<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 20, 1998
REGISTRATION NO. 333-36773
----------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
PRE-EFFECTIVE AMENDMENT NO. 2 TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
TAMARACK LENDERS CORPORATION
(Exact name of registrant as specified in charter)
TEXAS 6159 75-2716949
(state of (primary sic (I.R.S. employer
incorporation) code number) identification no.)
801 EAST CAMPBELL ROAD, SUITE 310
RICHARDSON, TEXAS 75081
972-994-9363
(address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
------------------------
GARRY P. ISAACS
801 EAST CAMPBELL ROAD, SUITE 310
RICHARDSON, TEXAS 75081
972-994-9363
(name, address, including zip code, and telephone number,
including area code, of agent for service)
------------------------
WITH A COPY TO:
WARREN M. S. ERNST, ESQ.
DONOHOE, JAMESON & CARROLL, P.C.
3400 RENAISSANCE TOWER
DALLAS, TEXAS 75270
------------------------
<PAGE>
Approximate date of commencement of proposed sale to the public: From time to
time after the effective date of this Registration Statement as determined by
market conditions.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
PROPOSED PROPOSED AMOUNT
MAXIMUM MAXIMUM OF
TITLE OF AMOUNT OFFERING AGGREGATE REGISTR-
EACH CLASS OF TO BE PRICE PER OFFERING ATION
SECURITIES (a) REGISTERED UNIT (b) PRICE (b) FEE
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A-1 Notes $ 4,000,000 100% $ 4,000,000 $1212.12
Class A-2 Notes $16,000,000 100% $16,000,000 $4848.49
Total $20,000,000 $20,000,000 $6060.61(c)
- ---------------------------------------------------------------------------
</TABLE>
(a) Class A-1 Notes bear interest at 9.5% per annum and have a one year
maturity. Class A-2 Notes bear interest at 12% per annum and have a five year
maturity.
(b) Estimated solely for purposes of calculating the registration fee.
(c) Previously paid.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933
<PAGE>
OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS
THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
<PAGE>
TAMARACK LENDERS CORPORATION
Cross Reference Sheet Pursuant to Item 501(b) of Regulation S-K
between Items in Part I of the Registration
Statement (Form S-1) and the Prospectus
ITEM CAPTION OR
NO. ITEM LOCATION IN PROSPECTUS
- ---- ---- ----------------------
1. Forepart of the Registration
Statement and Outside Cover
Page of Prospectus. . . . . . . . . . . . . . . . Facing Page and Front
Cover Page
2. Inside Front and Outside Back
Cover Pages of the
Prospectus. . . . . . . . . . . . . . . . . . .Inside Front and Outside
Back Cover Pages
3. Summary Information, Risk Factors
and Ratio of Earnings to
Fixed Charges . . . . . . . . . . . . . . . . . . .Summary; The Issuer;
Risk Factors
4. Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . Use of Proceeds
5. Determination of Offering Price. . . . . . . . . . . . . . . .Not Applicable
6. Dilution . . . . . . . . . . . . . . . . . . . . . . . . . . .Not Applicable
7. Selling Security Holders . . . . . . . . . . . . . . . . . . .Not Applicable
8. Plan of Distribution . . . . . . . . . . . . . . . . . .Plan of Distribution
9. Description of the Securities
to be Registered. . . . . . . . . . . . . . . .The Notes; The Indenture
10. Interest of Named Experts and Counsel. . . . . . . . . . . . None -- Omitted
11. Information with Respect to the Registrant
(a) Description of Business . . . . . . . . . . . . . . Summary; The Issuer
(b) Description of Property . . . . . . . . . . . . . . . . None -- Omitted
(c) Legal Proceedings . . . . . . . . . . . . . . . . . . . . . .The Issuer
(d) Market Price of and Dividends
on the Registrant's Common
Equity and Related Stockholder
Matters. . . . . . . . . . . . . . . . . . . . . . .Not Applicable
