the corporation or its
shareholders for monetary damages for breach of fiduciary duty as a director.
IN WITNESS WHEREOF, the above named incorporator signed these ARTICLES OF
INCORPORATION, this 2 day of March, 1990.
INCORPORATOR:
/s/ James D. Atkinson
---------------------------
James D. Atkinson III
STATE OF MINNESOTA)
) ss.
COUNTY OF DAKOTA )
I, the undersigned, a notary public, hereby certify that on the 2nd day
of March, 1990, the above-named incorporator personally appeared before me
and being by me first duly sworn, severally declared that they are the
persons who signed the
-2-
<PAGE>
foregoing document as incorporator, and that the statements therein contained
are true.
WITNESS my hand and official seal.
/s/ Tracy A. Westemeier
---------------------------
Notary Public
TRACY A. WESTEMEIER
NOTARY PUBLIC-MINNESOTA
HENNEPIN COUNTY
My commission expires 10-20-92
STATE OF MINNESOTA
DEPARTMENT OF STATE
FILED
MAR 8 1990
/s/ Joan Anderson Growe
Secretary of State
-3-
<PAGE>
> See instructions at bottom
of page for completing
this form.
[SEAL] State of Minnesota
Office of the Secretary of State
MODIFICATION OF STATUTORY REQUIREMENTS
OR AMENDMENT OF ARTICLES
- -------------------------------------------------------------------------------
Corporate Name
Olympic Financial Ltd.
- -------------------------------------------------------------------------------
Date of Adoption of Amendments/Modifications
March 26, 1990
- -------------------------------------------------------------------------------
Effective Date, if any, of Amendments/Modifications*
March 26, 1990
- -------------------------------------------------------------------------------
Amendments/Modifications Approved by Corporate:
/ / Shareholders /X/ Incorporators / / Directors
- -------------------------------------------------------------------------------
No shares have been issued
Pursuant to the provisions of Minnesota Statutes, Sections 302A.133 and
302A.135, the following amendments of articles or modifications to the
statutory requirements regulating the above corporation were adopted: (Insert
full text of newly amended or modified article(s), indicating which
article(s) is (are) being amended or added. If the full text of the amendment
will not fit into the space provided, please do not use this form. Instead,
retype the amendment on a separate sheet or sheets, using this format.)
ARTICLE II
Registered Office and Agent
The registered office of the corporation shall be 7825 Washington Avenue
South, Suite 545, Minneapolis, Minnesota 55439, and the name of the initial
registered agent at such address is Jeffrey C. Mack. Either the registered
office or the registered agent may be changed in the manner provided by law.
*Note: Effective date may be any date within 30 days after the filing date.
If no date is specified, the effective date is the filing date.
I swear that the foregoing is true and accurate and that I have the authority
to sign this document on behalf of the corporation.
Signed: /s/ James D. Atkinson III
-----------------------------
James D. Atkinson III
Position: Sole Incorporator
---------------------------
STATE OF MINNESOTA ) The foregoing instrument was acknowledged
) ss.
County of Dakota ) before me on this 26th day of March, 1990.
(Notarial TRACY A. WESTEMEIER
Seal) NOTARY PUBLIC-MINNESOTA /s/ Tracy A. Westemeier
HENNEPIN COUNTY ------------------------------
My commission expires 10-20-92 (Notary Public)
- -------------------------------------------------------------------------------
INSTRUCTIONS FOR USE BY SECRETARY OF STATE
1. Type or print with dark black ink.
2. Filing Fee: $15.00. STATE OF MINNESOTA
DEPARTMENT OF STATE
3. Make check for the filing fee payable FILED
to the Secretary of State. APR 06 1990
4. Mail or bring completed form to: /s/ Joan Andersen Growe
Secretary of State Secretary of State
Corporation Division
180 State Office Building
St. Paul, MN 55155
(612) 296-2803
<PAGE>
ARTICLES OF AMENDMENT
OF
THE ARTICLES OF INCORPORATION
OF
OLYMPIC FINANCIAL LTD.
The undersigned, President and Chief Executive Officer of Olympic
Financial Ltd., a Minnesota corporation, hereby certifies that the
shareholders of the Corporation, acting pursuant to Minnesota Statutes
302A.441, on January 18, 1991, did by written action adopt the Restated
Articles of Incorporation of the Corporation in the form attached hereto as
Exhibit A; and that such Restated Articles of Incorporation were designated
to supersede and take the place of the original Articles of Incorporation and
all amendments thereto.
IN WITNESS WHEREOF, the undersigned has executed these Articles of Amendment
on behalf of Olympic Financial Ltd. this 18 day of January, 1991.
/s/ JEFFREY C. MACK
--------------------------------------
Jeffrey C. Mack
President and Chief Executive Officer
Avron L. Gordon
BRIGGS AND MORGAN, P.A.
2400 IDS Center
Minneapolis, MN 55402
<PAGE>
EXHIBIT A
RESTATED ARTICLES OF INCORPORATION
OF
OLYMPIC FINANCIAL LTD.
The following Restated Articles of Incorporation are adopted by Olympic
Financial Ltd. to restate and supersede its existing Articles of
Incorporation, effective upon filing with the Minnesota Secretary of State:
ARTICLE 1
NAME: The name of this Corporation shall be OLYMPIC FINANCIAL LTD.
ARTICLE 2
REGISTERED OFFICE: The address of the Corporation's registered office in
the State of Minnesota is 7845 Washington Avenue So., Minneapolis, Minnesota
55439-2444.
ARTICLE 3
AUTHORIZED SHARES: The authorized capital stock of this Corporation
shall consist of (i) 3,000,000 shares of Common Stock, par value $.01 per
share; and (ii) 47,000,000 undesignated shares of a par value of $.01 per
share which may be issued in more than one class or series when authorized by
the Board of Directors of the Corporation.
3.1 The Board of Directors may, from time to time, establish by
resolution in the manner prescribed by law, different classes or series of
shares and may fix the relative rights and preferences of said shares in any
class or series.
3.2 The Board of Directors shall have the authority to issue shares of a
class or series, shares of which may then be outstanding, to holders of
shares of another class or series to effectuate share dividends, splits, or
conversion of its outstanding shares.
RECLASSIFICATION AND SPLIT OF OUTSTANDING SHARES. The outstanding
capital stock of this Corporation on the effective date of these Restated
Articles of Incorporation, consisting of 1,000 shares of Common Stock, are
hereby split and reclassified into 3,000,000 shares of
<PAGE>
Common Stock, $.01 par value per share. Each share of Common Stock of the
Corporation outstanding immediately preceding prior to the effective date of
these Restated Articles of Incorporation shall, pursuant to this
reclassification and without further action by the Corporation, be converted
into 3,000 shares of Common Stock, $.01 par value per share.
ARTICLE 4
CERTAIN SHAREHOLDER RIGHTS: Shareholders shall have no preemptive rights
to purchase, subscribe for or otherwise acquire any new or additional
securities of the Corporation. No shareholder shall be entitled to any
cumulative voting rights.
ARTICLE 5
WRITTEN ACTION BY BOARD: An action required or permitted to be taken by
the Board of Directors of this Corporation may be taken by written action
signed by the number of directors that would be required to take the same
action at a meeting of the Board at which all directors are present except as
to those matters which require shareholder approval, in which case the
written action must be signed by all members of the Board of Directors.
ARTICLE 6
NONLIABILITY OF DIRECTORS FOR CERTAIN ACTIONS: To the full extent
permitted by the Minnesota Business Corporation Act, Minnesota Statutes,
Chapter 302A, as it exists on the date hereof or may hereafter be amended, a
director of this Corporation shall not be liable to the Corporation or its
shareholders for monetary damages for breach of fiduciary duty as a director.
No amendment to or repeal of this Article shall apply to or have any effect
on the liability or alleged liability of any director of the Corporation for
or with respect to any acts or omissions of such director occurring prior to
such amendment or repeal.
STATE OF MINNESOTA
DEPARTMENT OF STATE
FILED
JAN 23 1991
/s/ Joan Anderson Growe
Secretary of State
2
<PAGE>
ORIGINAL
STATEMENT OF DESIGNATION OF CLASS, SERIES
PREFERENCES AND RIGHTS
OF
12% CUMULATIVE CONVERTIBLE PREFERRED STOCK, SERIES A
OF
OLYMPIC FINANCIAL LTD.
OLYMPIC FINANCIAL LTD., a corporation organized and existing under the
laws of the State of Minnesota (herein referred to as the "Corporation"), in
accordance with the provisions of Section 302A.401, Subd. 3 of the Minnesota
Business Corporation Act, does hereby certify:
(i) The Articles of Incorporation of the Corporation fixes the total
number of shares of all classes of capital stock which the Corporation shall
have the authority to issue as 50,000,000 designated as follows: (a)
3,000,000 shares, par value $.01 per share, designated as Common Stock; and
(b) 47,000,000 shares which are undesignated, $.01 par value.
(ii) The Articles of Incorporation of the Corporation expressly
grants to the Board of Directors of the Corporation authority to provide for
the issuance of shares from time to time in one or more classes or series,
with such designations, preferences, limitations, and relative rights as
shall be stated and expressed in the resolution or resolutions providing for
the issuance of such shares and adopted by the Board of Directors pursuant to
the authority given as provided by the Minnesota Business Corporation Act and
not inconsistent with the provisions of the Articles of Incorporation.
(iii) Pursuant to the authority conferred upon the Board of Directors
by the Articles of Incorporation of the Corporation, the Board of Directors
by action duly taken in writing effective January 24, 1991, as amended
February 1, 1991, authorized and adopted a resolution providing for
designation and issuance of its 2,040,000 shares of 12% Cumulative
Convertible Preferred Stock, Series A of the Corporation, and the following
is a true copy of such resolution:
12% CUMULATIVE CONVERTIBLE PREFERRED STOCK, SERIES A
----------------------------------------------------
RESOLVED, that the Board of Directors does hereby provide for the issue
of the following class consisting of 2,040,000 shares of the Corporation's
preferred stock (the "Preferred Stock"), to be designated as "12% Cumulative
Convertible Preferred Stock, Series A" (the "Series A Preferred").
<PAGE>
The voting powers, designations, preferences, relative, participating,
optional, conversion and other special rights, and qualifications,
limitations and restrictions of the Series A Preferred are as follows:
1. DESIGNATION OF THE SERIES; PARITY. There shall be a series of
Preferred Stock designated as "12% Cumulative Convertible Preferred Shares,
Series A", par value $.01 per share, consisting of up to 2,040,000 shares.
The Series A Preferred shall, with respect to dividend rights and rights on
liquidation, winding up and dissolution, rank prior to the Common Stock, no
par value per share (the "Common Stock"). All equity securities of the
Corporation to which the Series A Preferred ranks prior with respect to
dividends or upon liquidation, dissolution, winding-up or otherwise, are
collectively referred to herein as the "Junior Stock;" all equity securities
of the Corporation with which the Series A Preferred ranks on a parity are
herein collectively referred to as "Parity Stock;" and all equity securities
of the Corporation to which the Series A Preferred or Parity Stock ranks
junior, whether with respect to dividends or upon liquidation, dissolution,
winding-up or otherwise, are collectively referred to herein as the "Senior
Stock."
2. DIVIDENDS. For the purposes of this Section 2, the last day of the
month following the month in which Preferred Stock is originally issued and,
thereafter, the last day of each month on which any Series A Preferred shall
be outstanding shall be deemed to be a "Dividend Payment Date." The holders
of Convertible Preferred Shares shall be entitled to receive, when and as
authorized by the Board of Directors, out of funds legally available
therefor, cumulative preference dividends at the rate of 12% per year on each
share of Series A Preferred (based on $10 per each Series A Preferred share)
and no more, calculated on the basis of a year of 360 days consisting of
twelve 30-day months, payable ratably on each Dividend Payment Date, except
that if any Series A Preferred shall be issued to a holder other than on the
first day of a month, the dividend payable to such holder for the month in
which such Series A Preferred was issued shall be pro rated on the basis of a
30-day month. Dividends on each share of Series A Preferred shall accumulate
and be cumulative until payment from and after the date of issuance of such
Series A Preferred. The record date for the payment of dividends shall,
unless otherwise altered by the Corporation's Board of Directors, be the last
day of the month immediately preceding the relevant Dividend Payment Date.
The record date for the payment of dividends on the Series A Preferred shall
in no event be more than thirty-one (31) nor less than ten (10) days prior to
a Dividend Payment Date.
When dividends are not paid in full upon all shares of Parity Stock, all
dividends declared upon shares of Parity Stock will be declared pro rata so
that in all cases the amount of dividends declared per share on the Parity
Stock bear to each other the same ratio that the accumulated dividends per
share on the shares of Parity Stock bear to each other. Unless full
cumulative dividends on the Parity Stock have been paid or set aside for
payment: (i) no dividends, whether in cash, stock or other property, may be
paid or declared and set aside for payment or any other distribution made
upon any Junior Stock
2
<PAGE>
of the Corporation (other than dividends or distributions in Junior Stock);
(ii) no Parity Stock may be (A) redeemed pursuant to a sinking fund or
otherwise (unless all the Parity Stock is redeemed or a pro rata redemption
is made from all holders of Parity Stock, the amount allocable to each series
of such Stock being determined on the basis of the aggregate liquidation
preference of the outstanding shares of each series and the shares of each to
be redeemed only on a pro rata basis) or (B) purchased or otherwise acquired
for any consideration by the Corporation except pursuant to an acquisition or
offer made on the same terms to all holders of Parity Stock; and (iii) no
stock ranking junior to the Parity Stock as to dividends may be acquired for
consideration except by conversion into, exchange for, or out of the cash
proceeds from, the substantially cor current offering of Junior Stock.
3. VOTING. Except as hereinafter in this Section 3 expressly provided
or as otherwise required by law, the Series A Preferred shall have no voting
power.
If at the time of any regular or special meeting of stockholders for the
election of directors a default in (a) the payment of preference dividends on
any series of the Preferred Stock, or (b) the mandatory redemption of
Preferred Stock pursuant to Section 4(b) (either of such defaults hereinafter
referred to as a "Default") shall exist and be continuing, the number of
directors constituting the Board of Directors of the Corporation shall be
increased by one hundred percent (100%) plus one (1) director (such
additional directors referred to as the "Preferred Directors"), and the
holders of the Series A Preferred, together with the holders of any other
series or class of Preferred Stock similarly entitled to vote and in respect
of which a Default exists, shall have the right at such meeting, voting
together as a single class without regard to series to the exclusion of the
holders of Common Stock, to nominate and elect the Preferred Directors. Such
right to nominate and elect the Preferred Directors shall continue until such
time as the Default shall be cured. Effective as of such cure (i) each of the
Preferred Directors shall forthwith resign as a director of the Corporation
and (ii) the number of directors constituting the Board of Directors of the
corporation shall be reduced accordingly. Any Preferred Director may be
removed by, and shall not be removed except by, the vote of the holders of
record of the outstanding shares of Series A Preferred, together with that of
the holders of any other series or class of Preferred Stock similarly entitled
to vote and in respect of which a Default exists, voting together as a single
class without regard to series, to the exclusion of the holders of Common
Stock at a meeting of the stockholders called for that purpose. So long as a
Default shall exist, any vacancy in the office of a Preferred Director may be
filled by a successor elected by the vote of the holders of the outstanding
shares of Series A Preferred together with that of the holders of any other
series or class of Preferred Stock similarly entitled to vote and in respect
of which a Default exists, voting together as a single class without regard
to series, to the exclusion of the holders of Common Stock at any meeting of
the stockholders. For the purposes hereof, a "Default" shall be deemed to
have occurred whenever the amount of accrued, cumulative, unpaid dividends
upon any series of the Preferred Stock shall be equivalent to six (6) monthly
dividends or more, and, having so occurred, such default shall be deemed to
exist thereafter until, but only until, all accrued and cumulative dividends
on
3
<PAGE>
all shares of each and every series of parity stock then outstanding shall
have been paid, or a sufficient sum set apart for the payment of such
dividends, to and including the last preceding Dividend Payment Date.
In addition, as long as any shares of Series A Preferred are outstanding,
the affirmative vote of the holders of a majority of the outstanding shares
of all of the Series A Preferred, together with that of the holders of a
majority of the outstanding shares of any other series or class of Preferred
Stock similarly entitled to vote, voting together as a single class, shall be
required for any action by the Corporation to (i) amend, alter or repeal any
of the preferences or rights of the holders of the Series A preferred in a
manner which would adversely affect the rights of such holders, or (ii)
create any series of the Preferred Stock ranking senior to the Series A
Preferred as to dividends or liquidation rights.
The holders of record of Series A Preferred shall also be entitled to
vote as a class (the affirmative vote or consent of a majority of the
outstanding Shares of Series A Preferred being required) on any
reclassification of the Series A Preferred and to vote on any matter with
respect to which a class vote by the Parity Stock or the Series A Preferred
shall be expressly required by applicable law and on any other matter with
respect to which the Corporation's Board of Directors shall direct that the
Parity Stock or the Series A Preferred is to be voted as a separate class. A
class vote on the part of the Parity Stock (including the Series A Preferred)
shall be required for the authorization and issuance of Senior Shares Parity
Stock. A class vote shall, without limitation, specifically not be deemed to
be required (except as otherwise required by law or resolution of the
Corporation's Board of Directors) in connection with: (i) the authorization,
issuance or increase in the authorized amount of Junior Stock; (ii) the
authorization, issuance or increase in the amount of any bonds, mortgages,
debentures or other obligations of the Corporation; or (iii) any merger,
exchange, or consolidation involving the Corporation, provided that the
successor corporation assumes all of the obligations of the Corporation with
respect to the Series A Preferred or Parity Stock.
4. REDEMPTION.
(a) OPTIONAL REDEMPTION. Any or all of the Series A Preferred may be
redeemed, at the option of the Corporation and to the extent funds are
legally available therefor, as a whole at any time or in part from time to
time, during the following periods and redemption prices per Share (the
"Redemption Price") plus cumulative unpaid dividends:
First year following date of issuance................$12.20
Second year following date of issuance...............$14.40
Third year following date of issuance................$16.60
Fourth year following date of issuance...............$18.80
Fifth year following date of issuance................$21.00
4
<PAGE>
On and after the fifth anniversary of the issuance of Series A Preferred to
any holder, the Series A Preferred may be redeemed from such holder, at the
option of the Corporation, as a whole at any time or in part from time to
time, at $12.50, in each case plus all accumulated and unpaid dividends
(whether or not declared or due), plus accrued interest, to the date of
redemption.
No sinking fund shall be established for the Series A Preferred.
Notice of any proposed redemption of Series A Preferred shall be mailed
by means of first class mail, postage paid, addressed to the holders of
record of the Series A Preferred to be redeemed, at their respective
addresses then appearing on the books of the Corporation, at least thirty
(30) but not more than sixty (60) days prior to the date fixed for such
redemption (herein referred to as the "Redemption Date"). Each such notice
shall specify (i) the Redemption Date, (ii) the Redemption Price, (iii) the
place for payment and for delivering the stock certificate(s) and transfer
instrument(s) in order to receive payment of the Redemption Price, (iv) the
Shares of Series A Preferred to be redeemed and (v) the then effective
Conversion Rate and that the right of holders of Series A Preferred being
redeemed to exercise their conversion right shall terminate as to such Shares
at the close of business on the Redemption Date. Any notice mailed in such
manner shall be conclusively deemed to have been duly given whether or not
such notice is in fact received.
If less than all outstanding shares of Series A Preferred are to be
redeemed, the Corporation will select those to be redeemed by lot or a
substantially equivalent method. If full cumulative dividends on the Series A
Preferred have not been paid or declared and set apart for payment, the
Series A Preferred may not be redeemed in part and the Corporation may not
purchase or acquire any shares of the Series A Preferred, except as set forth
herein. On and after the Redemption Date, dividends will cease to accumulate
on shares of Series A Preferred called for redemption, provided that the
Redemption Price has been duly paid or provided for.
The holder of any Series A Preferred redeemed upon any exercise of the
Corporation's redemption right shall not be entitled to receive payment of
the Redemption Price for such Shares until such holder shall cause to be
delivered to the place specified in the notice given with respect to such
redemption (i) the certificate(s) representing such Shares of Series A
Preferred and (ii) transfer instrument(s) satisfactory to the Corporation and
sufficient to transfer such Shares of Series A Preferred to the Corporation
free of any adverse interest. No interest shall accrue on the Redemption
Price of any Series A Preferred after its Redemption Date.
At the close of business on the Redemption Date for any Series A
Preferred, such Share shall (provided the Redemption Price of such Share has
been paid or properly provided for) be deemed to cease to be outstanding and
all rights of any person other than the Corporation in such Share shall be
extinguished on the Redemption Date for such Share
5
<PAGE>
(including all rights to receive future dividends with respect to such Share)
except for the right to receive the Redemption Price, without interest, for
such Share in accordance with the provisions of this Section 4, subject to
applicable escheat laws.
In the even that any Shares of Series A Preferred shall be converted into
Common Stock pursuant to Section 6, then (i) the Corporation shall not have
the right to redeem such Shares, and (ii) any funds which shall have been
deposited for the payment of the Redemption Price for such Shares shall be
returned to the Corporation immediately after such conversion (subject to
dividends payable to holders of Series A Preferred on the record date for
such dividends being so payable regardless of whether such Shares are
converted subsequent to such record date and prior to the related Dividend
Payment Date).
Subject to Section 2 hereof, the Corporation shall have the right to
purchase any Shares of Series A Preferred in the public market or in private
transactions directly from the owner of such Shares on such terms as may be
agreeable to such owner, provided that a comparable offer shall be made in
writing by the Corporation to each other person then owning Series A
Preferred. Except as provided in this paragraph, Shares of Series A Preferred
may be acquired by the Corporation from any stockholder pursuant to this
paragraph without offering any other stockholder an equal opportunity to sell
his stock to the Corporation and no purchase by the Corporation from any
stockholder pursuant to this paragraph shall be deemed to create any right in
favor of any other stockholder to sell any Series A Preferred (or any other
stock) to the Corporation.
(b) MANDATORY REDEMPTION AT REQUEST OF HOLDERS. In the event that the
Corporation has not become a "publicly-held" corporation as defined herein at
any time prior to the fifth anniversary of the issuance of Series A Preferred
to a holder (the "Mandatory Redemption Date") the holders of Series A
Preferred will be entitled to require the Corporation to redeem their shares
of Series A Preferred at a price of $12.50 (the "Mandatory Redemption Price")
for each Share of Series A Preferred tendered for redemption, plus accrued
and unpaid dividends. The Corporation shall give written notice to each
holder of Series A Preferred within thirty (30) days following such fifth
anniversary of either (a) its having achieved publicly-held status within
said five-year period; or (b) the right of the holders of the Series A
Preferred shares to require redemption pursuant to this 4(b). A holder of the
Series A Preferred may exercise his right to require the Corporation to
purchase all, but not less than all, of his shares by giving written notice
to the Corporation not more than sixty (60) days after the Mandatory
Redemption Date. Within ninety (90) days following receipt of such notice,
the Corporation shall redeem the Shares of those holders who have (i) given
notice of redemption as provided herein, and (ii) tendered their Shares for
redemption. For purposes of this section, the term "publicly held" shall mean
(i) that the Corporation or any successor to the Corporation pursuant to a
reorganization transaction has either sold its Common Stock or Preferred
Stock pursuant to a registration statement under the Securities Act of 1933,
as amended, or an exemption therefrom; provided that the Corporation or such
successor has become a reporting company under the
6
<PAGE>
provisions of Sections 12, 13 or 15(d) of the Securities and Exchange Act of
1934, or (ii) that the Corporation's Common Stock or Preferred Stock are
traded on any recognized stock exchange in the United States or are included
in the National Association of Securities Dealers, Inc. NASDAQ system.
If the Corporation is unable, on or after the Mandatory Redemption Date,
to effect a redemption of all of the Series A Preferred tendered to it for
Mandatory Redemption and to pay the Mandatory Redemption Price therefor,
because it is legally unable to do so under applicable laws, it shall so
notify all holders of the Series A Preferred. The Corporation shall
thereafter continue to use its best efforts to acquire capital sufficient to
enable it to effect such redemption at the Mandatory Redemption Price. If,
within ninety (90) days following the Mandatory Redemption Date, and after
using such best efforts, the Corporation is unable to redeem all of the
Series A Preferred which have been tendered to it at the Mandatory Redemption
Price, but has funds which would enable it to pay a portion of such price, it
shall so notify in writing the holders of the Series A Preferred. Upon the
affirmative vote of not less than two-thirds of the holders of the Series A
Preferred who have tendered their shares for redemption taken at a special
meeting of such holders or evidenced by their written consent, such
holders may consent to a redemption price for such shares which is less than
the Mandatory Redemption Price. After such lesser redemption price is
established, any holder of Series A Preferred may tender his shares for
redemption at such lesser price for a period of sixty (60) days following the
date of such notice. Any holder of Series A Preferred who does not elect to
tender shares for redemption at such lesser price may, at such holder's
option: (i) retain such Series A Preferred and continue to receive the
dividend specified in Section 2; or (ii) convert the Series A Preferred into
Conversion Stock of the corporation as provided in Section 6 hereof. If such
non-tendering holder elects to continue receiving the preference dividend as
provided in the preceding sentence, the Corporation shall use its best
efforts to continue to acquire the capital necessary to enable the
Corporation to effect a redemption at the Mandatory Redemption Price.
5. SHARES TO BE RETIRED. All shares of Series A Preferred redeemed
by the Corporation shall be retired and canceled and shall be restored to he
status of authorized but unissued shares, without designation as to class or
series, and may thereafter be issued by the Corporation as designated by the
Board of Directors.
6. CONVERSION PRIVILEGE. Except as provided in Section 4(b), at
such time as the Corporation is publicly-held as defined above, the holder of
any Series A Preferred shall have the right at such holder's option (but if
such Shares or portion thereof are called for redemption, then in respect of
such Shares or portion thereof the conversion privilege shall expire on the
close of business on the tenth day preceding the date fixed for such
redemption so long as there has been no default of payment of the redemption
price) to convert each Share of Series A Preferred, into one fully paid and
nonassessable share of Common Stock (the "Conversion Rate"). The Corporation
may waive the condition of this
-7-
<PAGE>
Section that the Corporation be publicly-held prior to election by a holder
of the conversion right; provided, however, that such waiver shall extend
under similar circumstances to all holders of Series A Preferred. The
Conversion Rate shall be subject to adjustment as set forth below.
In order to exercise the conversion privilege, the holder of Shares of
Series A Preferred shall surrender such Shares, accompanied by instruments of
transfer satisfactory to the Corporation and sufficient to transfer the
Shares of Series A Preferred being converted, to the Corporation free of any
adverse interest, at the registered office of the Corporation (or at any
other office designated by the Board of Directors) and shall give written
notice to the Corporation at such office that the holder elects to convert
such Shares or the portion thereof specified in said notice. Such notice
shall also state the name or names, together with address or addresses, in
which the certificate or certificates for shares of Common Stock shall be
issuable on such conversion. As promptly as practicable after the surrender
of such Shares of Series A Preferred as aforesaid, the Corporation shall
issue and shall deliver at such address or addresses to such holder, a
certificate or certificates for the number of full shares of Common Stock
issuable upon the conversion of such Shares or portion thereof in accordance
with the provisions hereof and any fractional interest in respect of a share
of Common Stock arising upon such conversion shall be settled in cash as
provided below. Remainder certificates will be issued for the remaining
Shares of Series A Preferred in any case in which fewer than all of the
Shares of Series A Preferred represented by a certificate are converted.
Each conversion shall be deemed to have been effected immediately prior
to the close of business on the date on which Shares of Series A Preferred
shall have been so surrendered and such notice received by the Corporation as
aforesaid, and the person or persons in whose name or names any certificate
or certificates for shares of Common Stock shall be issuable upon such
conversion shall be deemed to have become the holder or holders of record of
the Common Stock represented thereby at such time. No payment or adjustment
shall be made on conversion for any dividends accrued on Shares of Series A
Preferred surrendered for conversion or for any dividends on the
Common Stock delivered on conversion. Effective as of any such conversion,
the Corporation shall be excused from paying any dividends on the Shares of
Series A Preferred converted, including any dividends past due at the time of
conversion; provided, that if a Share of Series A Preferred is surrendered
for conversion after the record date for a dividend payment, such dividend
shall nevertheless be paid on such Shares in the normal course.
No fractional shares of Common Stock shall be issued upon conversion of
the Series A Preferred. Instead of any fractional interest in a share of Common
Stock which would otherwise be deliverable upon the conversion of any Share
or Shares, the Corporation shall make an adjustment therefor to the nearest
1/100th of a share in cash at the last reported sale price regular way of the
Common Stock on the principal stock exchange on which the Common Stock is
listed (or, if the Common Stock is not listed on an exchange, on the
-8-
<PAGE>
principal market for the Common Stock or the fair market value of Common
Stock as determined in good faith by the Board of Directors) at the close of
business on the business day next preceding the day of conversion.
The Corporation will reserve and keep available, free from preemptive
rights, out of its authorized capital stock, solely for the purpose of
delivery of shares of Common Stock of the Corporation upon conversion of the
Series A Preferred, a number of shares of Common Stock of the Corporation as
would be deliverable upon the conversion of all of the Series A Preferred
then outstanding or issuable upon conversion of any other convertible
securities of the Corporation then outstanding.
The Conversion Rate shall be adjusted from time to time as follows:
a. In case the Corporation shall at any time or from time to
time declare or pay any dividend on this Common Stock payable in its Common
Stock or effect a subdivision of the outstanding shares of its Common Stock
into a greater number of shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in its Common Stock), then, and in
each such case, the number of shares of Common Stock into which each share of
the Series A Preferred is convertible shall be adjusted so that the holder of
each Share of Series A Preferred shall be entitled to receive, upon the
conversion thereof, the number of shares of Common Stock determined by
multiplying (i) the number of shares of Common Stock into which such Share
was convertible immediately prior to the occurrence of such event by (ii) a
fraction, the numerator of which is the sum of (A) the number of shares of
Common Stock into which such Share was convertible immediately prior to the
occurrence of such event plus (B) the number of Shares of Common Stock which
such holder would have been entitled to receive in connection with the
occurrence of such event had such Share been converted immediately prior
thereto, and the denominator of which is the number of shares of Common Stock
determined in accordance with clause (A) above. An adjustment made pursuant
to this paragraph shall become effective (i) in the case of any such
dividend, immediately after the close of business on the record date for the
determination of holders of Common Stock entitled to receive such dividend,
or (ii) in the case of any such subdivision, at the close of business on the day
immediately prior to the day upon which such corporate action becomes
effective;
b. In case the Corporation at any time or from time to time
shall combine or consolidate the outstanding shares of its Common Stock into
a lesser number of shares of Common Stock, by reclassification or otherwise,
then, and in each such case, the number of shares of Common Stock into which
each Share of the Series A Preferred is convertible shall be adjusted so that
the holder of each Share thereof shall be entitled to receive, upon the
conversion thereof, the number of shares of Common Stock determined by
multiplying (i) the number of shares of Common Stock into which such Share
was convertible immediately prior to the occurrence of such event by (ii) a
fraction, the numerator of which is the number of shares which the holder
would have owned after giving effect to such event
-9-
<PAGE>
had such Share been converted immediately prior to the occurrence of such
event and the denominator of which is the number of Common Shares into which
such Share was convertible immediately prior to the occurrence of such event.
An adjustment made pursuant to this subparagraph (b) shall become effective
at the close of business on the day immediately prior to the day upon which
such corporate action becomes effective;
c. If any capital reorganization of the Corporation, exchange, or
consolidation or merger of the Corporation with another corporation, or the
sale of all or substantially all of its assets to another corporation shall
be effected in such a way that holders of Common Stock shall be entitled to
receive stock, securities or assets with respect to or in exchange for
Common Stock, then, as a condition of such reorganization, consolidation,
exchange, merger or sale, and subject to Section 7 below, lawful and
adequate provision shall be made whereby the holders of Series A Preferred
shall thereafter have the right to receive upon the basis and upon the terms
and conditions specified herein and in lieu of the shares of Common Stock
immediately theretofore receivable upon the conversion of Series A
Preferred, such shares of stock, securities or assets as may be issued or
payable with respect to or in exchange for a number of outstanding shares of
such Common Stock equal to the number of shares of such stock immediately
theretofore receivable upon the conversion of Series A Preferred had such
reorganization, consolidation, exchange, merger or sale not taken place, plus
all dividends unpaid and accumlated or accrued thereon, plus accrued interest
on said dividends, to the date of such reorganization, consolidation,
exchange, merger or sale, and in any such case appropriate provision shall be
made with respect to the rights and interests of the holders of Series A
Preferred to the end that the provisions hereof (including without
limitation provisions for adjustments of the Conversion Rate and of the
number of shares receivable upon the conversion of Series A Preferred) shall
thereafter be applicable, as nearly as may be in relation to any shares of
stock, securities or assets thereafter receivable upon the conversion of
Series A Preferred. The Corporation shall not effect any such consolidation,
merger or sale, unless prior to the consummation thereof the successor
corporation (if other than the Corporation) resulting from such consolidation
or merger or the corporation purchasing such assets shall assume by written
instrument reasonably satisfactory to the holders of Series A Preferred
executed and mailed to the holders appearing on the books of the Corporation,
the obligation to deliver to such holder such shares of stock, securities or
assets as, in accordance with the foregoing provisions, such holder may be
entitled to receive.
d. Upon any adjustment of the Conversion Rate, then and in each case
the Corporation shall give written notice thereof, by first class mail,
postage prepaid, addressed to the holders of Series A Preferred, at the
address of such holders as shown on the books of the Corporation, which
notice shall state the Conversion Rate resulting from such adjustment and
increase or decrease, if any, in the number of shares receivable at such
rate upon the conversion of Series A Preferred, setting forth in reasonable
detail the method of calculation and the facts upon which such calculation is
based.
10
<PAGE>
7. LIQUIDATION. In the event of any voluntary or involuntary
dissolution, liquidation or winding up the Corporation (for the purposes of
this Section 7, a "Liquidation"), before any distribution of assets shall be
made to the holders of any Junior Stock of the Corporation, the holder of
each Series A Preferred then outstanding shall be entitled to be paid out of
the assets of the Corporation available for distribution to its stockholders,
an amount equal to $10.00 per share, plus all dividends (whether or not
declared or due), accumulated and unpaid on such Shares, together with any
accrued interest, on the date fixed for the distribution of assets of the
Corporation to the holders of Series A Preferred.
If upon any Liquidation of the Corporation, the assets available for
distribution to the holders of Series A Preferred, and any classes of Parity
Stock any other classes of stock ranking on a parity upon liquidation
with the Parity Stock issued by the Corporation which shall then be
outstanding (hereinafter in this paragraph called the "Total Amount
Available") shall be insufficient to pay the holders of all outstanding
Series A Preferred and all other such stock the full amounts (including all
dividends accumulated and unpaid) to which they shall be entitled by reason
of such Liquidation of the Corporation, then there shall be paid to the
holders of the Series A Preferred in connection with such Liquidation of the
Corporation, an amount equal to the product derived by multiplying the Total
Amount Available times a fraction, the numerator of which shall be the full
amount to which the Holders of the Series A Preferred shall be entitled under
the terms of the preceding paragraph by reason of such Liquidation of the
Corporation and the denominator of which shall be the total amount which
would have been distributed by reason of such Liquidation of the Corporation
with respect to the Series A Preferred, all Parity Stock and all other stock
ranking on a parity with the Parity Stock upon Liquidation then outstanding
had the Corporation possessed sufficient assets to pay the maximum amount
which the holders of all such stock would be entitled to receive in
connection with such Liquidation of the Corporation.
The voluntary sale, conveyance, lease, exchange or transfer of all or
substantially all the property or assets of the Corporation for value (unless
in connection therewith the Liquidation of the Corporation is specifically
approved) or the merger or consolidation of the Corporation into or with the
other Corporation into or with any other corporation, or the merger of any
other corporation into the Corporation, or any purchase or redemption of some
or all of the shares of any class or series of stock of the Corporation,
shall not be deemed to be a Liquidation of the Corporation for the purpose of
this Section 7.
The holder of any Shares of Series A Preferred shall not be entitled to
receive any payment owed for such Shares under this Section 7 until such
holder shall cause to be delivered to the Corporation: (i) the certificate(s)
representing such Shares of Series A Preferred and (ii) transfer
instrument(s) satisfactory to the Corporation and sufficient to transfer such
Shares of Series A Preferred to the Corporation free of any adverse interest.
As in the case of the Redemption Price, no interest shall accrue on any
payment upon
11
<PAGE>
liquidation after the due date thereof, provided that the Corporation has
duly provided therefor.
After the payment of the full amount of the liquidating distribution to
which they are entitled, the holders of the Series A Preferred will not be
entitled to any further participation in any distribution of assets by the
Corporation.
8. LIMITATION ON DIVIDENDS ON JUNIOR STOCK. So long as any Series A
Preferred shall be outstanding, the Corporation shall not declare any
dividends on the Common Stock of the Corporation or any other stock of the
Corporation ranking as to dividends of distribution of assets junior to the
Series A Preferred or make any payment on account of, or set apart money for,
a sinking or other analogous fund for the purpose, redemption or other
retirement of any shares of Junior Stock, or make any distribution in respect
thereof, whether in cash or property or in obligations or stock of the
Corporation, other than Junior Stock (such dividends, payments, setting apart
and distributions being herein called "Junior Stock Payments"), unless all of
the conditions set forth in the following subsections (a) and (b) of this
Section shall exist at the date of such declaration in the case of any such
dividend, or the date of such setting apart in the case of any such fund, or
the date of such payment or distribution in the case of any other Junior
Stock Payment:
(a) Full cumulative dividends shall have been paid or declared and
set apart for payment upon all outstanding shares of Preferred Stock other
than Junior Stock.
(b) The Corporation shall not be in default or in arrears with
respect to any purchase, redemption or other retirement of any shares of
Preferred Stock other than Junior Stock.
9. DEPOSIT OF FUNDS. The Corporation may provide funds for any payment
of the Redemption Price for any Shares of Series A Preferred or any amount
distributable with respect to any Shares of Series A Preferred under Section
6 hereof by depositing such funds with a bank or trust company selected by
the Corporation having a net worth of at least $50,000,000 and having its
principal place of business in Minneapolis/St. Paul, Minnesota or New York,
New York, in trust for the benefit of the holder of such Shares of Series A
Preferred under arrangements providing irrevocably for payment upon
satisfaction of any conditions to such payment by the holder of such Shares
of Series A Preferred which shall reasonably be required by the Corporation.
The Corporation shall be entitled to make any deposit of funds contemplated
by this Section 9 under arrangements designed to permit such funds to
generate interest or other income for the Corporation, and the Corporation
shall be entitled to receive all interest and other income earned by any
funds while they shall be deposited as contemplated by this Section 9,
provided that the Corporation shall maintain on deposit funds sufficient to
satisfy all payments which the deposit arrangement shall have been
established to satisfy. If the conditions precedent to the disbursement of
any funds deposited by the Corporation pursuant to this Section 9 shall not
have been satisfied within
12
<PAGE>
two years after the establishment of the trust for such funds, then (i) such
funds shall be returned to the Corporation upon its request; (ii) after such
return, such funds shall be free of any trust which shall have been impressed
upon them; (iii) the person entitled to the payment for which such funds
shall have been originally intended shall have the right to look only to the
Corporation for such payment, subject to applicable escheat laws; and (iv)
the trustee which shall have held such funds shall be relieved of any
responsibility for such funds upon the return of such funds to the
Corporation.
Any payment which may be owed for the payment of the Redemption Price
for any Shares of Series A Preferred pursuant to Section 4 or the payment of
any amount distributable with respect to any Shares of Series A Preferred
under Section 6 shall be deemed to have been "paid or properly provided or"
upon the earlier to occur of: (i) the date upon which funds sufficient to
make such payment shall be deposited in a manner contemplated by the
preceding paragraph or (ii) the date upon which a check payable to the person
entitled to receive such payment shall be delivered to such person or mailed
to such person at either the address of such person then appearing on the
books of the Corporation or such other address as the Corporation shall deem
reasonable.
10. STATUS OF REACQUIRED SERIES A PREFERRED. Shares issued and
reacquired by the Corporation (including Shares of Series A Preferred which
have been converted into shares of Common Stock) shall have the status of
authorized and unissued shares of Preferred Stock undesignated as to series,
subject to later issuance.
11. PREEMPTIVE RIGHTS. The Shares of Series A Preferred are not
entitled to any preemptive or subscription rights in respect of any
securities of the Corporation.