(e) Financial Statements. . . . . . . . . . . Index to Financial Statements
(f) Selected Financial Data . . . . . . . . . . . . . . . . .Not Applicable
(g) Supplementary Financial Information . . . . . . . . . . .Not Applicable
(h) Management's Discussion and
Analysis of Financial
Condition and Results
of Operations. . . . . . . . . . . . . . . . . . . .Not Applicable
(i) Changes in and Disagreements with
Accountants and Financial
Disclosure . . . . . . . . . . . . . . . . . . . . .Not Applicable
(j) Directors and Executive Officers. . . . . . . . . . . . . . .Management
(k) Executive Compensation. . . . . . . . . . . . . . . . . . . .Management
(l) Security Ownership of Certain
Beneficial Owners and
Management . . . . . . . . . . . . . . . . . . .Security Ownership
(m) Certain Relationships and
Related Transactions . . . . . . . . . . . . . . . . . .Management
12. Disclosure of Commission Position
on Indemnification for
Securities Act Liabilities. . . . . . . . . . . . . . . .Not Applicable
<PAGE>
(Subject to Completion -- Dated April 20, 1998)
PROSPECTUS
$20,000,000 (MAXIMUM) $100,000 (MINIMUM)
TAMARACK LENDERS CORPORATION
9 1/2% NOTES, CLASS A-1
12% NOTES, CLASS A-2
------------------
The Notes (the "NOTES") will consist of two classes of Notes (respectively,
the "Class A-1 Notes" and the "Class A-2 Notes"). The Class A-1 Notes bear
interest at 9 1/2%, mature one year from the date of issuance, and are
offered in a maximum amount of $4,000,000. The Class A-2 Notes bear interest
at 12%, mature five years from the date of issuance, and are offered in a
maximum amount of $16,000,000. Principal of each Note will be payable upon
maturity, but may be prepaid without penalty, and interest on each Note at
the rates specified above will be distributed monthly to the Noteholders. The
Notes will be unsecured obligations issued by Tamarack Lenders Corporation
(the "ISSUER"), a newly-formed special purpose Texas corporation that has not
commenced operations as of the date of this Prospectus. The Issuer currently
has no significant assets. The property of the Issuer, to be purchased with
the proceeds of the issuance of the Notes, will consist of a pool of retail
installment sale contracts secured by used automobiles and light trucks (the
"RECEIVABLES"), certain monies due or received thereunder and security
interests in the vehicles financed thereby. The Receivables will be
originated by independent motor vehicle dealers and purchased on behalf of
the Issuer by Tamarack Funding Corporation, a Texas corporation and the
parent of the Issuer ("TFC"), which will serve as the administrator of the
business of the Issuer. No Receivables have been identified for purchase as
of the date of this Prospectus. THE NOTES WILL NOT BE GUARANTEED, NOR WILL THEY
BE RATED BY ANY INDEPENDENT RATING AGENCY.
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" IN THIS PROSPECTUS AT PAGE 8. DEBT SECURITIES OFFERED WITH HIGH
INTEREST OR YIELD GENERALLY INVOLVE MORE RISK THAN MANY OTHER MEDIUM TERM
DEBT INSTRUMENTS WITH LOWER INTEREST OR YIELD. In addition, the Receivables
on which the Issuer will rely to meet its obligations under the Notes are
"sub-prime," representing obligations of less creditworthy individuals, with
resultant increased risks.
The Notes will be issued pursuant to an Indenture (the "INDENTURE") between
the Issuer and the Indenture Trustee (the "TRUSTEE" or "INDENTURE TRUSTEE").
The Notes will not be issued until escrowed funds, as described below, are
released. The various auto dealerships from which the Receivables are
purchased will be the servicers (the "Servicers") of the Receivables.
The offering will terminate on [one year], 1999, unless sooner terminated by
the Issuer for certain reasons. See "Plan of Distribution".