FURTHER RESOLVED, that Jeffrey C. Mack, Chief Executive Officer of the
Corporation, is hereby authorized and directed to prepare, execute,
acknowledge, and file a statement with the Secretary of State of Minnesota,
setting forth the name of the Corporation and the text of this resolution and
certifying (1) the adoption of the resolution by written consent of a
majority of the directors and (2) the date of adoption; and
FURTHER RESOLVED, that Jeffrey C. Mack is hereby authorized and directed
(1) to prepare, execute, acknowledge, and file any other document or
instrument necessary to establish and designate the Corporation's Series A
Preferred and (2) to do or cause to be done any other action necessary to
establish and designate such class and series and fix the relative rights and
preferences thereof; and
FURTHER RESOLVED, that this resolution be effective when the statement
is filed with the Secretary of State, at which time shares of Series A
Preferred of the Corporation may be issued.
13
<PAGE>
IN WITNESS WHEREOF, Olympic Financial Ltd. has caused this certificate
to be signed by its President this 1st day of February, 1991.
Olympic Financial Ltd.
By /s/ Jeffrey C. Mack
--------------------------
Jeffrey C. Mack
Avron L. Gordon, Esq.
BRIGGS AND MORGAN, P.A.
2400 IDS Center
80 South Eighth Street
Minneapolis, MN 55402
STATE OF MINNESOTA
DEPARTMENT OF STATE
FILED
FEB 6 1991
/s/ Joan Anderson Growe
Secretary of State
14
<PAGE>
[SEAL] State of Minnesota
Office of the Secretary of State
Notice of Change of
Registered Office -- Registered Agent or Both
by
- -------------------------------------------------------------------------------
Name of Corporation
OLYMPIC FINANCIAL, LTD.
- -------------------------------------------------------------------------------
Pursuant to Minnesota Statutes, Section 302A.123, 303.10, 317.19, 317A.123 or
308A.025 the undersigned hereby certifies that the Board of Directors of the
above named Corporation has resolved to change the corporation's registered
office and/or agent to:
- -------------------------------------------------------------------------------
If you do not wish to designate an agent, you must list "NONE" in
this box. DO NOT LIST THE CORPORATE NAME
Agent's
Name
- -------------------------------------------------------------------------------
(You may not list a P.O. Box, but you may list a rural route and
box number.)
Address
(No. & Street)
7825 WASHINGTON AVE. SO.
- -------------------------------------------------------------------------------
City County Zip
Minneapolis, MN. Hennepin MN 55439-
2444
- -------------------------------------------------------------------------------
(If different than address above -- P.O. Box is acceptable)
Mailing
Address
- -------------------------------------------------------------------------------
City County Zip
MN
- -------------------------------------------------------------------------------
The new address may not be a post office box. It must be a street address,
pursuant to Minnesota Statutes, Section 302A.011, Subd. 3., 303.02,
Subd. 5, 317.02 Subd. 13., 317A.01 Subd. 2.
This change is effective on the day it is
filed with the Secretary of State, unless you
indicate another date, no later than 30 days
after filing with the Secretary of State, in this
box: ------------------------
------------------------
I certify that I am authorized to execute this certificate and I further
certify that I understand that by signing this certificate I am subject to
the penalties of perjury as set forth in section 609.48 as if I had signed
this certificate under oath.
--------------------------------------------------------------
Name of Officer or Other Authorized Signature
Agent of Corporation
Jeffrey C. Mack /s/ Jeffrey C. Mack
(Please Print)
--------------------------------------------------------------
Title of Office Date
Presidend & C.E.O. 5/2/91
--------------------------------------------------------------
Do not write below this line. For Secretary of State's use only.
- -------------------------------------------------------------------------------
Receipt Number File Data D.A.R.
- -------------------------------------------------------------------------------
583172
- -------------------------------
Filing Fee: $35.00 STATE OF MINNESOTA
DEPARTMENT OF STATE
Return to: Business Services Division FILED
Office of the Secretary of State MAY 08 1991
180 State Office Building
St. Paul, MN 55155 /s/ Joan Anderson Growe
(612) 296-2803
Secretary of State
Make checks payable to: Secretary of State
<PAGE>
OLYMPIC FINANCIAL LTD.
STATEMENT OF CHANGE
OF
STATEMENT OF DESIGNATION
OF
CLASS, SERIES, PREFERENCES AND RIGHTS
OF 12% CONVERTIBLE PREFERRED STOCK, SERIES A
The undersigned, President and Chief Executive Officer of Olympic
Financial Ltd., a Minnesota corporation, pursuant to Minnesota Statutes
Section 302A.133, for the purpose of rescinding and deleting the
Corporation's Statement of Designation of Class, Series, Preferences and
Rights of 12% Convertible Preferred Stock, Series A (hereinafter the
"Statement of Designation") does hereby certify:
FIRST: The name of the Corporation is Olympic Financial Ltd.
SECOND: The following resolutions rescinding the Statement of Designation
was duly adopted by the Corporation's Board of Directors effective August
29,1991:
WHEREAS, the Board of Directors of the Corporation, pursuant to action
taken on February 1, 1991, adopted a Statement of Designation of Class,
Series, Preferences and Rights of 12% Convertible Preferred Stock,
Series A of Olympic Financial Ltd. (the "Statement of Designation"),
which Statement of Designation was filed with the Minnesota Secretary of
State on February 6, 1991, pursuant to which 2,040,000 shares of
Preferred Stock were designated and authorized for issuance by the
Corporation; and
WHEREAS, no shares of 12% Cumulative Convertible Preferred Stock, Series
A have been issued by the Corporation; and
WHEREAS, it is desirable for the Board of Directors to rescind the
Statement of Designation pursuant to Minnesota Statutes 302A.133 which
permits a board of directors to change a statement adopted pursuant to
Section 302A.401, subd. 3 before the issuance of any shares of that
class or series; it is
RESOLVED, that the Statement of Designation of Class, Series,
Preferences and Rights of 12% Convertible Preferred Stock, Series A of
Olympic Financial Ltd. be and the same hereby is rescinded and the same
shall be deleted as a part of the Articles of Incorporation of this
Corporation.
<PAGE>
RESOLVED FURTHER, that the President of this Corporation is authorized
and directed to execute and file with the Minnesota Secretary of State a
Statement pursuant to Section 302A.133 rescinding and deleting said
Statement of Designation, effective upon filing with the Minnesota
Secretary of State.
THIRD: The aforesaid resolutions were adopted unanimously by the Board of
Directors by written action signed by all members of the Board.
FOURTH: No shares of stock were issued or are contractually required to
be issued by the Corporation pursuant to the Statement of Designation.
IN WITNESS WHEREOF, the undersigned has executed this Statement
rescinding and deleting the Statement of Designation on August 29, 1991.
/s/ JEFFREY C. MACK
-------------------------
Jeffrey C. Mack
President and Chief Executive Officer
STATE OF MINNESOTA
DEPARTMENT OF STATE
FILED
SEP 26 1991
/s/ Joan Anderson Growe
Secretary of State
AVRON L. GORDON, ESQ.
Briggs and Morgan, P.A.
2400 IDS Center
Minneapolis, MN 55402
2
<PAGE>
ARTICLES OF AMENDMENT
TO
RESTATED ARTICLES OF INCORPORATION
OF
OLYMPIC FINANCIAL LTD.
OLYMPIC FINANCIAL LTD., a corporation organized and existing under the
laws of the State of Minnesota (herein referred to as the "Corporation"), in
accordance with the provisions of Minnesota Statutes, Section 302A.139, does
hereby certify that:
1. On December 5, 1991, pursuant to the authority conferred upon the
Board of Directors by Minnesota Statutes, Section 203A.402, Subdivision 3,
the Board of Directors authorized and adopted resolutions providing for a
five-for-seven share combination, and the following is a true copy of such
resolutions:
BE IT RESOLVED, that there is hereby declared a five-for-seven share
combination, pursuant to which each share of common stock outstanding and
each share of authorized but unissued stock existing on the Record Date shall
be converted into 5/7 of 1 share.
RESOLVED FURTHER, that the Record Date of such five-for-seven share
combination shall be December 5, 1991.
RESOLVED FURTHER, that the first paragraph of Article 3 of the
Corporation's Restated Articles of Incorporation shall be amended in its
entirety as follows:
AUTHORIZED SHARES: The authorized capital stock of this
Corporation shall consist of (i) 2,142,857 shares of Common Stock,
par value $.01 per share; and (ii) 33,571,429 undesignated shares
of a par value of $.01 per share which may be issued in more than
one class or series when authorized by the Board of Directors of
the Corporation.
RESOLVED FURTHER, that such five-for-seven share combination is hereby
effected automatically as of the Record Date without further action by the
Board of Directors or shareholders, and each shareholder of record on the
Record Date shall surrender such shareholder's certificates owned prior to
the Record Date to the Corporation to receive such lesser number of shares as
shall be determined pursuant to such five-for-seven share combination.
RESOLVED FURTHER, that any fractional shares resulting from the
five-for-seven share combination shall be rounded to the nearest whole share.
RESOLVED FURTHER, that each stock option and warrant outstanding on the
Record Date shall be adjusted to reflect the five-for-seven share combination
by
<PAGE>
proportionally reducing the number of shares purchasable under such options
and warrants and proportionally increasing the applicable exercise prices.
RESOLVED FURTHER, that the Chief Executive Officer of this Corporation is
authorized and directed: (1) to prepare, execute, acknowledge and file
Articles of Amendment to the Restated Articles of Incorporation of this
Corporation together with any other document or instrument necessary in
connection with such five-for-seven share combination; and (2) to do or cause
to be done any other action necessary or desirable to effect such share
combination and the intents and purposes of the foregoing resolutions.
2. The amendment to Article 3 of the Restated Articles of Incorporation
will not adversely affect the rights or preferences of the holders of
outstanding shares of any class or series of the Corporation's stock and will
not result in the percentage of authorized shares that remains unissued after
the combination exceeding the percentage of authorized shares that were
unissued before the combination.
3. The amendment to Article 3 of the Restated Articles of Incorporation
was adopted pursuant to Chapter 302A.
IN WITNESS WHEREOF, Olympic Financial Ltd. has caused these Articles of
Amendment to be signed by its President this 5th day of December, 1991.
OLYMPIC FINANCIAL LTD.
By: /s/ JEFFREY C. MACK
-------------------------
Jeffrey C. Mack
President
STATE OF MINNESOTA
DEPARTMENT OF STATE
FILED
DEC 5 1991
/s/ Joan Anderson Growe
Secretary of State
<PAGE>
AMENDMENT OF RESTATED
ARTICLES OF INCORPORATION
OF
OLYMPIC FINANCIAL LTD.
Olympic Financial Ltd. hereby amends its restated Articles of
Incorporation by adding the following Article 7 thereto:
ARTICLE 7
Whenever, at any time or times, the Corporation has failed to pay in
full when due (a) two consecutive installments of interest on the
Corporation's outstanding 9-7/8% Senior Subordinated Notes due 1999 (the
"Notes") or (b) two of four consecutive installments of interest on the
Notes, the holders of the Notes shall be entitled (until such default has
been cured) to elect a majority of the Corporation's Board of Directors as
provided in this Article 7. Upon the occurrence of an event specified in
the preceding sentence, the number of directors constituting the
Corporation's Board of Directors shall be increased by the Majority Amount
(as defined below) and the holders of the Notes, voting together as a
single class to the exclusion of the shareholders of the Corporation, shall
be entitled by a vote of the holders of a majority of the then outstanding
principal amount of the Notes, cast in person or by proxy, at any meeting
called for that purpose (and thereafter at each subsequent annual meeting
of shareholders until such default has been cured) to nominate and elect
the Noteholder Directors (as defined below). Upon the termination of the
right of the holders of the Notes to elect the Noteholder Directors, the
term of office of the Noteholder Directors so elected (other than the
Designated Directors (as defined below)) shall terminate effective on the
day preceding the date of the next annual meeting of shareholders of
the Corporation and the number of directors constituting the Board of
Directors of the Corporation shall thereupon be decreased by the Majority
Amount, for as long as any Notes remain outstanding subject to the
subsequent increase of the number of directors pursuant to this Article 7
if the holders of the Notes again become entitled to elect the Noteholder
Directors as provided herein. For the purposes of this Article 7: (a) the
term "Designated Directors" means, as of any date of determination, the
members then serving on the Corporation's Board of Directors that were
designated as the nominees of the Investors (as such term is defined in the
Coinvestors' Agreement, dated as of June 24, 1992, as amended, by and among
the Company, such Investors and certain existing management shareholders of
the Corporation); (b) the term "Majority Amount" means, as of any date of
determination, a number equal to the number of directors constituting the
Corporation's Board of Directors on such date MINUS the
<PAGE>
number of Designated Directors, PLUS one; and (c) the term "Noteholder
Directors" means, a number of directors equal to the Majority Amount and
consisting of the Designated Directors and the additional members of the
Corporation's Board of Directors resulting from an increase in the number
of directors constituting the Corporation's Board of Directors pursuant to
this Article 7. Any Noteholder Director may be removed by, and shall not
be removed except by, the vote of the holders of the then outstanding
principal amount of the Notes, voting together as a single class, to the
exclusion of the shareholders of the Corporation at any meeting called for
that purpose. So long as a default (described in the initial sentence of
this Article 7) shall exist, any vacancy in the office of a Noteholder
Director may be filled by a successor elected by the vote of the holders of
the outstanding principal amount of the Notes, voting together as a single
class to the exclusion of shareholders of the Corporation at any meeting
called for that purpose.
This Amendment is effective on the date it is filed with the Minnesota
Secretary of State.
This Amendment has been approved by the directors and the shareholders
of this corporation pursuant to Chapter 302A, Minnesota Statutes.
I certify that I am authorized to execute this Amendment and I further
certify that I understand that by signing this Amendment, I am subject to the
penalties of perjury as set forth in Section 609.48 as if I had signed this
Amendment under oath.
Dated this 15 day of March, 1993. /s/ Brian S. Anderson
--------------------------
Brian S. Anderson, Secretary of Olympic
Financial Ltd.
STATE OF MINNESOTA
DEPARTMENT OF STATE
FILED
MAR 15 1993
/s/ Joan Anderson Growe
Secretary of State
<PAGE>
CERTIFICATE OF DESIGNATION OF PREFERENCES AND RIGHTS
OF 8% CUMULATIVE CONVERTIBLE EXCHANGEABLE PREFERRED STOCK
OF OLYMPIC FINANCIAL LTD.
Pursuant to Section 302A.401 of the
Minnesota Business Corporation Act
Olympic Financial Ltd., a corporation organized and existing under the
laws of Minnesota (the "Corporation"), does hereby certify:
That pursuant to authority vested in the provisions of the Articles of
Incorporation, as amended, of the Corporation, the Board of Directors of said
Corporation by action in writing by the Board of Directors taken pursuant to
Section 302A.239 of the Minnesota Business Corporation Act ("MBCA"), at which
meeting a quorum of directors was present and acting throughout, and by
action of the Committee thereof taken on November 22, 1993, did adopt the
following resolution authorizing the creation and issuance of a series of
Preferred Stock designated as 8% Cumulative Convertible Exchangeable
Preferred Stock:
RESOLVED, that the Corporation hereby designates 1,150,000 shares of its
authorized by unissued shares, $0.01 par value, as 8% Cumulative Convertible
Exchangeable Preferred Stock, which shall have the following designations,
preferences, rights, qualifications, limitations and restrictions in addition
to those set forth in the Articles of Incorporation, as amended, of the
Corporation:
1. DESIGNATION; NUMBER OF SHARES; STATED VALUE.
One Million One Hundred Fifty Thousand (1,150,00) shares of Preferred
Stock shall be designated 8% Cumulative Convertible Exchangeable Preferred
Stock (hereinafter sometimes referred to as the "Convertible Preferred Stock"
or as this "Series"). Shares of this Series shall have a stated value of
$25.00 per share.
2. DIVIDENDS.
a. The holders of shares of Convertible Preferred Stock shall be
entitled to receive cumulative cash dividends, when and as declared by the
Board of Directors out of funds legally available therefor, at a rate of
$2.00 per share per annum and no more, before any dividend or distribution in
cash or other property (other than dividends payable in stock ranking junior
to the Convertible Preferred Stock as to dividends and upon liquidation,
dissolution or winding-up) on any class or series of stock of the Corporation
ranking junior to the Convertible Preferred Stock as to dividends or on
liquidation, dissolution or winding-up shall be declared or paid or set apart
for payment.
b. Dividends on the Convertible Preferred Stock shall be payable, when
and as declared by the Board of Directors, on January 15, July 15 and October
15 of each year, commencing January 15, 1994 (each such date being
hereinafter individually a "Dividend
<PAGE>
Payment Date" and collectively the "Dividend Payment Dates"), except that if
such date is a Saturday, Sunday or legal holiday then such dividend shall be
payable on the first immediately preceding calendar day which is not a
Saturday, Sunday or legal holiday, to holders of record as they appear on the
books of the Corporation on such respective dates, not exceeding sixty days
preceding such Dividend Payment Date, as may be determined by the Board of
Directors in advance of the payment of each particular dividend. Dividends in
arrears may be declared and paid at any time, without reference to any
regular Dividend Payment Date, to holders of record on such date as may be
fixed by the Board of Directors of the Corporation. Dividends declared and
paid in arrears shall be applied first to the earliest dividend period or
periods for which any dividends remain outstanding. The amount of dividends
payable per share of this Series for each dividend period shall be computed
by dividing the annual rate of $2.00 by four. Dividends payable on this
Series for the initial dividend period and for any other period less than a
full quarterly period shall be computed and pro rated on the basis of a
360-day year of twelve 30-day months.
c. Dividends on the Convertible Preferred Stock shall be cumulative and
accrue from and after the date of original issuance thereof, whether or not
declared by the Board of Directors. Accrued dividends shall not bear interest.
d. No cash dividend may be declared on any other class or series of
stock ranking on a parity with the Convertible Preferred Stock as to
dividends in respect of any dividend period unless there shall also be or
have been declared on the Convertible Preferred Stock like dividends for all
quarterly periods coinciding with or ending before such quarterly period,
ratably in proportion to the respective annual dividend rates fixed therefor.
[Remainder of this page intentionally left blank]
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3. REDEMPTION
a. The shares of this Series shall be redeemable by the Corporation at
its sole option, in whole or in part, at any time or from time to time, on or
after October 15, 1996 at the redemption prices set forth below:
If redeemed during the twelve-month period beginning October 15,
Year Price Per Share
---- ---------------
1996 .............................. 26.78
1997 .............................. 26.55
1998 .............................. 26.33
1999 .............................. 26.11
2000 .............................. 25.89
2001 .............................. 25.67
2002 .............................. 25.44
2003 .............................. 25.22
2004 .............................. 25.00
and thereafter at $25.00 per share, plus in each case accrued and unpaid
dividends thereon to the date fixed for redemption (the total sum so payable
on any such redemption being herein referred to as the "redemption price").
In the case of the redemption of a party only of the shares of this
Series at the time outstanding, the shares of this Series to be so redeemed
shall be selected by lot, pro rata (as nearly as may be), or in such other
equitable manner as the Board of Directors may determine.
b. Notice of any redemption pursuant to this paragraph 3 shall be mailed
at least 30, but not more than 60, days in advance of the date designated for
such redemption (herein called the "redemption date") to the holders of
record of shares of this Series so to be redeemed at their respective
addresses as the same shall appear on the books of the Corporation. In order
to facilitate the redemption of shares of this Series, the Board of Directors
may fix a record date for the determination of holders of shares of this
Series to be redeemed not more than 60 days prior to the redemption date.
Each such notice shall state: (1) the redemption date; (2) the number of
shares of this Series to be redeemed and, if less than all the shares held by
such holder are to be redeemed, the number of such shares to be redeemed from
such holder; (3) the redemption price; (4) the place or places where
certificates for such shares are to be surrendered for payment of the
redemption price; and (5) that dividends on the shares to be redeemed will
cease to accrue on such redemption date. If less than all the shares
represented by any such surrendered certificate are redeemed, a new
certificate shall be issued representing the unredeemed shares.
c. The Corporation shall, on or prior to the date fixed for redemption
of any shares, but not earlier than 45 days prior to the date fixed for
redemption, deposit with its
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<PAGE>
transfer agent or other redemption agent selected by the Board of Directors
of the Corporation, as a trust fund, a sum sufficient to redeem the shares
called for redemption, with irrevocable instructions and authority to such
transfer agent or other redemption agent to give or complete the notice of
redemption thereof and to pay to the respective holders of such shares, as
evidenced by a list of such holders certified by an officer of the
Corporation, the redemption price upon surrender of their respective share
certificates. Such deposit shall be deemed to constitute full payment of such
shares to their holders; and from and after the date of such deposit,
notwithstanding that any certificates for such shares shall not have been
surrendered for cancellation, the shares represented thereby shall no longer
be deemed outstanding, the rights to receive dividends and distributions
shall cease to accrue and after the redemption date, and all rights of the
holders of the shares of Convertible Preferred Stock called for redemption,
as stockholders of the Corporation with respect to such shares, shall cease
and terminate, except the right to receive the redemption price, without
interest, upon the surrender of their respective certificates, and except the
right to convert their shares into Common Stock as provided in paragraph 4
hereof, until the close of business on the redemption date. To the extent
that shares of Convertible Preferred Stock called for redemption are
converted into Common Stock prior to the date fixed for redemption, the
amount deposited by the Corporation to redeem such shares shall immediately
be returned to the Corporation. Any interest accrued on any funds so
deposited shall belong to the Corporation, and shall be paid to it from time
to time on demand.
4. CONVERSION.
a. The holder of any shares of this Series at his option may at any time
(except that if any such share shall have been called for redemption, then,
as to such share, such right shall terminate at the close of business on the
date fixed for such redemption, unless default shall be made by the
Corporation in providing money for the payment of the redemption price of the
shares called for redemption) convert the shares of this Series into fully
paid and non-assessable shares of Common Stock at the rate of 4.662 shares of
Common Stock for each share of this Series, subject to adjustment pursuant to
the provisions of subparagraph (d) of this paragraph 4. Subject to the
provisions of the next sentence, shares of this Series surrendered for
conversion during the period from the close of business on any record date
for the payment of dividends next preceding any Dividend Payment Date to the
opening of business on such Dividend Payment Date shall (except in the case
of shares which have been called for redemption on a redemption date within
such period) be accompanied by payment in Minneapolis Clearing House funds or
other funds acceptable to the Corporation of an amount equal to the dividend
payable on such Dividend Payment Date on the shares being surrendered for
conversion. A holder of Convertible Preferred Stock on the record date
preceding a Dividend Payment Date who (or whose transferee) converts shares
of Convertible Preferred Stock on a Dividend Payment Date, will receive the
dividend payable on such Convertible Preferred Stock by the Corporation on
such Dividend Payment Date, and the converting holder need not include
payment in the amount of such dividend upon surrender of shares of
Convertible Preferred Stock for conversion. Such right of conversion shall be
exercised by the surrender of the shares so to be converted to the
Corporation at any time during normal business hours at the office or agency
then maintained by it for payment of dividends on the shares of this Series
(the "Payment Office"), accompanied by written notice of such holder's
election to convert and (if so required by the Corporation or any conversion
agent) by instruments of transfer, in form satisfactory to
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<PAGE>
the Corporation and to any conversion agent, duly executed by the registered
holder or by his duly authorized attorney, and transfer tax stamps or funds
therefor, if required pursuant to subparagraph (i) of this paragraph 4.
b. As promptly as practicable after the surrender for conversion of any
shares of this Series in the manner provided in subparagraph (a) of this
paragraph 4 and the payment in cash of any amount required by the provisions
of subparagraphs (a) and (i) of this paragraph 4, the Corporation will
deliver or cause to be delivered at the Payment Office to or upon the written
order of the holder of such shares, certificates representing the number of
full shares of Common Stock issuable upon such conversion, issued in such
name or names as such holder may direct. Such conversion shall be deemed to
have been made immediately prior to the close of business on the date of such
surrender of the shares, and all rights of the holder of such shares as a
holder of such shares shall cease at such time and the person or persons in
whose name or names the certificates for such shares of Common Stock are to
be issued shall be treated for all purposes as having become the record
holder or holders thereof at such time and such conversion shall be at the
conversion rate in effect at such time; provided, however, that any such
surrender and payment on any date when the stock transfer books of the
Corporation shall be closed shall constitute the person or persons in whose
name or names the certificates for such shares of Common Stock are to be
issued as the record holder or holders thereof for all purposes immediately
prior to the close of business on the next succeeding day on which such stock
transfer books are opened and such conversion shall be at the conversion rate
in effect at such time on such succeeding day.
If the last day for the exercise of the conversion right shall be other
than a business day, then such conversion right may be exercised on the next
succeeding business day.
c. Except as provided in the second and third sentence of subparagraph
(a) of this paragraph 4, no adjustments in respect of or payments of
dividends on shares surrendered for conversion or any dividend on the Common
Stock issued upon conversion shall be made upon the conversion of any shares
of this Series; provided, however, that if any shares shall be converted
subsequent to the record date preceding a Dividend Payment Date but on or
prior to such Dividend Payment Date (except shares called for redemption
between such record date and Dividend Payment Date) the registered holder of
such shares at the close of business on such record date shall be entitled to
receive dividend payable on such shares on such the Dividend Payment Date
notwithstanding the conversion thereof or the Corporation's default in
payment of the dividend due on such Dividend Payment Date.
d. The initial conversion rate shall be 4.662 shares of Common Stock per
share of this Series (equivalent to a conversion price of $5.3625 per share).
The conversion rate shall be subject to adjustment as follows:
i. In case the Corporation shall (A) pay a dividend or make a
distribution in shares of its capital stock (whether shares of Common Stock
or of capital stock of any other class), (B) subdivide its outstanding shares
of Common Stock, (C) combine its outstanding shares of Common Stock into a
smaller number of shares, (D) issue by reclassification of its shares of
Common Stock (whether by merger or
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<PAGE>
consolidation or otherwise) any shares of capital stock of the Corporation or
(E) take any action with the same effect as any of the foregoing, the
conversion privilege and the conversion rate in effect immediately prior to
such action shall be adjusted so that the holder of any shares of this Series
thereafter surrendered for conversion shall be entitled to receive (subject
to further adjustments pursuant to subparagraphs (d)(ii) and (d)(iii) hereof)
the number of shares of capital stock of the Corporation (or of the
corporation surviving or resulting from any merger or consolidation) which
such holder would have owned immediately following such action had such share
been converted immediately prior thereto. An adjustment made pursuant to this
subparagraph (d)(i) shall become effective retroactively immediately after
the record date in the case of a dividend or distribution and shall become
effective immediately after the effective date in the case of a subdivision,
combination or reclassification. If, as a result of an adjustment made
pursuant to this subparagraph (d)(i), the holder of any shares thereafter
surrendered for conversion shall become entitled to receive shares of two or
more classes of capital stock of the Corporation, the Board of Directors of
the Corporation (whose determination shall be conclusive) shall determine the
allocation of the adjusted conversion rate between or among shares of such
classes of capital stock.
ii. In case the Corporation shall issue rights or warrants to all
holders of its Common Stock entitling them to subscribe for or purchase
shares of Common Stock at a price per share less than the current market
price per share (as determined pursuant to subparagraph (d)(iv) below) on the
record date mentioned below, other than pursuant to a dividend reinvestment
plan, the conversion rate shall be adjusted so that the same shall equal the
rate determined by multiplying the conversion rate in effect immediately
prior to the date of issuance of such rights or warrants by a fraction of
which the numerator shall be the number of shares of Common Stock outstanding
on the date of issuance of such rights or warrants plus the number of
additional shares of Common Stock offered for subscription or purchase, and
of which the denominator shall be the number of shares of Common Stock
outstanding on the date of issuance of such rights or warrants plus the
number of shares which the aggregate offering price of the total number of
shares so offered would purchase at such current market price. Such
adjustment shall become effective retroactively immediately after the record
date for the determination of stockholders entitled to receive such rights or
warrants. For the purposes of this subparagraph (d)(ii), the issuance of
rights or warrants to subscribe for or purchase stock or securities
convertible into shares of Common Stock shall be deemed to be the issuance of
rights or warrants to purchase the shares of Common Stock into which such
stock or securities are convertible at an aggregate offering price equal to
the aggregate offering price of such stock or securities plus the minimum
aggregate amount (if any) payable upon conversion of such stock or securities
into Common Stock.
iii. In case the Corporation shall distribute to all holders of its
Common Stock evidences of its indebtedness or assets (excluding any cash
dividend paid from retained earnings of the Corporation) or rights or
warrants to subscribe to securities of the Corporation (excluding those
referred to in subparagraph (d)(ii) above), then in each such case the
conversion rate shall be adjusted so that the same shall equal the rate
determined by multiplying the conversion rate in effect immediately prior to
the date of
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<PAGE>
such distribution by a fraction of which the numerator shall be the current
market price per share (determined as provided in subparagraph (d)(iv)
below) of the Common Stock on the record date mentioned below, and of
which the denominator shall be such current market price per share of
Common Stock less the then fair market value (as determined by the Board of
Directors of the Corporation, whose determination shall be conclusive) of
the portion of the assets or evidences of indebtedness so distributed or of
such subscription rights or warrants applicable to one share of Common
Stock. Such adjustment shall become effective retroactively immediately
after the record date for the determination of stockholders entitled to
receive such distribution.
iv. For the purpose of any computation under subparagraphs (d)(ii)
and (d)(iii) above, the current market price per share of Common Stock on
any date shall be deemed to be the average of the daily closing prices for
30 consecutive trading days commencing 45 trading days before the day in
question. The "closing price" on any day shall mean the reported last sale
price on such day or, in case no such reported sale takes place on such
day, the average of the reported closing bid and asking prices, in each
case on the New York Stock Exchange, or, if the Common Stock is not listed
or admitted to trading on such Exchange, on the principal national
securities exchange on which the Common Stock is listed or admitted to
trading, or, if not listed or admitted to trading on any national
securities exchange, then in the over-the-counter market as reported on
NASDAQ or a similar reporting service, or, if no such quotations are
available, the fair market price as determined by the Board of Directors of
the Corporation, whose determination shall be conclusive.
v. In any case in which this subparagraph (d) shall require that an
adjustment be made retroactively immediately following a record date, the
Corporation may elect to defer (but only until five business days following
the mailing by the Corporation of the certificate of independent public
accountants described in subparagraph (d)(vii) below) issuing to the holder
of any shares converted after such record date (x) the shares of Common
Stock and other capital stock of the Corporation issuable upon such
conversion over and above (y) the shares of Common Stock and other
capital Stock of the Corporation issuable upon such conversion only on the
basis of the conversion rate prior to adjustment.
vi. No adjustment in the conversion rate shall be required unless
such adjustment would require an increase or decrease of at least 1% in
such rate; provided, however, that any adjustments which by reason of
this subparagraph (d)(vi) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment; and, provided
further, that adjustment shall be required and made in accordance with the
provisions of this paragraph 4 (other than this subparagraph (d)(vi)) not
later than such time as may be required in order to preserve the tax-free
nature of a distribution to the holders of shares of Common Stock. All
calculations under this paragraph 4 shall be made to the nearest cent or to
the nearest one-hundredth of a share, as the case may be. Anything in this
paragraph 4 to the contrary notwithstanding, the Corporation shall be
entitled to make such increases in the conversion rate in addition to those
required by this subparagraph (d) as it in its discretion shall determine
to be
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<PAGE>
advisable in order that any stock dividends, subdivision of shares,
distribution of rights to purchase stock or securities, or distribution
of securities convertible into or exchangeable for stock hereafter made by
the Corporation to its stockholders shall not be taxable.
vii. Whenever the conversion rate is adjusted as herein provided,
the Corporation shall promptly (x) file with each conversion agent a
certificate of a firm of independent public accountants selected by the
Board of Directors of the Corporation (who may be the regular accountants
employed by the Corporation) setting forth the conversion rate after such
adjustment and setting forth a brief statement of the facts requiring such
adjustment, which certificate shall be conclusive evidence of the
correctness of such adjustment, and (y) mail or cause to be mailed a
notice of such adjustment to the holders of shares of this Series at
their last addresses as they shall appear upon the books of the
Corporation.
viii. The term "Common Stock" shall mean the Corporation's Common
Stock, par value $.01 per share, as the same exists at the date of filing
of this Certificate of Designation, Preferences and Rights of
Convertible Preferred Stock, or any other class of stock resulting from
successive changes or reclassifications of such Common Stock consisting
solely of changes in par value, or from par value to no par value, or
from no par value to par value. In the event that at any time as a result
of an adjustment made pursuant to subparagraph (d)(i) above, the holder
of any share thereafter surrendered for conversion shall become entitled
to receive any shares of the Corporation other than shares of its Common
Stock, thereafter the conversion rate of such other shares so receivable
upon conversion of any share shall be subject to adjustment from time
to time in a manner and on terms as nearly equivalent as practicable to
the provisions with respect to Common Stock contained in subparagraphs
(d)(i) through (d)(vii) above, and the provisions of subparagraphs (a)
through (c) and subparagraphs (e) through (k) of this paragraph 4 with
respect to Common Stock shall apply on like or similar terms to any such
other shares.
e. No fractional shares of stock shall be issued upon the conversion
of any share of shares of this Series. If more than one such share of this
Series shall be surrendered for conversion at the same time by the same
holder, the number of full shares which shall be issuable upon the conversion
thereof shall be computed on the basis of the aggregate number of shares so
surrendered. If any fractional interest in a share of Common Stock would,
except for the provisions of this subparagraph (e), be deliverable upon the
conversion of any share or shares, the Corporation shall in lieu of
delivering the fractional share therefor, adjust such fractional interest by
payment to the holder of such surrendered share or shares of an amount in cash
equal (computed to the nearest cent) to the current market value of such
fractional interest on the last business day prior to the date of conversion,
computed on the basis of the last reported sale price on such day or, in case
no such reported sale takes place on such day, the average of the reported
closing bid and asked prices, in each case on the New York Stock Exchange,
or, if the Common Stock is not listed or admitted to trading on such
Exchange, on the principal national securities exchange on which the Common
Stock is listed or admitted to trading, or, if not listed or admitted to
trading on any national securities exchange, then in the
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<PAGE>
over-the-counter market as reported by NASDAQ or a similar reporting
service, or if no such quotations are available, the fair market price as
determined by the Board of Directors of the Corporation, whose determination
shall be conclusive.
f. If either of the following shall occur, namely: (i) any
consolidation or merger to which the Corporation is a party, other than a
consolidation or a merger in which consolidation or merger the Corporation is
a continuing corporation and which does not result in any reclassification
of, or change (other than a change in par value or from par value to no par
value or from no par value to par value, or as a result of a subdivision or
combination) in, outstanding shares of the Common Stock, or (ii) any sale or
conveyance to another corporation of the property of the Corporation as an
entirety or substantially as an entirety; then the holder of each share of
Convertible Preferred Stock then outstanding shall have the right to convert
such share into the kind and amount of shares of stock and other securities
and property receivable upon such consolidation, merger, sale or conveyance
by a holder of the number of shares of Common Stock issuable upon conversion
of such share immediately prior to such consolidation, merger, sale or
conveyance, subject to adjustments which shall be as nearly equivalent as may
be practicable to the adjustments provided for in this paragraph 4. In any
such event, effective provision shall be made in the articles or certificate
of incorporation of the resulting or surviving corporation or other
corporation issuing or delivering such shares of stock or other securities or
property or otherwise, so that the provisions set forth herein for the
protection of the conversion rights of the Convertible Preferred Stock shall
thereafter be applicable, as nearly as reasonably may be, to any such other
shares of stock and other securities and property deliverable upon conversion
of the Convertible Preferred Stock remaining outstanding or other convertible
stock or securities received by the holders in place thereof; and any such
resulting or surviving corporation or other corporation issuing or delivering
such shares or other securities or property shall expressly assume the
obligation to deliver, upon the exercise of the conversion privilege, such
shares of stock or other securities or property as the holders of the
Convertible Preferred Stock remaining outstanding, or other convertible stock
or securities received by the holders in place thereof, shall be entitled to
receive, pursuant to the provisions hereof, and to make provision for the
protection of the conversion right as above provided. In case shares,
securities or other property other than Common Stock shall be issuable or
deliverable upon conversion as aforesaid, then all references to Common Stock
in this paragraph 4(f) shall be deemed to apply, so far as provided and as
nearly as is reasonable, to any such shares of stock and other securities and
property. The provisions of this subparagraph (f) shall similarly apply to
successive consolidations, mergers, sales or conveyances.
g. The Corporation covenants that it will at times reserve and keep
available, solely for the purpose of issue upon conversion of the shares of
this Series, such number of shares of Common Stock as shall be issuable upon
the conversion of all such outstanding shares; provided, that nothing
contained herein shall be construed to preclude the Corporation from
satisfying its obligations in respect of the conversion of the shares by
delivery of purchased shares of Common Stock which are held in the treasury
of the Corporation. For the purpose of this subparagraph (g), the full number
of shares of Common Stock issuable upon the conversion of all outstanding
shares of this Series shall be computed as if at the time of computation of
such number of shares of Common Stock all outstanding shares of this Series
were held by a single holder.
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<PAGE>
The Corporation covenants that if any shares of Common Stock, required
to be reserved for purposes of conversion of the shares of this Series,
require registration with or approval of any governmental authority under any
Federal or state law before such shares may be issued upon conversion, the
Corporation will cause such shares to be duly registered or approved, as the
case may be.
The Corporation will endeavor to list the shares of Common Stock
required to be delivered upon conversion of shares prior to such delivery
upon each national securities exchange upon which the outstanding Common
Stock is listed or admitted to trading at the time of such delivery or in the
over-the-counter market as maintained by NASDAQ.
The Corporation covenants that all shares of Common Stock which shall
be issued upon conversion of the shares will upon issue be fully paid and
non-assessable and not subject to any preemptive rights.
h. Before taking any action which would cause an adjustment reducing
the conversion price per share of this Series below the then par value of the
Common Stock, the Corporation will take any corporate action which may, in
the opinion of its counsel, be necessary in order that the Corporation may
validly and legally issue fully paid and non-assessable shares of Common
Stock at the conversion rule as so adjusted. If as a result of conversion of
the shares of this Series it becomes necessary to authorize additional shares
of Common Stock, the Corporation covenants that it will take such action at
such time as is necessary by amendment of the Corporation's Articles of
Incorporation.
i. The Corporation shall pay any and all issue or other taxes payable
in respect of any issue or delivery of shares of Common Stock upon
conversion. However, if any such certificate is to be issued in a name other
than that of the holder of the share or shares converted, the person or
persons requesting the issuance thereof shall pay to the Corporation the
amount of any tax which may be payable in respect of any transfer involved in
such issuance or shall establish to the satisfaction of the Corporation that
such tax has been paid.
j. Notwithstanding anything elsewhere contained in this Certificate,
any funds which at any time shall have been deposited by the Corporation or
on its behalf with any paying agent for the purpose of paying dividends on or
the redemption price of any of the shares of this Series and which shall not
be required for such purposes because of the conversion of such shares, as
provided in this paragraph 4, shall be, upon delivery to the paying agent of
evidence satisfactory to it of such conversion, after such conversion be
repaid to the Corporation by the paying agent.
k. In case:
i. the Corporation shall take any action which would require an
adjustment in the conversion rate pursuant to subparagraph (d) of this
paragraph 4; or
ii. the Corporation shall authorize the granting to the holders
of its Common Stock of rights or warrants to subscribe for or purchase
any shares of stock of
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<PAGE>
any class or of any other rights and notice thereof shall be given to
holders of Common Stock; or
iii. there shall be any capital reorganization or reclassification
of the Common Stock (other than a subdivision or combination of the
outstanding Common Stock and other than a change in par value or from par
value to no par value or from no par value to par value of the Common
Stock), or any consolidation or merger to which the Corporation is a party
and for which approval of any stockholders of the Corporation is required,
or any sale or transfer of all or substantially all of the assets of the
Corporation; or
iv. there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Corporation;
then the Corporation shall cause to be filed with any conversion agent, and
shall cause to be given to the holders of the shares of this Series at least
ten days prior to the applicable date hereinafter specified, a notice setting
forth (x) the date on which a record is to be taken for the purpose of any
distribution or grant to holders of Common Stock, or, if a record is not to
be taken, the date as of which the holders of Common Stock of record to be
entitled to such distribution or grant are to be determined or (y) the date
on which such reorganization, reclassification, consolidation, merger, sale,
transfer, dissolution, liquidation or winding-up is expected to become
effective, and the date as of which it is expected that holders of Common
Stock of record shall be entitled to exchange their shares of Common Stock
for securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding-up. Failure to give such notice or any defect therein
shall not affect the legality or validity of the proceedings described in
clauses (i) through (iv) of this subparagraph (k).
5. EXCHANGE.
a. Shares of Convertible Preferred Stock are exchangeable in whole by
the Corporation, at its sole option, on any Dividend Payment Date at any time
on or after October 15, 1994 to and including October 15, 2008 for the
Corporation's 8% Convertible Subordinated Debentures due 2008 described in
the Corporation's Registration Statement on Form S-1 (Registration No.