-------------------------
PROCEEDS OF THE ASSETS OF THE ISSUER ARE THE SOLE SOURCES OF PAYMENTS ON THE
NOTES. THE NOTES WILL NOT REPRESENT AN INTEREST IN OR OBLIGATION OF, AND ARE
NOT GUARANTEED BY, TAMARACK FINANCIAL, INC., TAMARACK FUNDING CORPORATION,
OR ANY OF THEIR RESPECTIVE AFFILIATES.
-------------------------
1
<PAGE>
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
NO PUBLIC MARKET IS EXPECTED TO DEVELOP FOR THESE SECURITIES. INVESTORS
SHOULD EXPECT TO RETAIN OWNERSHIP OF THE NOTES AND BEAR THE ECONOMIC RISKS OF
THEIR INVESTMENT FOR THE ENTIRE TERM OF THE NOTES.
<TABLE>
PRICE TO BROKERS' PROCEEDS TO
PUBLIC COMMISSION COMPANY (1)
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Note 100%
6% 94%
Total Minimum $100,000 $6,000 $94,000
Total Maximum $20,000,000 $1,200,000 $18,800,000
- -------------------------------------------------------------------------------
</TABLE>
(1) Before deduction of up to 5% of the offering proceeds for the payment of
offering and organizational expenses incurred by the Issuer. See "The Issuer -
General".
The Notes will be sold on a best-efforts basis by Tamarack Financial, Inc., a
licensed broker-dealer affiliated with the Issuer. All subscriptions are
subject to the right of the issuer to reject any subscription in whole or in
part. Investor funds will be held in an escrow account at __________ Bank
until a minimum of $100,000 in principal amount of the Notes, regardless of
which class, are sold. In the event the minimum amount of Notes is not
subscribed on or before ________, 1998, the offering will be terminated and
the escrowed funds, plus any interest earned thereon, will be promptly
returned to the investors by the escrow agent. Upon the subscription by
investors for the minimum amount of Notes, the escrowed funds (less interest
thereon which will be paid to investors) will be released to the Issuer.
Interest will not accrue on the Notes
2
<PAGE>
until the escrowed funds are released to the Issuer. Any subsequent sales
proceeds from Notes will be immediately available for use by the Issuer.
The date of this Prospectus is _________________, 1998.
3
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, IN CONNECTION
WITH THE OFFERING MADE HEREBY, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
ISSUER, THE UNDERWRITER OR ANY OTHER PERSON. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
SECURITIES OTHER THAN THOSE TO WHICH IT RELATES OR AN OFFER TO OR
SOLICITATION OF ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO
MAKE SUCH AN OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS
NOR ANY OFFER OR SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THE INFORMATION SET FORTH HEREIN IS CORRECT AS OF ANY
TIME SUBSEQUENT TO THE DATE HEREOF.