33-69750 as declared effective by the Securities and Exchange Commission on
November 23, 1993 (the "Debentures")); provided that on or prior to the date
of exchange the Corporation shall have paid to the holders of outstanding
shares of Convertible Preferred Stock all accumulated and unpaid dividends to
the date of exchange. Holders of outstanding shares of Convertible Preferred
Stock will be entitled to receive $25.00 principal amount of Debentures in
exchange for each share of Convertible Preferred Stock held by them at the
time of exchange. The Corporation will mail to each holder of record of the
shares of Convertible Preferred Stock written notice of its intention to
exchange no less than 30 nor more than 60 days prior to the date fixed for
the exchange (the "exchange date"). Each such notice shall state: (i) the
exchange date, (ii) the place or places where certificates for such shares
are to be surrendered for exchange into Debentures and (iii) that dividends
on the shares to be exchanged will cease to accrue on such exchange date. The
terms of the Debentures are set
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forth in the Indenture by and between the Corporation and a trustee to be
selected by the Corporation, filed as an exhibit to the Registration
Statement referred to above. The Corporation will cause the Debentures to be
authenticated on the Dividend Payment Date on which the exchange is
effective, and the Corporation will pay interest on the Debentures at the
rate and on the dates specified in such Indenture from the exchange date.
b. If notice has been mailed as aforesaid, from and after the exchange
date (unless default shall be made by the Corporation in issuing Debentures
in exchange for shares of Convertible Preferred Stock or in making the final
dividend payment on the outstanding shares of Convertible Preferred Stock on
the exchange date), dividends on the shares of Convertible Preferred Stock
shall cease to accrue, and such shares shall no longer be deemed to be issued
and outstanding, and all rights of the holders thereof as stockholders of the
Corporation (except the right to receive from the Corporation the Debentures)
shall cease and terminate. Upon surrender in accordance with said notice of
the certificates for any shares so exchanged (properly endorsed or assigned
for transfer, if the Board of Directors shall so require and the notice shall
so state), such shares shall be exchanged by the Corporation into Debentures
as aforesaid.
c. The conversion price per share equivalent to the conversion rate on
any exchange date shall be the initial conversion price for the Debentures.
6. VOTING.
The shares of this Series shall not have any voting powers either
general or special, except as set forth in this Certificate of Designation,
Preferences and Rights in the Corporation's Articles of Incorporation, or as
otherwise provided by law. In exercising such voting rights, each share of
Convertible Preferred Stock shall be entitled to one vote.
7. LIQUIDATION RIGHTS.
Upon the dissolution, liquidation or winding-up of the Corporation,
whether voluntary or involuntary, the holders of the shares of this Series
shall be entitled to receive, before any payment or distribution of the
assets of the Corporation or proceeds thereof (whether capital or surplus)
shall be made to or set apart for the holders of the Common Stock or any
other class or series of stock ranking junior to the shares of this Series
upon liquidation, the amount of $25.00 per share, plus a sum equal to all
dividends on such shares (whether or not earned or declared) accrued and
unpaid thereof to the date of final distribution, but such holders shall not
be entitled to any further payment. If, upon any liquidation, dissolution or
winding-up of the Corporation, the assets of the Corporation, or proceeds
thereof, distributable among the holders of shares of the Convertible
Preferred Stock and any other class or series of Preferred Stock ranking on a
parity with the Convertible Preferred Stock as to payments upon liquidation,
dissolution or winding-up shall be insufficient to pay in full the
preferential amount aforesaid, then such assets or the proceeds thereof,
shall be distributed among such holders ratably in accordance with the
respective amounts which would be payable on such shares if all amounts
payable thereon were paid in full. For the purposes of this paragraph 7, the
voluntary sale, conveyance, lease, exchange or transfer (for cash, shares of
stock, securities or other
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<PAGE>
consideration) of all or substantially all the property or assets of the
Corporation to, or a consolidation or merger of the Corporation with, one or
more other corporations (whether or not the Corporation is the corporation
surviving such consolidation or merger) shall not be deemed to be a
liquidation, dissolution or winding-up, voluntary or involuntary.
8. NO PURCHASE, RETIREMENT OR SINKING FUND.
The shares of this Series shall not be subject to the operation of any
purchase, retirement or sinking fund.
9. STATUS.
Shares of this Series which have been issued and reacquired in any
manner by the Corporation shall, upon compliance with any applicable
provisions of law, have the status of authorized and unissued shares of
Preferred Stock and may be reissued as a part of this Series or as part of a
new series of Preferred Stock to be established by the Board of Directors or
as part of any other series of Preferred Stock the terms of which do not
prohibit such reissue.
10. PRIORITY.
The Common Stock of the Corporation, now or hereafter issued, shall
rank junior to the Convertible Preferred Stock as to payment of dividends and
as to distributions of assets upon liquidation, dissolution or winding-up of
the Corporation, whether voluntary or involuntary.
11. SPECIAL RIGHTS ON DEFAULT.
a. If at any time the Corporation shall have failed to pay dividends
in full on the Convertible Preferred Stock, thereafter and until dividends in
full, including all accumulated and unpaid dividends to the next preceding
Dividend Payment Date on the Convertible Preferred Stock outstanding, shall
have been declared and set apart for payment or paid, (i) the Corporation
shall not redeem less than all the Convertible Preferred Stock at such time
outstanding, and (ii) neither the Corporation nor any subsidiary shall
purchase or otherwise acquire any Convertible Preferred Stock except in
accordance with a purchase offer made in writing or by publication (as
determined by the Board of Directors of the Corporation) to all holders of
Convertible Preferred Stock upon such terms as the Board of Directors of the
Corporation in its sole discretion, after consideration of the annual
dividend rate and other rights and preferences of this Series, shall
determine (which determination shall be final and conclusive) will result in
fair and equitable treatment to all stockholders of the Corporation, provided
that nothing shall prevent the Corporation from completing the purchase or
redemption of shares of Convertible Preferred Stock for which a purchase
contract was entered into, or notice of redemption of which was initially
given, prior to such default.
b. Whenever, at any time or times, dividends payable on the shares of
this Series shall be in arrears in an amount equal to at least six full
quarterly dividends on the shares of this Series at the time outstanding, the
holders of the outstanding shares of this Series shall
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<PAGE>
have the exclusive right, voting separately as a class with holders of shares
of any one or more other series of Preferred Stock ranking on a parity with
this Series either as to dividends or the distribution of assets upon
liquidation, dissolution or winding-up and upon which like voting rights have
been conferred and are exercisable, to elect two directors of the Corporation
(and to exercise any right of removal or replacement of such directors) at
the Corporation's next annual meeting of stockholders and at each subsequent
annual meeting of stockholders. At elections for such directors, the presence,
in person or by proxy, of the holders of a majority of the outstanding shares
of this Series (together with the holders of shares of any one or more other
series of Preferred Stock ranking on a parity with respect to the election of
such additional directors) shall be required and be sufficient to constitute
a quorum of such class for the election of such directors. At elections for
such directors or adjournments thereof, (1) the absence of a quorum of this
Series (together with the holders of shares of any one or more other series
of Preferred Stock ranking on a parity with respect to the election of such
additional directors) shall not prevent the election of the directors to be
elected otherwise than pursuant to this subparagraph (b), and the absence of
a quorum of stock other than this Series (together with the holders of shares
of any one or more other series of Preferred Stock ranking on a parity with
respect to the election of such additional directors) shall not prevent the
election of the directors to be elected pursuant to this subparagraph (b),
and (2) in the absence of such quorum either of this Series or of the stock
other than this Series, or both, a majority of the holders, present in person
or by proxy, of the class or classes of stock which lack a quorum shall have
a power to adjourn the meeting for the election of directors whom they are
entitled to elect, from time to time without notice other than announcement
at the meeting, until a quorum shall be present. At elections for such
directors, each holder of this Series shall be entitled to one vote for each
share held (the holders of shares of any other series of Preferred Stock
ranking on such a parity being entitled to such number of votes, if any, for
each share of stock held as may be granted to them). Upon the vesting of such
right of the holders of this Series, the maximum authorized number of
members of the Board of Directors shall automatically be increased by two
and the two vacancies so created shall be filled by vote of the holders of
the outstanding shares of this Series (together with the holders of shares of
any one or more other series of Preferred Stock ranking on a parity with
respect to the election of such additional directors) as hereinafter set
forth. The right of the holders of this Series, voting separately as a class
to elect (together with the holders of shares of any one or more other series
of Preferred Stock ranking on a parity with respect to the election of such
additional directors) members of the Board of Directors of the Corporation as
aforesaid shall continue until such time as all dividends in arrears on this
Series shall have been paid in full, at which time such right shall
immediately terminate, except as herein or by law expressly provided, subject
to revesting in the event of each and every subsequent default of the
character above mentioned.
Each director elected by the holders of shares of this Series shall
continue to serve as such director until such time as all dividends in
arrears on this Series shall have been paid in full, at which time the term
of office of all persons elected as directors by the holders of shares of
this Series shall immediately terminate and the number of members of the
Board of Directors of the Corporation shall be reduced accordingly. Any
director elected by the holder of shares of this Series may be removed from
office only by a vote of the majority of the outstanding shares of this
Series. If the office of any director elected by the holders of this Series
voting as a class becomes vacant by reason of death, resignation, retirement,
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<PAGE>
disqualification, removal from office, or otherwise, the remaining director
elected by the holders of this Series voting as a class may choose a
successor who shall hold office for the unexpired term in respect of which
such vacancy occurred. Whenever the term of office of the directors elected
by the holders of this Series voting as a class shall end and the special
voting powers vested in the holders of this Series as provided in this
subparagraph (b) shall have expired, the number of directors shall be such
number as may be provided for in the By Laws irrespective of any increase
made pursuant to the provisions of this subparagraph (b).
12. RELATIVE RIGHTS OF CONVERTIBLE PREFERRED STOCK.
So long as any of the Convertible Preferred Stock is outstanding, the
Corporation will not:
a. Declare, or pay, or set apart for payment, any dividends (other
than dividends payable in stock ranking junior to the Convertible Preferred
Stock as to dividends and upon liquidation, dissolution or winding-up) or
make any distribution in cash or other property on any other class or series
of stock of the Corporation ranking junior to the Convertible Preferred Stock
either as to dividends or upon liquidation, dissolution or winding-up and
will not redeem, purchase or otherwise acquire any shares of any such junior
class or series if at the time of making such declaration, payment,
distribution, redemption, purchase or acquisition the Corporation shall be in
default with respect to any dividend payable on, or any obligation to retire
shares of, Convertible Preferred Stock; and
b. Without the affirmative vote or consent of the holders of at least
66-2/3% of all the Convertible Preferred Stock at the time outstanding,
voting separately as a class, given in person or by proxy, either in writing
or by resolution adopted either at an annual meeting or special meeting
called for the purpose, (i) authorize, create, or issue, or increase the
authorized or issued amount, of any class or series of stock ranking prior to
the Convertible Preferred Stock, either as to dividends or upon liquidation,
dissolution or winding-up or (ii) amend, alter or repeal (whether by merger,
consolidation or otherwise) any of the provisions of the Corporation's
Articles of Incorporation, or of the Certificate of Designation, Preferences
and Rights of the Convertible Preferred Stock, so as to materially and
adversely affect the preferences, special rights, privileges or powers of the
Convertible Preferred Stock; provided, however, that any increase in the
authorized Preferred Stock or the creation and issuance of other series of
Preferred Stock ranking in a parity with or junior to the Convertible
Preferred Stock shall not be deemed to materially and adversely affect such
preferences, rights, privileges or powers.
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<PAGE>
IN WITNESS WHEREOF, Olympic Financial Ltd. has caused this Certificate
of Designation, Preferences and Rights to be signed by its President and
Chief Executive Officer and attested by its Secretary this 22nd day of
November, 1993.
OLYMPIC FINANCIAL LTD.
(Corporate Seal) By /s/ Jeffrey C. Mack
----------------------
-NONE- Its President and Chief
Executive Officer
-------------------
Attest:
/s/ [Illegible]
- ---------------------
Secretary
STATE OF MINNESOTA
DEPARTMENT OF STATE
FILED
NOV 29 1993
/s/ Joan Anderson Growe
Secretary of State
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CERTIFICATE OF DESIGNATION OF PREFERENCES AND RIGHTS
OF SERIES B CONVERTIBLE PREFERRED STOCK
OF OLYMPIC FINANCIAL LTD.
Pursuant to Section 302A.401 of the
Minnesota Business Corporation Act
Olympic Financial Ltd., a corporation organized and existing under the
laws of Minnesota (the "Corporation"), does hereby certify:
That pursuant to authority vested in it by the provisions of the
Articles of Incorporation, as amended, of the Corporation, the Board of
Directors of said Corporation by action in writing duly taken pursuant to
Section 302A.239 of the Minnesota Business Corporation Act ("MBCA"), did
adopt the following resolution authorizing the creation and issuance of a
series of Preferred Stock designated as Series B Convertible Stock:
RESOLVED, that the Corporation hereby designates 100 shares of its
authorized but unissued shares, $0.01 par value, as Series B Convertible
Preferred Stock, which shall have the following designations, preferences,
rights, qualifications, limitations, and restrictions in addition to those
set forth in the Articles of Incorporation, as amended, of the Corporation.
1. CERTAIN DEFINITIONS. For purposes of this Certificate of
Designation, the following terms shall have the following meanings:
"Applicable Amount" means, as of any date, a number equal to (i)
$100,000,000 PLUS (ii) the EXCESS of (A) the Liquidation Preference of, and
all accrued and unpaid dividends (calculated on a daily accrual basis), on
all 100 originally authorized shares of Series B Convertible Preferred Stock,
including all shares of Series B Convertible Preferred Stock issued and
outstanding, never issued or no longer outstanding because of conversion or
any other reason, as though all such 100 originally authorized shares were
outstanding as of such date and had been outstanding at all times from the
Exercise Date through such date OVER (B) $50,000,000.
"Applicable Rate" means a fixed rate per annum equal to the interest
rate applicable to the Senior Bridge Notes on the Exercise Date; PROVIDED,
HOWEVER, that from and after the occurrence of any Conversion Default, such
Applicable Rate shall automatically increase by 50 basis points on each
Dividend Payment Date thereafter until the Conversion Default Termination
Date.
"Average Market Price" means, as of any date, the average of the
closing price per share of the Common Stock as reported by the NASDAQ
National Market System for the 10 trading days immediately preceding such
date or, if the
<PAGE>
Common Stock is not reported by the NASDAQ National Market System during such
period but is reported on the NASDAQ system during such period, the average
of the closing bid and asked price per share of the Common Stock as reported
on such system or if the Common Stock is not reported by the NASDAQ system
during such period, the average of the high bid and low asked quotations of
the Common Stock in the over-the-counter market during the period in question
as reported by the National Quotation Bureau Incorporated, or a similarly
generally accepted reporting service, or, if no such quotations are
available, the fair market value of the Common Stock as determined by a
nationally recognized investment banking firm selected by the Board of
Directors of the Corporation and reasonably acceptable to the holders of a
majority of the outstanding shares of Series B Convertible Preferred Stock.
"Common Stock" means the common stock, $0.01 par value, of the
Corporation.
"Conversion Date" shall have the meaning set forth in Section 4.
A "Conversion Default" shall occur on any date on which any holder of
Series B Convertible Preferred Stock shall have notified the Corporation
pursuant to Section 4.b(ii) of its election to convert one or more shares of
Series B Convertible Preferred Stock if, on such date, the aggregate number
of shares of Common Stock available for issuance upon conversion of such
shares is less than the number of shares of Common Stock required to be
issued upon conversion of such surrendered shares.
"Conversion Default Termination Date" means, with respect to a
Conversion Default, the first Dividend Payment Date following such Conversion
Default on which the Company shall be in compliance with Section 11.
"Conversion Rights" shall have the meaning set forth in Section 4.
"Dividend Payment Date" means January 15, April 15, July 15 and October
15 of each year, commencing on the first such date following the Exercise
Date.
"Dividend Period" means the Initial Dividend Period and, thereafter,
each Quarterly Dividend Period.
"DLJ Bridge" means OFL Funding, Inc., a Delaware corporation affiliated
with DLJ Bridge Finance, Inc., a Delaware Corporation, and all successors
thereto.
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<PAGE>
"Exercise Date" means the date on which DLJ Bridge or its designated
affiliate exercises its option to purchase shares of the Series B Convertible
Preferred Stock.
"Existing Preferred Stock" means the Corporation's 8% Cumulative
Convertible Exchangeable Preferred Stock.
"Initial Dividend Period" means the dividend period commencing on the
Exercise Date and ending on and including the first Dividend Payment Date.
"Liquidation Preference" means, as of any date with respect to each
share of Series B Convertible Preferred Stock issued pursuant hereto,
$500,000 PLUS the amount of all dividends paid with respect thereto on or
prior to such date in accordance with Section 3.
"Quarterly Dividend Period" means each quarterly period commencing on
and including the day after the immediately preceding Dividend Payment Date
and ending on and including the immediately subsequent Dividend Payment Date.
"Senior Bridge Notes" means the senior increasing rate notes issued by
the Corporation to DLJ Bridge pursuant to the Securities Purchase Agreement
dated February 24, 1995, between the Corporation and DLJ Bridge.
2. DESIGNATION; NUMBER OF SHARES; STATED VALUE
One Hundred (100) authorized but unissued shares, $0.01 par value,
shall be designated Series B Convertible Preferred Stock (hereinafter
referred to as the "Series B Convertible Preferred Stock"). Shares of the
Series B Convertible Preferred Stock shall have a stated value per share
equal to the Liquidation Preference.
3. DIVIDENDS
a. The holders of shares of Series B Convertible Preferred Stock
shall be entitled to receive dividends on each share of Series B Convertible
Preferred Stock, out of funds legally available therefor, at a rate per
annum equal to the Applicable Rate and in the manner and at the times set
forth in Section 3.b and 3.c hereof, before any dividend or distribution in
cash or other property (other than dividends payable in stock ranking junior
to the Series B Convertible Preferred Stock as to dividends and upon
liquidation, dissolution or winding-up) on any class or series of stock of
the Corporation ranking junior to the Series B Convertible Preferred Stock as
to dividends or on liquidation, dissolution, or winding-up shall be declared
or paid or set apart for payment.
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<PAGE>
b. Dividends on the Series B Convertible Preferred Stock shall be
payable, when and as declared by the Board of Directors, by increasing the
Liquidation Preference thereof in accordance with this Section 3.b and
Section 3.c hereof, on each Dividend Payment Date out of funds legally
available therefor, except that if such date is a Saturday, Sunday or legal
holiday then such dividend shall be payable on the first immediately
preceding calendar day which is not a Saturday, Sunday or legal holiday, to
holders of record as they appear on the books of the Corporation on such
respective dates, not exceeding sixty days preceding such Dividend Payment
Date, as may be determined by the Board of Directors in advance of the
payment of each particular dividend. The dividend payable with respect to
each share of Series B Convertible Preferred Stock on each Dividend Payment
Date in respect of the Dividend Period then ended shall be an amount equal to
(i) the Liquidation Preference of such share on the immediately preceding
Dividend Payment Date (after giving effect to the dividend payment made on
such preceding Dividend Payment Date or, if any dividend payment has not been
made, an amount equal to the Liquidation Preference plus an amount equal to
the amount by which the Liquidation Preference would have increased through
and including such preceding Dividend Date had all dividends been timely
paid) or, in the case of the first Dividend Payment Date, $500,000,
MULTIPLIED BY the Applicable Rate and (ii) DIVIDED BY four; PROVIDED,
HOWEVER, that the dividend payable with respect to each share of Series B
Convertible Preferred Stock for any Dividend Period less than a Quarterly
Dividend Period (including the Initial Dividend Period) shall be equal to a
PRO RATA portion of the total dividend payable for the Quarterly Dividend
Period during which such Dividend Period occurs, based on the actual number
of days elapsed in such period and the total number of days in the applicable
Quarterly Dividend Period. Dividends shall accrue on a daily basis during
each Dividend Period at the rate provided above. The holders of shares of
Series B Convertible Preferred Stock shall not be entitled to receive
dividends in respect of the Series B Convertible Preferred Stock in any form
or manner other than as an adjustment to the Liquidation Preference herein
provided.
c. Dividends on the Series B Convertible Preferred Stock shall be
cumulative and accrue from and after the date of original issuance thereof
whether or not declared by the Board of Directors.
d. No dividend may be declared on any other class or series of stock
ranking on a parity with the Series B Convertible Preferred Stock as to
dividends in respect of any dividend period unless there shall also be or
have been paid (in the manner provided in Section 3.c) on the Series B
Convertible Preferred Stock dividends for all Dividend Periods coinciding
with or ending before such Dividend Period, ratably in proportion to the
respective annual dividend rates fixed therefor.
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<PAGE>
4. CONVERSION.
a. Subject to (i) the availability for issuance under the Articles
of Incorporation of the Corporation of the number of shares of Common Stock
issuable pursuant to this Section 4.a upon conversion of shares of Series B
Convertible Preferred Stock surrendered for conversion pursuant to Section
4.b, (ii) prior approval of the conversion rights set forth in this Section 4
(the "Conversion Rights") by the shareholders of the Corporation, (iii) prior
receipt by the Corporation of notification that the shares of Common Stock
issuable upon conversion of the Series B Convertible Preferred Stock shall
have been approved for listing or quotation, as applicable, subject to
issuance and notice of shareholder approval of the Conversion Rights, as
required by any securities exchange or automated quotation system on which
the Common Stock is then listed, or quoted, and (iv) such governmental
approvals as may be necessary, each share of Series B Convertible Preferred
Stock shall be convertible, at the option of the holder thereof, at any time
and from time to time on any Conversion Date, into such number of validly
issued, fully paid and nonassessable shares of Common Stock equal to (A) the
result of (i) the Applicable Amount on the Conversion Date DIVIDED BY (ii)
the Average Market Price on the Conversion Date DIVIDED BY (B) 100. In no
event shall the Series B Convertible Preferred Stock be convertible into
shares of Common Stock unless the stockholders of the Corporation shall have
approved the Conversion Rights.
b. To convert one or more of its shares of Series B Convertible
Preferred Stock, a holder of Series B Convertible Preferred Stock shall:
(i) surrender the certificate or certificates evidencing the
shares of Series B Convertible Preferred Stock to be converted duly
endorsed, at the office of the Corporation;
(ii) notify the Corporation that he elects to convert the same;
and
(iii) state in writing the name or names in which he wishes the
certificate or certificates for shares of Common Stock to be issued and
the certificate or certificates for shares of Series B Convertible
Preferred Stock evidenced by the surrendered certificate or
certificates not so converted.
If required, the Corporation will pay any and all issue and other taxes
(other than taxes based on income) that may be payable in respect of any
issue or delivery of shares of Common Stock upon conversion of the Series B
Convertible Preferred Stock pursuant hereto.
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<PAGE>
The date on which a holder of the Series B Convertible Preferred Stock
satisfies all of the foregoing requirements is the "Conversion Date." As soon
as practicable (but in no event within ten business days after the Conversion
Date), the Corporation shall deliver through the transfer agent (i) a
certificate for the number of duly authorized, validly issued, fully paid and
non-assessable shares of Common Stock issuable upon the conversion and (ii)
if less than the full number of shares of Series B Convertible Preferred
Stock evidenced by the surrendered certificate or certificates is being
converted, a new certificate or certificates of like tenor, for the number of
shares evidenced by such surrendered certificate or certificates less the
number of shares being converted. The person in whose name the certificate
for Common Stock is registered shall be treated for all purposes as having
become the holder of record of such shares of Common Stock on the Conversion
Date.
5. VOTING.
a. Except as set forth in Section 5.b, the shares of the Series B
Convertible Preferred Stock shall not have any voting powers either general
or special, except as set forth in this Certificate of Designation,
Preferences and Rights, in the Corporation's Articles of Incorporation, or as
otherwise provided by law. In exercising such voting rights, each share of
Series B Convertible Preferred Stock shall be entitled to one vote.
b. From and after the occurrence of any Conversion Default,
subject to any prohibition thereof or limitations thereto contained in the
Articles of Incorporation of the Corporation or in any instrument or
agreement related to the outstanding indebtedness of the Corporation, as in
effect on such date or to any securities issued in connection therewith
(provided that the Corporation shall take no action after February 24, 1995
which would have the effect of denying or otherwise adversely affecting the
rights of the holders of Series B Convertible Preferred Stock under this
Section 5(b)), the number of directors constituting the Board of Directors
will be adjusted to permit the holders of the majority of the then
outstanding Series B Convertible Preferred Stock, voting separately as a
class, to elect one director of the Corporation and the holders of the Series
B Convertible Stock will have the right, voting as a class, to elect one
director of the Corporation. Such voting rights shall terminate upon the next
succeeding Conversion Default Termination Date.
6. LIQUIDATION RIGHTS.
Upon the dissolution, liquidation or winding-up of the Corporation,
whether voluntary or involuntary, each holder of shares of Series B
Convertible Preferred Stock shall be entitled to receive with respect to each
share of Series B Convertible Preferred Stock held by such holder, before any
payment or distribution of the assets of the Corporation or proceeds thereof
(whether capital or surplus) shall be made to or set apart for the holders of
the Common Stock or any other class or
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<PAGE>
series of stock ranking junior to the shares of Series B Convertible
Preferred Stock upon liquidation, the Liquidation Preference of such share
PLUS a sum equal to all dividends on such share (whether or not earned or
declared) accrued and unpaid thereon (calculated on a daily accrual basis) to
the date of final distribution, but such holders shall not be entitled to
any further payment. If, upon any liquidation, dissolution or winding-up of
the Corporation, the assets of the Corporation, or proceeds thereof,
distributable among the holders of shares of the Series B Convertible
Preferred Stock and any other class or series of Preferred Stock ranking on a
parity with the Series B Convertible Preferred Stock as to payments upon
liquidation, dissolution or winding-up shall be insufficient to pay in full
the preferential amount aforesaid, then such assets or the proceeds thereof,
shall be distributed among such holders ratably in accordance with the
respective amounts which would otherwise be payable on such shares if all
amounts payable thereon were paid in full. For the purposes of this Section 6,
the voluntary sale, conveyance, lease, exchange or transfer (for cash,
shares of stock, securities or other consideration) of all or substantially
all the property or assets of the Corporation to, or a consolidation or
merger of the Corporation with, one or more other corporations (whether or
not the Corporation is the corporation surviving such consolidation or
merger) shall not be deemed to be a liquidation, dissolution or winding-up,
voluntary or involuntary.
7. NO PURCHASE, RETIREMENT OR SINKING FUND; NO REDEMPTION.
The shares of the Series B Convertible Preferred Stock shall not be
subject to the operation of any purchase, retirement or sinking fund and
shall not be redeemable by the Corporation or any holder thereof.
8. STATUS.
Shares of the Series B Convertible Preferred Stock which have been
issued and reacquired in any manner by the Corporation shall, upon compliance
with any applicable provisions of law, have the status of authorized and
unissued shares of Preferred Stock and may be reissued as a part of the
Series B Convertible Preferred Stock or as part of a new series of Preferred
Stock to be established by the Board of Directors or as part of any other
series of Preferred Stock the terms of which do not prohibit such reissue.
9. PRIORITY.
The Common Stock of the Corporation, now or hereafter issued, and any
other series or class of stock of the Corporation that does not expressly
provide that it ranks prior to or on a parity with the Series B Convertible
Preferred Stock shall rank junior to the Series B Convertible Preferred Stock
as to payment of dividends and as to distributions of assets upon
liquidation, dissolution or winding-up of the Corporation, whether voluntary
or involuntary. The Existing Preferred
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<PAGE>
Stock and any other series or class of stock of the Corporation that
expressly provides that it ranks on a parity with the Series B Convertible
Preferred Stock shall rank on a parity with the Series B Convertible
Preferred Stock as to payment of dividends and as to distributions of assets
upon liquidation, dissolution or winding-up of the Corporation, whether
voluntary or involuntary.
10. RELATIVE RIGHTS OF CONVERTIBLE PREFERRED STOCK.
So long as any of the Series B Convertible Preferred Stock is
outstanding, the Corporation will not:
a. Declare or pay, or set apart for payment, any dividends (other
than dividends payable in stock ranking junior to the Series B Convertible
Preferred Stock as to dividends and upon liquidation, dissolution or
winding-up) or make any distribution in cash or other property on any other
class or series of stock of the Corporation ranking junior to the Series B
Convertible Preferred Stock either as to dividends or upon liquidation,
dissolution or winding-up, and will not redeem, purchase or otherwise acquire
any shares of any such junior class or series or any securities exercisable
or exchangeable for or convertible into, or any obligations evidencing the
right to purchase or acquire, any shares of any such junior class or series,
if at the time of making such declaration, payment, distribution, redemption
or acquisition the Corporation shall be in default with respect to any
dividend payable on shares of the Series B Convertible Preferred Stock; and
b. Without the affirmative vote or consent of the holders of at
least 66-2/3% of all the Series B Convertible Preferred Stock at the time
outstanding, voting separately as a class, given in person or by proxy,
either in writing or by resolution adopted either at an annual meeting or
special meeting called for the purpose, (i) authorize, create, or issue, or
increase the authorized or issued amount, of any class or series of stock
ranking prior to the Series B Convertible Preferred Stock, either as to
dividends or upon liquidation, dissolution or winding-up, (ii) amend, alter
or repeal (whether by merger, consolidation or otherwise) any of the
provisions of the Corporation's Articles of Incorporation, or of this
Certificate of Designation or any other specified designation, rights,
preferences or powers of the Series B Convertible Preferred Stock so as to
materially and adversely affect the preferences, special rights, privileges
or powers of the Series B Convertible Preferred Stock or (iii) reclassify any
series or class of stock of the Corporation, or any securities exercisable or
exchangeable for or convertible into, or any obligations evidencing the right
to purchase or acquire, any such series of class of stock ranking junior to
or on a parity with the Series B Convertible Preferred Stock, either as to
dividends or upon liquidation, dissolution or winding-up into a series or
class of stock ranking on a parity with or prior to the Series B Convertible
Preferred Stock, either as to dividends or upon liquidation, dissolution or
winding-up.
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11. CERTAIN COVENANTS.
So long as any of the Series B Convertible Preferred Stock is
outstanding, the Corporation shall at all times reserve and keep available,
free from preemptive rights, out of the aggregate of its authorized but
unissued Common Stock or its authorized and issued Common Stock held in its
treasury, for the purpose of enabling it to satisfy any obligation to issue
shares of Common Stock upon conversion of the Series B Convertible Preferred
Stock, the maximum number of shares of Common Stock which may then be
deliverable upon the conversion of all outstanding shares of Series B
Convertible Preferred Stock.
IN WITNESS WHEREOF, Olympic Financial Ltd. has caused this Certificate
of Designation, Preferences and Rights to be signed by its President and
Chief Executive Officer and attested by its Secretary this 3rd day of March,
1995.
OLYMPIC FINANCIAL LTD.
(Corporate Seal) By /s/ Jeffrey C. Mack
-None- -------------------
President and Chief Executive
Officer
Attest:
/s/ James D. Atkinson III
- -------------------------
Secretary
STATE OF MINNESOTA
DEPARTMENT OF STATE
FILED
MAR 7 1995
/s/ Joan Anderson Growe
Secretary of State
- 9 -
<PAGE>
{SEAL} MINNESOTA SECRETARY OF STATE
AMENDMENT OF ARTICLES OF INCORPORATION
BEFORE COMPLETING THIS FORM, PLEASE READ INSTRUCTIONS LISTED BELOW.
CORPORATE NAME: (List the name of the company prior to any desired name
change)
Olympic Financial Ltd.
- -----------------------------------------------------------------------------
This amendment is effective on the day it is filed with the Secretary of
State, unless you indicate another date, no later than 30 days after filing
with the Secretary of State.
---------------------------
The following amendment(s) of articles regulating the above corporation were
adopted: (insert full text of newly amended article(s) indicating which
article(s) is (are) being amended or added.) If the full text of the
amendment will not fit in the space provided, attach additional numbered
pages. (Total number of pages including this form 2 .)
---
ARTICLE ________
CANCELLATION OF
CERTIFICATE OF DESIGNATION OF RIGHTS AND
PREFERENCES OF SERIES B CONVERTIBLE PREFERRED STOCK
This amendment has been approved pursuant to MINNESOTA STATUTES CHAPTER 302A
OR 317A. I certify that I am authorized to execute this amendment and I
further certify that I understand that by signing this amendment, I am
subject to the penalties of perjury as set forth in section 609.48, as if I
had signed this amendment under oath.
/s/ James D. Atkinson, III
-------------------------------------
(Signature of Authorized Person)
_____________________________________________________________________________
INSTRUCTIONS FOR OFFICE USE ONLY
1. Type or print with black ink.
2. A Filing Fee of: $35.00, made payable to the
Secretary of State.
3. Return completed forms to:
Secretary of State
180 State Office Building
100 Constitution Ave.
St. Paul, MN 55155-1299
(612)296-2803
<PAGE>
STATEMENT OF CANCELLATION
OF
CERTIFICATE OF DESIGNATION OF PREFERENCES AND RIGHTS
OF
SERIES B CONVERTIBLE PREFERRED STOCK
OF
OLYMPIC FINANCIAL LTD.
1. The name of the corporation is Olympic Financial Ltd., a Minnesota
corporation.
2. The Certificate of Designation of Rights and Preferences of Series B
Convertible Preferred Stock of Olympic Financial Ltd. is hereby canceled.
3. The Statement of Cancellation has been adopted pursuant to Chapter 302A of
the Minnesota Business Corporation Act.
IN WITNESS WHEREOF, the undersigned, the President and Chief Executive
Officer of Olympic Financial Ltd., being duly authorized on behalf of Olympic
Financial Ltd., has executed this document this 15 day of May 1995.
--
/s/ Jeffrey Mack
--------------------------
Jeffrey C. Mack
President and Chief Executive Officer
STATE OF MINNESOTA
DEPARTMENT OF STATE
FILED
JUN 08 1995
/s/ Joan Anderson Growe
Secretary of State
<PAGE>
ARTICLES OF AMENDMENT
TO
RESTATED ARTICLES OF INCORPORATION
OF
OLYMPIC FINANCIAL LTD.
OLYMPIC FINANCIAL LTD., a corporation organized and existing under the
laws of the State of Minnesota (herein referred to as the "Corporation"), in
accordance with the provisions of Minnesota Statutes, Section 302A.139, does
hereby certify that:
1. On May 18, 1995, pursuant to the authority conferred upon the
shareholders by Minnesota Statutes 302A.111, Subdivision 1, the shareholders
authorized and adopted resolutions increasing the authorized capital of the
Corporation to 100,000,000 shares, $.01 par value, from the 35,714,286 shares
currently authorized and the following is a true copy of such resolutions:
RESOLVED that the first paragraph of Article 3 of the Restated Articles
of Incorporation of the Corporation, as amended, is hereby amended in its
entirety to read as follows:
AUTHORIZED SHARES: The authorized capital stock of the Corporation
shall consist of (i) 17,058,376 shares of Common Stock, par value $.01
per share; (ii) 1,150,000 shares of 8% Cumulative Convertible
Exchangeable Preferred Stock, par value $.01 per share; (iii) 100 shares
of Series B Convertible Preferred Stock, par value $.01 per share; and
(iv) 81,791,524 undesignated shares, of a par value of $.01 per share
which may be issued in more than one class or series when authorized by
the Board of Directors of the Corporation.
2. On May 18, 1995, pursuant to authority conferred upon the
shareholders by Minnesota Statutes 302A.139, the shareholders authorized and
adopted a resolution repealing and deleting Article 7 of the Restated
Articles of Incorporation of the Corporation, as amended and the following is
a true copy of such resolution:
RESOLVED, that subject to prepayment in full of the Corporation's 9
7/8% Senior Subordinated Notes in accordance with the Eighth Amendment
to the Securities Purchase Agreement dated as of March 6, 1995, by and
among the Corporation and investors named therein, Article 7 of the
Corporation's Restated Articles of Incorporation, as amended, shall be
repealed and deleted.
The Corporation's 9 7/8% Senior Subordinated Notes having been paid in
full, Article 7 of the Corporation's Restated Articles of Incorporation, as
amended, is repealed and deleted.
1
<PAGE>
IN WITNESS WHEREOF, Olympic Financial Ltd. has caused these Articles of
Amendment to be signed by its Chief Executive Officer and President this 8
day of June, 1995.
OLYMPIC FINANCIAL LTD.
By: /s/ Jeffrey C. Mack
--------------------------
Jeffrey C. Mack
Its Chief Executive Officer and President
STATE OF MINNESOTA
DEPARTMENT OF STATE
FILED
JUN 20 1995
/s/ Joan Anderson Growe
Secretary of State
2
<PAGE>
DESIGNATION OF RIGHTS AND PREFERENCES OF UNDESIGNATED
STOCK
OF
OLYMPIC FINANCIAL LTD.
The undersigned, Senior Vice President of Olympic Financial Ltd., a
Minnesota corporation, does hereby certify that the Board of Directors of
said Corporation, by written action dated as of October 2, 1995, did adopt a
resolution providing that 3,923,364 shares of the Corporation's undesignated
shares be designated as Common Stock, $.01 par value per share. Accordingly:
(a) 3,923,364 shares of the Corporation's undesignated shares are
hereby designated as Common Stock, $.01 par value per share.
IN WITNESS WHEREOF, the undersigned has executed this Certificate of
Designation this 20th day of October, 1995.
/s/ A. Mark Berlin, Jr.
---------------------------------------
A. Mark Berlin, Jr.
STATE OF MINNESOTA
DEPARTMENT OF STATE
FILED
OCT 20 1995
/s/ Joan Anderson Growe
Secretary of State
<PAGE>
4 / 23
[STATE SEAL OF MINNESOTA] MINNESOTA SECRETARY OF STATE
AMENDMENT OF ARTICLES OF INCORPORATION
BEFORE COMPLETING THIS FORM, PLEASE READ INSTRUCTIONS LISTED BELOW.
CORPORATE NAME:(List the name of the company prior to any desired name change)
OLYMPIC FINANCIAL LTD.
- -------------------------------------------------------------------------------
This amendment is effective on the day it is filed with the Secretary of
State, unless you indicate another date, no later than 30 days after filing
with the Secretary of State.
---------------
The following amendment(s) of articles regulating the above corporation were
adopted: (Insert full text of newly amended article(s) indicating which
article(s) is (are) being amended or added.) If the full text of the
amendment will not fit in the space provided, attach additional numbered
pages. (Total number of pages including this form _____.)
ARTICLE ________
SEE ATTACHED
DESIGNATION OF RIGHTS AND
PREFERENCES OF UNDESIGNATED STOCK
OF
OLYMPIC FINANCIAL LTD.
This amendment has been approved pursuant to MINNESOTA STATUTES CHAPTER 302A
OR 317A. I certify that I am authorized to execute this amendment and I
further certify that I understand that by signing this amendment, I am
subject to the penalties of perjury as set forth in section 609.48 as if I
had signed this amendment under oath.
/s/ James D. Atkinson, III
-------------------------------------------
(Signature of Authorized Person)
- -------------------------------------------------------------------------------
INSTRUCTIONS FOR OFFICE USE ONLY
1. Type of print with black ink.
2. A Filing Fee of: $35.00, made
payable to the Secretary of State.
3. Return completed forms to:
Secretary of State
180 State Office Building
100 Constitution Ave.
St. Paul, MN 55155-1299
(612)296-2803
<PAGE>
4 / 23
[STATE SEAL OF MINNESOTA] MINNESOTA SECRETARY OF STATE
AMENDMENT OF ARTICLES OF INCORPORATION
BEFORE COMPLETING THIS FORM, PLEASE READ INSTRUCTIONS LISTED BELOW.
CORPORATE NAME:(List the name of the company prior to any desired name change)
OLYMPIC FINANCIAL LTD.
- -------------------------------------------------------------------------------
This amendment is effective on the day it is filed with the Secretary of
State, unless you indicate another date, no later than 30 days after filing
with the Secretary of State.
---------------
The following amendment(s) of articles regulating the above corporation were
adopted: (Insert full text of newly amended article(s) indicating which
article(s) is (are) being amended or added.) If the full text of the
amendment will not fit in the space provided, attach additional numbered
pages. (Total number of pages including this form _____.)
ARTICLE ________
SEE ATTACHED
DESIGNATION OF RIGHTS AND
PREFERENCES OF UNDESIGNATED STOCK
OF
OLYMPIC FINANCIAL LTD.
This amendment has been approved pursuant to MINNESOTA STATUTES CHAPTER 302A
OR 317A. I certify that I am authorized to execute this amendment and I
further certify that I understand that by signing this amendment, I am
subject to the penalties of perjury as set forth in section 609.48 as if I
had signed this amendment under oath.
James D. Atkinson, III
-------------------------------------------
(Signature of Authorized Person)
- -------------------------------------------------------------------------------
INSTRUCTIONS FOR OFFICE USE ONLY
1. Type of print with black ink.
2. A Filing Fee of: $35.00, made
payable to the Secretary of State.