TABLE OF CONTENTS
AVAILABLE INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
REPORTS TO NOTEHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
MINIMUM INVESTOR SUITABILITY STANDARDS . . . . . . . . . . . . . . . . . . . 5
PROSPECTUS SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
THE ISSUER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
THE RECEIVABLES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
USE OF PROCEEDS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
CAPITALIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
THE NOTES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
THE INDENTURE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
THE PURCHASE AND SERVICING AGREEMENTS. . . . . . . . . . . . . . . . . . . . 19
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES . . . . . . . . . . . . . . . . . . 22
MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
4
<PAGE>
SECURITY OWNERSHIP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
FEDERAL INCOME TAX CONSEQUENCES. . . . . . . . . . . . . . . . . . . . . . . 29
PLAN OF DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
LEGAL MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
EXPERTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
INDEX OF DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
INDEX TO FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . . . . . . 34
AVAILABLE INFORMATION
Tamarack Lenders Corporation, as Issuer, has filed with the Securities and
Exchange Commission (the "COMMISSION") a Registration Statement (together
with all amendments and exhibits thereto, referred to herein as the
"REGISTRATION STATEMENT") under the Securities Act of 1933, as amended (the
"SECURITIES ACT"), with respect to the Notes offered pursuant to this
Prospectus. This Prospectus, which forms part of the Registration Statement,
does not contain all of the information contained in the Registration
Statement and exhibits. The Registration Statement is available for
inspection without charge at the public reference facilities of the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and
at the regional offices of the Commission at 7 World Trade Center, 13th
Floor, New York, New York 10048 and the Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such information
can be obtained from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Washington D.C. 20549, at prescribed rates. The
Commission maintains a Web site that contains reports, proxy and information
statements and other information regarding registrants that file
electronically with the Commission at http://www.sec.gov. Statements made in
this Prospectus as to the contents of any agreement or other document
referred to herein are not necessarily complete and reference is made to the
copy of such agreement or other documents filed as an exhibit or schedule to
the Registration Statement and to the exhibits and schedules filed therewith,
each such statement being qualified in all respects by such reference.
REPORTS TO NOTEHOLDERS
The Issuer will furnish quarterly unaudited summary information regarding the
Receivables and annual reports containing audited financial statements of the
Issuer and information concerning the Receivables to Noteholders. An IRS Form
1099 will be mailed to each Noteholder promptly after the end of each
calendar year for interest paid during the prior year. In addition, the
Issuer
5
<PAGE>
will file periodic reports with the Commission as required by the Securities
Exchange Act of 1934, as amended.
MINIMUM INVESTOR SUITABILITY STANDARDS
Minimum investor suitability requirements have been established for purchase
of the Notes. Subscribers must represent that they have either (a) an annual
gross income of at least $45,000 and a net worth of at least $45,000
exclusive of the subscriber's principal residence and its furnishings and
personal use automobiles; or (b) a net worth of at least $150,000, exclusive
of the subscriber's principal residence and its furnishings and personal use
automobiles. In the case of sales to a subscriber which is a fiduciary
account, the foregoing standards must be met by the beneficiary, the
fiduciary account, or by the donor or grantor who directly or indirectly
supplies the funds to purchase the securities if the donor or grantor is the
fiduciary.
PROSPECTUS SUMMARY
This Prospectus Summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus. An index of
definitions is provided at page 33 for capitalized terms used in this
Prospectus.
The Notes will be issued by the Issuer, a newly-formed special purpose Texas
corporation that has not commenced operations as of the date of this
Prospectus. The property of the Issuer, to be purchased with the proceeds of
the issuance of the Notes, will consist of Receivables (retail installment
sale contracts secured by used automobiles and light trucks), certain monies
due or received thereunder and security interests in the vehicles financed
thereby. The Receivables will be originated by motor vehicle dealers
unaffiliated with the Issuer, and will be purchased on behalf of the Issuer
by TFC, which will serve as the administrator of the business of the Issuer.
No dealers have been selected, nor will they be selected prior to the
effective date. THE NOTES WILL NOT BE GUARANTEED, NOR WILL THEY BE RATED BY
ANY INDEPENDENT RATING AGENCY.
The Issuer will purchase Receivables at a discount, generally 80% (but in no
event more than 90%) of principal plus accrued interest. Dealers typically
sell Receivables at a discount because the Receivables are sub-prime, and the
sale provides immediate cash to the Dealer. See "The Receivables--Receivables
Purchase Criteria." The principal and interest from the Receivables are
collected by the auto dealerships as servicers and remitted to the Issuer as
the owner of the Receivables, in the form of weekly, biweekly and/or monthly
installments. The Issuer reinvests periodic proceeds in excess of
Noteholders' principal and interest payments, into additional Receivables of
the same type. The Issuer holds title to the Receivables until the
Receivables are paid in full. Dealers, as Servicers, are obligated to collect
payments and submit them to the Issuer in full.