3. Return completed forms to:
Secretary of State
180 State Office Building
100 Constitution Ave.
St. Paul, MN 55155-1299
(612)296-2803
<PAGE>
DESIGNATION OF RIGHTS AND PREFERENCES OF UNDESIGNATED
STOCK
OF
OLYMPIC FINANCIAL LTD.
The undersigned, Senior Vice President and Secretary of Olympic
Financial Ltd., a Minnesota corporation, does hereby certify that the Board
of Directors of said Corporation, by written action dated as of December 18,
1995, did adopt a resolution providing that 155,496 shares of the
Corporation's undesignated shares be designated as Common Stock, $.01 par
value per share. Accordingly:
(a) 155,496 shares of the Corporation's undesignated shares are
hereby designated as Common Stock, $.01 par value per share.
IN WITNESS WHEREOF, the undersigned has executed this Certificate of
Designation this 20th day of December, 1995.
/s/ James D. Atkinson, III
----------------------------------
James D. Atkinson, III
STATE OF MINNESOTA
DEPARTMENT OF STATE
FILED
DEC 27 1995
/s/ Joan Anderson Growe
Secretary of State
<PAGE>
[SEAL] MINNESOTA SECRETARY OF STATE
AMENDMENT OF ARTICLES OF INCORPORATION
BEFORE COMPLETING THIS FORM, PLEASE READ INSTRUCTIONS LISTED BELOW.
CORPORATE NAME: (List the name of the company prior to any desired name change)
Olympic Financial Ltd.
- -------------------------------------------------------------------------------
This amendment is effective on the day it is filed with the Secretary of
State, unless you indicate another date, no later than 30 days after filing
with the Secretary of State.
---------------------
The following amendment(s) of articles regulating the above corporation were
adopted (Insert full text of newly amended article(s) indicating which
article(s) is (are) being amended or added.) If the full text of the
amendment will not fit in the space provided, attach additional numbered
pages. (Total number of pages including this form ______.)
ARTICLE __________
SEE ATTACHED
DESIGNATION OF RIGHTS AND
PREFERENCES OF UNDESIGNATED STOCK
OF
OLYMPIC FINANCIAL LTD.
This amendment has been approved pursuant to MINNESOTA STATUTES CHAPTER 302A
OR 317A. I certify that I am authorized to execute this amendment and I
further certify that I understand that by signing this amendment, I am
subject to the penalties of perjury as set forth in section 609.48 as if I
had signed this amendment under oath.
/s/ James D. Atkinson, III
----------------------------------
(Signature of Authorized Person)
- --------------------------------------------------------------------------------
INSTRUCTIONS FOR OFFICE USE ONLY
1. Type or print with black ink.
2. A Filing Fee of: $35.00, made payable to the
Secretary of State.
3. Return completed forms to:
Secretary of State
180 State Office Building
100 Constitution Ave.
St. Paul, MN 55155-1299
(612) 296-2803
<PAGE>
DESIGNATION OF RIGHTS AND PREFERENCES
OF
UNDESIGNATED STOCK
OF
OLYMPIC FINANCIAL LTD.
The undersigned, Senior Vice President and Secretary of Olympic
Financial Ltd., a Minnesota corporation (the "Corporation"), does hereby
certify that the Board of Directors of the Corporation, by written action
dated as of April 17, 1996, did adopt the following resolution providing that
8,050,000 shares of the Corporation's undesignated shares be designated as
shares of Common Stock, $.01 par value per share:
RESOLVED, that pursuant to the authority vested in the Board of Directors
of the Corporation by the Articles of Incorporation of the Corporation,
the Board of Directors hereby designates 8,050,000 shares of the
Corporation's authorized but undesignated shares as shares of Common
Stock, $.01 par value per share.
IN WITNESS WHEREOF, the undersigned has executed this Certificate of
Designation on behalf of the Corporation as of April 17, 1996.
/s/ James D. Atkinson III
----------------------------------
James D. Atkinson III
Senior Vice President and Secretary
STATE OF MINNESOTA
DEPARTMENT OF STATE
FILED
APR 19 1996
/s/ Joan Anderson Growe
Secretary of State
<PAGE>
[SEAL] MINNESOTA SECRETARY OF STATE
AMENDMENT OF ARTICLES OF INCORPORATION
BEFORE COMPLETING THIS FORM, PLEASE READ INSTRUCTIONS LISTED BELOW.
CORPORATE NAME:(List the name of the company prior to any desired name change)
Olympic Financial Ltd.
- -------------------------------------------------------------------------------
This amendment is effective on the day it is filed with the Secretary of
State, unless you indicate another date, no later than 30 days after filing
with the Secretary of State.
----------------------
The following amendment(s) of articles regulating the above corporation were
adopted: (Insert full text of newly amended article(s) indicating which
article(s) is (are) being amended or added.) If the full text of the
amendment will not fit in the space provided, attach additional numbered
pages. (Total number of pages including this form 9 .)
---
ARTICLE
-----------
CERTIFICATE OF DESIGNATION, PREFERENCES AND
RIGHTS OF Class A Preferred Stock
of
OLYMPIC FINANCIAL LTD.
This amendment has been approved pursuant to MINNESOTA STATUTES CHAPTER 302A
OR 317A. I certify that I am authorized to execute this amendment and I
further certify that I understand that by signing this amendment, I am
subject to the penalties of perjury as set forth in section 609.48 as if I
had signed this amendment under oath.
/s/ James D. Atkinson, III
-------------------------------------
(Signature of Authorized Person)
- -------------------------------------------------------------------------------
INSTRUCTIONS FOR OFFICE USE ONLY
1. Type or print with black ink.
2. A Filing Fee of: $35.00, made payable
to the Secretary of State.
3. Return competed forms to:
Secretary of State
180 State Office Building
100 Constitution Ave.
St. Paul, MN 55155-1299
(612)296-2803
<PAGE>
CERTIFICATE OF DESIGNATION, PREFERENCES AND
RIGHTS OF CLASS A PREFERRED STOCK
OF
OLYMPIC FINANCIAL LTD.
Pursuant to Section 302A.401 of the Business Corporation Act
of the State of Minnesota
I, James D. Atkinson, III, Secretary of Olympic Financial Ltd., a
corporation organized and existing under the Business Corporation Act of the
State of Minnesota, in accordance with the provisions of Section
302A.401 thereof, DO HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of
Directors by the Certificate of Incorporation, as amended, of this
Corporation, the Board of Directors on October 28, 1996, adopted the
following resolution creating a series of 90,000 shares of Preferred Stock
designated as Class A Preferred Stock:
RESOLVED, that pursuant to the authority vested in the Board of
Directors of this Corporation in accordance with the provisions of its
Certificate of Incorporation, as amended, a series of Preferred Stock of the
Corporation be and it hereby is created, and that the designation and amount
thereof and the voting powers, preferences and relative, participating,
optional and other special rights of the shares of such series, and the
qualifications, limitations and restrictions thereof are as follows:
Section 1. DESIGNATION AND AMOUNT. The shares of such series shall
be designated as "Class A Preferred Stock" and the number of shares
constituting such series shall be 90,000.
Section 2. DIVIDENDS AND DISTRIBUTIONS.
(A) Subject to the prior and superior rights of the holders of any
shares of any series of Preferred Stock ranking prior and superior to the
shares of Class A Preferred Stock with respect to dividends, the holders of
a shares of Class A Preferred Stock shall be entitled to receive, when, as
and if declared by the Board of Directors out of funds legally available for
the purpose, quarterly dividends payable in cash on the first day of January,
November, July and October in each year (each such date being referred to
herein as a "Quarterly Dividend Payment Date"), commencing on the first
Quarterly Dividend Payment Date after the first issuance of a share of
fraction of a share of Class A Preferred Stock, in an amount per share
(rounded to the nearest
<PAGE>
cent), subject to the provision for adjustment hereinafter set forth, equal
to 1000 times the aggregate per share amount of all cash dividends, and 1000
times the aggregate per share amount (payable in kind) of all non-cash
dividends or other distributions other than a dividend payable in shares of
Common Stock or a subdivision of the outstanding shares of Common Stock (by
reclassification or otherwise), declared on the Common Stock, par value $.01
per share, of the Corporation (the "Common Stock") since the immediately
preceding Quarterly Dividend Payment Date, or, with respect to the first
Quarterly Dividend Payment Date, since the first issuance of any share or
fraction of a share of Class A Preferred Stock. In the event the Corporation
shall at any time (i) declare any dividend on Common Stock payable in shares
of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii)
combine the outstanding Common Stock into a smaller number of shares, then in
each such case the amount to which holders of shares of Class A Preferred
Stock were entitled immediately prior to such event under clause (b) of the
preceding sentence shall be adjusted by multiplying such amount by a fraction
the numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or distribution on the
Class A Preferred Stock as provided in paragraph (A) above immediately after
it declares a dividend or distribution on the Common Stock (other than a
dividend payable in shares of Common Stock).
(C) Dividends shall begin to accrue and be cumulative on
outstanding shares of Class A Preferred Stock from the Quarterly Dividend
Payment Date next preceding the date of issue of the shares of Class A
Preferred Stock, unless the date of issue of such shares is prior to the
record date for the first Quarterly Dividend Payment Date, in which case
dividends on such shares shall begin to accrue from the date of issue of such
shares, or unless the date of issue is a Quarterly Dividend Payment Date or
is a date after the record date for the determination of holders of shares of
Class A Preferred Stock entitled to receive a quarterly dividend and before
such Quarterly Dividend Payment Date, in either of which events such
dividends shall begin to accrue and be cumulative from such Quarterly
Dividend Payment Date. Accrued but unpaid dividends shall not bear interest.
Dividends paid on the shares of Class A Preferred Stock in an amount less
than the total amount of such dividends at the time accrued and payable on
such shares shall be allocated pro rata on a share-by-share basis among all
such shares at the time outstanding. The Board of Directors may fix a record
date for the determination of holders of shares of Class A Preferred Stock
entitled to receive payment of a dividend or distribution declared thereon,
which record date shall be no more than thirty (30) days prior to the date
fixed for the payment thereof.
-2-
<PAGE>
Section 3. VOTING RIGHTS. The holders of shares of Class A Preferred
Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth, each
share of Class A Preferred Stock shall entitle the holder thereof to 1000
votes on all matters submitted to a vote of the shareholders of the
Corporation. In the event the Corporation shall at any time (i) declare any
dividend on Common Stock payable in shares of Common Stock, (ii) subdivide
the outstanding Common Stock, or (iii) combine the outstanding Common Stock
into a smaller number of shares, then in each such case the number of votes
per share to which holders of shares of Class A Preferred Stock were entitled
immediately prior to such event shall be adjusted by multiplying such number
by a fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to
such event.
(B) Except as otherwise provided herein or by law, the holders of
shares of Class A Preferred Stock and the holders of shares of Common Stock
shall vote together as one class on all matters submitted to a vote of
shareholders of the Corporation.
(C) (i) If at any time dividends on any Class A Preferred Stock shall
be in arrears in an amount equal to six (6) quarterly dividends thereon, the
occurrence of such contingency shall mark the beginning of a period (herein
called a "default period") which shall extend until such time when all
accrued and unpaid dividends for all previous quarterly dividend periods and
for the current quarterly dividend period on all shares of Class A Preferred
Stock then outstanding shall have been declared and paid or set apart for
payment. During each default period, all holders of Preferred Stock
(including holders of the Class A Preferred Stock) with dividends in arrears
in an amount equal to six (6) quarterly dividends thereon, voting as a class,
irrespective of series, shall have the right to elect two (2) Directors.
(ii) During any default period, such voting right of the holders of
Class A Preferred Stock may be exercised initially at a special meeting
called pursuant to subparagraph (iii) of this Section 3(C) or at any annual
meeting of shareholders, and thereafter at annual meetings of shareholders,
provided that neither such voting right nor the right of the holders of any
other series of Preferred Stock, if any, to increase, in certain cases, the
authorized number of Directors shall be exercised unless the holders of ten
percent (10%) in number of shares of Preferred Stock outstanding shall be
present in person or by proxy. The absence of a quorum of the holders of
Common Stock shall not affect the exercise by the holders of Preferred Stock
of such voting right. At any meeting at which the holders of Preferred Stock
shall exercise such voting right initially during
-3-
<PAGE>
an existing default period, they shall have the right, voting as a class, to
elect Directors to fill such vacancies, if any, in the Board of Directors as
may then exist up to two (2) Directors or, if such right is exercised at an
annual meeting, to elect two (2) Directors. If the number which may be so
elected at any special meeting does not amount to the required number, the
holders of the Preferred Stock shall have the right to make such increase in
the number of Directors as shall be necessary to permit the election by them
of the required number. After the holders of the Preferred Stock shall have
exercised their right to elect Directors in any default period and during the
continuance of such period, the number of Directors shall not be increased or
decreased except by vote of the holders of Preferred Stock as herein provided
or pursuant to the rights of any equity securities ranking senior to or PARI
PASSU with the Class A Preferred Stock.
(iii) Unless the holders of Preferred Stock shall, during an existing
default period, have previously exercised their right to elect Directors, the
Board of Directors may order, or any shareholder or shareholders owning in
the aggregate not less than ten percent (10%) of the total number of shares
of Preferred Stock outstanding, irrespective of series, may request, the
calling of a special meeting of the holders of Preferred Stock, which meeting
shall thereupon be called by the President, a Vice-President or the Secretary
of the Corporation. Notice of such meeting and of any annual meeting at which
holders of Preferred Stock are entitled to vote pursuant to this paragraph
(C)(iii) shall be given to each holder of record of Preferred Stock by
mailing a copy of such notice to him at his last address as the same appears
on the books of the Corporation. Such meeting shall be called for a time not
earlier than twenty (20) days and not later than sixty (60) days after such
order or request or in default of the calling of such meeting within sixty
(60) days after such order or request, such meeting may be called on similar
notice by any shareholder or shareholders owning in the aggregate not less
than ten percent (10%) of the total number of shares of Preferred Stock
outstanding. Notwithstanding the provisions of this paragraph (C)(iii), no
such special meeting shall be called during the period within sixty (60) days
immediately preceding the date fixed for the next annual meeting of the
shareholders.
(iv) In any default period, the holders of Common Stock, and other
classes of stock of the Corporation if applicable, shall continue to be
entitled to elect the whole number of Directors until the holders of
Preferred Stock shall have exercised their right to elect two (2) Directors
voting as a class, after the exercise of which right (x) the Directors so
elected by the holders of Preferred Stock shall continue in office until
their successors shall have been elected by such holders or until the
expiration of the default period, and (y) any vacancy in the Board of
Directors may (except as provided in paragraph (C)(ii) of this Section 3) be
filled by vote of a
-4-
<PAGE>
majority of the remaining Directors theretofore elected by the holders of the
class of stock which elected the Director whose office shall have become
vacant. References in this paragraph (C) to Directors elected by the holders
of a particular class of stock shall include Directors elected by such
Directors to fill vacancies as provided in clause (y) of the foregoing
sentence.
(v) Immediately upon the expiration of a default period, (x) the right
of the holders of Preferred Stock as a class to elect Directors shall cease,
(y) the term of any Directors elected by the holders of Preferred Stock as a
class shall terminate, and (z) the number of Directors shall be such number
as may be provided for in the certificate of incorporation or by-laws
irrespective of any increase made pursuant to the provisions of paragraph
(C)(ii) of this Section 3 (such number being subject, however, to change
thereafter in any manner provided by law or in the certificate of
incorporation or by-laws). Any vacancies in the Board of Directors effected
by the provisions of clauses (y) and (z) in the preceding sentence may be
filled by a majority of the remaining Directors.
(D) Except as set forth herein, holders of Class A Preferred Stock
shall have no special voting rights and their consent shall not be required
(except to the extent they are entitled to vote with holders of Common Stock
as set forth herein) for taking any corporate action.
Section 4. CERTAIN RESTRICTIONS.
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Class A Preferred Stock as provided in Section 2 are in
arrears, thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on shares of Class A Preferred Stock
outstanding shall have been paid in full, the Corporation shall not:
(i) declare or pay dividends on, make any other distributions on, or
redeem or purchase or otherwise acquire for consideration any shares of
stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Class A Preferred Stock;
(ii) declare or pay dividends on or make any other distributions on
any shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Class A Preferred Stock,
except dividends paid ratably on the Class A Preferred Stock and all such
parity stock on which dividends are payable or in arrears in proportion to
the total amounts to which the holders of all such shares are then
entitled;
(iii) redeem or purchase or otherwise acquire for consideration shares
of any stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or
-5-
<PAGE>
winding up) with the Class A Preferred Stock, provided that the Corporation
may at any time redeem, purchase or otherwise acquire shares of any such
parity stock in exchange for shares of any stock of the Corporation ranking
junior (either as to dividends or upon dissolution, liquidation or winding
up) to the Class A Preferred Stock;
(iv) purchase or otherwise acquire for consideration any shares of
Class A Preferred Stock, or any shares of stock ranking on a parity with the
Class A Preferred Stock, except in accordance with a purchase offer made in
writing or by publication (as determined by the Board of Directors) to all
holders of such shares upon such terms as the Board of Directors, after
consideration of the respective annual dividend rates and other relative
rights and preferences of the respective series and classes, shall determine
in good faith will result in fair and equitable treatment among the
respective series or classes.
(B) The Corporation shall not permit any subsidiary of the Corporation
to purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under paragraph (A) of this Section
4, purchase or otherwise acquire such shares at such time and in such manner.
Section 5. REACQUIRED SHARES. Any shares of Class A Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and cancelled promptly after the acquisition thereof. All
such shares shall upon their cancellation become authorized but unissued
shares of Preferred Stock and may be reissued as part of a new series of
Preferred Stock to be created by resolution or resolutions of the Board of
Directors, subject to the conditions and restrictions on issuance set forth
herein.
Section 6. LIQUIDATION, DISSOLUTION OR WINDING UP. (A) Upon any
liquidation (voluntary or otherwise), dissolution or winding up of the
Corporation, no distribution shall be made to the holders of shares of stock
ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Class A Preferred Stock unless, prior thereto, the holders
of shares of Class A Preferred Stock shall have received $10.00 per share,
plus an amount equal to accrued and unpaid dividends and distributions
thereon, whether or not declared, to the date of such payment. Thereafter,
the holders of the Class A Preferred Stock shall be entitled to receive an
aggregate amount per share, subject to the provision for adjustment
hereinafter set forth, equal to 1000 times the aggregate amount to be
distributed per share to holders of shares of Common Stock. Following the
payment of the foregoing, holders of Class A Preferred Stock and holders of
shares of Common Stock shall receive their ratable and proportionate share of
the remaining assets to be distributed.
-6-
<PAGE>
(B) In the event, however, that there are not sufficient assets
available to permit payment in full of the Class A Preferred Stock
Liquidation Preference and the liquidation preferences of all other series of
preferred stock, if any, which rank on a parity with the Class A Preferred
Stock, then such remaining assets shall be distributed ratably to the holders
of such parity shares in proportion to their respective liquidation
preferences.
(C) In the event the Corporation shall at any time (i) declare any
dividend on Common Stock payable in shares of Common Stock, (ii) subdivide
the outstanding Common Stock (by reclassification or otherwise), or (iii)
combine the outstanding Common Stock into a smaller number of shares, then in
each such case the aggregate amount to which holders of shares of the Class A
Preferred Stock were entitled immediately prior to such event shall be
adjusted by multiplying such amount by a fraction the numerator of which is
the number of shares of Common Stock outstanding immediately after such event
and the denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.
Section 7. CONSOLIDATION, MERGER, ETC. In case the Corporation shall
enter into any consolidation, merger, combination or other transaction in
which the shares of Common Stock are exchanged for or changed into other
stock or securities, cash and/or any other property, then in any such case
the shares of Class A Preferred Stock shall at the same time be similarly
exchanged or changed in an amount per share (subject to the provision for
adjustment, hereinafter set forth) equal to 1000 times the aggregate amount
of stock, securities, cash and/or any other property (payable in kind), as
the case may be, into which or for which each share of Common Stock is
changed or exchanged. In the event the Corporation shall at any time (i)
declare any dividend on Common Stock payable in shares of Common Stock, (ii)
subdivide the outstanding Common Stock (by reclassification or otherwise), or
(iii) combine the outstanding Common Stock into a smaller number of shares,
then in each such case the amount set forth in the preceding sentence with
respect to the exchange or change of shares of Class A Preferred Stock shall
be adjusted by multiplying such amount by a fraction the numerator of which
is the number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common Stock
that were outstanding immediately prior to such event.
Section 8. NO REDEMPTION. The shares of Class A Preferred Stock shall
not be redeemable.
Section 9. RANKING. The Class A Preferred Stock shall rank junior to
all other series of the Corporation's Preferred Stock as to the payment of
dividends and the distribution of assets, unless the terms of any such series
shall provide otherwise.
-7-
<PAGE>
Section 10. AMENDMENT. The Certificate of Incorporation, as amended,
of the Corporation shall not be further amended in any manner which would
materially alter or change the powers, preferences or special rights of the
Class A Preferred Stock so as to affect them adversely without the
affirmative vote of the holders of a majority or more of the outstanding
shares of Class A Preferred Stock voting separately as a class.
Section 11. FRACTIONAL SHARES. Class A Preferred Stock may be issued
in fractions of a share which shall entitle the holder, in proportion to such
holder's fractional shares, to exercise voting rights, receive dividends,
participate in distributions and to have the benefit of all other rights of
holders of Class A Preferred Stock.
IN WITNESS WHEREOF, we have executed and subscribed this Certificate
and do affirm the foregoing as true under the penalties of perjury this 6th
day of November, 1996.
/s/ James D. Atkinson III
--------------------------
James D. Atkinson III
Secretary
STATE OF MINNESOTA
DEPARTMENT OF STATE
FILED
NOV 7 1996
/s/ Joan Anderson Growe
Secretary of State
-8-
<PAGE>
[SEAL] MINNESOTA SECRETARY OF STATE
AMENDMENT OF ARTICLES OF INCORPORATION
BEFORE COMPLETING THIS FORM, PLEASE READ INSTRUCTIONS LISTED BELOW.
CORPORATE NAME: (List the name of the company prior to any desired name change)
Olympic Financial Ltd.
- -------------------------------------------------------------------
This amendment is effective on the day it is filed with the Secretary of
State, unless you indicate another date, no later than 30 days after filing
with the Secretary of State.
--------------------
The following amendment(s) of articles regulating the above corporation were
adopted: (Insert full text of newly amended article(s) indicating which
article(s) is (are) being amended or added.) If the full text of the
amendment will not fit in the space provided, attach additional numbered
pages. (Total number of pages including this form ___.)
ARTICLE ________
SEE ATTACHED
DESIGNATION OF RIGHTS AND PREFERENCES
OF
UNDESIGNATED STOCK
OF
OLYMPIC FINANCIAL LTD.
This amendment has been approved pursuant to MINNESOTA STATUTES CHAPTER 302A
OR 317A. I certify that I am authorized to execute this amendment and I
further certify that I understand that by signing this amendment, I am
subject to the penalties of perjury as set forth in section 609.48 as if I
had signed this amendment under oath.
/s/ James D. Atkinson III
-----------------------------------------------
(Signature of Authorized Person)
- --------------------------------------------------------------------------------
INSTRUCTIONS FOR OFFICE USE ONLY
1. Type or print with black ink.
2. A Filing Fee of: $35.00, made
payable to the Secretary of
State.
3. Return completed forms to:
SECRETARY OF STATE
180 STATE OFFICE BUILDING
100 CONSTITUTION AVE.
ST. PAUL, MN 55155-1299
(612) 296-2803
<PAGE>
DESIGNATION OF RIGHTS AND PREFERENCES
OF
UNDESIGNATED STOCK
OF
OLYMPIC FINANCIAL LTD.
The undersigned, Senior Vice President and Secretary of Olympic
Financial Ltd., a Minnesota corporation (the "Corporation"), does hereby
certify that the Board of Directors of the Corporation, by written action
dated as of March 7, 1997, did adopt the following resolution providing that
2,052,000 shares of the Corporation's undesignated shares be designated as
shares of Common Stock, $.01 par value per share.
RESOLVED, that pursuant to the authority vested in the Board of
Directors of the Corporation by the Articles of Incorporation of the
Corporation, the Board of Directors hereby designates 2,052,000 shares of the
Corporation's authorized but undesignated shares as shares of Common Stock,
$.01 par value per share.
IN WITNESS WHEREOF, the undersigned has executed this
Certificate of Designation on behalf of the Corporation as of March 10, 1997.
/s/ James D. Atkinson III
---------------------------------------
James D. Atkinson III
Senior Vice President and Secretary
STATE OF MINNESOTA
DEPARTMENT OF STATE
FILED
MAR 25 1997
/s/ Joan Anderson Growe
Secretary of State
<PAGE>
ARTICLES OF AMENDMENT
TO
RESTATED ARTICLES OF INCORPORATION
OF
OLYMPIC FINANCIAL LTD.
OLYMPIC FINANCIAL LTD., a corporation organized and existing under
the laws of the State of Minnesota (herein referred to as the "Corporation"),
in accordance with the provisions of Minnesota Statutes Section 302A.139,
does hereby certify that:
On April 28, 1997, pursuant to the authority conferred upon the
shareholders by Minnesota Statutes 302A.111 Subdivision 1, the shareholders
authorized and adopted a resolution amending Article I of the Restated
Articles of Incorporation of the Corporation, as amended, by changing the
name of the Corporation from Olympic Financial Ltd. to Arcadia Financial Ltd.
and the following is a true copy of such resolution:
RESOLVED, that Article I of the Corporation's Restated Articles
of Incorporation, as amended, shall be amended to change the
name of the Corporation from Olympic Financial Ltd. to Arcadia
Financial Ltd.
IN WITNESS WHEREOF, Olympic Financial Ltd. has caused these Articles
of Amendment to be signed by its Chief Executive Officer and President this
28th day of April, 1997.
OLYMPIC FINANCIAL LTD.
By: /s/ Richard A. Greenawalt
----------------------------
Richard A. Greenawalt
Chief Executive Officer and President
STATE OF MINNESOTA
DEPARTMENT OF STATE
FILED
APR 29 1997
/s/ Joan Anderson Growe
Secretary of State
<PAGE>
___________________________________
| |
| STATE OF MINNESOTA |
| |
| DEPARTMENT OF STATE |
| |
| I hereby certify that this is |
| a true and complete copy of the |
| document as filed for record in |
| this office. |
| |
| DATED 5/29 1997 |
| -------- -- |
| |
| /s/ Joan Anderson Growe |
| -------------------------- |
| Secretary of State |
| |
| [SEAL] |
| |
| BY /s/ (Signature illegible) |
| -------------------------- |
| |
__________________________________
<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.
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<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) the name and address of
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<PAGE>
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.
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*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
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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 said
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<PAGE>
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.
---------------------------------------
James D. Atkinson III
Secretary
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SPREAD ACCOUNT AGREEMENT,
dated as of March 25, 1993,
as amended and restated
as of June 1, 1997
among
ARCADIA FINANCIAL LTD.,
ARCADIA RECEIVABLES FINANCE CORP.,
ARCADIA SECURITY ASSURANCE INC.
THE CHASE MANHATTAN BANK
and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
<PAGE>
<TABLE>
TABLE OF CONTENTS
PAGE
ARTICLE I
DEFINITIONS
<CAPTION>
<S> <C> <C>
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
Section 2.09. Program Spread Account and Tag Accounts . . . . . . . . . . . . 16
ARTICLE III
SPREAD ACCOUNTS
Section 3.01. Establishment of Spread Accounts; Initial Deposits into
Spread Accounts . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 3.02. Investments . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 3.03. Distributions: Priority of Payments . . . . . . . . . . . . . . 21
Section 3.04. General Provisions Regarding Spread Accounts . . . . . . . . . 25
Section 3.05. Reports by the Collateral Agent . . . . . . . . . . . . . . . . 25
ARTICLE IV
THE COLLATERAL AGENT
Section 4.01. Appointment and Powers. . . . . . . . . . . . . . . . . . . . . 26
Section 4.02. Performance of Duties . . . . . . . . . . . . . . . . . . . . . 26
Section 4.03. Limitation on Liability . . . . . . . . . . . . . . . . . . . . 26
Section 4.04. Reliance upon Documents . . . . . . . . . . . . . . . . . . . . 27
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Section 4.05. Successor Collateral Agent. . . . . . . . . . . . . . . . . . . 27
Section 4.06. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 4.07. Compensation and Reimbursement. . . . . . . . . . . . . . . . . 29
Section 4.08. Representations and Warranties of the Collateral Agent. . . . . 29
Section 4.09. Waiver of Setoffs . . . . . . . . . . . . . . . . . . . . . . . 30
Section 4.10. Control by the Controlling Party. . . . . . . . . . . . . . . . 30
ARTICLE V
COVENANTS OF THE SELLER
Section 5.01. Preservation of Collateral. . . . . . . . . . . . . . . . . . . 30
Section 5.02. Opinions as to Collateral . . . . . . . . . . . . . . . . . . . 31
Section 5.03. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 5.04. Waiver of Stay or Extension Laws; Marshalling of Assets . . . . 31
Section 5.05. Noninterference, etc. . . . . . . . . . . . . . . . . . . . . . 32
Section 5.06. Seller Changes. . . . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE VI
CONTROLLING PARTY; INTERCREDITOR PROVISIONS
Section 6.01. Appointment of Controlling Party. . . . . . . . . . . . . . . . 32
Section 6.02. Controlling Party's Authority . . . . . . . . . . . . . . . . . 33
Section 6.03. Rights of Secured Parties . . . . . . . . . . . . . . . . . . . 35
Section 6.04. Degree of Care. . . . . . . . . . . . . . . . . . . . . . . . . 35
ARTICLE VII
REMEDIES UPON DEFAULT
Section 7.01. Remedies upon a Default . . . . . . . . . . . . . . . . . . . . 35
Section 7.02. Waiver of Default . . . . . . . . . . . . . . . . . . . . . . . 36
Section 7.03. Restoration of Rights and Remedies. . . . . . . . . . . . . . . 36
Section 7.04. No Remedy Exclusive . . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE VIII
MISCELLANEOUS
Section 8.01. Further Assurances. . . . . . . . . . . . . . . . . . . . . . . 36
Section 8.02. Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 8.03. Amendments; Waivers . . . . . . . . . . . . . . . . . . . . . . 37
Section 8.04. Severability. . . . . . . . . . . . . . . . . . . . . . . . . . 37
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Section 8.05. Nonpetition Covenant. . . . . . . . . . . . . . . . . . . . . . 37
Section 8.06. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 8.07. Term of this Agreement. . . . . . . . . . . . . . . . . . . . . 40
Section 8.08. Assignments: Third-Party Rights; Reinsurance . . . . . . . . . 40
Section 8.09. Consent of Controlling Party. . . . . . . . . . . . . . . . . . 40
Section 8.10. Trial by Jury Waived. . . . . . . . . . . . . . . . . . . . . . 41
Section 8.11. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 8.12. Consents to Jurisdiction. . . . . . . . . . . . . . . . . . . . 41
Section 8.13. Limitation of Liability . . . . . . . . . . . . . . . . . . . . 41
Section 8.14. Determination of Adverse Effect . . . . . . . . . . . . . . . . 42
Section 8.15. Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 8.16. Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
</TABLE>
EXHIBIT A Form of Pooling and Servicing Agreement
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<PAGE>
SPREAD ACCOUNT AGREEMENT, dated as of March 25, 1993, as amended and restated
as of June 1, 1997 (the "Agreement"), by and among ARCADIA FINANCIAL LTD., a
Minnesota corporation ("Arcadia Financial"), ARCADIA RECEIVABLES FINANCE
CORP., a Delaware corporation (the "Seller"), FINANCIAL SECURITY ASSURANCE
INC., a New York stock insurance company ("Financial Security"), NORWEST BANK
MINNESOTA, NATIONAL ASSOCIATION, a national banking association in its
capacities as Trustee under each Pooling and Servicing Agreement and/or as
Trustee under each Indenture with respect to each Series specified in the
related Series Supplement (as defined below), THE CHASE MANHATTAN BANK, as
Trustee under each Indenture with respect to each Series specified in the
related Series Supplement, each in such respective capacities as agent for
the Certificateholders and/or Noteholders with respect to the related Series
(the "Trustee") and NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, 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 Pooling and Servicing Agreements or Sale and
Servicing Agreements, the Seller from time to time sells all of its right,
title and interest in and to Receivables and certain other Trust Property.
3. The Seller has requested that Financial Security issue
Policies to guarantee payment of the Guaranteed Distributions or Scheduled
Payments (as defined in the relevant Policy) on each Distribution Date in
respect of asset-backed securities backed by such Receivables and Other Trust
Property.
4. In partial consideration of the issuance of the Policies, the
Seller has agreed that Financial Security shall have certain rights as
Controlling Party, to the extent set forth herein.
5. The Seller is a wholly owned special purpose subsidiary of
OFL. Certain of the purchasers of Receivables and Other Trust Property have
agreed to pay a 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 Insurance Agreements (such obligations
forming part of the Insurer Secured Obligations referred to herein). The
Insurer Secured Obligations form part of the consideration to Financial
Security for its issuance of the Policies.
6. In order to secure the performance of the 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 Collateral as
Collateral to the Collateral Agent for the benefit of Financial Security
<PAGE>
and for the benefit of the Trustees on behalf of the Trusts, upon the terms
and conditions set forth herein.
7. In connection with the issuance of Policies subsequent to the
Policy issued with respect to the Series 1993-A Trust, 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 have entered into or will enter into a
Series Supplement hereto pursuant to which the Seller has pledged or will
pledge additional Collateral pursuant to the terms hereof and such Series
Supplement.
8. The Seller has entered into a Repurchase Agreement dated as of
December 3, 1996 with Arcadia Receivables Conduit Corp., a Delaware
corporation, (the "Issuer") (the "Repurchase Agreement") pursuant to which
the Seller has sold or will sell all of its right, title and interest in
certain Receivables, and that the Issuer will issue one or more classes or
tranches of Warehousing 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
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<PAGE>
defined herein with respect to one or more Series, if applicable, such term
shall be defined with respect to any other Series in the Series Supplement
related thereto. The following terms shall have the following respective
meanings:
"AUTHORIZED OFFICER" means, (i) with respect to Financial Security,
the Chairman of the Board, the President, the Executive Vice President or any
Managing Director of Financial Security, (ii) with respect to the Trustee or
the Collateral Agent, any Vice President or Trust Officer thereof, (iii) with
respect to OFL, the President or any Vice President thereof, and (iv) with
respect to the Seller, the President or any Vice President thereof.
"AVERAGE DELINQUENCY RATIO" means, with respect to any Series
(other than the Warehousing 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 March 12, 1997, between OFL and Norwest
Bank Minnesota, National Association, as amended or supplemented, relating to
OFL's $300,000,000 11 1/2% Senior Notes due 2007, 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, any property
pledged pursuant to Section 2.09(f), and, with respect to any 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
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<PAGE>
of such reduction. A "Cram Down Loss" shall be deemed to have occurred on the
date of issuance of such order.
"CUMULATIVE DEFAULT RATE" means, with respect to any Determination
Date and any Series (other than the Warehousing 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 (other than the Warehousing 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, with respect to Series 1994-B, Series
1994-A, Series 1993-D, Series 1993-C, Series 1993-B or Series 1993-A and each
other Spread Account for which "Deemed Cured" is not defined in the related
Series Supplement, (a) with respect to a Trigger Event that has occurred
pursuant to clause (A)(i) or (ii) of the definition thereof, as of a
Determination Date that no such clause (A)(i) or clause (A)(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 (A)(iii)
or clause (A)(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, that no such clause (A)(iii) or clause (A)(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 (other than the Warehousing 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
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<PAGE>
denominator of which is equal to the Aggregate Principal Balance as of the
related Accounting Date.
"ELIGIBLE ACCOUNT" means a segregated trust account that (i) is
either (x) maintained with a depository institution or trust company the
long-term unsecured debt obligations of which are rated "AA" or higher by
Standard & Poor's and "Aa2" or higher by Moody's, or (y) maintained with a
depository institution or trust company the commercial paper or other
short-term unsecured debt obligations of which are rated "A-l+" by Standard &
Poor's and "P-l" by Moody's and (ii) in either case, such depository
institution or trust company shall have been specifically approved by the
Controlling Party, acting in its discretion, by written notice to the
Collateral Agent.
"FINAL TERMINATION DATE" means, with respect to a Series, the date
that is the later of (i) the Insurer Termination Date with respect to such
Series and (ii) the Trustee Termination Date with respect to such Series.
"FINANCIAL SECURITY DEFAULT" means, with respect to any Series, any
one of the following events shall have occurred and be continuing:
(a) Financial Security shall have failed to make a payment
required under a related Policy;
(b) Financial Security shall have (i) filed a petition or
commenced any case or proceeding under any provision or chapter of the United
States Bankruptcy Code, the New York State Insurance Law or any other similar
federal or state law relating to insolvency, bankruptcy, rehabilitation,
liquidation or reorganization, (ii) made a general assignment for the benefit
of its creditors, or (iii) had an order for relief entered against it under
the United States Bankruptcy Code, the New York State Insurance Law, or any
other similar federal or state law relating to insolvency, bankruptcy,
rehabilitation, liquidation or reorganization which is final and
nonappealable; or
(c) a court of competent jurisdiction, the New York Department of
Insurance or other competent regulatory authority shall have entered a
final and nonappealable order, judgment or decree (i) appointing a
custodian, trustee, agent or receiver for Financial Security or for all or
any material portion of its property or (ii) authorizing the taking of
possession by a custodian, trustee, agent or receiver of Financial Security
(or the taking of possession of all or any material portion of the property
of Financial Security).
"INITIAL PRINCIPAL AMOUNT" means $59,222,640.38 with respect to
Series 1993-A.
"INITIAL SPREAD ACCOUNT DEPOSIT" means $2,368,906 for Series 1993-A.
"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
5
<PAGE>
on such Distribution Date) and (ii) the Spread Account Minimum Amount as of
such Distribution Date.
"INSURANCE AGREEMENT" means, with respect to any Series, the
Insurance and Indemnity Agreement among Financial Security, the Seller, OFL
and such other parties as may be named therein.
"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 Arcadia Receivables Conduit Corp., a Delaware
corporation.
"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 (other than the Warehousing 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.
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"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.
"PROGRAM SPREAD ACCOUNT" has the meaning specified in Section 2.09(a)
hereof.
"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.
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"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 "Cumulative Default Rate," "Average Delinquency Ratio,"
"Cumulative Net Loss Rate," "Deemed Cured," "Delinquency Ratio," "Net Losses,"
"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 Determination Date, and no Insurance
Agreement Event of Default with respect to Series
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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 (other than the Warehousing 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 Third Amended and Restated Stock
Pledge Agreement, dated as of December 3, 1996, between OFL, Financial Security
and the Collateral Agent, as amended from time to time.
"TAG ACCOUNT" has the meaning specified in Section 2.09(c).
"TRANSACTION DOCUMENTS" means, with respect to a Series, this
Agreement, each of the Pooling and Servicing Agreement or Trust Agreement, Sale
and Servicing Agreement and Indenture, or Servicing Agreement, Repurchase
Agreement, Indenture and Security Agreement, as applicable, the Insurance
Agreement, the Custodian Agreement, the Purchase Agreement, any
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Subsequent Purchase Agreements and Subsequent Transfer Agreements, any
Underwriting Agreement, the Lockbox Agreement, and the Stock Pledge Agreement
related to such Series.
"TRIGGER EVENT" means, with respect to Series 1993-A and as of a
Determination Date, the occurrence of any of the events specified in clause (A)
together with the occurrence of the event specified in clause (B):
(A) (i) [reserved];
(ii) the Average Delinquency Ratio for such Determination Date shall
be equal to or greater than 5.00%;
(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
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during the sixth calendar month succeeding the Series 1993-A
Closing 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.
(B) The amount specified with respect to such Series in the last
sentence of Section 2.09(f) hereof is positive on such
Determination Date, and such amount has not been deposited in
the related Tag Account on such Determination 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 (other than the
Warehousing Series), has the meaning specified in the related Pooling and
Servicing Agreement or Trust Agreement, as the case may be, and with respect to
the Warehousing Series, means the Seller Conveyed Property (as defined in the
Repurchase Agreement).
"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
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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, (ii) the Trustee, the Owner Trustee, the Trust, the
Certificateholders or the Noteholders under the Trust Agreement, the Sale and
Servicing Agreement or the Indenture with respect to such Series or (iii) the
Trustee and the Noteholders under the Indenture with respect to the Warehousing
Series.