The Issuer may purchase Receivables from Dealers subject to the requirement
that the selling Dealer repurchase any Receivable that becomes overdue for
more than 60 days, although the terms of any such requirement for any
particular Dealer or group of Receivables purchased will be determined by
the Issuer and such Dealer. Any such agreement could provide additional
protection to the Issuer, to the extent a dealer fulfills that obligation.
6
<PAGE>
TFC's management has recognized the need for stable relationships with
automobile dealers as dealers are adjusting to new trends in pre-owned car
sales techniques. The recent introduction of the "automobile super store" has
been strong competition for traditional established preowned car dealers,
creating an important trend among established preowned car dealers toward
stronger high quality customer relationships. TFC has designed the Issuer's
dealer relationship criteria with a focus on traditional established dealers,
so that dealers can establish better and more dependable customer relations
which build loyalty and a stronger determination in the customer to meet
contractual obligations and to return to the dealer's store to trade up
and/or to purchase another car. The Issuer's strategic plan is based upon
encouraging and supporting the dealerships in developing and maintaining a
regular personal relationship with their customers by appointing the
dealerships as Servicers.
Funding experience in years prior to the formation of the Issuer led the
Issuer's management to decide to focus on risk management first and
secondarily on growth. In the business of purchasing car receivables, risk is
proportionate to benefit. The greater the risk, the bigger the discount and
the higher the interest charged. In order to achieve higher benefit and less
risk, the strategic plan of the Issuer is to buy receivables only from
pre-qualified dealers, and to seek to obtain the dealers' agreement to
replace defaulting Receivables. The Issuer thereby will limit its risk, and
reduce its overhead costs as well, by requiring that dealers collect and
service the Receivables and by providing the dealer financial incentives for
doing so in the form of a back-end servicing fee paid only upon final payment
on the Receivable. This practice benefits the car dealer by allowing it to
keep long term and repeat customer relationships.
Tamarack Funding Tamarack Funding Corporation, or TFC, is a Texas corporation
whose business purpose is the acquisition and collection of
automobile sales contracts or receivables. TFC will
administer and manage the ongoing operations of the Issuer,
monitor the servicing of originating auto dealers, and
administer payments, communications and reports to
Noteholders. TFC will arrange for the purchase of
Receivables on behalf of the Issuer pursuant to a Master
Contract Purchase Agreement (the "PURCHASE AGREEMENT").
Issuer Tamarack Lenders Corporation, a newly-formed special purpose
Texas corporation, wholly-owned by TFC, that has not
commenced business as of the date of this Prospectus.
Servicers Various auto dealerships, pursuant to Servicing Agreements
with the Issuer (the "SERVICING AGREEMENTS").
7
<PAGE>
Indenture Trustee Sterling Trust Company, Waco, Texas. All payments of
amounts due and payable with respect to the Notes will be
made on behalf of the Issuer by the Indenture Trustee.
See "The Notes--The Trust Account". In addition, the
Trustee will act on behalf of the Noteholders upon the
occurrence of an Event of Default. See "The
Indenture--Rights Upon Event of Default".
The Notes Notes will be available for purchase in denominations of
$1,000 and integral multiples thereof with a minimum of
$10,000. The Class A-1 Notes will have a final maturity
date one year following issuance. The Class A-2 Notes will
have a final maturity date five years following issuance.
The Notes will be unsecured general obligations of the
Issuer.
Interest Payments Each Class A-1 Note will bear interest at 9 1/2% per annum
on its outstanding principal and each Class A-2 Note will
bear interest at 12% per annum on its outstanding principal
(with respect to each class of Notes, the "INTEREST RATE").
Interest will not accrue on the Notes, nor will the Notes be
issued, until release of escrowed subscription funds to the
Issuer, which will not occur until the minimum of $100,000
of the Notes, regardless of which class, is sold. Investors
in this offering will receive an IRS Form 1099 following
the end of each calendar year which will state the amount
of interest on which to calculate income taxes.