"TRUSTEE TERMINATION DATE" means, with respect to any Series, the date
which is the later 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 or (ii)
except with respect to the Warehousing Series, 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 (other than
the Warehousing 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
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Agent for deposit and distribution pursuant to this Agreement. The Seller and
OFL hereby agree that payment of the Series 1993-A Credit Enhancement Fee in
the manner and subject to the conditions set forth herein and in the Series
1993-A Pooling and Servicing Agreement is adequate consideration and the
exclusive consideration to be received by the Seller or OFL for the
obligations of the Seller pursuant hereto and the obligations of OFL pursuant
hereto (including, without limitation, the transfer by the Seller to the
Collateral Agent of the Initial Spread Account Deposit) and pursuant to the
Series 1993-A Insurance Agreement. The Seller and OFL hereby agree with the
Trustee and with Financial Security that payment of the Series 1993-A Credit
Enhancement Fee to the Seller is expressly conditioned on subordination of
the Series 1993-A Credit Enhancement Fee to payments on the Certificates of
any Series, payments on the Notes of any Series, payments of amounts due to
Financial Security and the other obligations of the Trusts, in each case to
the extent provided in Section 4.6 of the Standard 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 or will sell 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
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pledges, assigns, grants, transfers and conveys to the Collateral Agent, on
behalf of and for the benefit of the Secured Parties to secure the Secured
Obligations with respect to each Series, a lien on and security interest in
(which lien and security interest is intended to be prior to all other liens,
security interest or other encumbrances), all of its right, title and
interest in and to the following (all being collectively referred to herein
as the "Series 1993-A Collateral"):
(i) the Series 1993-A Credit Enhancement Fee and all rights and
remedies that the Seller may have to enforce payment of the Series 1993-A
Credit Enhancement Fee whether under the Series 1993-A Pooling and
Servicing Agreement or otherwise;
(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
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either the Seller or OFL from, any obligation to perform or satisfy, any
term, covenant, condition or agreement to be performed or satisfied by the
Seller or OFL under or in connection with this Agreement, the Insurance
Agreement or any other Transaction Document to which it is a party or (ii)
impose any obligation on any of the Secured Parties or the Collateral Agent
to perform or observe any such term, covenant, condition or agreement or
impose any liability on any of the Secured Parties or the Collateral Agent
for any act or omission on its part relative thereto or for any breach of any
representation or warranty on its part contained therein or made in
connection therewith, except, in each case, to the extent provided herein and
in the other Transaction Documents.
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
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deliver such instruments as the successor Controlling Party may reasonably
request to effectuate such release, and any such instruments so executed and
delivered shall be fully binding on Financial Security and any Person
claiming by, through or under Financial Security.
(b) On the Trustee Termination Date related to a Series, the
rights, remedies, powers, duties, authority and obligations, if any, conferred
upon the Trustee pursuant to this Agreement in respect of the Collateral related
to such Series shall terminate and be of no further force and effect and all
such rights, remedies, powers, duties, authority and obligations of the Trustee
with respect to such Collateral shall be automatically released; PROVIDED that
any indemnity provided to the Trustee herein shall survive such Trustee
Termination Date. If the 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, or of any deferred portion of the purchase price
payable by the Seller to OFL with respect to any Receivable 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.
Section 2.09. PROGRAM SPREAD ACCOUNT AND TAG ACCOUNTS. (a) On or
prior to the date of any transfer of cash by the Seller pursuant to Section
2.09(b)(i), the
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Collateral Agent at the direction of the Seller shall establish at an
institution at which one or more Spread Accounts established hereunder
are then maintained an Eligible Account, designated "Program Spread
Account -- Norwest Bank Minnesota, National Association" (the "Program Spread
Account"). The Program Spread Account shall continuously be maintained at an
institution at which one or more Spread Accounts are established hereunder.
(b) The Collateral Agent shall hold, for the benefit of the Seller,
the following property in the Program Spread Account:
(i) all cash amounts from time to time on deposit in the Program
Spread Account which at the Seller's election it has delivered to the
Collateral Agent from (x) the proceeds of the sale of securities of a Series
or (y) amounts released to the Seller from the Lien of this Agreement ; and
(ii) investments made with the proceeds of the property described in
clause (i) above, or made with amounts on deposit in the Program Spread
Account.
Notwithstanding anything herein or in any Series Supplement to the
contrary, the property held by the Collateral Agent under this Section
2.09(b) shall not constitute Collateral hereunder.
(c) With respect to each Series for which the Seller has made an
election pursuant to Section 2.09(f) in connection with such Series, on or
prior to the date of any transfer of cash from the Program Spread Account in
connection with such election, the Collateral Agent at the direction of the
Seller shall establish at the same institution at which the related Spread
Account established hereunder is then maintained an Eligible Account,
designated "Tag Account Series [series designation] - Norwest Bank Minnesota,
National Association, as Collateral Agent for Financial Security Assurance
Inc. and another Secured Party" (each such account, a "Tag Account"). Each
Tag Account shall continue to be maintained at the same institution as the
related Spread Account established hereunder.
(d) In order to secure the performance of the Secured Obligations
with respect to each Series, the Seller 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 a security interest on (which lien and security
interest is intended to be prior to all other liens, security interests and
other encumbrances), all of its right, title and interest in and to the
following:
(i) each Tag Account established pursuant to Section 2.09(c) hereof,
(including, without limitation, all monies, checks, securities, investments
and other documents held in or evidencing any such accounts);
(ii) all of the Seller's right, title and interest in and to
investments made with proceeds of the property described in clause (i) above;
and
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(iii) all distributions, revenues, products, substitutions, benefits,
profits and proceeds, in whatever form, of any of the foregoing.
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 shall, prior to the
deposit of amounts in any Tag Account, execute and file 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 on the Collateral pledged or to be
pledged pursuant to Section 2.09(d) which can be perfected by the filing of a
financing statement.
(e) The Program Spread Account and each Tag 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, the Program Spread Account
and each Tag Account shall be maintained by the Collateral Agent at all times
separate and apart from any other account of the Seller, OFL, the Servicer,
the Trust or the Issuer. All income or loss on investments of funds in the
Program Spread Account and any Tag Account shall be reported by the Seller as
taxable income or loss of the Seller.
(f) Upon the occurrence of an event specified in clause (A) of the
definition of Trigger Event with respect to a Series and until such event is
Deemed Cured, at the election of the Seller amounts on deposit in the Program
Spread Account may be withdrawn on the related Determination Date by the
Collateral Agent from the Program Spread Account and irrevocably deposited
into one or more Tag Accounts for each Series with respect to which an event
specified in such clause (A) shall have occurred (and which event is not
Deemed Cured) and with respect to which the Seller has made such election.
In the event of such election, the Collateral Agent shall deposit from the
Program Spread Account into the related Tag Account, on such related
Determination Date, an amount equal to the excess, if any, of amounts on
deposit in the Spread Account (excluding any amount in any related Tag
Account, and taking into account any deposits thereto to be made pursuant to
the first paragraph of Section 3.03(b) and taking into account any
withdrawals therefrom to be made pursuant to priority FIRST of Section
3.03(b) on the related Distribution Date, but not taking into account any
other changes in the amount on deposit in such account pursuant to Section
3.03(b)) over the amount specified in clause (i) of the definition of Spread
Account Maximum Amount with respect to such Series (taking into account the
decline in the related Series Balance to be effected on the related
Distribution Date).
(g) Amounts on deposit in the Program Spread Account shall be
released from such account at any time upon the request of the Seller. Funds
in the Program Spread Account shall not be commingled with funds in any
Spread Account, any Tag Account or with any other moneys. Amounts on deposit
in a Spread Account shall be released from the Lien of this Agreement and
delivered to the Seller, or at the direction of the Seller deposited into the
Program Spread Account, upon deposit of a like amount pursuant to Section
2.09(f) into the related Tag Account.
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(h) Upon deposit pursuant to Section 2.09(f) of amounts into a Tag
Account for a Series such amounts shall be treated fungibly with all amounts
on deposit in the Spread Account with respect to the same Series, except
that, amounts deposited into a Spread Account pursuant to Section 3.03(b)
shall be deemed to be deposited into the Spread Account, and amounts
withdrawn from a Spread Account pursuant to Section 3.03(b) shall be
withdrawn first from the related Tag Account and second from the Spread
Account. Except as otherwise explicitly specified, all references herein to a
Series Spread Account hereunder shall be deemed to include reference to any
Tag Account created with respect to such Series, and all references herein to
amounts on deposit in a Series Spread Account shall be deemed to include
reference amounts on deposit in the related Tag Account, if any, created with
respect to such Series.
ARTICLE III
SPREAD ACCOUNTS
Section 3.01. ESTABLISHMENT OF SPREAD ACCOUNTS; INITIAL DEPOSITS INTO
SPREAD ACCOUNTS.
(a) 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").
The Spread Accounts established under this Agreement may be maintained at one
or more depository institutions (which depository institutions 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 and in the Warehousing Series
Supplement. 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 (other than the
Warehousing 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 (other than the Warehousing 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.
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(d) Each Spread Account shall be separate from each respective Trust
and amounts on deposit therein will not constitute a part of the Trust
Property of any Trust. 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 or in the Program Spread Account shall
be invested and reinvested by the Collateral Agent, at the written direction
(which may include, subject to the provisions hereof, general standing
instructions) of the Seller (unless a Default shall have occurred and be
continuing, in which case at the written direction of the Controlling Party)
or its designee received by the Collateral Agent by 1:00 P.M. New York City
time on the Business Day prior to the date on which such investment shall be
made, in one or more Eligible Investments in the manner specified in Section
3.02(c). If no written direction with respect to any portion of such Spread
Account or the Program 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 or in the Program
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 N.Y. U.C.C. Section 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
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Bank of New York or the Federal Reserve Bank of Minneapolis, or (D) in the
case of uncertificated securities, issued in the name of such institution,
and (iii) identified, by book entry or otherwise, as held for the account of,
or pledged to, the Collateral Agent on the records of such institution, and
such institution shall have sent the Collateral Agent a confirmation thereof,
(c) with respect to repurchase obligations held in such account, such
repurchase obligations shall be identified by such institution, by book entry
or otherwise, as held for the account of, or pledged to, the Collateral Agent
on the records of such institution, and the related securities shall be held
in accordance with the requirements of clause (b) above, and (d) with respect
to other Eligible Investments other than securities and repurchase
agreements, such Eligible Investments shall be held in a manner acceptable to
the Collateral Agent. Subject to the other provisions hereof, the Collateral
Agent shall have sole control over each such investment and the income
thereon, and any certificate or other instrument evidencing any such
investment, if any, shall be delivered directly to the Collateral Agent or
its agent, together with each document of transfer, if any, necessary to
transfer title to such investment to the Collateral Agent in a manner which
complies with Section 2.06 and this subsection.
(d) If amounts on deposit in any Spread Account are at any time
invested in an Eligible Investment payable on demand, the Collateral Agent
shall (i) consistent with any notice required to be given thereunder, demand
that payment thereon be made on the last day such Eligible Investment is
permitted to mature under the provisions hereof and (ii) demand payment of
all amounts due thereunder promptly upon receipt of written notice from the
Controlling Party to the effect that such investment does not constitute an
Eligible Investment.
(e) All moneys on deposit in a Spread Account together with any
deposits or securities in which such moneys may be invested or reinvested,
and any gains from such 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 3.11
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:
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FIRST, determine the amounts to be on deposit in the respective Spread
Accounts (taking into account amounts in respect of the respective Credit
Enhancement Fees to be deposited into the related Spread Accounts) on the
next succeeding Distribution Date which will be available to satisfy any
Collection Account Shortfall and any Warehousing Shortfall;
SECOND, determine (i) the amounts, if any, to be distributed from each
Spread Account related to each Series with respect to which there exists a
Collection Account Shortfall and (ii) whether, following distribution from
the related Spread Accounts to the respective Trustees for deposit into the
respective Collection Accounts with respect to which there exist Collection
Account Shortfalls, a Collection Account Shortfall will continue to exist
with respect to one or more Series;
THIRD, (i) if a Collection Account Shortfall will continue to exist
with respect to one or more Series 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 in respect of such Collection Account
Shortfall(s). 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 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) 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) of
Section 3.6(a) or priority (v) of Section 3.6(b) 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
3.11 of the Servicing Agreement of a Collection Account Shortfall or
Warehousing
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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 Collection Account Shortfall or Warehousing Shortfall referred
to in clause (iii) shall be the respective amounts, if any, withdrawn from
unrelated Spread Accounts, as calculated pursuant to paragraph THIRD of this
Section 3.03(a) or calculated to be available pursuant to priority SEVENTH of
Section 3.03(b)), if any, to be distributed to such Trustee on the next
Distribution Date in respect of such Collection Account Shortfall or
Warehousing Shortfall, as the case may be.
(b) On each Distribution Date, following delivery by the Trustee of
the respective Credit Enhancement Fees for deposit into the respective Spread
Accounts pursuant to Section 4.6 of the Standard Terms and Conditions
included in the respective Pooling and Servicing Agreements or Section 4.6 of
the respective Sale and Servicing Agreements, or the amount deposited into
the Spread Account for the Warehousing Series pursuant to Section 3.6 or
Section 3.10 of the Warehousing Series 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.
References herein to a Spread Account shall include references to the related
Tag Account and such amounts shall be treated fungibly, except that amounts
deposited into a Spread Account pursuant to Section 3.03(b) shall be deemed
to be deposited into a Spread Account, and amounts withdrawn from a Spread
Account pursuant to Section 3.03(b) shall be withdrawn first from the related
Tag Account and second from the Spread Account.
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 there exists a Collection Account
Shortfall after deposit into the Collection Account of amounts distributed
pursuant to priority FIRST, from each 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, 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;
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 (excluding the Warehousing Series) 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
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Shortfalls for all Series for deposit into each Spread Account PRO RATA in
accordance with their respective Spread Account Shortfalls;
FOURTH, if with respect to one or more Series (excluding the Warehousing
Series), amounts have been withdrawn from the related Spread Account pursuant
to priority FIRST or SECOND of this Section 3.03(b) on such Distribution Date
and/or on prior Distribution Dates and such amounts have not been redeposited
in full into such Spread Account pursuant to this priority FOURTH (such
amounts in the aggregate for a Series "Unreimbursed Amounts"), from amounts,
if any, on deposit in each Spread Account in excess of the related Spread
Account Maximum Amount (after making any withdrawals therefrom required by
priority FIRST, SECOND or THIRD of this Section 3.03(b)), an amount up to the
aggregate of the Unreimbursed Amounts for all such Series for deposit into
each Spread Account with respect to which there exist Unreimbursed Amounts
PRO RATA in accordance with the excess of the Spread Account Maximum Amount
of each such Spread Account over the amount on deposit in such Spread Account;
FIFTH, if any amounts are owed to a successor Servicer pursuant to
Section 9.3(c) of the Standard Terms and Conditions included in a Pooling and
Servicing Agreement or Section 8.3(c) of a Sale and Servicing Agreement 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, 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
Warehousing Shortfall, from the aggregate of all amounts on deposit in the
Warehousing Series Spread Account and from the aggregate of all amounts in
unrelated Spread Accounts in excess of the related Spread Account Maximum
Amount (except that such limitation shall not exist with respect to a Spread
Account Maximum Amount which is unlimited), an amount up to the amount of
such Warehousing 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.
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Section 3.04. GENERAL PROVISIONS REGARDING SPREAD ACCOUNTS.
(a) Promptly upon the establishment (initially or upon any
relocation) of a Spread Account hereunder, the Collateral Agent shall advise
the Seller and each Secured Party in writing of the name and address of the
depository institution or trust company where such Spread Account has been
established (if not Norwest Bank Minnesota, National Association or any
successor Collateral Agent in its commercial banking capacity), the name of
the officer of the depository institution who is responsible for overseeing
such Spread Account, the account number and the individuals whose names
appear on the signature cards for such Spread Account. The Seller shall cause
each such depository institution or trust company to execute a written
agreement, in form and substance satisfactory to the Controlling Party,
waiving, and the Collateral Agent by its execution of this Agreement hereby
waives (except to the extent expressly provided herein), in each case to the
extent permitted under applicable law, (i) any banker's or other statutory or
similar Lien, and (ii) any right of set-off or other similar right under
applicable law with respect to such Spread Account and any other Spread
Account and agreeing, and the Collateral Agent by its execution of this
Agreement hereby agrees, to notify the Seller, the Collateral Agent, and each
Secured Party of any charge or claim against or with respect to such Spread
Account. The Collateral Agent shall give the Seller and each Secured Party at
least ten Business Days' prior written notice of any change in the location
of such Spread Account or in any related account information. If the
Collateral Agent changes the location of any Spread Account, it shall change
the location of the other Spread Accounts, so that all Spread Accounts shall
at all times be located at the same depository institution. Anything herein
to the contrary notwithstanding, unless otherwise consented to by the
Controlling Party in writing, the Collateral Agent shall have no right to
change the location of any Spread Account.
(b) Upon the written request of the Controlling Party or the Seller
and at the expense of the Seller, the Collateral Agent shall cause, at the
expense of the Seller, the 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
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the identity of the investments included therein as of the last day of the
related Monthly Period, and shall provide accountings of deposits into and
withdrawals from the Spread Accounts, and of the investments made therein, to
the independent accountants upon their request for purposes of their reports
pursuant to Section 3.11 of the Pooling and Servicing Agreements and Section
3.11 of the Sale and Servicing Agreements.
ARTICLE IV
THE COLLATERAL AGENT
Section 4.01. APPOINTMENT AND POWERS. Subject to the terms and
conditions hereof, each of the Secured Parties hereby appoints Norwest Bank
Minnesota, National Association as the Collateral Agent with respect to the
Series 1993-A Collateral and the related Collateral subsequently specified in
a Series Supplement, and Norwest Bank Minnesota, National Association hereby
accepts such appointment and agrees to act as Collateral Agent with respect
to the Series 1993-A Collateral, and upon execution of any Series Supplement,
shall be deemed to accept such appointment, and agree to act as Collateral
Agent with respect to such Collateral, in each case, for the Secured Parties,
to maintain custody and possession of such Collateral (except as otherwise
provided hereunder) and to perform the other duties of the Collateral Agent
in accordance with the provisions of this Agreement. Each Secured Party
hereby authorizes the Collateral Agent to take such action on its behalf, and
to exercise such rights, remedies, powers and privileges hereunder, as the
Controlling Party may direct and as are specifically authorized to be
exercised by the Collateral Agent by the terms hereof, together with such
actions, rights, remedies, powers and privileges as are reasonably incidental
thereto. The Collateral Agent shall act upon and in compliance with the
written instructions of the Controlling Party delivered pursuant to this
Agreement promptly following receipt of such written instructions; provided
that the Collateral Agent shall not act in accordance with any 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
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responsible for the validity, effectiveness, value, sufficiency or
enforceability against the Seller or OFL of this Agreement or any of the
Collateral (or any part thereof). Notwithstanding any term or provision of
this Agreement, the Collateral Agent shall incur no liability to the Seller,
OFL or the Secured Parties for any action taken or omitted by the Collateral
Agent in connection with the Collateral, except for the negligence or willful
misconduct on the part of the Collateral Agent, and, further, shall incur no
liability to the Secured Parties except for negligence or willful misconduct
in carrying out its duties to the Secured Parties. Subject to Section 4.04,
the Collateral Agent shall be protected and shall incur no liability to any
such party in relying upon the accuracy, acting in reliance upon the
contents, and assuming the genuineness of any notice, demand, certificate,
signature, instrument or other document reasonably believed by the Collateral
Agent to be genuine and to have been duly executed by the appropriate
signatory, and (absent actual knowledge to the contrary) the Collateral Agent
shall not be required to make any independent investigation with respect
thereto. The Collateral Agent shall at all times be free independently to
establish to its reasonable satisfaction, but shall have no duty to
independently verify, the existence or nonexistence of facts that are a
condition to the exercise or enforcement of any right or remedy hereunder or
under any of the Transaction Documents. The Collateral Agent may consult with
counsel, and shall not be liable for any action taken or omitted to be taken
by it hereunder in good faith and in accordance with the written advice of
such counsel. The Collateral Agent shall not be under any obligation to
exercise any of the remedial rights or powers vested in it by this Agreement
or to follow any direction from the Controlling Party unless it shall have
received reasonable security or indemnity satisfactory to the Collateral
Agent against the costs, expenses and liabilities which might be incurred by
it.
Section 4.04. RELIANCE UPON DOCUMENTS. In the absence of bad faith
or negligence on its part, the Collateral Agent shall be entitled to rely on
any communication, instrument, paper or other document reasonably believed by
it to be genuine and correct and to have been signed or sent by the proper
Person or Persons and shall have no liability in acting, 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
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performance of its duties under this Agreement would cause it to be in
violation of such legal requirements in a manner which would result in a
material adverse effect on the Collateral Agent, and the Controlling Party
does not elect to waive the Collateral Agent's obligation to perform those
duties which render it legally unable to act or elect to delegate those
duties to another Person, or (ii) with the prior written consent of the
Controlling Party. The Collateral Agent shall give not less than 60 days'
prior written notice of any such permitted resignation by registered or
certified mail to the other Secured Party and the Seller; PROVIDED, that such
resignation shall take effect only upon the date which is the latest of (i)
the effective date of the appointment of a successor Collateral Agent and the
acceptance in writing by such successor Collateral Agent of such appointment
and of its obligation to perform its duties hereunder in accordance with the
provisions hereof, (ii) delivery of the Collateral to such successor to be
held in accordance with the procedures specified in Article II hereof, and
(iii) receipt by the Controlling Party of an Opinion of Counsel to the effect
described in Section 5.02. Notwithstanding the preceding sentence, if by the
contemplated date of resignation specified in the written notice of
resignation delivered as described above no successor Collateral Agent or
temporary successor Collateral Agent has been appointed Collateral Agent or
becomes the Collateral Agent pursuant to subsection (d) hereof, the resigning
Collateral Agent may petition a court of competent jurisdiction in New York,
New York for the appointment of a successor.
(c) REMOVAL. The Collateral Agent may be removed by the
Controlling Party at any time, with or without cause, by an instrument or
concurrent instruments in writing delivered to the Collateral Agent, the
other Secured Party and the Seller. A temporary successor may be removed at
any time to allow a successor Collateral Agent to be appointed pursuant to
subsection (d) below. Any removal pursuant to the provisions of this
subsection (c) shall take effect only upon the date which is the latest of
(i) the effective date of the appointment of a successor Collateral Agent and
the acceptance in writing by such successor Collateral Agent of such
appointment and of its obligation to perform its duties hereunder in
accordance with the 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
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instruments shall, at the request of the temporary or permanent successor
Collateral Agent, be forthwith executed, acknowledged and delivered by the
Seller. The designation of any successor Collateral Agent and the instrument
or instruments removing any Collateral Agent and appointing a successor
hereunder, together with all other instruments provided for herein, shall be
maintained with the records relating to the Collateral and, to the extent
required by applicable law, filed or recorded by the successor Collateral
Agent in each place where such filing or recording is necessary to effect the
transfer of the Collateral to the successor Collateral Agent or to protect or
continue the perfection of the security interests granted hereunder.
(e) Any resignation or removal of a Collateral Agent and
appointment of a successor Collateral Agent shall be effected with respect to
this Agreement and all Series Supplements simultaneously, so that at no time is
there more than one Collateral Agent acting hereunder and under all Series
Supplements.
Section 4.06. INDEMNIFICATION. The Seller and OFL shall indemnify
the Collateral Agent, its directors, officers, employees and agents for, and
hold the Collateral Agent, its directors, officers, employees and agents
harmless against, any loss, liability or expense (including the costs and
expenses of defending against any claim of liability) arising out of or in
connection with the Collateral Agent's acting as Collateral Agent hereunder,
except such loss, liability or expense as shall result from the negligence,
bad faith or willful misconduct of the Collateral Agent or its officers or
agents. The obligation of the Seller and OFL under this Section shall survive
the termination of this Agreement and the resignation or removal of the
Collateral Agent. The Collateral Agent covenants and agrees that the
obligations of the Seller hereunder and under Section 4.07 shall be limited
to the extent provided in Section 2.08, and further covenants not to take any
action to enforce its rights to indemnification hereunder with respect to the
Seller and to payment under Section 4.07 except in accordance with the
provisions 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
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States and is duly authorized and licensed under applicable law to conduct
its business as presently conducted.
(b) CORPORATE POWER. The Collateral Agent has all requisite
right, power and authority to execute and deliver this Agreement and to
perform all of its duties as Collateral Agent hereunder.
(c) DUE AUTHORIZATION. The execution and delivery by the
Collateral Agent of this Agreement and the other Transaction Documents to
which it is a party, and the performance by the Collateral Agent of its
duties hereunder and thereunder, have been duly authorized by all necessary
corporate proceedings and no further approvals or filings, including any
governmental approvals, are required for the valid execution and delivery by
the Collateral Agent, or the performance by the Collateral Agent, of this
Agreement and such other Transaction Documents.
(d) VALID AND BINDING AGREEMENT. The Collateral Agent has duly
executed and delivered this Agreement and each other Transaction Document to
which it is a party, and each of this Agreement and each such other
Transaction Document constitutes the legal, valid and binding obligation of
the Collateral Agent, enforceable against the Collateral Agent in accordance
with its terms, except as (i) such enforceability may be limited by
bankruptcy, insolvency, reorganization and similar laws relating to or
affecting the enforcement of creditors' rights generally and (ii) the
availability of equitable remedies may be limited by equitable principles of
general applicability.
Section 4.09. WAIVER OF SETOFFS. The Collateral Agent hereby
expressly waives any and all rights of setoff that the Collateral Agent may
otherwise at any time have 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,
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executed, acknowledged and delivered, such instruments of transfer or take
such other steps or actions as may be necessary, or required by the
Controlling Party, to perfect the Security Interests granted hereunder in the
Collateral, to ensure that such Security Interests rank prior to all other
Liens and to preserve the priority of such Security Interests and the
validity and enforceability thereof. Upon any delivery or substitution of
Collateral, the Seller shall be obligated to execute such documents and
perform such actions as are necessary to create in the Collateral Agent for
the benefit of the Secured Parties a valid first Lien on, and valid and
perfected, first priority security interest in, the Collateral so delivered
and to deliver such Collateral to the Collateral Agent, free and clear of any
other Lien, together with satisfactory assurances thereof, and to pay any
reasonable costs incurred by any of the Secured Parties or the Collateral
Agent (including its agents) or otherwise in connection with such delivery.
Section 5.02. OPINIONS AS TO COLLATERAL. Not more than 90 days nor
less than 30 days prior to (i) each anniversary of the date hereof during the
term of this Agreement and (ii) each date on which the Seller proposes to
take any action contemplated by Section 5.06, the Seller shall, at its own
cost and expense, furnish to each Secured Party and the Collateral Agent an
Opinion of Counsel with respect to each Series either (a) stating that, in
the opinion of such counsel, such action has been taken with respect to the
execution and filing of any financing statements and continuation statements
and other actions as are necessary to perfect, maintain and protect the lien
and security interest of the Collateral Agent (and the priority thereof), on
behalf of the Secured Parties, with respect to such Collateral against all
creditors of and purchasers from the Seller or OFL and reciting the details
of such action, or (b) stating that, in the opinion of such counsel, no such
action is necessary to maintain such perfected lien and security interest.
Such Opinion of Counsel shall further describe each execution and filing of
any financing statements and continuation statements and such other actions
as will, in the opinion of such counsel, be required to perfect, maintain and
protect the lien and security 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
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power as though no such law had been enacted. The Seller, for itself and all
who may claim under it, waives, to the fullest extent permitted by applicable
law, all right to have the Collateral marshalled upon any foreclosure or
other disposition thereof.
Section 5.05. NONINTERFERENCE, ETC. The Seller shall not (i) waive
or alter any of its rights under the Collateral (or any agreement or
instrument relating thereto) without the prior written consent of the
Controlling Party; or (ii) fail to pay any tax, assessment, charge or fee
levied or assessed against the Collateral, or to defend any action, if such
failure to pay or defend may adversely affect the priority or enforceability
of the Seller's right, title or interest in and to the Collateral or the
Collateral Agent's lien on, and security interest in, the Collateral for the
benefit of the Secured Parties; or (iii) take any action, or fail to take any
action, if such action or failure 'to take action will interfere with the
enforcement of any rights under the Transaction Documents.
Section 5.06. SELLER CHANGES.
(a) CHANGE IN NAME, STRUCTURE, ETC. The Seller shall not change
its name, identity or corporate structure unless it shall have given each
Secured Party and the Collateral Agent at least 60 days' prior written notice
thereof, shall have effected any necessary or appropriate assignments or
amendments thereto and filings of financing statements or amendments thereto,
and shall have delivered to the Collateral Agent and each Secured Party an
Opinion of Counsel of the type described in Section 5.02. The parties hereto
acknowledge receipt of prior written notice of the Seller's intent to change
its name on or after January 1, 1997 to Arcadia Receivables Finance Corp.
(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
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exercise all the rights given the Controlling Party hereunder with respect to
such Series. From and after the Insurer Termination Date related to such
Series until the Trustee Termination Date related to such Series, the Trustee
shall be the Controlling Party with respect to such Series. Notwithstanding
the foregoing, in the event that a Financial Security Default shall have
occurred and be continuing, the Trustee shall be the Controlling Party with
respect to such Series until the applicable Trustee Termination Date. If
prior to an Insurer Termination Date the Trustee shall have become the
Controlling Party with respect to a Series as a result of the occurrence of a
Financial Security Default and either such Financial Security Default is
cured or for any other reason ceases to exist or the Trustee Termination Date
with respect to a Series occurs, then upon such cure or other cessation or on
such Trustee Termination Date, as the case may be, Financial Security shall,
upon notice thereof being duly given to the Collateral Agent, again be the
Controlling Party with respect to such Series.
Section 6.02. CONTROLLING PARTY'S AUTHORITY.
(a) Each of OFL and the Seller hereby irrevocably appoint the
Controlling Party, and any successor to the Controlling Party appointed
pursuant to Section 6.01, its true and lawful attorney, with full power of
substitution, in the name of OFL, the Seller, the Secured Parties or
otherwise, but (subject to Section 2.08) at the expense of the Seller, to the
extent permitted by law to exercise, at any time and from time to time while
any Insurance Agreement Event of Default has occurred and is continuing, any
or all of the following powers with respect to all or any of the Collateral
related to the relevant Series: (i) to demand, sue for, collect, receive and
give acquittance for any and all monies due or to become due upon or by
virtue thereof, (ii) to settle, compromise, compound, prosecute or defend any
action or proceeding with respect thereto, (iii) to sell, transfer, assign or
otherwise deal with the same or the proceeds thereof as fully and effectively
as if the Collateral Agent were the absolute owner thereof, and (iv) to
extend the time of payment of any or all thereof and to make any allowance or
other 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.
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(c) So long as Financial Security shall be the Controlling Party
with respect to a Series (other than the Warehousing Series), the Trustee
hereby agrees, that if there exists an Insurance Agreement Event of Default
with respect to such Series:
(i) Financial Security shall have the exclusive right to
direct the Trustee as to any and all actions to be taken under the related
Transaction Documents, including without limitation all actions with
respect to the giving of directions to the Servicer and any subservicer
with respect to the servicing of the Receivables of such Series;
enforcement of any rights of the Trustee under such Transaction Documents;
and the giving or withholding of any other consents, requests, notices,
directions, approvals, extensions or waivers under or in respect of any
such Transaction Documents; and
(ii) Financial Security shall have the right to control the
time, method and place of conducting any proceeding for any remedy
available to the Trustee, or exercising any trust or power conferred upon
the Trustee under the related Pooling and Servicing Agreement or under any
other Transaction Document, including the remedies provided in Article VII.
PROVIDED, HOWEVER, that the Trustee may decline to follow any of the above
directions from Financial Security, if the Trustee, in accordance with an
opinion of counsel to the Trustee, that is independent of the Trustee,
determines that the action or proceeding so directed may not lawfully be
taken or if the Trustee in good faith determines that the action or
proceeding so directed would involve it in personal liability for which
adequate indemnity is not reasonably assured to it or, in the case of actions
or directions not specifically permitted to be taken by Financial Security so
long as no Financial Security Default has occurred and is continuing, would
adversely affect the interests of the Certificateholders in any material
respect.
(d) So long as Financial Security shall be the Controlling Party
with respect to a Series (other than the Warehousing 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.
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(ii) Financial Security shall have the right to direct the
Trustee as to any and all actions to be taken in the event of the
occurrence of a Servicer Termination Event under the related Pooling and
Servicing Agreement and shall have such other rights in respect of the
appointment of a successor servicer as are provided in such Pooling and
Servicing Agreement.
Section 6.03. RIGHTS OF SECURED PARTIES. With respect to each
Series of Certificates and the related Collateral, the Non-Controlling Party
at any time expressly agrees that it shall not assert any rights that it may
otherwise have, as a Secured Party with respect to the Collateral, to direct
the maintenance, sale or other disposition of the Collateral or any portion
thereof, notwithstanding the occurrence and continuance of any Default with
respect to such Series or any non-performance by OFL or the Seller of any
obligation owed to such Secured Party hereunder or under any other
Transaction Document, and each party hereto agrees that the Controlling Party
shall be the only Person entitled to assert and exercise such rights.
Section 6.04. DEGREE OF CARE.
(a) CONTROLLING PARTY. Notwithstanding any term or provision of
this Agreement, the Controlling Party shall incur no liability to OFL or the
Seller for any action taken or omitted by the Controlling Party in connection
with the Collateral, except for any gross negligence, bad faith or willful
misconduct on the part of the Controlling Party and, further, shall incur no
liability to the Non-Controlling Party except for a breach of the terms of
this Agreement or for gross negligence, bad faith or willful misconduct in
carrying out its duties, if any, to the Non-Controlling Party. The
Controlling Party shall be protected and shall incur no liability to any such
party in relying upon the accuracy, acting in reliance upon the contents and
assuming the genuineness of any notice, demand, certificate, signature,
instrument or other document believed by the Controlling Party to be genuine
and to have been duly executed by 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
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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 Transaction Documents and Sections 6.02(a), (c), (d) and (e) hereof.
Section 7.02. WAIVER OF DEFAULT. The Controlling Party shall have
the sole right, to be exercised in its complete discretion, to waive any
Default by a writing setting forth the terms, conditions and extent of such
waiver signed by the Controlling Party and delivered to the Collateral Agent,
the other Secured Party and the Seller. Any such waiver shall be binding upon
the Non-Controlling Party and the Collateral Agent. Unless such writing
expressly provides to the contrary, any waiver so granted shall extend only
to the specific event or occurrence which gave rise to the Default so waived
and not to any other similar event or occurrence which occurs subsequent to
the date of such waiver.
Section 7.03. RESTORATION OF RIGHTS AND REMEDIES. If the
Collateral Agent has instituted any proceeding to enforce any right or remedy
under this Agreement, and such proceeding has been discontinued or abandoned
for any reason, or has been determined adversely to such Collateral Agent,
then and in every such case the Seller, the Collateral Agent and each of the
Secured Parties shall, subject to any determination in such proceeding, be
restored severally and respectively to their former positions hereunder, and
thereafter all rights and remedies of the Secured Parties shall continue as
though no such proceeding had been instituted.
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
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specifically provided for herein, as may be reasonably requested or required
to effectuate the purpose or provisions of this Agreement or to confirm or
perfect any transaction described or contemplated herein.
Section 8.02. WAIVER. Any waiver by any party of any provision of
this Agreement or any right, remedy or option hereunder shall only prevent and
estop such party from thereafter enforcing such provision, right, remedy or
option if such waiver is given in writing and only as to the specific instance
and for the specific purpose for which such waiver was given. The failure or
refusal of any party hereto to insist in any one or more instances, or in a
course of dealing, upon the strict performance of any of the terms or provisions
of this Agreement by any party hereto or the partial exercise of any right,
remedy or option hereunder shall not be construed as a waiver or relinquishment
of any such term or provision, but the same shall continue in full force and
effect.
Section 8.03. AMENDMENTS; WAIVERS. No amendment, modification, waiver
or supplement to this Agreement or any provision of this Agreement shall in any
event be effective unless the same shall have been made or consented to in
writing by each of the parties hereto and each Rating Agency shall have
confirmed in writing that such amendment will not cause a reduction or
withdrawal of a rating on any Series; PROVIDED, HOWEVER, that, for so long as
Financial Security shall be the Controlling Party with respect to a Series,
amendments, modifications, waivers or supplements hereto relating to such
Series, the related Collateral or Spread Account or any requirement hereunder to
deposit or retain any amounts in such Spread Account or to distribute any
amounts therein as provided in Section 3.03 shall be effective if made or
consented to in writing by Financial Security, the Seller, OFL and the
Collateral Agent (the consent of which shall not be withheld or delayed with
respect to any amendment that does not adversely affect the Collateral Agent)
but shall in no circumstances require the consent of the Trustee or the
Certificateholders related to such Series or any other Series.
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
37
<PAGE>
America, any State or other political subdivision thereof or any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government for the purpose of commencing or
sustaining a case by or against the Seller, OFL or the Trust under a Federal
or state bankruptcy, insolvency or similar law or appointing a receiver,
liquidator, assignee, trustee, custodian, sequestrator or other similar
official of the Seller, OFL or the Trust or all or any part of its property
or assets or ordering the winding up or liquidation of the affairs of the
Seller, OFL or the Trust. The parties agree that damages will be an
inadequate remedy for breach of this covenant and that this covenant may be
specifically enforced.
Section 8.06. NOTICES. All notices, demands, certificates, requests
and communications hereunder ("notices") shall be in writing and shall be
effective (a) upon receipt when sent through the U.S. mails, registered or
certified mail, return receipt requested, postage prepaid, with such receipt to
be effective the date of delivery indicated on the return receipt, or (b) one
Business Day after delivery to an overnight courier, or (c) on the date
personally delivered to an Authorized Officer of the party to which sent, or (d)
on the date transmitted by legible telecopier transmission with a confirmation
of receipt, in all cases addressed to the recipient as follows:
(i) If to OFL:
Olympic Financial Ltd.
7825 Washington Avenue South, Suite 410
Minneapolis, Minnesota 55439-2435
Attention: 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) 942-6730
(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
38
<PAGE>
(in each case in which notice or other communication to Financial
Security refers to a Default or a claim on the Policy or in which
failure on the part of Financial Security to respond shall be deemed
to constitute consent or acceptance, then with a copy to the attention
of the Senior Vice President Surveillance)
(iv) If to the Trustee:
The Chase Manhattan Bank
450 West 33rd Street
New York, New York 10001-2697
Attention: Global Trust Services Group
(with respect to those Series for which Chase serves as
Trustee)
or
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
(with respect to those Series for which Norwest serves as
Trustee)
(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
39
<PAGE>
A copy of each notice given hereunder to any party hereto shall also be given to
(without duplication) Financial Security, the Seller, the Trustee and the
Collateral Agent. Each party hereto may, by notice given in accordance herewith
to each of the other parties hereto, designate any further or different address
to which subsequent notices shall be sent.
Section 8.07. TERM OF THIS AGREEMENT. This Agreement shall take
effect on the Closing Date of the Series 1993-A Certificates and shall continue
in effect until the last Final Termination Date to occur with respect to each
Series. On such Final Termination Date, this Agreement shall terminate, all
obligations of the parties hereunder shall cease and terminate and the
Collateral, if any, held hereunder and not to be used or applied in discharge of
any obligations of the Seller or OFL in respect of the Secured Obligations or
otherwise under this Agreement, shall be released to and in favor of the Seller,
PROVIDED that the provisions of Sections 4.06, 4.07 and 8.05 shall survive any
termination of this Agreement and the release of any Collateral upon such
termination.
Section 8.08. ASSIGNMENTS: THIRD-PARTY RIGHTS; REINSURANCE.
(a) This Agreement shall be a continuing obligation of the parties
hereto and shall (i) be binding upon the parties and their respective successors
and assigns, and (ii) inure to the benefit of and be enforceable by each Secured
Party and the Collateral Agent, and by their respective successors, transferees
and assigns. Neither the Seller nor OFL may assign this Agreement, or delegate
any of its duties hereunder, without the prior written consent of the
Controlling Party.
(b) Financial Security shall have the right (unless a Financial
Security Default shall have occurred and be continuing) to give participations
in its rights under this Agreement and to enter into contracts of reinsurance
with respect to any Policy issued in connection with a Series of Certificates
and each such participant or reinsurer shall be entitled to the benefit of any
representation, warranty, covenant and obligation of each party (other than
Financial Security) hereunder as if such participant or reinsurer was a party
hereto and, subject 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
40
<PAGE>
herein, the determination whether to grant or withhold such consent shall be
made solely by the Controlling Party in its sole discretion.
Section 8.10. TRIAL BY JURY WAIVED. Each of the parties hereto
waives, to the fullest extent permitted by law, any right it may have to a trial
by jury in respect of any litigation arising directly or indirectly out of,
under or in connection with this Agreement, any of the other Transaction
Documents or any of the transactions contemplated hereunder or thereunder. Each
of the parties hereto (a) certifies that no representative, agent or attorney of
any other party has represented, expressly or otherwise, that such other party
would not, in the event of litigation, seek to enforce the foregoing waiver and
(b) acknowledges that it has been induced to enter into this Agreement and the
other Transaction Documents to which it is a party, by among other things, this
waiver.