The Issuer's
Assets The assets of the Issuer will consist of the Receivables and
the proceeds thereof, including security interests in the
vehicles financed thereby and any proceeds from claims on
certain insurance policies covering the vehicles.
Purchase and
Servicing of
Receivables TFC will purchase Receivables from various auto dealerships
(the "DEALERS") on behalf of the Issuer, and the Dealers
will agree to serve as Servicers of the Receivables they
sell to the Issuer. The Servicers will agree to be
responsible for servicing, managing and making collections
on Receivables. TFC will be entitled to be reimbursed for
expenses incurred by it on behalf of the Issuer up to a
maximum of 5% of the total principal amount of Notes sold.
Any such reimbursement will be payable by the Issuer only
out of revenues, and only after current obligations on the
Notes are met.
Servicing Fees Servicers will receive a back-end servicing fee of 5% of the
price paid by the Issuer for a Receivable, payable only
when the Receivable has been paid in full by the obligor.
Federal
Income Tax
Consequences The Issuer has been advised by its tax counsel that for
federal income tax purposes the Notes will constitute
indebtedness. See "Federal Income Tax
8
<PAGE>
Consequences" for additional information concerning the
application of federal laws.
No Ratings The Notes will not be rated by any rating agency. The Issuer
has not sought, and is not required by the Indenture or any
other document, to obtain a rating of the Notes by a rating
agency.
Risk Factors An investment in the Notes entails certain risks, including
the following:
- The Notes have not been rated by any rating agency.
- The Notes are unsecured general obligations of the Issuer.
- No public market for the Notes presently exists and none
is expected to result from this offering.
- Obligors under the Receivables are anticipated to be
somewhat less creditworthy than typical purchasers of
automobiles from new car dealers.
- The Issuer anticipates that a portion of the Receivables
will become delinquent and require repossession and resale
of the related vehicle. The Issuer will be dependent upon
the Servicers' ability to take the necessary steps in the
event of a delinquency.
- The Issuer will not have any significant assets other
than the Receivables and the proceeds thereof.
- The Issuer will have numerous competitors engaged in the
business of buying new and used motor vehicle retail
installment contracts and notes at a discount, including
companies with greater financial resources than the Issuer.
For a more complete discussion of the risks involved, see
"Risk Factors."
Offering
Termination Date [One year], 1999, unless sooner terminated by the Issuer
for certain reasons. See "Plan of Distribution."
RISK FACTORS
9
<PAGE>
LIMITED ASSETS; SINGLE PURPOSE NATURE. The Issuer had no operating history
prior to the date of this Prospectus. The Issuer has been formed for the
sole purpose of purchasing and collecting retail installment sales contracts
and obligations secured by used automobiles and light trucks. The Notes are
dependent upon the performance of the Receivables selected by TFC and the
ability of the obligors on those Receivables to perform their obligations.
TFC was organized in June 1995 and has no long term operating history. TFC
has a limited history of owning auto receivables of the type to be purchased
by the Issuer. Further, the Indenture Trustee may be left to administer and
collect the Receivables on behalf of Noteholders in the event of the failure
of the Servicers, and thereafter TFC and its affiliates, to perform. The
Issuer does not have, and is not expected to have, any significant assets
other than the Receivables and the proceeds thereof. No other party,
including TFC, will insure or guarantee the Notes or be obligated at any time
to make capital contributions at any time for the purpose of paying any
delinquencies on the Notes. See "The Notes-General," "The Indenture" and
"Certain Information Regarding the Notes."
NO RATINGS OF NOTES; EFFECT ON LIQUIDITY. The Notes will not be rated by any
rating agency. The Issuer has not sought, and is not required by the
Indenture or any other document, to obtain a rating of the Notes by a rating
agency. This will have the effect of making the Notes highly illiquid;
accordingly, the Notes should only be purchased by persons who have no need
for liquidity in their investment.