Section 8.11. GOVERNING LAW. This Agreement shall be governed by and
construed, and the obligations, rights and remedies of the parties hereunder
shall be determined, in accordance with the laws of the State of New York.
Section 8.12. CONSENTS TO JURISDICTION. Each of the parties hereto
irrevocably submits to the jurisdiction of the United States District Court for
the Southern District of New York, any court in the state of New York located in
the city and county of New York, and any appellate court from any thereof, in
any action, suit or proceeding brought against it and related to or in
connection with this Agreement, the other Transaction Documents or the
transactions contemplated hereunder or thereunder or for recognition or
enforcement of any judgment and each of the parties hereto irrevocably and
unconditionally agrees that all claims in respect of any such suit or action or
proceeding may be heard or determined in such New York State court or, to the
extent permitted by law, in such federal court. Each of the parties hereto
agrees that a final judgment in any such action, suit or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law. To the extent permitted by applicable law,
each of the parties hereby waives and agrees not to assert by way of motion, as
a defense or otherwise in any such suit, action or proceeding, any claim that it
is not personally subject to the jurisdiction of such courts, that the suit,
action 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 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 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 (i) not in its individual capacity but
in its capacity as trustee of the Trusts pursuant
41
<PAGE>
to the Transaction Documents and (ii) as Collateral Agent hereunder (b) in no
case whatsoever shall Norwest Bank Minnesota, National Association in its
capacity as trustee of Trusts be personally liable on, or for any loss in
respect of, any of the statements, representations, warranties, covenants,
agreements or obligations of the Trust hereunder, all such liability, if any,
being expressly waived by the parties hereto.
Section 8.14. DETERMINATION OF ADVERSE EFFECT. Any determination of
an adverse effect on the interest of the Secured Parties or the
Certificateholders shall be made without consideration of the availability of
funds under the Policies.
Section 8.15. COUNTERPARTS. This Agreement may be executed in two or
more counterparts by the parties hereto, and each such counterpart shall be
considered an original and all such counterparts shall constitute one and the
same instrument.
Section 8.16. HEADINGS. The headings of sections and paragraphs and
the Table of Contents contained in this Agreement are provided for convenience
only. They form no part of this Agreement and shall not affect its construction
or interpretation.
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<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.
ARCADIA FINANCIAL LTD.
By
--------------------------------------------
Name:
Title
ARCADIA RECEIVABLES FINANCE CORP.
By
--------------------------------------------
Name:
Title:
FINANCIAL SECURITY ASSURANCE INC.
By
--------------------------------------------
Authorized Officer
THE CHASE MANHATTAN BANK,
as Trustee
By
--------------------------------------------
Name:
Title:
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Trustee
By
--------------------------------------------
Name:
Title:
<PAGE>
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Collateral Agent
By
--------------------------------------------
Name:
Title:
<PAGE>
SERIES 1997-B SUPPLEMENT
dated as of June 19, 1997
to
SPREAD ACCOUNT AGREEMENT
dated as of March 25, 1993,
as amended and restated
as of June 1, 1997
among
ARCADIA FINANCIAL LTD.
ARCADIA RECEIVABLES FINANCE CORP.
FINANCIAL SECURITY ASSURANCE INC.
THE CHASE MANHATTAN BANK
and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS . . . . . . . . . . . . . . . 2
Section 1.1 Definitions. . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.2 Rules of Interpretation. . . . . . . . . . . . . . . . . . 5
ARTICLE II
CREDIT ENHANCEMENT FEE; SERIES SUPPLEMENTS; THE COLLATERAL. . . . 5
Section 2.1 Series 1997-B Credit Enhancement Fee . . . . . . . . . . . 5
Section 2.2 Series Supplements . . . . . . . . . . . . . . . . . . . . 6
Section 2.3 Grant of Security Interest by Arcadia Financial
and the Seller . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE III
SPREAD ACCOUNT. . . . . . . . . . . . . . . 7
Section 3.1 Establishment of Series 1997-B Spread Account; Initial
Deposit into Series 1997-B Spread Account. . . . . . . . . 7
Section 3.2 Spread Account Additional Deposits . . . . . . . . . . . . 7
ARTICLE IV
MISCELLANEOUS. . . . . . . . . . . . . . . 7
Section 4.1 Further Assurances . . . . . . . . . . . . . . . . . . . . 7
Section 4.2 Governing Law . . . . . . . . . . . . . . . . . . . . . . 8
Section 4.3 Counterparts . . . . . . . . . . . . . . . . . . . . . . . 8
Section 4.4 Headings . . . . . . . . . . . . . . . . . . . . . . . . . 8
Schedule I
<PAGE>
SERIES 1997-B SUPPLEMENT
SERIES 1997-B SUPPLEMENT, dated as of June 19, 1997 (the "Series 1997-B
Supplement"), by and among ARCADIA FINANCIAL LTD., a Minnesota corporation
("Arcadia Financial"), ARCADIA RECEIVABLES FINANCE CORP., a Delaware
corporation (the "Seller"), FINANCIAL SECURITY ASSURANCE INC., a New York
stock insurance company ("Financial Security"), THE CHASE MANHATTAN BANK, a
national banking association, in its capacity as Indenture Trustee under the
Indenture and NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION 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 June 1,
1997 (the "Spread Account Agreement"), and, as contemplated by Section 2.02
of the Spread Account Agreement, this Series 1997-B Supplement constitutes a
Series Supplement to the Spread Account Agreement so that hereafter this
Series 1997-B 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. Arcadia Automobile Receivables Trust, 1997-B (the "Series 1997-B
Trust") is being formed contemporaneously herewith pursuant to the Series
1997-B Trust Agreement (as defined herein).
3. Pursuant to the Series 1997-B Sale and Servicing Agreement, the
Seller is selling to the Series 1997-B Trust all of its right, title and
interest in and to the Initial Receivables (as defined in the Series 1997-B
Sale and Servicing Agreement) and certain other Trust Property (as defined in
the Series 1997-B Trust Agreement).
4. Pursuant to the Series 1997-B Indenture, the Series 1997-B Trust is
issuing the Series 1997-B Notes (as defined herein).
5. The Seller has requested that Financial Security issue the Series
1997-B 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 1997-B Notes.
6. In partial consideration of the issuance of the Series 1997-B Note
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 1997-B Indenture.
7. The Seller is a wholly owned special purpose subsidiary of Arcadia
Financial. The Series 1997-B Trust has agreed to pay the Series 1997-B
Credit Enhancement Fee to the Seller in consideration of the obligations of
the Seller and Arcadia Financial pursuant hereto and in consideration of the
obligations of Arcadia Financial pursuant to the Series 1997-B Insurance
Agreement (such obligations forming part of the Series 1997-B Insurer Secured
Obligations as
<PAGE>
referred to herein). The Series 1997-B Insurer Secured Obligations form part
of the consideration to Financial Security for its issuance of the Series
1997-B Policies.
8. In order to secure the performance of the Series 1997-B Secured
Obligations, to further effect and enforce the subordination provisions to
which the Series 1997-B Credit Enhancement Fee is subject, and in
consideration of the receipt of the Series 1997-B Credit Enhancement Fee,
Arcadia Financial and the Seller have agreed to pledge the Series 1997-B
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
acknowedged, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
Section 1.1 DEFINITIONS. All terms defined in Section 1.1 of the
Series 1997-B Sale and Servicing Agreement shall have the same meaning with
respect to this Series 1997-B Supplement. The following terms shall have the
following meanings:
"COLLECTION ACCOUNT SHORTFALL" means, with respect to Series 1997-B and
any Distribution Date, the Deficiency Claim Amount, as defined in the Series
1997-B Sale and Servicing Agreement, with respect to such Distribution Date.
"DEEMED CURED" means with respect to Series 1997-B, (a) with respect to
an event that has occurred pursuant to clause (A)(i) of the definition of
Trigger Event, as of a Determination Date with respect to Series 1997-B, that
no event as specified in clause (A)(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 an event that has occurred pursuant to clause (A)(ii) or clause (A)(iii)
of the definition of Trigger Event, as of the next Determination Date which
occurs in a calendar month which is a multiple of three months succeeding the
Series 1997-B Closing Date, that no event specified in clause (A)(ii) or
clause (A)(iii) of the definition of Trigger Event with respect to such
Series shall have occurred as of such Determination Date.
"INITIAL PRINCIPAL AMOUNT" means $775,000,000 with respect to Series
1997-B.
"INITIAL SPREAD ACCOUNT DEPOSIT" means $11,625,000 for Series 1997-B.
2
<PAGE>
"INITIAL SPREAD ACCOUNT MAXIMUM AMOUNT" means, with respect to Series
1997-B and any Distribution Date, an amount equal to the greater of (i) 7% of
the Series 1997-B 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 1997-B BALANCE" means, with respect to Series 1997-B and any
Distribution Date, the aggregate principal amount of the Series 1997-B Notes
as of such Distribution Date (after giving effect to the distributions in
respect of principal on the Notes made on such Distribution Date).
"SERIES 1997-B COLLATERAL" has the meaning specified in Section 2.3(a)
hereof.
"SERIES 1997-B CREDIT ENHANCEMENT FEE" means the amount distributable on
each Distribution Date pursuant to Section 4.6(viii) and (ix) of the Series
1997-B Sale and Servicing Agreement.
"SERIES 1997-B INDENTURE" means the Indenture, dated as of June 1, 1997,
among the Series 1997-B Trust, the Trustee and the Indenture Collateral Agent.
"SERIES 1997-B NOTE POLICY" means the financial guaranty insurance
policy issued by Financial Security with respect to the Series 1997-B Notes.
"SERIES 1997-B NOTES" means the Class A-1, Class A-2, Class A-3, Class
A-4 and Class A-5 Notes issued pursuant to the Series 1997-B Indenture.
"SERIES 1997-B 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 1997-B Trust Agreement.
"SERIES 1997-B RECEIVABLE" means each Receivable referenced on the
Schedule of Receivables attached to the Series 1997-B Sale and Servicing
Agreement, as supplemented from time to time during the Funding Period by one
or more Subsequent Transfer Agreements.
"SERIES 1997-B RESERVE ACCOUNT" means the Reserve Account established
pursuant to Section 4.1(d) of the Series 1997-B Sale and Servicing Agreement.
"SERIES 1997-B SALE AND SERVICING AGREEMENT" means the Sale and
Servicing Agreement, dated as of June 1, 1997, among the Series 1997-B Trust,
Arcadia Financial, 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 1997-B SECURED OBLIGATIONS" means the Insurer Secured
Obligations and the Trustee Secured Obligations with respect to Series 1997-B.
"SERIES 1997-B SPREAD ACCOUNT" means the Spread Account established
pursuant to Section 3.1(a) hereof.
3
<PAGE>
"SERIES 1997-B SUPPLEMENT" means this Series 1997-B Supplement which
constitutes a Series Supplement to the Spread Account Agreement.
"SERIES 1997-B TRUST AGREEMENT" means the Trust Agreement, dated as of June
1, 1997, among the Seller, Financial Security and the Series 1997-B Owner
Trustee.
"SPREAD ACCOUNT ADDITIONAL DEPOSIT" means, with respect to Series 1997-B
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 1997-B 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 1997-B Notes will be in the
highest category by such Rating Agencies.
"SPREAD ACCOUNT MAXIMUM AMOUNT" means, with respect to Series 1997-B and
any Distribution Date:
(i) if no Insurance Agreement Event of Default with respect to
Series 1997-B 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 1997-B
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 1997-B and such Distribution Date;
(ii) if an event specified in clause (A) of the definition of
Trigger Event with respect to Series 1997-B has occurred as of the
Determination Date or has occurred as of a prior Distribution Date (and
whether or not a Trigger Event shall occur or shall have occurred in
connection with such event), and such event is not Deemed Cured as of the
related Determination Date and no Insurance Agreement Event of Default with
respect to Series 1997-B 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 1997-B 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 1997-B 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 1997-B 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 1997-B and
any Distribution Date, an amount equal to the greater of:
(i) $100,000, and
4
<PAGE>
(ii) the lesser of:
(A) 1.5% of the Initial Principal Amount of Series 1997-B, and
(B) the Series 1997-B Balance.
"TRIGGER EVENT" means, with respect to Series 1997-B and as of a
Determination Date, the occurrence of any of the events specified in clause (A)
together with the occurrence of the event specified in clause (B):
(A)(i) the Average Delinquency Ratio for such Determination Date shall
be 6.18% or greater;
(ii) with respect to any Determination Date, the Cumulative Default
Rate shall be equal to or greater than the percentage set forth
in Column A of Schedule I attached hereto corresponding to such
Determination Date;
(iii) with respect to any Determination Date, the Cumulative Net Loss
Rate shall be equal to or greater than the percentage set forth
in Column B of Schedule I attached hereto corresponding to such
Determination Date;
(B) The amount specified with respect to such Series in the last
sentence of Section 2.09(d) of the Spread Account Agreement is
positive on such Determination Date, and such amount has not been
deposited in the related Tag Account on such Determination 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 1997-B 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 1997-B Supplement.
The definition of a term shall include the singular, the plural, the past,
the present, the future, the active and the passive forms of such term. A
term defined herein and used herein preceded by a Series designation, shall
mean such term as it relates to the Series designated.
ARTICLE II
CREDIT ENHANCEMENT FEE; SERIES SUPPLEMENTS; THE COLLATERAL
Section 1.2 SERIES 1997-B CREDIT ENHANCEMENT FEE. The Series 1997-B
Sale and Servicing Agreement provides for the payment to the Seller of the
Series 1997-B 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 Arcadia Financial
hereby agree that payment of the Series 1997-B Credit Enhancement Fee in the
manner and subject to the conditions set forth herein and in the Series
1997-B Sale and Servicing Agreement is adequate consideration and the
exclusive consideration to be received by the Seller or Arcadia
5
<PAGE>
Financial for the obligations of the Seller pursuant hereto and the
obligations of Arcadia Financial pursuant hereto (including, without
limitation, the transfer by the Seller to the Collateral Agent of the Initial
Spread Account Deposit with respect to Series 1997-B) and pursuant to the
Series 1997-B Insurance Agreement. The Seller and Arcadia Financial hereby
agree with the Trustee and with Financial Security that payment of the Series
1997-B Credit Enhancement Fee to the Seller is expressly conditioned on
subordination of the Series 1997-B 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 1997-B Collateral is intended to effect and
enforce such subordination and to provide security for the Series 1997-B
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 1997-B Supplement with respect
to the Series 1997-B Securities.
Section 2.3 GRANT OF SECURITY INTEREST BY ARCADIA FINANCIAL AND THE
SELLER.
(a) In order to secure the performance of the Secured Obligations with
respect to each Series, the Seller (and Arcadia Financial, 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 1997-B Collateral"):
(i) the Series 1997-B Credit Enhancement Fee and all rights
and remedies that the Seller may have to enforce payment of the Series
1997-B Credit Enhancement Fee whether under the Series 1997-B Sale and
Servicing Agreement or otherwise;
(ii) the Series 1997-B Spread Account established pursuant
to Section 3.1 of this Series 1997-B Supplement and Section 3.01 of the
Spread Account Agreement, and each other account owned by the Seller and
maintained by the Collateral Agent (including, without limitation, all
monies, checks, securities, investments and other documents from time to
time held in or evidencing any such accounts);
(iii) all of the Seller's right, title and interest in and to
investments made with proceeds of the property described in clauses (i)
and (ii) above, or made with amounts on deposit in the Series 1997-B Spread
Account; and
(iv) all distributions, revenues, products, substitutions,
benefits, profits and proceeds, in whatever form, of any of the foregoing.
6
<PAGE>
(b) In order to effectuate the provisions and purposes of this Series
1997-B 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 1997-B 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
1997-B Collateral which can be perfected by the filing of a financing
statement.
ARTICEL III
SPREAD ACCOUNT
Section 3.1 ESTABLISHMENT OF SERIES 1997-B SPREAD ACCOUNT; INITIAL
DEPOSIT INTO SERIES 1997-B SPREAD ACCOUNT.
(a) On or prior to the Closing Date, the Collateral Agent shall
establish with respect to Series 1997-B, at its office or at another
depository institution or trust company, an Eligible Account, designated
"Spread Account--Series 1997-B--Norwest Bank Minnesota, National Association,
as Collateral Agent for Financial Security Assurance Inc. and another Secured
Party" (the "Series 1997-B Spread Account").
(b) On the Closing Date relating to Series 1997-B, the Collateral
Agent shall deposit the Initial Spread Account Deposit with respect to Series
1997-B received from the Seller into the Series 1997-B Spread Account.
Section 3.2 SPREAD ACCOUNT ADDITIONAL DEPOSITS. On each Subsequent
Transfer Date, the Series 1997-B Trust will, pursuant to Section 2.4 of the
Series 1997-B Sale and Servicing Agreement, deliver on behalf of the Seller
the Spread Account Additional Deposit for such Subsequent Transfer Date to
the Collateral Agent. The Collateral Agent shall deposit each such Spread
Account Additional Deposit received from the Series 1997-B Trust into the
Series 1997-B Spread Account. IV.B.
ARTICLE VI
MISCELANEOUS
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 1997-B Supplement or to confirm or perfect any transaction
described or contemplated herein.
7
<PAGE>
Section 4.2 GOVERNING LAW. This Series 1997-B 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 1997-B 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 1997-B Supplement are provided for
convenience only. They form no part of this Series 1997-B Supplement and
shall not affect its construction or interpretation.
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Series 1997-B
Supplement as of the date set forth on the first page hereof.
ARCADIA FINANCIAL LTD.
By______________________________
Name: John A. Witham
Title: Executive Vice President and
Chief Financial Officer
ARCADIA RECEIVABLES FINANCE CORP.
By________________________________
Name: John A. Witham
Title: Senior Vice President and
Chief Financial Officer
FINANCIAL SECURITY ASSURANCE INC.
By________________________________
Authorized Officer
THE CHASE MANHATTAN BANK,
as Trustee
By________________________________
Name:
Title:
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Collateral Agent
By________________________________
Name: Thomas D. Wraalstad
Title: Corporate Trust Officer
<PAGE>
SCHEDULE I
Determination Date* Cumulative Default Rate Cumulative Net Loss Rate
(month) (Column A) (Column B)
0 to 3 2.60% 1.35%
3 to 6 4.78% 2.35%
6 to 9 6.72% 3.18%
9 to 12 8.32% 3.77%
12 to 15 9.09% 4.13%
15 to 18 10.14% 4.45%
18 to 21 11.08% 4.70%
21 to 24 11.78% 4.90%
24 to 27 12.42% 5.05%
27 to 30 12.96% 5.20%
30 to 33 13.37% 5.30%
33 to 36 13.68% 5.40%
36 to 39 13.96% 5.48%
39 to 42 14.12% 5.55%
42 to 45 14.27% 5.63%
45 to 48 14.40% 5.67%
48 to 51 14.47% 5.70%
51 to 54 14.54% 5.74%
54 to 57 14.57% 5.77%
57 to 60 14.61% 5.79%
60 to 63 14.62% 5.81%
63 to 66 14.64% 5.82%
66 to 69 14.65% 5.84%
69 to 72 14.68% 5.85%
- --------------------
* Such Determination Date occurring after the designated calendar months
succeeding the Series 1997-B Closing Date appearing first in the column
below, and prior to or during the designated calendar months succeeding the
Series 1997-B Distribution Date appearing second in the column below.
<PAGE>
- -----------------------------------------------------------------------------
INSURANCE AND INDEMNITY AGREEMENT
among
FINANCIAL SECURITY ASSURANCE INC.,
ARCADIA AUTOMOBILE RECEIVABLES TRUST, 1997-B,
ARCADIA RECEIVABLES FINANCE CORP.
and
ARCADIA FINANCIAL LTD.
Dated as of June 19, 1997
- -----------------------------------------------------------------------------
Arcadia Automobile Receivables Trust, 1997-B
$82,000,000 5.7425% Class A-1 Automobile Receivables-Backed Notes
$210,000,000 6.10% Class A-2 Automobile Receivables-Backed Notes
$170,000,000 6.30% Class A-3 Automobile Receivables-Backed Notes
$150,000,000 6.50% Class A-4 Automobile Receivables-Backed Notes
$163,000,000 6.70% Class A-5 Automobile Receivables-Backed Notes
- -----------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I
DEFINITIONS
Section 1.01. Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . .2
ARTICLE II
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 2.01. Representations and Warranties of the Trust . . . . . . . . . . 7
Section 2.02. Affirmative Covenants of the Trust . . . . . . . . . . . . . . 10
Section 2.03. Negative Covenants of the Trust . . . . . . . . . . . . . . . .15
Section 2.04. Representations and Warranties of Arcadia Financial and
the Seller. . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 2.05. Affirmative Covenants of Arcadia Financial and the Seller. . . 21
Section 2.06. Negative Covenants of Arcadia Financial and the Seller. . . . .26
Section 2.07. Representations and Warranties of Arcadia Financial. . . . . . 28
Section 2.08. Affirmative Covenants of Arcadia Financial. . . . . . . . . . .30
Section 2.09. Negative Covenants of Arcadia Financial . . . . . . . . . . . .34
ARTICLE III
THE NOTE POLICY; REIMBURSEMENT; INDEMNIFICATION
Section 3.01. Conditions Precedent to Issuance of the Note Policy . . . . . .35
Section 3.02. Payment of Fees and Premium. . . . . . . . . . . . . . . . . . 40
Section 3.03. Reimbursement and Additional Payment Obligation. . . . . . . . 41
Section 3.04. Certain Obligations Not Recourse to Arcadia Financial;
Recourse to Trust Property. . . . . . . . . . . . . . . . . . .42
Section 3.05. Indemnification. . . . . . . . . . . . . . . . . . . . . . . . 42
Section 3.06. Payment Procedure. . . . . . . . . . . . . . . . . . . . . . . 44
Section 3.07. Subrogation. . . . . . . . . . . . . . . . . . . . . . . . . . 44
ARTICLE IV
FURTHER AGREEMENTS; MISCELLANEOUS
Section 4.01. Effective Date; Term of Agreement. . . . . . . . . . . . . . . 45
Section 4.02. Further Assurances and Corrective Instruments. . . . . . . . . 45
Section 4.03. Obligations Absolute. . . . . . . . . . . . . . . . . . . . . .45
Section 4.04. Assignments; Reinsurance; Third-Party Rights. . . . . . . . . .46
Section 4.05. Liability of Financial Security. . . . . . . . . . . . . . . . 47
ARTICLE V
EVENTS OF DEFAULT; REMEDIES
Section 5.01. Events of Default. . . . . . . . . . . . . . . . . . . . . . . 48
Section 5.02. Remedies; Waivers. . . . . . . . . . . . . . . . . . . . . . . 50
ARTICLE VI
<PAGE>
MISCELLANEOUS
Section 6.01. Amendments, Etc. . . . . . . . . . . . . . . . . . . . . . . .51
Section 6.02. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . .51
Section 6.03. Severability. . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 6.04. Governing Law. . . . . . . . . . . . . . . . . . . . . . . . .52
Section 6.05. Consent to Jurisdiction. . . . . . . . . . . . . . . . . . . .52
Section 6.06. Consent of Financial Security. . . . . . . . . . . . . . . . .53
Section 6.07. Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 6.08. Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 6.09. Trial by Jury Waived. . . . . . . . . . . . . . . . . . . . . 54
Section 6.10. Limited Liability. . . . . . . . . . . . . . . . . . . . . . .54
Section 6.11. Limited Liability of Mellon Bank (DE), National Association. .54
Section 6.12. Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . 54
Schedule I
ii
<PAGE>
INSURANCE AND INDEMNITY AGREEMENT
INSURANCE AND INDEMNITY AGREEMENT dated as of June 19, 1997, among
FINANCIAL SECURITY ASSURANCE INC., a New York stock insurance company
("Financial Security"), ARCADIA AUTOMOBILE RECEIVABLES TRUST, 1997-B, a
Delaware business trust (the "Trust"), ARCADIA RECEIVABLES FINANCE CORP., a
Delaware corporation (the "Seller"), and ARCADIA FINANCIAL LTD., a Minnesota
corporation (when referred to individually hereunder, "Arcadia Financial",
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 Notes pursuant to the Indenture.
2. Each Note will be secured by the Indenture Property. The Trust has
requested that Financial Security issue a financial guaranty insurance policy
guarantying respectively certain distributions of interest and principal on
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. Arcadia Financial 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.
4. The parties hereto desire to specify the conditions precedent to
the issuance of the Note Policy by Financial Security, the payment of premium
in respect of the Note Policy, the indemnity and reimbursement to be provided
to Financial Security in respect of amounts paid by Financial Security under
the Note Policy or otherwise and certain other matters.
<PAGE>
In consideration of the premises and of the agreements herein
contained, Financial Security, the Trust, Arcadia Financial, 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 1997-B. 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.
"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 Arcadia Financial, as the case may be, each entity, whether or not
incorporated, which is affiliated with the Trust, the Seller or Arcadia
Financial, as the case may be, pursuant to Section 414(b), (c), (m) or (o) of
the Code.
"DEFAULT" means any event which results, or which with the giving of
notice or the lapse of time or both would result, in an Event of Default.
"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.
2
<PAGE>
"EXPIRATION DATE" means, with respect to the Note Policy, the final
date of the Term of such Note 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 Arcadia Financial the
audited consolidated balance sheets as of December 31, 1996, December 31, 1995
and December 31, 1994 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 March 31, 1997 and March
31, 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 Note Policy.
"INDENTURE COLLATERAL AGENT" means initially, The Chase Manhattan
Bank, in its capacity as collateral agent on behalf of Financial Security and
the Indenture Trustee on behalf of the Noteholders pursuant to the Indenture,
its successor in interest and any successor Indenture Collateral Agent under the
Indenture.
"INDENTURE PROPERTY" means the property pledged to the Indenture
Collateral Agent on behalf of Financial Security and the Indenture Trustee on
behalf of the Noteholders pursuant to the Indenture.
"INSURANCE AGREEMENT INDENTURE CROSS DEFAULT" means an Event of
Default specified in clause (a), (f), (g), (h) or (i) of Section 5.01.
"INVESTMENT COMPANY ACT" means the Investment Company Act of 1940,
including, unless the context otherwise requires, the rules and regulations
thereunder, as amended from time to time.
"IRS" means the Internal Revenue Service.
"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
3
<PAGE>
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 the Note Policy.
"OTHER TRUST PROPERTY" means the property conveyed by the Seller to
the Trust pursuant to the Sale and Servicing Agreement and any Subsequent
Transfer Agreement.
"PBGC" means the Pension Benefit Guaranty Corporation or any successor
agency, corporation or instrumentality of the United States to which the duties
and powers of the Pension Benefit Guaranty Corporation are transferred.
"PLAN" means any pension plan (other than a Multiemployer Plan)
covered by Title IV of ERISA, which is maintained by a Commonly Controlled
Entity or in respect of which a Commonly Controlled Entity has liability.
"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
Arcadia Financial dated the date hereof in respect of the premium payable by
Arcadia Financial in consideration of the issuance of the Note Policy.
"PREMIUM SUPPLEMENT" means a non-refundable premium, in addition to
the premium payable in accordance with Section 3.02 of this Agreement, payable
by Arcadia
4
<PAGE>
Financial 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, Olympic Automobile Receivables Trust,
1996-D, Olympic Automobile Receivables Trust, 1997-A and the Warehousing Notes.
"PROSPECTUS" has the meaning set forth in Section 2.04(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 2.04(o)
of this Agreement.
"REPORTABLE EVENT" means any of the events set forth in Section
4043(b) of ERISA or the regulations thereunder.
"RESTRICTIONS ON TRANSFERABILITY" means, as applied to the property or
assets (or the income or profits therefrom) of any Person, in each case whether
the same is consensual or 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 June 1, 1997 among the Seller, Arcadia Financial, 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.
5
<PAGE>
"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 March 12, 1997
between Olympic Financial Ltd. ("OFL") and Norwest Bank Minnesota, National
Association, as amended or supplemented, relating to OFL's $300,000,000 11 1/2%
Senior Notes due 2007.
"SERIES 1997-B" means the Series of Notes issued on the date hereof
pursuant to the Trust Agreement and the Indenture, respectively.
"SERIES OF NOTES" or "SERIES" means Series 1997-B or any, or as the
context may require, all, additional series of notes 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 June 19, 1997, 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 June 1, 1997 as supplemented
in accordance with the terms thereof, among Arcadia Financial, 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, Arcadia Financial, and the Collateral Agent, as the same may
be amended from time to time.
"SUBSIDIARY" means, with respect to any Person, any corporation of
which a majority of the outstanding shares of capital stock having ordinary
voting power for the election of directors is at the time owned by such Person
directly or through one or more Subsidiaries.
"TERM OF THE NOTE POLICY" means, with respect to the Note 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.
6
<PAGE>
"TRUST AGREEMENT" means the Trust Agreement, dated as of June 1, 1997,
among the Seller, 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 J.P. Morgan Securities Inc., BancAmerica
Securities, Inc., Bear, Stearns & Co. Inc. and Donaldson, Lufkin & Jenrette
Securities Corporation.
"UNDERWRITING AGREEMENT" means the Pricing Agreement, dated June 19,
1997, among Arcadia Financial 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.
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
7
<PAGE>
is a party and to carry out the terms of each such agreement, and has full
power and authority to issue the Notes and pledge and assign its assets
pursuant to the Indenture and has duly authorized the issuance of the Notes
and the assignment of its assets by all necessary trust proceedings.
(c) DUE AUTHORIZATION. The execution, delivery and performance
of this Agreement and each other Transaction Document to which the Trust is a
party has been duly authorized by all necessary action on the part of the Trust
and does not require any additional approvals or consents or other action by or
any notice to or filing with any Person by or on behalf of the Trust, including,
without limitation, any governmental entity.
(d) NONCONTRAVENTION. Neither the execution and delivery of
this Agreement and each other Transaction Document to which the Trust is a
party, the consummation of the Transaction nor the satisfaction of the terms and
conditions of this Agreement and each other Transaction Document to which the
Trust is a party,
(i) conflicts with or results in any breach or violation of
any provision of the Certificate of Trust or the Trust Agreement or any
law, rule, regulation, order, writ, judgment, injunction, decree,
determination or award currently in effect having applicability to the
Trust or any of its properties, including regulations issued by an
administrative agency or other governmental authority having supervisory
powers over the Trust,
(ii) constitutes a default by the Trust under or a breach of
any provision of any loan agreement, mortgage, indenture or other agreement
or instrument to which the Trust is a party or by which it or any of its
properties is or may be bound or affected, or
(iii) results in or requires the creation of any Lien upon or
in respect of any of the Trust's assets except as otherwise expressly
contemplated by the Transaction Documents.
(e) PENDING LITIGATION OR OTHER PROCEEDING. There is no action,
proceeding or investigation pending, or, to the Trust's best knowledge,
threatened, before any court, regulatory body, administrative agency, arbitrator
or governmental agency or instrumentality having jurisdiction over the Trust or
its properties: (A) asserting the invalidity of this Agreement or any other
Transaction Document to which the Trust is a party, (B) seeking to prevent the
issuance 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 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
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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 Notes, when executed,
authenticated and delivered in accordance with the Indenture, will be
entitled to the benefits of the Indenture and will constitute legal, valid
and binding obligations of the Trust, enforceable in accordance with their
terms.
(g) NO CONSENTS. No consent, license, approval or authorization
from, or registration, filing or declaration with, any regulatory body,
administrative agency, or other governmental instrumentality, nor any consent,
approval, waiver or notification of any creditor, lessor or other
non-governmental person, is required in connection with the execution, delivery
and performance by the Trust of this Agreement or of any other Transaction
Document to which the Trust is a party, except (in each case) such as have been
obtained and are in full force and effect.
(h) COMPLIANCE WITH LAW, ETC. No practice, procedure or policy
employed or proposed to be employed by the Trust in the conduct of its business
violates any law, regulation, judgment, agreement, order or decree applicable to
the Trust which, if enforced, would result in a Material Adverse Change with
respect to the Trust.
(i) ERISA. The Trust does not maintain or contribute to, or
have any obligation to maintain or contribute to, any Plan. The Trust is not
subject to any of the provisions of ERISA.
(j) COLLATERAL. On the Closing Date, and on each Subsequent
Transfer Date, the Trust will have good and marketable title to each item of
Other Trust Property conveyed on such date and will own each such item free and
clear of any Lien (other than Liens contemplated under the Indenture) or any
equity or participation interest of any other Person.
(k) PERFECTION OF LIENS AND SECURITY INTEREST. On the Closing
Date, the Lien and security interest in favor of the Indenture Collateral Agent
with respect to Indenture Property will be perfected by the filing of financing
statements on Form UCC-1 in each jurisdiction where such recording or filing is
necessary for the perfection thereof, the delivery of the Receivable Files for
the Receivables to the Custodian, and the establishment of the Collection
Account, the Subcollection Account, the Lockbox Account, the Pre-Funding
Account, the Reserve Account and the Note Distribution Account in accordance
with the provisions of the Transaction 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 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.
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(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 Arcadia
Financial, the Seller or any Affiliate of either of them.
(iii) The Trust's funds and assets are not, and will not be,
commingled with the funds of any other Person, except as provided in the
Transaction Documents.
(p) SOLVENCY; FRAUDULENT CONVEYANCE. The Trust is solvent and
will not be rendered insolvent by the Transaction or by the performance of its
obligations under the Transaction Documents and, after giving effect to such
Transaction, the Trust will not be left with an unreasonably small amount of
capital with which to engage in its business. The Trust does not intend to
incur, or believe that it has incurred, debts beyond its ability to pay such
debts as they mature. The Trust does not contemplate the commencement of
insolvency, bankruptcy, liquidation or consolidation proceedings or the
appointment of a receiver, liquidator, conservator, trustee or similar official
in respect of the Trust or any of its assets.
Section 2.02. AFFIRMATIVE COVENANTS OF THE TRUST. The Trust hereby
agrees that during the Term of the Agreement, unless Financial Security shall
otherwise expressly consent in writing:
(a) COMPLIANCE WITH AGREEMENTS AND APPLICABLE LAWS. The Trust
will comply with all terms and conditions of this Agreement and each other
Transaction Document to which it is a party and with all material requirements
of any law, rule or regulation applicable 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
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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 or the Noteholders,
as the case may be, copies of all reports, certificates, statements,
financial statements or notices furnished to the Indenture Trustee or the
Noteholders, as the case may be, pursuant to the Transaction Documents.
(i) ANNUAL FINANCIAL STATEMENTS. As soon as available, and in
any event within 90 days after the close of each fiscal year of the Trust,
the audited balance sheets of the Trust as of the end of such fiscal year
and the audited statements of income, changes in equityowners' equity and
cash flows of the Trust for such fiscal year, all in reasonable detail and
stating in comparative form the respective figures for the corresponding
date and period in the preceding fiscal year, prepared in accordance with
generally accepted accounting principles, consistently applied, and
accompanied by the certificate of the Trust's independent accountants (who
shall be acceptable to Financial Security) and by the certificate specified
in Section 2.02(c) hereof.
(ii) QUARTERLY FINANCIAL STATEMENTS. As soon as available, and
in any event within 45 days after the close of each of the first three
quarters of each fiscal year of the Trust, the unaudited balance sheets of
the Trust as of the end of such quarter and the unaudited statements of
income, changes in equityowners' equity and cash flows of the Trust for the
portion of the fiscal year then ended, all in reasonable detail and stating
in comparative form the respective figures for the corresponding date and
period in the preceding fiscal year, prepared in accordance with generally
accepted accounting principles consistently applied (subject to normal
year-end adjustments), and accompanied by the certificate specified in
Section 2.02(c) hereof.
(iii) ACCOUNTANTS' REPORTS. Promptly upon receipt thereof, copies
of any reports or comment letters submitted to the Trust by its independent
accountants in connection with any examination of the financial statements
of the Trust.
(iv) CERTAIN INFORMATION. Not less than ten days prior to the
date of filing with the IRS of any tax return or amendment thereto, copies
of the proposed form of such return or amendment and, promptly after the
filing or sending thereof, (i) copies of each tax return and amendment
thereto that the Trust files with the IRS and (ii) copies 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, concurrently with the delivery of
the financial statements required
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pursuant to Section 2.02 (b)(i) and (ii) hereof, a certificate signed by an
Authorized Officer of the Administrator stating that:
(i) a review of the Trust's performance under the Transaction
Documents during such period has been made under such officer's
supervision;
(ii) to the best of such individual's knowledge following
reasonable inquiry, no Default or Event of Default has occurred and is
continuing or, if a Default or Event of Default has occurred and is
continuing, specifying the nature thereof and, if the Trust has a right to
cure pursuant to Section 5.01, stating in reasonable detail the steps, if
any, being taken by the Trust to cure such Default or Event of Default or
to otherwise comply with the terms of the agreement or agreements to which
such Default or Event of Default relates; and
(iii) the financial reports submitted in accordance with Section
2.02(b)(i) or (ii) hereof, as applicable, are complete and correct in all
material respects and present fairly the financial condition and results of
operations of the Trust as of the dates and for the periods indicated, in
accordance with generally accepted accounting principles consistently
applied (subject as to interim statements to normal year-end adjustments).
(d) ACCESS TO RECORDS; DISCUSSIONS WITH OFFICERS AND
ACCOUNTANTS. The Trust shall, upon the request of Financial Security, permit
Financial Security or its authorized agents (i) to inspect the books and
records of the Trust as they may relate to the Notes, the 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
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local court or before any governmental body or agency, or before any
arbitration board, or the promulgation of any proceeding or any proposed
or final rule which, if adversely determined,would result in a Material
Adverse Change with respect to the Trust;
(v) the commencement of any proceedings by or against the
Trust under any applicable bankruptcy, reorganization, liquidation,
rehabilitation, insolvency or other similar law now or hereafter in effect
or of any proceeding in which a receiver, liquidator, conservator, trustee
or similar official shall have been, or may be, appointed or requested for
the Trust or any of its assets;
(vi) the receipt of notice that (A) the Trust is being placed
under regulatory supervision, (B) any license, permit, charter,
registration or approval necessary for the conduct of the Trust's business
is to be, or may be, suspended or revoked, or (C) the Trust is to cease and
desist any practice, procedure or policy employed by the Trust in the
conduct of its business, and such cessation may result in a Material
Adverse Change with respect to the Trust; or
(vii) any other event, circumstance or condition that has
resulted, or has a material possibility of resulting, in a Material Adverse
Change in respect of the Trust.
(f) FURTHER ASSURANCES. The Trust will file all necessary
financing statements, assignments or other instruments, and any amendments or
continuation statements relating thereto, necessary to be kept and filed in such
manner and in such places as may be required by law to preserve and protect
fully the Lien and security interest in, and all rights of the Indenture
Collateral Agent with respect to the Indenture Property, under the Indenture.
In addition, the Trust shall, upon the request of Financial Security (so long as
no Insurer Default has occurred and is continuing), from time to time, execute,
acknowledge and deliver and, if necessary, file such further instruments and
take such further action as may be reasonably necessary to effectuate the
intention, performance and provisions of the Transaction Documents to which the
Trust is a party or to protect the interest of the Indenture Collateral Agent in
the Indenture Property under the Indenture. The Trust agrees to cooperate with
the Rating Agencies in connection with any review of the Transaction which may
be undertaken by the Rating Agencies after the date hereof.
(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. The Trust shall, 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 Note Policy, surrender the Note
Policy to Financial Security for cancellation.
(i) DISCLOSURE DOCUMENT. Each Prospectus delivered with respect
to the Notes shall clearly disclose that the Note Policy is not covered by the
property/casualty insurance security fund specified in Article 76 of the New
York Insurance Law. In addition, each
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Prospectus delivered with respect to the Notes which include financial
statements of Financial Security prepared in accordance with generally
accepted accounting principles (other than a Prospectus that only
incorporates such financial statements by reference) shall include the
following statement immediately preceding such financial statements:
The New York State Insurance Department recognizes only
statutory accounting practices for determining and reporting
the financial condition and results of operations of an
insurance company, for determining its solvency under the
New York Insurance Law, and for determining whether its
financial condition warrants the payment of a dividend to
its stockholders. No consideration is given by the New York
State Insurance Department to financial statements prepared
in accordance with generally accepted accounting principles
in making such determinations.
(j) SPECIAL PURPOSE ENTITY.
(i) The Trust shall conduct its business solely in its own
name through its duly authorized officers or agents so as not to
mislead others as to the identity of the entity with which those
others are concerned, and particularly will use its best efforts to
avoid the appearance of conducting business on behalf of Arcadia
Financial, the Seller, or any other Affiliates thereof or that the
assets of the Trust are available to pay the creditors of Arcadia
Financial, 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 Arcadia Financial, the Seller 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 Arcadia Financial, 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 Arcadia
Financial, the Seller or any Affiliate of any of them.