UNSECURED NATURE OF NOTES. The Notes are unsecured obligations of the Issuer.
Upon occurrence of an Event of Default with respect to the Notes, the Trustee
will not have rights of a secured creditor with respect to the Issuer's
assets, but must obtain a judgment against the Issuer before proceeding
against the Issuer's assets. This may have the effect of reducing the
amounts recoverable by the Trustee on behalf of the Noteholders, and delaying
any recovery.
NATURE OF RECEIVABLES TO BE PURCHASED. A subscriber for the Notes must rely
primarily on the business judgment of TFC's management for selection of
Receivables. No Receivables have been identified for purchase prior to the
Offering. Further, the risk in the collection of Receivables is that the
Receivables may fail to perform, whereupon the Dealer will have to collect or
enforce the Receivables by repossession and resale of the Financed Vehicles.
If the Dealer fails to perform its obligation under its Servicing Agreement,
the Issuer must engage either TFC or another entity to act as successor
servicer. The Noteholders' only source of repayment on the Notes will be the
Receivables and the proceeds thereof. The Receivables represent "sub-prime"
obligations of less creditworthy individuals, with resultant increased risks
of default. If the Receivables experience greater than anticipated defaults,
the assets of the Issuer may be less than the amounts owed by the Issuer on
the Notes. See "Certain Legal Aspects of the Receivables."
LACK OF MARKET FOR NOTES. No public market for the Notes presently exists and
none is expected to result from this offering. Noteholders have no right to
require advance redemption of the Notes and may not be able to liquidate
their investment in the Notes in the event of an emergency or for any other
reason, and the Notes may not be readily accepted as collateral for loans.
Accordingly, the Notes should be purchased only by persons who have no need
for liquidity in their investment.
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<PAGE>
DEPENDENCE ON MANAGEMENT. Purchasing receivables associated with pre-owned
automobiles has certain and particular risks and requires specialized business
acumen in order to minimize the risks involved. Management of such risks is
essential for the success of the servicing company. Repayment of the Notes
requires reliance upon the success of management of TFC in selecting Dealers and
in selecting Receivables, as well as the Dealers in their roles as Servicers.
TFC has a limited history owning auto receivables. To date, __% of those
receivables have defaulted, but in every case to date the respective auto dealer
has been subject to a contractual obligation to repurchase defaulted
receivables, and has done so. There can be no assurance, however, that dealers
will agree to such a contractual obligation as to the Receivables purchased by
the Issuer, or whether dealers will comply with such obligation if entered into.
Further, no assurance can be given that management will be successful in
achieving its goals with respect to the business of the Issuer, or that chosen
business methods will produce desired results. The success of the Issuer will
depend largely upon the efforts of its principal executive officers, who will
each devote full time to the Issuer's and TFC's affairs. See "Management."
CONFLICTS OF INTEREST. TFC invests its capital into the same types of
receivables as it will acquire for the Noteholders. This activity has the
potential to create a conflict of interest; however, the Board of Directors of
TFC has adopted the policy to acquire Receivables as they become available on
behalf of TFC and the Issuer based upon availability of funds, with no
preferences.
DELAY IN PURCHASING RECEIVABLES. To maximize its investment yields, the Issuer
expects to purchase Receivables using the net proceeds from the sale of Notes as
soon as practicable following receipt of such proceeds. However, the timing of
expenditure of the net proceeds will be based partly on availability of
Receivables purchases, and cannot be predicted with certainty. In addition, it
is expected that the Issuer will purchase Receivables on a volume basis, thereby
potentially further delaying expenditures of the net proceeds. If unforeseen
delays occur in the investment of the net proceeds from the sale of Notes in the
purchase of Receivables, the Issuer's overall profitability and ability to repay
the Notes could be adversely affected because the yields of its short-term
investment alternatives for such funds, as permitted under the Indenture, are
expected to be less than the yields anticipated to be received by the Issuer
from the Receivables.