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(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 Arcadia Financial, the Seller and each
Affiliate of any of them.
(vii) The Trust shall maintain an arm's-length relationship with
Arcadia Financial, the Seller 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, Arcadia Financial, the Seller 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 1997-B Supplement, the Indenture, the
Administration Agreement and each Transaction Document to which Financial
Security is a party to be provided to Financial Security on the Closing Date.
(l) TAX MATTERS. The Trust will take all actions necessary to
ensure that, for federal and state income tax purposes, the Trust is not taxable
as an association (or publicly traded partnership) or 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.
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(b) CREATION OF INDEBTEDNESS; GUARANTEES. The Trust shall not
create, incur, assume or suffer to exist any indebtedness or assume, guarantee,
endorse or otherwise be or become directly or contingently liable for the
obligations of any Person by, among other things, agreeing to purchase any
obligation of another Person, agreeing to advance funds to such Person or
causing or assisting such Person to maintain any amount of capital, except as
contemplated by the Transaction Documents.
(c) SUBSIDIARIES. The Trust shall not form, or cause to be
formed, any Subsidiaries.
(d) NO LIENS. The Trust shall not, except as contemplated by
the Transaction Documents create, incur, assume or suffer to exist any Lien
of any nature upon or with respect to any of its properties or assets, now
owned or hereafter acquired, or sign or file under the Uniform Commercial
Code of any jurisdiction any financing statement that names the Trust as
debtor, or sign any security agreement authorizing any secured party
thereunder to file such a financing statement.
(e) IMPAIRMENT OF RIGHTS. The Trust shall not take any action,
or fail to take any action, if such action or failure to take action may
interfere with the enforcement of any rights under the Transaction Documents
that are material to the rights, benefits or obligations of the Indenture
Trustee, the Noteholders 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
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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 ARCADIA FINANCIAL
AND THE SELLER. Each of Arcadia Financial and the Seller represent and
warrant as of the date hereof and as of the Closing Date, as follows:
(a) DUE ORGANIZATION AND QUALIFICATION. The Seller is a
corporation duly organized and validly existing and in good standing under the
laws of the State of Delaware, with power and authority to own its properties
and to conduct its business. The Seller is duly qualified to do business, is in
good standing and has obtained all necessary licenses, permits, charters,
registrations and approvals (together, "approvals") necessary for the conduct of
its business as currently conducted and as described in the Prospectus and the
performance of its obligations under the Transaction Documents, in each
jurisdiction in which the failure to be so qualified or to obtain such approvals
would render the Receivables in such jurisdiction or any Transaction Document
unenforceable in any respect or would otherwise have a material adverse effect
upon the Transaction.
(b) POWER AND AUTHORITY. The Seller has all necessary corporate
power and authority to conduct its business as currently conducted and as
described in the Prospectus, to execute, deliver and perform its obligations
under this Agreement and each other Transaction Document to which the Seller is
a party and to carry out the terms of each such agreement, and has full power
and authority to sell and assign the Receivables and the Other Trust Property to
the Trust and has duly authorized such sale and assignment to the Trust by all
necessary corporate action.
(c) DUE AUTHORIZATION. The execution, delivery and performance
of this Agreement and each other Transaction Document to which the Seller is a
party has been duly authorized by all necessary corporate action on the part of
the Seller and does not require any additional approvals or consents or other
action by or any notice to or filing with any Person by or on behalf of the
Seller, including, without limitation, any governmental entity or the Seller's
stockholder.
(d) NONCONTRAVENTION. Neither the execution and delivery of
this Agreement and each other Transaction Document to which the Seller is a
party, the consummation of the 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
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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 Arcadia
Financial'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
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 or the Trust.
(f) VALID AND BINDING OBLIGATIONS. Each of the Transaction
Documents to which the Seller is a party, when executed and delivered by the
Seller, and assuming due authorization, execution and delivery by the other
parties thereto, will constitute the legal, valid and binding obligation of
the Seller enforceable in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting creditors' rights generally and
general equitable principles. The 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.
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(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 Arcadia Financial with respect to either of them, their Subsidiaries, the
Receivables or the Transaction contain any statement of a material fact which
was untrue or misleading in any material respect when made (except insofar as
any Document was corrected or superseded by a subsequent Document and
Financial Security has not detrimentally relied on the original Document).
There is no fact known to the Seller or Arcadia Financial which has a
material possibility of causing a Material Adverse Change with respect to the
Seller or Arcadia Financial, 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 Arcadia Financial 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 Arcadia
Financial 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
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Agreement, the Seller is not engaged in any business transactions with
Arcadia Financial or any Affiliate of Arcadia Financial.
(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 Arcadia Financial or any of its Affiliates or
Subsidiaries.
(iv) The Seller's funds and assets are not, and will not
be, commingled with the funds of any other Person, except as provided in
the Transaction Documents.
(v) The by-laws of the Seller require it to maintain (A)
correct and complete minute books and records of account, and (B) minutes
of the meetings and other proceedings of its shareholders and board of
directors.
(n) SOLVENCY; FRAUDULENT CONVEYANCE. The Seller is solvent and
will not be rendered insolvent by the Transaction and, after giving effect to
such Transaction, the Seller will not be left with an unreasonably small
amount of capital with which to engage in its business. The Seller does not
intend to incur, or believe that it has incurred, debts beyond its ability to
pay such debts as they mature. The Seller does not contemplate the
commencement of insolvency, bankruptcy, liquidation or consolidation
proceedings or the appointment of a receiver, liquidator, conservator,
trustee or similar official in respect of the Seller or any of its assets.
The amount of consideration being received by the Seller upon the sale of the
Initial Receivables and related Other Trust Property and contemplated to be
received upon the Sale of the Subsequent Receivables and related Other Trust
Property constitutes reasonably equivalent value and fair consideration for
interest in such Receivables and such Other Trust Property. The Seller is
not transferring the Other Trust Property to the Trust, 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") a registration
statement on Form S-3 (No. 333-18021), including a preliminary prospectus and
prospectus supplement for the registration of 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 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 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
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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 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 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
prospectusmade in reliance upon information furnished to the Seller in writing
by Financial Security expressly for use therein or the financial statements
(including the related notes thereto) of Financial Security.
(p) ERISA. The Seller is in compliance with ERISA and has not
incurred and does not reasonably expect to incur any liabilities to the PBGC
under ERISA in connection with any Plan or Multiemployer Plan or to contribute
now or in the future in respect of any Plan or Multiemployer Plan.
(q) PLEDGE OF SHARES. The shares of stock of the Seller which
have been pledged pursuant to the Stock Pledge Agreement constitute all of the
issued and outstanding shares of the Seller.
(r) PERFECTION OF LIENS AND SECURITY INTEREST. On the Closing
Date, the Lien and security interest in favor of the Indenture Collateral Agent
with respect to Indenture Property will be perfected by the filing of financing
statements on Form UCC-1 in each jurisdiction where such recording or filing is
necessary for the perfection thereof, the delivery of the Receivable Files for
the Receivables to the Custodian, and the establishment of the Collection
Account, the Subcollection Account, the Lockbox Account, the Pre-Funding
Account, the Reserve Account and the Note Distribution Account in accordance
with the provisions of the Transaction Documents, and no other filings in any
jurisdiction or any other actions (except as expressly provided herein) are
necessary to perfect the Collateral Agent's Lien on and security interest in the
Collateral as against any third parties.
(s) SECURITY INTEREST IN FUNDS AND INVESTMENTS. Assuming the
retention of funds in the Accounts 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 2.05. AFFIRMATIVE COVENANTS OF ARCADIA FINANCIAL AND THE
SELLER. Each of Arcadia Financial and the Seller hereby agree that during
the Term of the Agreement, unless Financial Security shall otherwise
expressly consent in writing:
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(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 2.04(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. 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 or the Noteholders, as the case may
be, copies of all reports, certificates, statements, financial statements or
notices furnished to the Trustee or the Noteholders, 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.
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(iii) the financial reports submitted in accordance with
Section 2.05(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 Receivables and the Other
Trust Property, the obligations of the Seller under the Transaction Documents,
the Seller's business and the Transaction and (ii) to discuss the affairs,
finances and accounts of the Seller with any of its officers, directors and
representatives, including its Independent Accountants. Such inspections and
discussions shall be conducted during normal business hours and shall not
unreasonably disrupt the business of the Seller. The books and records of the
Seller will be maintained at the address of the Seller designated herein for
receipt of notices, unless the Seller shall otherwise advise the parties hereto
in writing.
(f) NOTICE OF MATERIAL EVENTS. The Seller shall promptly inform
Financial Security in writing of the occurrence of any of the following:
(i) the submission of any claim or the initiation of any
legal process, litigation or administrative or judicial investigation
against the Seller involving potential damages or penalties in an uninsured
amount in excess of $5,000 in any one instance or $25,000 in the aggregate;
(ii) any change in the location of Seller's principal
office or any change in the location of the Seller's books and records;
(iii) the occurrence of any Default or Event of Default;
(iv) the commencement or threat of any rule making or
disciplinary proceedings or any proceedings instituted by or against the
Seller in any federal, state or local court or before any governmental body
or agency, or before any arbitration board, or the promulgation of any
proceeding or any proposed or final rule which, if adversely determined,
would result in a Material Adverse Change with respect to the Seller or the
Trust;
(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
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revoked, or (C) the Seller is to cease and desist any practice, procedure
or policy employed by the Seller in the conduct of its business, and such
cessation may result in a Material Adverse Change with respect to the
Seller or the Trust; or
(vii) any other event, circumstance or condition that has
resulted, or has a material possibility of resulting, in a Material Adverse
Change in respect of the Seller or the Trust.
(g) FURTHER ASSURANCES. The Seller will file all necessary
financing statements, assignments or other instruments, and any amendments or
continuation statements relating thereto, necessary to be kept and filed in such
manner and in such places as may be required by law to preserve and protect
fully the Lien and security interest in, and all rights of the Trust with
respect to Other Trust Property, under the Sale and Servicing Agreement. In
addition, the Seller shall, upon the request of Financial Security (so long as
no Insurer Default has occurred and is continuing), from time to time, execute,
acknowledge and deliver and, if necessary, file such further instruments and
take such further action as may be reasonably necessary to effectuate the
intention, performance and provisions of the Transaction Documents to which the
Seller is a party or to protect the interest of the Trust in the Receivables
under the Sale and Servicing Agreement. The Seller agrees to cooperate with the
Rating Agencies in connection with any review of the Transaction which may be
undertaken by the Rating Agencies after the date hereof.
(h) MAINTENANCE OF LICENSES. The Seller shall maintain all
licenses, permits, charters and registrations which are material to the
performance by the Seller of its obligations under this Agreement and each other
Transaction Document to which the Seller is a party or by which the Seller is
bound.
(i) DISCLOSURE DOCUMENT. Each Prospectus delivered with respect
to the Notes shall clearly disclose that the Note Policy is 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 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.
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(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 Arcadia Financial or any
other Affiliate thereof or that the assets of the Seller are available to
pay the creditors of Arcadia Financial 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 Arcadia Financial and the other
Affiliates thereof.
(iii) The Seller shall obtain proper authorization from its
board of directors of all corporate action requiring such authorization,
meetings of the board of directors of the Seller shall be held not less
frequently than three times per annum and copies of the minutes of each
such board meeting shall be delivered to Financial Security within two
weeks of such meeting.
(iv) The Seller shall obtain proper authorization from its
shareholders of all corporate action requiring shareholder approval,
meetings of the shareholders of the Seller shall be held not less
frequently than one time per annum and copies of each such authorization
and the minutes of each such shareholder meeting shall be delivered to
Financial Security within two weeks of such authorization or meeting, as
the case may be.
(v) Although the organizational expenses of the Seller
have been paid by Arcadia Financial, 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 Arcadia Financial 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 Arcadia Financial and each other Affiliate
thereof.
(viii) The Seller shall maintain an arm's-length relationship
with Arcadia Financial and the other Affiliates thereof and will not hold
itself out as being liable for the debts of Arcadia Financial or any
Affiliate thereof.
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(ix) The Seller shall keep its assets and its liabilities
wholly separate from those of all other entities, including, but not
limited to Arcadia Financial 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 1997-B Supplement, the Indenture, the
Administration Agreement and each Transaction Document to which Financial
Security is a party to be provided to Financial Security on the Closing Date.
(l) SUBSEQUENT RECEIVABLES: GOOD TITLE; VALID TRANSFER; ABSENCE
OF LIENS; SECURITY INTEREST. Immediately prior to the sale to the Trust
pursuant to a Subsequent Transfer Agreement, the Seller will be the owner of,
and shall have good and marketable title to, the Subsequent Receivables
transferred thereby and the related Other Trust Property free and clear of all
Liens and Restrictions on Transferability, and shall have full right, corporate
power and lawful authority to assign, transfer and pledge such property.
(m) INCORPORATION OF COVENANTS. The Seller agrees to comply
with each of the Seller's covenants set forth in the Transaction Documents and
hereby incorporates such covenants by reference as if each were set forth
herein.
Section 2.06 NEGATIVE COVENANTS OF ARCADIA FINANCIAL AND THE
SELLER. Each of Arcadia Financial 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 Notes.
(c) SUBSIDIARIES. The Seller shall not form, or cause to be
formed, any Subsidiaries.
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(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 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 Noteholders or Financial Security.
(g) NO MERGERS. The Seller shall not consolidate with or merge
into any Person or transfer all or any material amount of its assets to any
Person (except as contemplated by the Transaction Documents or the documents
relating to a Series of 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 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 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.
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(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 2.07. REPRESENTATIONS AND WARRANTIES OF ARCADIA FINANCIAL.
Arcadia Financial represents and warrants, as of the date hereof and as of the
Closing Date, as follows:
(a) DUE ORGANIZATION AND QUALIFICATION. Arcadia Financial 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.
Arcadia Financial 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. Arcadia
Financial and each of its Subsidiaries has obtained all licenses, permits,
charters, registrations and approvals necessary for the conduct of its business
as currently conducted and as described in the Prospectus and for the
performance of its obligations under the Transaction Documents.
(b) POWER AND AUTHORITY. Arcadia Financial 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
Arcadia Financial 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 Arcadia Financial's stockholders.
(d) NONCONTRAVENTION. Neither the execution and delivery of
this Agreement and each other Transaction Document to which Arcadia Financial
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 Arcadia Financial is a party,
(i) conflicts with or results in any breach or violation of
any provision of the corporate charter or bylaws of Arcadia Financial or
any law, rule, regulation, order, writ, judgment, injunction, decree,
determination or award currently in effect having applicability to
Arcadia Financial or any of its properties, including regulations issued
by an administrative agency or other governmental authority having
supervisory powers over Arcadia Financial,
(ii) constitutes a default by Arcadia Financial under or a
breach of any provision of any loan agreement, mortgage, indenture or
other agreement or instrument
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to which Arcadia Financial 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 Arcadia Financial'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 Arcadia Financial's best knowledge,
threatened, before any court, regulatory body, administrative agency, or other
governmental instrumentality having jurisdiction over Arcadia Financial or its
properties: (A) asserting the invalidity of this Agreement or any other
Transaction Document to which Arcadia Financial is a party, (B) seeking to
prevent the issuance of 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 Arcadia Financial is a party, (D) which might
result in a Material Adverse Change with respect to Arcadia Financial or
(E) which might adversely affect the federal or state tax attributes of the
Notes 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 Arcadia Financial. Each of the other Transaction Documents to which
Arcadia Financial is a party when executed and delivered by Arcadia Financial,
and assuming the due authorization, execution and delivery by the other parties
thereto, will constitute the legal, valid and binding obligation of Arcadia
Financial 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 Arcadia Financial of this Agreement or of any other
Transaction Document to which Arcadia Financial 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 Arcadia
Financial, 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 Arcadia Financial 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, Arcadia Financial is not
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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 Arcadia Financial.
(i) COMPLIANCE WITH LAW, ETC. No practice, procedure or policy
employed or proposed to be employed by Arcadia Financial in the conduct of its
business violates any law, regulation, judgment, agreement, order or decree
applicable to Arcadia Financial which, if enforced, would result in a Material
Adverse Change with respect to Arcadia Financial.
(j) TAXES. Arcadia Financial 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 Arcadia Financial in connection with the Transaction, the
execution and delivery of the Transaction Documents and the issuance of the
Notes have been paid or shall have been paid at or prior to the Closing Date.
(k) ERISA. Arcadia Financial is in compliance with ERISA and
has not incurred and does not reasonably expect to incur any liabilities to the
PBGC under ERISA in connection with any Plan or Multiemployer Plan or to
contribute now or in the future in respect of any Plan or Multiemployer Plan
except in accordance with the provisions of Section 2.9(e) hereof.
(l) INCORPORATION OF CERTAIN REPRESENTATIONS AND WARRANTIES.
Arcadia Financial represents and warrants to Financial Security that the
representations and warranties of Arcadia Financial set forth in the Transaction
Documents are (in each case) true and correct as if set forth herein.
Section 2.08. AFFIRMATIVE COVENANTS OF ARCADIA FINANCIAL.
Arcadia Financial 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. Arcadia
Financial 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. Arcadia Financial 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. Arcadia
Financial 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. Arcadia Financial 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 2.07(a), (b) and (c) hereof) and shall conduct its business in
accordance with the terms of its corporate charter and bylaws.
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(c) FINANCIAL STATEMENTS; ACCOUNTANTS' REPORTS; OTHER
INFORMATION. Arcadia Financial shall keep or cause to be kept in reasonable
detail books and records of account of Arcadia Financial's assets and business.
Arcadia Financial, 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 or the Noteholders, as the case may be, copies
of all reports, certificates, statements or notices furnished to the Owner
Trustee, Indenture Trustee or the Noteholders, as the case may be, pursuant to
the Transaction Documents. Arcadia Financial 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 Arcadia
Financial, the audited balance sheets of Arcadia Financial 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 Arcadia Financial 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 Arcadia Financial'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 2.08(d) hereof.
(ii) QUARTERLY FINANCIAL STATEMENTS. As soon as available,
and in any event within 45 days after the close of each of the first
three quarters of each fiscal year of Arcadia Financial, the unaudited
consolidated balance sheets of Arcadia Financial as of the end of such
quarter and the unaudited consolidated statements of income, changes in
shareholders' equity and cash flows of Arcadia Financial 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 2.08(d) hereof.
(iii) ACCOUNTANTS' REPORTS. Promptly upon receipt thereof,
copies of any reports submitted to Arcadia Financial by its independent
accountants in connection with any examination of the financial
statements of Arcadia Financial.
(iv) CERTAIN INFORMATION. Promptly after the filing or
sending thereof, copies of all proxy statements, financial statements,
reports and registration statements which Arcadia Financial files, or
delivers to, the IRS, the Commission, or any other federal government
agency, authority or body which supervises the issuance of securities by
Arcadia Financial or any national securities exchange.
(d) COMPLIANCE CERTIFICATE. Arcadia Financial shall deliver
to Financial Security within 90 days after the close of each fiscal year of
Arcadia Financial, a certificate signed by an Authorized Officer of Arcadia
Financial stating that:
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(i) a review of Arcadia Financial'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 Arcadia Financial has or had a right to cure pursuant to Section
5.01 hereof, stating in reasonable detail the steps, if any, taken or
being taken by Arcadia Financial 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 2.08(c) hereof, as applicable, are complete and correct in all
material respects and present fairly the financial condition and results
of operations of Arcadia Financial 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. Arcadia Financial shall, upon the request of Financial Security,
permit Financial Security or its authorized agents (i) to inspect the books and
records of Arcadia Financial as they may relate to the Notes, the Receivables,
the obligations of Arcadia Financial as Servicer under the Transaction
Documents, its business and the Transaction and (ii) to discuss the affairs,
finances and accounts of Arcadia Financial 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 Arcadia Financial. The books and records
of Arcadia Financial will be maintained at the address of Arcadia Financial
designated herein for receipt of notices, unless Arcadia Financial shall
otherwise advise the parties hereto in writing.
(f) NOTICE OF MATERIAL EVENTS. Arcadia Financial 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 Arcadia Financial 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 Arcadia Financial's
principal office or any change in the location of the Arcadia Financial'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
Arcadia Financial in any federal, state or local court or before any
governmental body or agency, or before any arbitration
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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 Arcadia Financial;
(v) the commencement of any proceedings by or against
Arcadia Financial 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 Arcadia Financial or any of its assets;
(vi) the receipt of notice that (A) Arcadia Financial is
being placed under regulatory supervision, (B) any license, permit,
charter, registration or approval necessary for the conduct of Arcadia
Financial's business is to be, or may be, suspended or revoked, or (C)
Arcadia Financial is to cease and desist any practice, procedure or
policy employed by Arcadia Financial in the conduct of its business, and
such cessation may result in a Material Adverse Change with respect to
Arcadia Financial; 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 Arcadia Financial.
(g) MAINTENANCE OF LICENSES. Arcadia Financial shall maintain
all licenses, permits, charters and registrations which are material to the
performance by Arcadia Financial of its obligations under this Agreement and
each other Transaction Document to which Arcadia Financial is a party or by
which Arcadia Financial is bound.
(h) ERISA. Arcadia Financial 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,
Arcadia Financial 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. Arcadia Financial 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) thereof and the covenants set forth in Section 3.6(a) thereof
shall be limited to the remedies set forth in the Sale and Servicing Agreement.
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(j) INCORPORATION OF COVENANTS. Arcadia Financial agrees to
comply with each of Arcadia Financial'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 ARCADIA FINANCIAL. Arcadia
Financial hereby agrees that during the Term of this Agreement, unless Financial
Security shall otherwise give its express written consent:
(a) RESTRICTIONS ON LIENS. Arcadia Financial 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. Arcadia Financial 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 or Financial Security.
(c) LIMITATION ON MERGERS. Arcadia Financial 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 Arcadia Financial
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 Arcadia Financial 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 Arcadia Financial under the Transaction
Documents and shall expressly assume in writing all of the obligations of
Arcadia Financial, 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 Arcadia Financial immediately prior to such consolidation,
merger or transfer of assets; and Arcadia Financial 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. Arcadia Financial shall furnish to
Financial Security all information requested by it that is reasonably necessary
to determine compliance with this paragraph.
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(d) WAIVER, AMENDMENTS, ETC. Arcadia Financial 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. Arcadia Financial shall not contribute or incur any
obligation to contribute to, or incur any liability in respect of, any Plan or
Multiemployer Plan, except that Arcadia Financial may make such a contribution
or incur such a liability provided that neither Arcadia Financial nor any
Commonly Controlled Entity will:
(i) terminate any Plan so as to incur any material
liability to the PBGC;
(ii) knowingly participate in any "prohibited transaction"
(as defined in ERISA) involving any Plan or Multiemployer Plan or any
trust created thereunder which would subject any of them to a material
tax or penalty on prohibited transactions imposed under Section 4975 of
the Code or ERISA;
(iii) fail to pay to any Plan or Multiemployer Plan any
contribution which it is obligated to pay under the terms of such Plan or
Multiemployer Plan, if such failure would cause such Plan to have any
material Accumulated Funding Deficiency, whether or not waived; or
(iv) allow or suffer to exist any occurrence of a
Reportable Event, or any other event or condition, which presents a
material risk of termination by the PBGC of any Plan or Multiemployer
Plan, to the extent that the occurrence or nonoccurrence of such
Reportable Event or other event or condition is within the control of it
or any Commonly Controlled Entity.
(f) INSOLVENCY. Arcadia Financial 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 (B) seeking appointment of a receiver, trustee,
custodian or other similar official for the Seller. Arcadia Financial 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 NOTE POLICY; REIMBURSEMENT; INDEMNIFICATION
Section 3.01 CONDITIONS PRECEDENT TO ISSUANCE OF THE NOTE POLICY.
Financial Security agrees to issue the Note Policy subject to satisfaction of
the conditions set forth below.
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(a) The obligation of Financial Security to issue the Note
Policy 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 Seller and of Arcadia Financial 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 Note
Policy 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 Arcadia Financial stating that nothing has come to the
attention of such entity to indicate that the Registration Statement or
the Prospectus, on the date the Registration Statement became effective,
contained an untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading, or that the Prospectus on any date on
which it was forwarded to the Underwriter for use in connection with the
offering of the Notes 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) 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
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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;
(iv) copies, certified to be true copies by an Authorized
Officer of Arcadia Financial, of (i) the resolutions of the board of
directors of Arcadia Financial authorizing the execution, delivery and
performance of this Agreement and each other Transaction Document to
which Arcadia Financial is a party and all other transactions and
documents contemplated hereby and thereby, and of all documents
evidencing any other necessary action of Arcadia Financial (which
certification shall state that such resolutions have not been modified,
are in full force and effect and constitute the only resolutions adopted
by Arcadia Financial's board of directors or any committee thereof with
respect thereto), (ii) the corporate charter of Arcadia Financial and
(iii) the by-laws, as amended, of Arcadia Financial;
(v) 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;
(vi) 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;
(vii) a certificate of an Authorized Officer of Arcadia
Financial stating that (i) all consents, licenses and approvals necessary
for Arcadia Financial to execute, deliver and perform this Agreement, the
other Transaction Documents to which Arcadia Financial is a party and all
other documents and instruments on the part of Arcadia Financial to be
delivered pursuant hereto or thereto have been obtained, and (ii) all such
consents, licenses and approvals are in full force and effect, Arcadia
Financial has not received any notice of any proceeding for the revocation
of any such license, charter, permit or approval, and, to Arcadia
Financial's knowledge, there is no threatened action or proceeding or any
basis therefor;
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(viii) a certificate of an Authorized Officer of the Owner
Trustee certifying (i) the names and true signatures of the officers of the
Owner Trustee executing and delivering this Agreement, the other
Transaction Documents to which the Owner Trustee is a party and the other
documents to be executed and delivered by the Owner Trustee hereunder and
thereunder, (ii) that approval by the Owner Trustee's equity holders of the
execution and delivery of this Agreement, the other Transaction Documents
and all other such documents to be executed and delivered, by the Owner
Trustee hereunder, has been obtained or is not required, and (iii) that no
action for the dissolution of the Owner Trustee has been adopted or
contemplated and that no such proceedings have been commenced or are
contemplated;
(ix) 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;
(x) a certificate of an Authorized Officer of Arcadia
Financial certifying (i) the names and true signatures of the officers of
Arcadia Financial executing and delivering this Agreement, the other
Transaction Documents to which Arcadia Financial is a party and the other
documents to be executed and delivered by Arcadia Financial hereunder and
thereunder, (ii) that approval by Arcadia Financial'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 Arcadia
Financial hereunder, has been obtained or is not required, and (iii) that
no resolution for the dissolution of Arcadia Financial has been adopted or
contemplated and that no such proceedings have been commenced or are
contemplated;
(xi) 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;
(xii) 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;
(xiii) a certificate of an Authorized Officer of Arcadia
Financial to the effect that (x) the representations and warranties of
Arcadia Financial set forth or incorporated by reference in this Agreement
are true and correct on and as of the Closing
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Date, and (y) confirming that the conditions precedent set forth herein
with respect to Arcadia Financial are satisfied;
(xiv) favorable opinions of counsel and special Texas counsel
to the Seller and Arcadia Financial in form and substance satisfactory to
Financial Security and its counsel;
(xv) a favorable opinion of counsel to each of the Trust,
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;
(xvi) 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;
(xvii) a fully executed copy of each of the Transaction
Documents;
(xviii) 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;
(xix) a certificate or opinion of Independent Accountants
addressed to Financial Security in form and substance satisfactory to
Financial Security;
(xx) 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
(xxi) 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 Note Policy 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 and the Class A-5 Notes, when
issued, will be rated "AAA" by S&P and "Aaa" by Moody's.
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(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 (other than the issuance of the Note Policy) shall have been
concurrently satisfied.
Section 3.02. PAYMENT OF FEES AND PREMIUM.
(a) LEGAL FEES. On the Closing Date, Arcadia Financial shall
pay or cause to be paid legal fees and disbursements incurred by Financial
Security in connection with the issuance of the Note Policy up to an amount not
to exceed $20,000.00, plus disbursements.
a.
(b) RATING AGENCY FEES. The initial fees of S&P and Moody's
with respect to the Notes and the Transaction shall be paid by Arcadia Financial
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 shall be for the account
of, shall be billed to, and shall be paid by Arcadia Financial. The fees for
any other rating agency shall be paid by the party requesting such other
agency's rating, unless such other agency is a substitute for S&P or Moody's in
the event that S&P or Moody's is no longer rating the Notes, in which case the
cost for such agency shall be paid by Arcadia Financial.
(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 Arcadia Financial.
Any additional fees incurred by Financial Security after the Closing Date in
respect of any additional consents shall be paid by Arcadia Financial on demand.
(d) PREMIUM. In consideration of the issuance by Financial
Security of the Note Policy, Arcadia Financial 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
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Agreement shall be nonrefundable without regard to whether Financial Security
makes any payment under the Note Policy or any other circumstances relating
to the Notes or provision being made for payment of the Notes 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 Arcadia Financial.
Section 3.03. REIMBURSEMENT AND ADDITIONAL PAYMENT OBLIGATION.
Each of Arcadia Financial 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 Note Policy;
(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 Note Policy to the
extent Financial Security has not been immediately reimbursed on the date
that any amount is paid by Financial Security under the Note Policy, (ii) the
administration, enforcement, defense or preservation of any rights in respect
of any of the Transaction Documents, including defending, monitoring or
participating in any litigation, proceeding (including any insolvency or
bankruptcy proceeding in respect of any Transaction participant or any
Affiliate thereof), restructuring or engaging in any protective measures or
monitoring activities relating to any of the Transaction Documents, any party
to any of the Transaction Documents or the Transaction, (iii) the foreclosure
against, sale or other disposition of any collateral securing any obligations
under any of the Transaction Documents or otherwise in the discretion of
Financial Security, or pursuit of any other remedies under any of the
Transaction Documents, to the extent such costs and expenses are not
recovered from such foreclosure, sale or other disposition (iv) any
amendment, waiver or other action with respect to, or related to, any
Transaction Document whether or not executed or completed, (v) preparation of
bound volumes of the Transaction Documents, (vi) any review or investigation
made by Financial Security in those circumstances where its approval or
consent is sought under any of the Transaction Documents; (vii) any federal,
state or local tax (other than taxes payable in respect of the gross income
of Financial Security) or other governmental charge imposed in connection
with the issuance of the Note Policy; 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
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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, Arcadia Financial, the Indenture Trustee, the Owner
Trustee or the Trust including, without limitation, any amounts payable by
Arcadia Financial in its capacity as Servicer or by the Trust, in respect of
the Notes 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 Arcadia Financial of amounts due
hereunder.
Section 3.04. CERTAIN OBLIGATIONS NOT RECOURSE TO ARCADIA
FINANCIAL; 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 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 Arcadia Financial 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 Arcadia Financial,
but shall be payable in the manner and in accordance with priorities provided
in the Sale and Servicing Agreement.
(b) Financial Security covenants and agrees that it shall not be
entitled to any payment from the Trust Property with respect to amounts owed
under this Agreement other than as set forth in Section 4.6 and Section 9.1
of the Sale and Servicing Agreement and Section 5.06 of the Indenture.
Section 3.05. INDEMNIFICATION.
(a) INDEMNIFICATION BY ARCADIA FINANCIAL. In addition to any
and all rights of reimbursement, indemnification, subrogation and any other
rights pursuant hereto or under law or in equity, Arcadia Financial 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;
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(ii) the negligence, bad faith, willful misconduct,
misfeasance, malfeasance or theft committed by any director, officer,
employee or agent of the Trust, the Seller or Arcadia Financial in
connection with the Transaction;
(iii) the violation by the Trust, the Seller or Arcadia
Financial 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, the Seller or Arcadia
Financial of any representation, warranty or covenant under any of the
Transaction Documents or the occurrence, in respect of the Trust, the
Seller or Arcadia Financial, 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 Financial
Security (individually, an "Indemnified Party" and, collectively, the
"Indemnified Parties") in respect of which indemnity may be sought from Arcadia
Financial hereunder, Financial Security shall promptly notify Arcadia Financial
in writing, and Arcadia Financial 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 Arcadia Financial if (i)
Arcadia Financial has agreed to pay such fees and expenses, (ii) Arcadia
Financial 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 Seller or Arcadia Financial, 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,
the Seller or Arcadia Financial (in which case, if the Indemnified Party
notifies Arcadia Financial in writing that it elects to employ separate counsel
at the expense of Arcadia Financial, Arcadia
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Financial 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 Arcadia Financial 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).
Arcadia Financial 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 Arcadia Financial shall have received
notice in accordance with this subsection (c) Arcadia Financial 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 Arcadia Financial is
determined to be unavailable for any Indemnified Party (other than due to
application of this Section), Arcadia Financial shall contribute to the
losses incurred by the Indemnified Party on the basis of the relative fault
of Arcadia Financial, 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 Arcadia Financial 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 Arcadia Financial. In the event that the date of
any payment to Financial Security or the expiration of any time period
hereunder occurs on a day which is not a Business Day, then such payment or
expiration of time period shall be made or occur on the next succeeding
Business Day with the same force and effect as if such payment was made or
time period expired on the scheduled date of payment or expiration date.
Payments to be made to Financial Security under this Agreement shall bear
interest at the Late Payment Rate from the date when due to the date paid.
Section 3.07. SUBROGATION. Subject only to the priority of payment
provisions of the Sale and Servicing Agreement, each of the Trust, the
Indenture Trustee, the Seller and Arcadia Financial acknowledges that, to the
extent of any payment made by Financial Security pursuant to the Note 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 Notes under the
Transaction Documents or otherwise. Each of the Trust, the Indenture Trustee,
the Seller and Arcadia Financial 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
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perfect the rights of Financial Security to receive any such moneys paid or
payable in respect of the Notes 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 Note Policy and the Note 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
Notes 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, the Seller and Arcadia
Financial 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, the Seller and Arcadia
Financial 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 or the Note Policy; 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, the Seller or Arcadia Financial
may have at any time against Financial Security or any other Person;
(iv) any document presented in connection with the Note
Policy 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 Note Policy
against presentation of a certificate or other document which does not
strictly comply with terms of the Note Policy;
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(vi) any failure of the Seller or the Trust to receive the
proceeds from the Sale of the Notes;
(vii) any breach by the Trust, the Seller or Arcadia
Financial 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, the Seller or Arcadia Financial in respect of any Transaction
Document.
(b) The Trust, the Seller and Arcadia Financial 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, the Seller or
Arcadia Financial; (v) agree that its liabilities hereunder shall, except as
otherwise expressly provided in this Section 4.03, be unconditional and without
regard to any setoff, counterclaim or the liability of any other Person for the
payment hereof; (vi) agree that any consent, waiver or forbearance hereunder
with respect to an event shall operate only for such event and not for any
subsequent event; (vii) consent to any and all extensions of time that may be
granted by Financial Security with respect to any payment hereunder or other
provisions hereof and to the release of any security at any time given for any
payment hereunder, or any part thereof, with or without substitution, and to the
release of any Person or entity liable for any such payment; and (viii) consent
to the addition of any and all other makers, endorsers, guarantors and other
obligors for any payment hereunder, and to the acceptance of any and all other
security for any payment hereunder, and agree that the addition of any such
obligors or security shall not affect the liability of the parties hereto for
any payment hereunder.
(c) Nothing herein shall be construed as prohibiting the Trust,
Seller or Arcadia Financial 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, the Seller nor Arcadia Financial may assign its rights
under this Agreement, or delegate any of its duties hereunder, without the
prior written
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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 Note 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
Note 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.
(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 (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 Note Policy), other than
Financial Security, against the Trust, the Seller, Arcadia Financial 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 shall have any right to payment from any
premiums paid or payable hereunder or from any other amounts paid by the
Seller or Arcadia Financial pursuant to Section 3.02, 3.03 or 3.04 hereof
(without limitation to the rights of the Noteholders 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 Note Policy 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 Note 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 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
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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 Note Policy;
(b) any representation or warranty made by the Trust, the
Seller, Arcadia Financial 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, the Seller, Arcadia Financial or the Servicer
shall fail to pay when due any amount payable by the Seller, Arcadia Financial
or the Servicer under any of the Related Documents (other than payments of
principal and interest on the Notes); (ii) the Trust, the Seller, Arcadia
Financial 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, the Seller, Arcadia Financial 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, the Seller, Arcadia Financial 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
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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 9.1 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
1997-B Spread Account (prior to any deposits into such Spread Account from
Spread Accounts related to any other Series) and the amount that may be
withdrawn from the Reserve Account pursuant to Section 5.1 of the Sale and
Servicing Agreement is less than the sum of the amounts payable on such
Distribution Date pursuant to clauses (i) through (viii) of Section 4.6 of
the Sale and Servicing Agreement;
(i) any default in the observance or performance of any
covenant or agreement of the Trust made in the Indenture (other than a
default in the payment of the interest or principal on any Note when due) or
any representation or warranty of the Trust made in the Indenture or in any
certificate or other writing delivered pursuant thereto or in connection
therewith proving to have been incorrect in any material respect as of the
time when the same shall have been made, and such default shall continue or
not be cured, or the circumstance or condition in respect of which such
misrepresentation or warranty was incorrect shall not have been eliminated or
otherwise cured, for a period of 30 days after there shall have been given,
by registered or certified mail, to the Trust and the Indenture Trustee by
Financial Security, a written notice specifying such default or incorrect
representation or warranty and requiring it to be remedied;
(j) the Average Delinquency Ratio with respect to any
Determination Date shall have been equal to or greater than 7.66%.
(k) with respect to any Determination Date, the Cumulative
Default Rate shall be equal to or greater than the percentage set forth in
Column A of Schedule I attached hereto corresponding to such Determination Date;
(l) with respect to any Determination Date, the Cumulative Net
Loss Rate shall be equal to or greater than the percentage set forth in Column B
of Schedule I attached hereto corresponding to such Determination 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, Arcadia
Financial, 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.
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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, the Seller or Arcadia Financial 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.
(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 Arcadia Financial. 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.
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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 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 each of the General
Counsel and the Head--Financial Guaranty Group and shall be
marked to indicate "URGENT MATERIAL ENCLOSED.")
(b) To the Seller:
Arcadia Receivables Finance Corp.
7825 Washington Avenue South, Suite 410
Minneapolis, Minnesota 55439-2435
Telephone: (612) 942-9888
Telecopier: (612) 942-6730
(c) To Arcadia Financial:
Arcadia Financial Ltd.
7825 Washington Avenue South
Minneapolis, Minnesota 55439-2435
Telephone: (612) 942-9880
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Telecopier: (612) 942-6730
(d) To the Trust:
Arcadia Automobile Receivables Trust, 1997-B
c/o Mellon Bank (DE), National Association,
as Owner Trustee
919 North Market Street, Second Floor
Wilmington, Delaware 19801
Attention: Robert H. Bell
Telephone: (302) 421-2283
Telecopier: (302) 421-2323
with a copy to:
Mellon Bank, National Association
Two Mellon Bank Center
Room 325
Pittsburgh, Pennsylvania 15259
Attention: Kent Christman
Telephone: (412) 234-5737
Telecopier: (412) 234-9196
A party may specify an additional or different address or addresses by
writing mailed or delivered to the other party as aforesaid. All such notices
and other communications shall be effective upon receipt.
Section 6.03. SEVERABILITY. In the event that any provision of
this Agreement shall be held invalid or unenforceable by any court of
competent jurisdiction, the parties hereto agree that such holding shall not
invalidate or render unenforceable any other provision hereof. The parties
hereto further agree that the holding by any court of competent jurisdiction
that any remedy pursued by any party hereto is unavailable or unenforceable
shall not affect in any way the ability of such party to pursue any other
remedy available to it.
Section 6.04. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
Section 6.05. CONSENT TO JURISDICTION.
(a) TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE
PARTIES THERETO HEREBY IRREVOCABLY SUBMIT TO THE JURISDICTION OF THE UNITED
STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND ANY COURT IN THE
STATE OF NEW YORK LOCATED IN THE CITY AND COUNTY OF NEW YORK, AND ANY APPELLATE
COURT FROM ANY THEREOF, IN ANY ACTION, SUIT OR PROCEEDING BROUGHT AGAINST IT AND
TO OR IN
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CONNECTION WITH ANY OF THE TRANSACTION DOCUMENTS OR THE 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) Arcadia Financial 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. The Seller and Arcadia Financial 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 Arcadia Financial 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,
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all references to articles and sections in this Agreement refer to the
corresponding articles and sections of this Agreement.
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 or the Note 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. 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 Note 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.
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IN WITNESS WHEREOF, the parties hereto have duly executed and
delivered this Insurance and Indemnity Agreement, all as of the day and year
first above written.
FINANCIAL SECURITY ASSURANCE INC.
By:
---------------------------------------------
Authorized Officer
ARCADIA AUTOMOBILE RECEIVABLES
TRUST, 1997-B
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
ARCADIA FINANCIAL LTD.
By:
---------------------------------------------
John A. Witham
Executive Vice President and
Chief Financial Officer
ARCADIA RECEIVABLES FINANCE CORP.
By:
---------------------------------------------
John A. Witham
Senior Vice President and
Chief Financial Officer
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SCHEDULE I
Determination Date* Cumulative Default Rate Cumulative Net Loss Rate
(month) (Column A) (Column B)
0 to 3 3.74% 1.90%
3 to 6 7.17% 3.45%
6 to 9 10.07% 4.76%
9 to 12 12.48% 5.66%
12 to 15 13.64% 6.19%
15 to 18 15.21% 6.68%
18 to 21 16.63% 7.05%
21 to 24 17.68% 7.35%
24 to 27 18.63% 7.58%
27 to 30 19.44% 7.80%
30 to 33 20.06% 7.95%
33 to 36 20.52% 8.10%
36 to 39 20.94% 8.21%
39 to 42 21.18% 8.33%
42 to 45 21.41% 8.44%
45 to 48 21.60% 8.50%
48 to 51 21.71% 8.55%
51 to 54 21.81% 8.60%
54 to 57 21.85% 8.65%
57 to 60 21.89% 8.68%
60 to 63 21.92% 8.70%
63 to 66 21.94% 8.72%
66 to 69 21.96% 8.74%
69 to 72 21.99% 8.76%
- --------------------------
* Such Determination Date occurring after the designated calendar months
succeeding the Series 1997-B Closing Date appearing first in the column below,
and prior to or during the designated calendar months succeeding the Series
1997-B Distribution Date appearing second in the column below.
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EMPLOYMENT AGREEMENT
THIS AGREEMENT between Arcadia Financial Ltd. (the "Company") and
Duane E. White (the "Executive") is dated as of this 1st day of May, 1997.
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. Not applicable.
3. RETENTION PERIOD. The Company agrees to employ the Executive,
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) POSITION. During the Retention
Period, Executive shall serve as Executive Vice President of Corporate
Services and shall report to the President and Chief Executive Officer.
(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 becoming employed hereunder, 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
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Effective Date (including but not limited to the Board of Career College
Loan Company) shall not be deemed to interfere with the performance of the
Executive's services to the Company. Further, the Executive's performance
of duties for Career College Loan Company in any capacity shall be
permitted so long as the performance of such duties does not unreasonably
interfere with his performance of his duties hereunder.
5. COMPENSATION AND BENEFITS. (a) BASE SALARY. During the
Retention Period, the Executive shall receive a base salary ("Base Salary")
at an annual rate of $250,000 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 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 commencement of 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 Executive by the Company pursuant to this Section
5(c)(i) and
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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. During the first year of the term hereof, the
Executive shall be entitled to three weeks paid vacation the first year
of employment. Each year thereafter, the Executive shall be entitled to
four weeks of vacation. Such vacation shall be 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. The Company shall pay to Executive a monthly
auto expense allowance in the amount of not less than Four Hundred
Dollars ($400) per month.
(v) STOCK OPTION. The Company shall on the Effective Date
grant to the Executive an incentive stock option to purchase up to
100,000 shares of Common Stock of the Company at a price per share equal
to the fair market value of the stock on such date subject to the terms
of an incentive stock option agreement to be agreed upon by the parties.
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.
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(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) 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; or
(iv) during the period from May 1, 1998 to July 31, 1998, a
determination by the Executive in his sole discretion that his scope of
responsibilities are not acceptable to him.
(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 (except as to Good
Reason based upon Subsection 6(d)(iv), in which case such notice must be given
prior to August 1, 1998), 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) 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
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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 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 (other than Good Reason pursuant to Section 5(d)(iv)), the Executive
shall receive all Accrued Obligations, and in addition, the Company shall pay
to the Executive in a lump
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sum, within 15 days after the Date of Termination, a cash amount equal to two
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 payable to
the Executive pursuant to Section 5(c)(iv) hereof during one
calendar year of the Retention Period; 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.
If such termination occurs due to the Executive's termination hereof for Good
Reason pursuant to Section 5(d)(iv) hereof, the Executive shall receive all
Accrued Obligation, and 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 the sum of items (1) through (4) set forth in this subsection 7(d).
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
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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) 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,
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(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 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
8
<PAGE>
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. Such termination shall be deemed to have
been by mutual consent of the Company and the Executive.
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
positions with the Company and its subsidiaries, he will 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 will develop 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 will include involvement in the
management, promotion and development of the Company's business. Accordingly,
the parties deem it
9
<PAGE>
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) whose primary business consists of 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") or for any subdivision or department of
any business whose primary business does not consist of Restricted Activities,
but where the primary business of such subdivision or department consists of
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.
10
<PAGE>
(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: Duane E. White
707 Kenwood Parkway
Minneapolis, Minnesota 55403
If to the Company: Arcadia Financial Ltd.
7825 Washington Avenue South
Minneapolis, MN 55439
Attention: Chief Executive Officer
(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.
11
<PAGE>
(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.
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.
ARCADIA FINANCIAL LTD.
By: /s/ Richard A. Greenawalt
----------------------------------
Name: Richard A. Greenawalt
Title: President and Chief Executive Officer
/s/ Duane E. White
-------------------------------------
Duane E. White
12
<PAGE>
EXECUTION COPY
- --------------------------------------------------------------------------------
AMENDMENT NO. 4
Dated as of May 30, 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
ARCADIA FINANCIAL LTD.
(formerly 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(c) of the Sale
and Servicing 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 Sale and Servicing Agreement in Full
Force and Effect as Amended................................... 2
i
<PAGE>
AMENDMENT NO. 4 dated as of May 30, 1997 (the "AMENDMENT") to SALE AND
SERVICING AGREEMENT dated as of December 28, 1995 and amended as of June 12,
1996, September 30, 1996 and December 20, 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"), Arcadia Financial Ltd. (formerly 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 meaning 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. The definition of "REQUISITE AMOUNT" in Section 1.1 of the Sale and
Servicing Agreement is hereby amended by deleting each reference to "4.0%" and
substituting therefor "6.0%".
SECTION 2.2 AMENDMENT TO SECTION 2.1(c) OF THE SALE AND SERVICING
AGREEMENT. Clause (B) of Section 2.1(c)(2)(ix) of
<PAGE>
the Sale and Servicing Agreement is hereby amended to read in its entirety as
follows:
(B) the Portfolio Loss Ratio shall exceed 2.50%, provided that on or
before August 29, 1997, no Purchase Termination Event shall be declared as long
as the Portfolio Loss Ratio shall not, as of any Determination Date, exceed
4.0%;
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 of executed on behalf of the Issuer, the Seller
(including in its capacity as a Certificateholder) and the Servicer, (b) the
consents of the Backup Servicer, the Indenture Trustee and JPMD, as a
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 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
reference to the Sale and Servicing Agreement in any other document or
instrument shall be deemed to mean the Sale and Servicing Agreement, as attended
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.
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<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 AND CERTIFICATEHOLDER:
OLYMPIC RECEIVABLES FINANCE CORP. II
By:
---------------------------
Name:
Title:
SERVICER:
ARCADIA FINANCIAL LTD.,
in its individual capacity
and as Servicer
By:
---------------------------
Name:
Title:
3
<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
Certificateholder, and as Administrative
Agent for Delaware Funding Corporation, as
sole Noteholder
By:
---------------------------
Name:
Title:
4
<PAGE>
EXECUTION COPY
- --------------------------------------------------------------------------------
SECOND AMENDMENT
AND CONSENT
dated as of May 30, 1997
Relating to
NOTE PURCHASE AGREEMENT
among
OLYMPIC AUTOMOBILE RECEIVABLES WAREHOUSE TRUST
as Seller,
ARCADIA FINANCIAL LTD.
(formerly 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 SECOND AMENDMENT AND CONSENT dated as of May 30, 1997 (this
"AMENDMENT") Relating to the Note Purchase Agreement dated as of December 28,
1995 and amended as of January 17, 1997 (as amended and supplemented from time
to time, the "NOTE PURCHASE AGREEMENT") by and among OLYMPIC AUTOMOBILE
RECEIVABLES WAREHOUSE TRUST, a Delaware business trust (the "SELLER"), ARCADIA
FINANCIAL LTD. (formerly 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 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
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 that certain covenant relating to OFL's Capital Base and the
Incremental Purchase condition and Note Purchase Termination Event relating to
the minimum Certificate Balance; and
WHEREAS, the parties to the Note Purchase Agreement desire to extend
the optional termination date provision of the Purchase Commitment Expiration
Date by amending the related definition in the Note Purchase Agreement; and
WHEREAS, the Purchaser desires to consent to the amendments to the
Sale and Servicing Agreement.
<PAGE>
NOW THEREFORE, in consideration of the premises and the agreements
contained herein, the parties to this Amendment agree as follows:
SECTION 1. EXTENSION AND AMENDMENT OF PURCHASE COMMITMENT EXPIRATION
DATE. The parties hereto agree to extend the optional termination date
provision of 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) August 29, 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 July 31, 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 2. AMENDMENT TO REQUIREMENTS FOR INCREMENTAL PURCHASES.
Section 2.03(a)(ix) of the Note Purchase Agreement is hereby amended to increase
the requirement relating to the minimum Certificate Balance of the Investor
Certificates and now reads as follows:
(ix) the aggregate Certificate Balance of the Investor Certificates
shall equal at least twelve (12) percent of the sum of (a) the Facility
Balance and (b) the Certificate Balance of the General Partner
Certificates.
SECTION 3. AMENDMENT TO NOTE PURCHASE TERMINATION EVENT. Section
2.08(g) of the Note Purchase Agreement is amended so that a "Note Purchase
Termination Event" will occur if the Certificate Balance of the Investor
Certificates is not maintained at an increased amount and now reads as follows:
(g) unless no Notes are issued and outstanding, the aggregate
Certificate Balance of the Investor Certificates shall be less than twelve
(12) percent of the sum of (i) the Facility Balance and (ii) the
Certificate Balance of the General Partner Certificates;
SECTION 4. ADDITION OF WAIVER TO OFL'S MINIMUM CAPITAL BASE COVENANT.
The following new waiver language is added to the end of OFL's covenant in
Section 9.07 to the Note Purchase Agreement and Section 9.07 now reads as
follows:
2
<PAGE>
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;
and
(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;
PROVIDED, HOWEVER, that OFL shall not be deemed or declared to be in breach
of the covenants contained in this Section 9.07 as long as on the last day
of any fiscal quarter, OFL's consolidated Capital Base is not less than
$325,000,000;
SECTION 5. CONSENT TO AMENDMENTS TO SALE AND SERVICING AGREEMENT.
The Purchaser hereby consents, pursuant to Sections 8.06 and 9.06 of the Note
Purchase Agreement, to Amendment No. 4 to Sale and Servicing Agreement of even
date herewith, substantially in the form attached to this Amendment as Appendix
A.
SECTION 6. 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 7. EFFECTIVENESS. This Amendment shall become effective as
of May 30, 1997, upon receipt by the Administrative Agent of the following:
(a) executed counterparts of this Amendment; (b) an executed copy of the Fourth
Amendment and Consent Relating to DFC Asset Purchase Agreement, dated as of the
date hereof, evidencing the extension of the optional termination commitment
terms and certain other changes to the provisions thereof; (c) an executed copy
of the Third 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 executed counterpart of Amendment No. 4 to
3
<PAGE>
the Sale and Servicing Agreement 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 as of the date hereof;
and (f) confirmation by each of S&P and Moody's of the then-current ratings of
the Commercial Paper Notes.
SECTION 8. 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 9. 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 10. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK.
4
<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:
ARCADIA 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:
5
<PAGE>
EXECUTION COPY
- --------------------------------------------------------------------------------
ACKNOWLEDGMENT OF
REDUCTION OF PURCHASE COMMITMENT
AND CONSENT
dated as of June 30, 1997
Relating to
NOTE PURCHASE AGREEMENT
among
OLYMPIC AUTOMOBILE RECEIVABLES WAREHOUSE TRUST
as Seller,
ARCADIA FINANCIAL LTD.
(formerly 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 ACKNOWLEDGMENT OF REDUCTION OF PURCHASE COMMITMENT dated as of
June 30, 1997 (this "ACKNOWLEDGMENT") Relating to the Note Purchase Agreement
dated as of December 28, 1995 and amended as of January 17, 1997 and May 30,
1997 (as amended and supplemented from time to time, the "NOTE PURCHASE
AGREEMENT") by and among OLYMPIC AUTOMOBILE RECEIVABLES WAREHOUSE TRUST, a
Delaware business trust (the "SELLER"), ARCADIA FINANCIAL LTD., (formerly
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 Acknowledgment and not
otherwise defined shall have the meanings assigned to such terms in the Note
Purchase Agreement.
RECITALS
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, the Purchaser and the Administrative Agent desire to
acknowledge receipt of notice of the reduction of the amount of the Purchase
Commitment.
NOW THEREFORE, in consideration of the premises and the agreements
contained herein, the parties to this Acknowledgment agree as follows:
SECTION 1. 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 Acknowledgment constitutes notice
of the reduction of the Purchase Commitment from $225,000,000 to $185,000,000.
SECTION 2. NOTE PURCHASE AGREEMENT IN FULL FORCE AND EFFECT AS
SUPPLEMENTED. Except for the reduction in the Purchase Commitment, 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 Acknowledgment.
SECTION 3. EFFECTIVENESS. This Acknowledgment shall become effective
as of June 30, 1997, upon receipt by the Administrative Agent of the following:
(a) executed counterparts of this Acknowledgment; (b) an executed copy of the
Fifth Amendment Relating to the DFC Asset Purchase Agreement, dated as of the
date hereof, evidencing the termination of the Purchase
<PAGE>
Commitments of certain APA Purchasers and the reduction of the aggregate Maximum
Purchase of remaining APA Purchasers; (c) an executed copy of the
Acknowledgement of Reduction of Purchase Commitments Relating to Certificate
Purchase Agreement among the Seller, OFL, the "Purchasers" named therein 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. PRIOR UNDERSTANDINGS. This Acknowledgment 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 Acknowledgment 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 ACKNOWLEDGMENT 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 Acknowledgment 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:
ARCADIA 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:
3
<PAGE>
EXECUTION COPY
- --------------------------------------------------------------------------------
THIRD AMENDMENT
AND CONSENT
dated as of May 30, 1997
Relating to
CERTIFICATE PURCHASE AGREEMENT
among
OLYMPIC AUTOMOBILE RECEIVABLES WAREHOUSE TRUST
as Seller,
ARCADIA FINANCIAL LTD.
(formerly 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 THIRD AMENDMENT AND CONSENT dated as of May 30, 1997 (this
"AMENDMENT") Relating to the Certificate Purchase Agreement dated as of December
28, 1995 and amended as of December 20, 1996 and January 17, 1997 (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"), ARCADIA FINANCIAL LTD. (formerly 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(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; 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 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
that certain covenant relating to OFL's Capital Base; and
WHEREAS, the parties to the Certificate Purchase Agreement desire to
extend the optional termination date
<PAGE>
provision of the Purchase Commitment Expiration Date by amending the related
definition in the Certificate Purchase Agreement; and
WHEREAS, the Purchasers and the Purchasers' Agent desire to agree to
the Seller's request for an increase in the aggregate Purchase Commitments; and
WHEREAS, the Purchasers and the Purchasers' Agent desire to consent to
amendment of the Sale and Servicing Agreement.
NOW THEREFORE, in consideration of the premises and the agreements
contained herein, the parties to this Amendment agree as follows:
SECTION 1. EXTENSION AND AMENDMENT OF PURCHASE COMMITMENT EXPIRATION
DATE. The parties hereto agree to extend the optional termination date
provision of 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) December 19, 1997, (ii) August 29, 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 July 31, 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 2. INCREASE IN PURCHASE COMMITMENTS. The Purchasers and the
Purchasers' Agent agree to the increase of the aggregate of the Purchase
Commitments from $22,275,000 to $30,700,000. Following such increase, the
Purchasers' Purchase Percentages will remain unchanged, and their Purchase
Commitments will be revised proportionately. The Purchasers will evidence their
respective Purchase Commitments and Purchase Percentages by executing signature
pages to this Agreement. Such signature pages shall supersede the signature
pages to the Certificate Purchase Agreement dated January 17, 1997, 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 3. ADDITION OF WAIVER TO OFL'S MINIMUM CAPITAL BASE COVENANT.
The following new waiver language is added to the
2
<PAGE>
end of OFL's covenant in Section 9.06 to the Certificate Purchase Agreement and
Section 9.06 now 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;
and
(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;
PROVIDED, HOWEVER, that OFL shall not be deemed or declared to be in breach
of the covenants contained in this Section 9.06 as long as on the last day
of any fiscal quarter, OFL's consolidated Capital Base is not less than
$325,000,000;
SECTION 4. CONSENT TO AMENDMENT TO SALE AND SERVICING AGREEMENT. The
Purchasers hereby consent, pursuant to Section 8.05 and 9.05 of the Certificate
Purchase Agreement, to the Amendment No. 4 to Sale and Servicing Agreement, of
even date herewith, substantially in the form attached hereto as Appendix A.
SECTION 5. 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
amended by this Amendment, as though the terms and obligations of the
Certificate Purchase Agreement were set forth herein.
SECTION 6. EFFECTIVENESS. This Amendment shall become effective as
of May 30, 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 Second Amendment and Consent Relating to
Note Purchase Agreement dated the date hereof have been satisfied
3
<PAGE>
and (iii) confirmation by each of S&P and Moody's of the then-current ratings of
the Commercial Paper Notes.
SECTION 7. 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 8. 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 9. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK.
4
<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:
---------------------------
Name: Authorized Officer
ARCADIA FINANCIAL LTD., as
Servicer and in its
individual capacity
By:
---------------------------
Name:
Title: Treasurer
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as a
Purchaser
Purchase By:
Commitment: $15,350,000 ---------------------------
Purchase Percentage: 50% Name:
Title:
OLYMPIC RECEIVABLES FINANCE
CORP. II, as a Purchaser
Purchase By:
Commitment: $15,350,000 ---------------------------
Purchase Percentage: 50% Name:
Title:
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK,
as Purchasers' Agent
By:
---------------------------
Name:
Title:
5
<PAGE>
EXECUTION COPY
- --------------------------------------------------------------------------------
ACKNOWLEDGMENT OF
REDUCTION OF PURCHASE COMMITMENTS
dated as of June 30, 1997
Relating to
CERTIFICATE PURCHASE AGREEMENT
among
OLYMPIC AUTOMOBILE RECEIVABLES WAREHOUSE TRUST
as Seller,
ARCADIA FINANCIAL LTD.
(formerly 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 ACKNOWLEDGMENT OF REDUCTION OF PURCHASE COMMITMENTS dated as of
June 30, 1997 (this "ACKNOWLEDGMENT") Relating to the Certificate Purchase
Agreement dated as of December 28, 1995 and amended as of December 20, 1996,
January 17, 1997 and May 30, 1997 (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"), ARCADIA
FINANCIAL LTD. (formerly 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 Arcadia 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 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, the Purchasers and the Purchasers' Agent desire to accept
this Acknowledgment 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.
NOW THEREFORE, in consideration of the premises and the agreements
contained herein, the parties to this Acknowledgment agree as follows:
SECTION 1. DECREASE IN PURCHASE COMMITMENTS. In accordance with the
provisions of Section 2.05(a) of the Certificate Purchase Agreement, the
Purchasers and the Purchasers' Agent acknowledge notice of the reduction in the
aggregate of the Purchase Commitments from $30,700,000 to $25,230,000.
Following such reduction, the Purchasers' Purchase Percentages will remain
unchanged, and their Purchase Commitments will be revised proportionately. The
Purchasers will evidence their respective Purchase Commitments and Purchase
Percentages by executing signature pages to this Acknowledgment. Such signature
pages shall supersede the signature pages to the Certificate Purchase Agreement
dated May 30, 1997, and from and after the date of this Acknowledgment, all
references to the signature
<PAGE>
pages of the Certificate Purchase Agreement shall refer to the signature pages
to this Acknowledgment.
SECTION 2. CERTIFICATE PURCHASE AGREEMENT IN FULL FORCE AND EFFECT AS
AMENDED AND SUPPLEMENTED. Except for the reduction in the Purchase Commitments,
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 Acknowledgment.
SECTION 3. EFFECTIVENESS. This Acknowledgment shall become effective
as of June 30, 1997 upon receipt by the Purchasers' Agent of (i) counterparts of
this Acknowledgment, duly executed by each of the parties hereto, (ii) notice
that the conditions to effectiveness of the Acknowledgment of Reduction of
Purchase Commitment 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 4. PRIOR UNDERSTANDINGS. This Acknowledgment 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 Acknowledgment 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 ACKNOWLEDGMENT 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 Acknowledgment 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:
---------------------------
Name: Authorized Officer
ARCADIA FINANCIAL LTD., as
Servicer and in its
individual capacity
By:
---------------------------
Name:
Title: Treasurer
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as a
Purchaser
Purchase By:
---------------------------
Commitment: $12,615,000 Name:
Purchase Percentage: 50% Title:
ARCADIA RECEIVABLES FINANCE
CORP. II, as a Purchaser
Purchase By:
---------------------------
Commitment: $12,615,000 Name:
Purchase Percentage: 50% Title:
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK,
as Purchasers' Agent
By:
---------------------------
Name:
Title:
3
<PAGE>
EXECUTION COPY
FOURTH AMENDMENT
AND CONSENT
RELATING TO
ASSET PURCHASE AGREEMENT
Olympic Automobile Receivables Warehouse Trust
Variable Funding Notes
THIS FOURTH AMENDMENT AND CONSENT dated as of May 30, 1997 (the
"FOURTH AMENDMENT") Relating to the ASSET PURCHASE AGREEMENT, dated as of
December 28, 1995 and amended as of June 12, 1996, December 20, 1996 and January
17, 1997 (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 Fourth Amendment and not otherwise defined shall have the meanings assigned
to such terms in the Agreement.
RECITALS
WHEREAS, the Agent and the APA Purchasers desire to amend the
Agreement to extend each APA Purchaser's Purchase Termination Date and the
Expiry Date; and
WHEREAS, the APA Purchasers also desire to amend the definition of
"Purchase Price" contained in Section 2(c) of the Agreement; and
WHEREAS, in a Second Amendment and Consent relating to the Note
Purchase Agreement dated the date hereof, the parties thereto have agreed to
amend the Note Purchase Termination Event contained in Section 2.08(g) of the
Note Purchase Agreement; and
WHEREAS, in accordance with the provisions of Section 13(l) of the
Agreement, Delaware Funding Corporation and Arcadia Financial Ltd. (formerly
Olympic Financial Ltd.) ("OFL") are willing to consent to this Fourth 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 Note Purchase Termination Event in Section 2.08(g) of the Note
Purchase Agreement and to the Sale and Servicing Agreement.
<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; AMENDED SIGNATURE
PAGES. The APA Purchasers who execute the attached signature pages hereby
consent to either (i) in the case of an APA Purchaser who notified the Agent on
or before May 27, 1997 of its determination to terminate its Purchase Commitment
on June 30, 1997, the Purchase Termination Date for such APA Purchaser being
June 30, 1997 as specified on the appropriate signature page, and (ii) in the
case of an APA Purchaser who did not so notify the Agent, the extension of the
optional termination date provision of such APA Purchaser's Purchase Termination
Date to the date specified on the appropriate signature page. The signature
pages attached to this Fourth Amendment as Exhibit A shall supersede the
signature pages to the Agreement dated January 17, 1997, and from and after the
date of this Fourth Amendment all references to the signature pages of the
Agreement shall refer to the signature pages attached as Exhibit A to this
Fourth Amendment.
SECTION 2. 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 (other than those APA Purchasers who notified
the Agent on or before May 27, 1997 of their determination to terminate
their Purchase Commitments on June 30, 1997), the earlier of (i) December
19, 1997 or (ii) August 29, 1997, but only if 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 July 31, 1997 or (b) DFC terminates its Purchase Commitment under
the Note Purchase Agreement,
SECTION 3. AMENDMENT OF PURCHASE PRICE. In accordance with the
provisions of Section 13(1) of the Agreement, the parties, with the consent of
OFL, desire to amend the "Purchase Price" as defined in the last sentence of the
first paragraph of Section 2(c) of the Agreement by deleting at the end of such
paragraph "9%" and replacing it with "12%".
SECTION 4. CONSENT TO AMENDMENTS TO OTHER AGREEMENTS. 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 (i) Second Amendment and
Consent Relating to Note Purchase Agreement and (ii) Amendment No. 4 to Sale and
Servicing Agreement, each dated the hereof, substantially in the forms attached
to this Fourth Amendment as Exhibits B and C.
2
<PAGE>
SECTION 5. EFFECTIVENESS. The amendments provided for by this Fourth
Amendment shall become effective as of May 30, 1997, upon receipt by the Agent
of (i) counterparts of this Fourth Amendment, duly executed by each of the
parties hereto, (ii) notice that the conditions to effectiveness of the Second
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 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 Fourth Amendment. This Fourth 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 Fourth Amendment, as though the terms and
obligations of the Agreement were set forth herein.
SECTION 7. PRIOR UNDERSTANDINGS. This Fourth 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 Fourth 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 FOURTH 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 Fourth
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:
May 30, 1997
DELAWARE FUNDING CORPORATION
By: Morgan Guaranty Trust Company
of New York,
as attorney-in-fact for
Delaware Funding Corporation
By:
------------------------
Authorized Signatory
------------------------
Title
ARCADIA FINANCIAL LTD.
By:
------------------------
Authorized Signatory
------------------------
Title
4
<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
Amended as of May 30, 1997
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: 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:
------------------------
Authorized Signature
------------------------
Title
- -----------------------
* At the option of the APA Purchaser named above, August 29, 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: June 30, 1997
THE BANK OF NOVA SCOTIA,
ATLANTA AGENCY
Suite 2700
600 Peachtree Street, N.E.
Atlanta, Georgia 30308
By:
------------------------
Title:
By:
------------------------
Title:
<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: June 30, 1997
COMMERZBANK AKTIENGESELLSCHAFT, CHICAGO BRANCH
311 S. Wacker Drive
Chicago, Illinois 60606
By:
------------------------
Title:
By:
------------------------
Title:
<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:
------------------------
Title:
By:
------------------------
Title:
- -----------------------
* At the option of the APA Purchaser named above, August 29, 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:
------------------------
Title:
By:
------------------------
Title:
- -----------------------
* At the option of the APA Purchaser named above, August 29, 1997.
<PAGE>
EXECUTION COPY
FIFTH AMENDMENT
RELATING TO
ASSET PURCHASE AGREEMENT
Olympic Automobile Receivables Warehouse Trust
Variable Funding Notes
THIS FIFTH AMENDMENT AND CONSENT dated as of June 30, 1997 (the "FIFTH
AMENDMENT") Relating to the ASSET PURCHASE AGREEMENT, dated as of December 28,
1995 and amended as of June 12, 1996, December 20, 1996, January 17, 1997 and
May 30, 1997 (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 Fifth Amendment and not otherwise defined shall have the meanings assigned
to such terms in the Agreement.
RECITALS
WHEREAS, May 27, 1997 was the date by which each current APA Purchaser
is required to notify OFL and the Agent if it has determined to exercise its
option to terminate its Purchase Commitment; and
WHEREAS, certain current APA Purchasers have so notified the Agent and
OFL (such APA Purchasers, the "Terminating Purchasers"); and
WHEREAS, the Seller has determined to reduce the Facility Limit, such
reduction to be effective as of June 30, 1997; and
WHEREAS, due to the exercise of the optional termination by the
Terminating Purchasers, 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 accordance with the provisions of Section 13(l) of the
Agreement, Delaware Funding Corporation and Arcadia Financial Ltd. (formerly
Olympic Financial Ltd.) ("OFL") are willing to consent to this Fifth Amendment
upon the terms provided for herein.
NOW THEREFORE, in consideration of the premises and the agreements
contained herein, the parties hereto agree as follows:
<PAGE>
SECTION 1. 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 $225,000,000 to $185,000,000.
SECTION 2. AMENDMENTS OF SIGNATURE PAGES. As a result of the
withdrawal of the Terminating Purchasers as APA Purchasers, pursuant to Sections
2(a), 12(b) and 13(1) 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 Fifth Amendment as Exhibit A. The attached signature
pages shall supersede the signature pages to the Agreement dated May 30, 1997,
and from and after the date of this Fifth Amendment all references to the
signature pages of the Agreement shall refer to the signature pages attached as
Exhibit A to this Fifth Amendment.
SECTION 3. EFFECTIVENESS. The amendments provided for by this Fifth
Amendment shall become effective as of June 30, 1997, upon receipt by the Agent
of (i) counterparts of this Fifth Amendment, duly executed by each of the
parties hereto, (ii) notice that the conditions to effectiveness of the
Acknowledgment of Reduction of Purchase Commitment 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 4. 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 Fifth Amendment. This Fifth 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 Fifth Amendment, as though the terms and
obligations of the Agreement were set forth herein.
SECTION 5. PRIOR UNDERSTANDINGS. This Fifth 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 6. COUNTERPARTS. This Fifth 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.
2
<PAGE>
SECTION 7. GOVERNING LAW. THIS FIFTH AMENDMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
SECTION 8. 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 Fifth
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 30, 1997
DELAWARE FUNDING CORPORATION
By: Morgan Guaranty Trust Company
of New York,
as attorney-in-fact for
Delaware Funding Corporation
By:
------------------------
Authorized Signatory
------------------------
Title
ARCADIA FINANCIAL LIMITED
By:
------------------------
Authorized Signatory
------------------------
Title
4
<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
Amended as of May 30, 1997
Amended as of June 30, 1997
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: 45.946%
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:
------------------------
Authorized Signature
------------------------
Title
- ---------------------------
* At the option of the APA Purchaser named above, August 29, 1997.
<PAGE>
Signature Page
with respect to
Olympic Automobile Receivables Warehouse Trust
Variable Funding Notes
Asset Purchase Agreement
SECTION 1.
Percentage: 27.027%
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:
------------------------
Title:
By:
------------------------
Title:
- ---------------------------
* At the option of the APA Purchaser named above, August 29, 1997.
<PAGE>
Signature Page
with respect to
Olympic Automobile Receivables Warehouse Trust
Variable Funding Notes
Asset Purchase Agreement
SECTION 1.
Percentage: 27.027%
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:
------------------------
Title:
By:
------------------------
Title:
- ---------------------------
* At the option of the APA Purchaser named above, August 29, 1997.
<PAGE>
ARCADIA 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 Arcadia 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.
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<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 The total number of shares of Stock reserved for issuance upon
exercise of Options under the Plan is 5,000,000. Such shares shall consist of
authorized but unissued Stock. If any Option granted under the Plan lapses or
terminates for any reason before being completely
2
<PAGE>
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.
4.3 AWARD LIMITATIONS UNDER THE PLAN. No eligible participant, who is an
employee of the Company at the time of grant, may be granted any Option or
Options, the value of which Options are based solely on an increase in the value
of the Shares after the date of grant of such Options for more than 1,500,000
shares (subject to adjustment as provided for in Section 4.2 relating to stock
splits, etc.), in the aggregate, in any one calendar year period beginning with
the period commencing January 1, 1997 and ending December 31, 1997. The
foregoing annual limitation specifically includes the grant of any Options
representing "qualified performance based compensation" within the meaning of
Section 162(m) of the Code.
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
3
<PAGE>
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 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;
4
<PAGE>
(c) if the Stock is not listed on a national securities exchange, it
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 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.
5
<PAGE>
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 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:
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
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<PAGE>
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.
11. TERMINATION OF EMPLOYMENT
11.1 GENERALLY. Except as otherwise provided in this Section 11, if any
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 three (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 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.
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<PAGE>
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 (including all then vested and unvested options)
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.
11.2.3 If the Optionee dies within three (3) 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 acquired 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 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
Optionee shall have the right to exercise the
8
<PAGE>
Option as to all of the optioned stock, including shares as to which the
Option would not otherwise be exercisable, and 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; 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:
(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 except as to the accelerated vesting of
the option due to such sale or merger, and
(c) a propriety adjustment of the original 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.
9
<PAGE>
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.
10
<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
2
<PAGE>
hereof, or (ii) the date on which such person first becomes an Outside
Director, whether through election by the shareholders of the Company or
appointment by the Board to fill a vacancy; provided, however, solely for
the calendar year 1996 such automatic grant shall be reduced to an option
to purchase 5,000 shares.
(c) 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 (except that for the calendar year 1996 such
Outside Director shall be automatically granted an Option to purchase 5,000
shares); 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) Each Outside Director who is an Outside Director on January 2,
1997, shall be automatically granted on such date an option to purchase
10,000 shares.
(e) Notwithstanding the provisions of Sections 4(b), (c) and (d)
hereof, in the event that a grant would cause the number of Shares subject
to outstanding Options by 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 term 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.
3
<PAGE>
(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.
(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 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,
4
<PAGE>
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.
(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
5
<PAGE>
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
(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 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.
6
<PAGE>
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
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
7
<PAGE>
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.
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.
8
<PAGE>
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 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>
EXHIBIT 11.1
OLYMPIC FINANCIAL LTD.
COMPUTATION OF EARNINGS PER SHARE
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------------- -----------------------------
1997 1996 1997 1996
---------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
PRIMARY:
Income before extraordinary item and preferred dividends....... $ 5,743 $ 14,715 $ (53,768) $ 25,793
Less preferred dividends....................................... -- (363) -- (807)
----------- ----------- ----------- -----------
Net income before extraordinary item applicable to
common stock................................................. 5,743 14,352 (53,768) 24,986
Less extraordinary item........................................ -- -- (15,828) --
----------- ----------- ----------- -----------
Net income applicable to common stock........................ $ 5,743 $ 14,352 $ (69,596) $ 24,986
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Weighted average number of common shares outstanding........... 38,702,011 31,019,492 38,558,754 27,078,748
Net effect of assumed exercise of stock options and warrants... 480,737 2,488,723 604,571 2,318,572
----------- ----------- ----------- -----------
Weighted average primary shares.............................. 39,182,748 33,508,215 39,163,325 29,397,320
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Net income per common share before extraordinary item.......... $ 0.15 $ 0.43 $ (1.37) $ 0.85
Extraordinary item per common share............................ -- -- (0.41) --
----------- ----------- ----------- -----------
Net income per common share.................................. $ 0.15 $ 0.43 $ (1.78) $ 0.85
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
FULLY DILUTED:
Income before extraordinary item and preferred dividends....... $ 5,743 $ 14,715 $ (53,768) $ 25,793
Less extraordinary item........................................ -- -- (15,828) --
----------- ----------- ----------- -----------
Net income as adjusted....................................... $ 5,743 $ 14,715 $ (69,596) $ 25,793
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Weighted average number of common shares outstanding........... 38,702,011 31,019,492 38,558,754 27,078,748
Net effect of assumed exercise of stock options and warrants... 480,737 2,687,123 680,820 2,912,442
Net effect of assumed conversion of 8% Cumulative
Convertible Exchangeable Preferred stock..................... -- 3,498,672 -- 3,990,615
----------- ----------- ----------- -----------
Weighted average fully diluted shares........................ 38,182,748 37,205,287 39,239,574 33,981,805
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Net income per share before extraordinary item................. $ 0.15 $ 0.40 $ (1.37) $ 0.76
Extraordinary item per share................................... -- -- (0.40)(a) --
----------- ----------- ----------- -----------
Net income per share......................................... $ 0.15 $ 0.40 $ (1.77)(a) $ 0.76
----------- ----------- ----------- -----------
</TABLE>
(a) Weighted average shares under the fully diluted computation have an
anti-dilutive effect in a loss situation, therefore, fully diluted EPS
will be shown equal to primary for reporting purposes.
<PAGE>
EXHIBIT 12.1
OLYMPIC FINANCIAL LTD.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Dollars in Thousands)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
------------------- --------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
-------- ------- -------- ------- ------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
COMPUTATION OF INCOME:
Income (loss) before income taxes and
extraordinary item . . . . . . . . . $(86,834) $41,637 $ 96,004 $48,835 $ 6,030 $1,395 $(1,342)
Capitalized interest . . . . . . . . . -- -- -- -- -- -- --
-------- ------- -------- ------- ------- ------ -------
Income (loss) before income taxes and
capitalized interest . . . . . . . . (86,834) 41,637 96,004 48,835 6,030 1,395 (1,342)
Fixed charges. . . . . . . . . . . . . 20,347 12,507 26,366 17,784 5,700 1,927 878
-------- ------- -------- ------- ------- ------ -------
Total income (loss) for computation. . $(66,487) $54,144 $122,370 $66,619 $11,730 $3,322 $ (464)
-------- ------- -------- ------- ------- ------ -------
-------- ------- -------- ------- ------- ------ -------
COMPUTATION OF FIXED CHARGES:
Portion of rentals deemed
representative of interest (a) . . . $ 2,105 $ 558 $ 1,173 $ 614 $ 284 $ 129 $ 68
INTEREST:
Interest on long-term debt . . . . . . 15,778 10,209 21,153 15,529 4,885 1,648 702
Interest other than funding of
purchase of auto loans . . . . . . . 1,623 1,169 2,836 945 116 63 70
Amortization of debt placement . . . . 841 571 1,204 696 415 87 38
Capitalized interest . . . . . . . . . -- -- -- -- -- -- --
-------- ------- -------- ------- ------- ------ -------
Total fixed charges. . . . . . . . . . $ 20,347 $12,507 $ 26,366 $17,784 $ 5,700 $1,927 $ 878
-------- ------- -------- ------- ------- ------ -------
-------- ------- -------- ------- ------- ------ -------
Ratio of earnings to fixed charges . . -- 4.33x 4.64x 3.75x 2.06x 1.72x --
Deficiency in earnings to fixed
charges. . . . . . . . . . . . . . . $(86,834) -- -- -- -- -- $(1,342)
ADDITIONAL INFORMATION:
Net rental expense . . . . . . . . . . $ 6,315 $ 1,675 $ 3,520 $ 1,842 $ 861 $ 391 $ 207
-------- ------- -------- ------- ------- ------ -------
-------- ------- -------- ------- ------- ------ -------
</TABLE>
(a) Portion of rental deemed representative of interest equals one third of
rental expense.
<PAGE>
EXHIBIT 12.2
OLYMPIC FINANCIAL LTD.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
(Dollars in Thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30, Year Ended December 31,
-------------------- -----------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
-------------------- -------------------- ------- ------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
COMPUTATION OF INCOME:
Income (loss) before income taxes and
extraordinary item.......................... $(86,834) $41,637 $ 96,004 $48,835 $ 6,030 $1,395 $(1,342)
Capitalized interest........................... -- -- -- -- -- -- --
-------------------- -------------------- ------- ------ --------
Income (loss) before income taxes and
capitalized interest........................ (86,834) 41,637 96,004 48,835 6,030 1,395 (1,342)
Fixed charges.................................. 20,347 12,507 26,366 17,784 5,700 1,927 878
-------------------- -------------------- ------- ------ --------
Total income (loss) for computation............ $(66,487) $54,144 $122,370 $66,619 $11,730 $3,322 $ (464)
-------------------- -------------------- ------- ------ --------
-------------------- -------------------- ------- ------ --------
COMPUTATION OF FIXED CHARGES:
Portion of rentals deemed representative
of interest (a)............................. $ 2,105 $ 558 $ 1,173 $ 614 $ 284 $ 129 $ 68
Interest on long-term debt..................... 15,778 10,209 21,153 15,529 4,885 1,648 702
Interest other than funding of purchase of
auto loans.................................. 1,623 1,169 2,836 945 116 63 70
Amortization of debt placement................. 841 571 1,204 696 415 87 38
Capitalized interest........................... -- -- -- -- -- -- --
-------------------- -------------------- ------- ------ --------
Total fixed charges............................ 20,347 12,507 26,366 17,784 5,700 1,927 878
Preferred stock dividends in a pre-tax basis... -- 1,346 1,829 3,688 3,286 192 --
-------------------- -------------------- ------- ------ --------
Total combined fixed charges and preferred
stock dividends............................. $ 20,347 $13,853 $28,195 $21,472 $ 8,986 $2,119 $ 878
-------------------- -------------------- ------- ------ --------
-------------------- -------------------- ------- ------ --------
Ratio of earnings (deficit) to combined
fixed charges and preferred stock
dividends................................... -- 3.91X 4.34x 3.10x 1.31x 1.57x --
Deficiency in earnings to combined fixed
charges and preferred stock dividends....... $(86,834) -- -- -- -- -- $(1,342)
ADDITIONAL INFORMATION:
Net rental expense............................. $ 6,315 $ 1,675 $ 3,520 $ 1,842 $ 861 $ 391 $ 207
-------------------- -------------------- ------- ------ --------
-------------------- -------------------- ------- ------ --------
</TABLE>
(a) Portion of rental deemed representative of interest equals one third of
rental expense.
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0
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