UNPREDICTABLE FUTURE PURCHASE OF RECEIVABLES; TERMS, INTEREST RATES AND
DEFAULTS. The Issuer will use additional cash flow that it receives in the
form of principal payments on the Receivables to purchase additional
Receivables. There is the risk that those Receivables will bear lower
interest rates, or will experience higher default rates, such that the future
ability of the Issuer to meet its obligations on the Notes is impaired.
There can be no assurance that management will be able to successfully manage
the Issuer's acquisition of Receivables in light of future market or credit
conditions.
COMPETITION. The Issuer will have numerous competitors engaged in the business
of buying new and used motor vehicle retail installment contracts and notes at a
discount, including companies with greater financial resources than the Issuer.
As a result, the Issuer may have to pay a higher price for Receivables than
anticipated or may have to purchase Receivables bearing a greater risk of
default.
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SALE OF SMALL AMOUNT OF NOTES. The offering may be consummated by the Issuer
with the sale of as little as $100,000 in principal amount of the Notes. In the
event the Issuer sells only a small portion of the Notes, fewer individual
Receivables will be purchased by the Issuer, and the performance of the smaller
pool of Receivables will be affected more by the performance of each individual
Receivable. This in turn, will have a greater effect on the ability of the
Issuer to meet its obligations under the Notes than if a large portion of the
Notes are sold in the offering.
THE ISSUER
Tamarack Lenders Corporation, a single purpose Texas corporation, is the
Issuer of the Notes. The Issuer is wholly-owned subsidiary of TFC. The
Property of the Issuer will consist of (i) retail installment sales contracts
for used automobiles and light trucks (the Receivables), all scheduled
payments due thereunder and all payments received thereunder, and (ii)
security interests in vehicles financed by the Receivables (the "FINANCED
VEHICLES") and, to the extent permitted by law, any accessions thereto.
The activities of the Issuer will be limited to (i) acquiring, managing and
holding the related Receivables, and (ii) issuing the related Notes and making
payments and distributions thereon. See "The Indenture--Restrictions on
Business Activities and Additional Indebtedness."
The Servicers will continue to service the Receivables held by the Issuer.
Servicers will receive a back-end fee, payable when the Receivable has been paid
in full, equal to 5% of the amount paid by the Issuer for such Receivable. See
"The Transfer and Servicing Agreements-Servicing Compensation and Payment of
Expenses." Following the purchase of Receivables, the certificates of title to
the Financed Vehicles will be amended to reflect the Issuer as the lienholder.
The Dealers will be responsible for the legality, validity or enforceability of
any security interest in any Financed Vehicle financed by Receivables they sell
to the Issuer. See "Certain Legal Aspects of the Receivables" and "The Transfer
and Servicing Agreements-Sale and Assignment of Receivables."
The Issuer will have no paid employees. The Issuer will be required to
reimburse TFC and its affiliates for certain expenses incurred on its behalf,
pursuant to the Administration Agreement, for ongoing administrative
services. Such reimbursement will be from cash flow in excess of amounts
required to service the Notes, and only to the extent that the Issuer retains
cash on hand plus an Aggregate Principal Balance of Receivables at least
equal to the then-outstanding principal balance on the Notes. Further, the
maximum amount of expenses incurred by TFC that can be reimbursed by the
Issuer, including organizational and offering expenses, is 5% of the amount
of Notes issued. See "The Transfer and Servicing Agreements."
The principal offices of the Issuer are at 801 East Campbell Road, Suite 310,
Richardson, Texas 75081, telephone 972-994-9353. The Issuer is not party to any
litigation.
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THE RECEIVABLES
The Receivables will be acquired by the Issuer from automobile and light truck
dealers pursuant to agreements with the Issuer. The Receivables will be
acquired in accordance with the Issuer's purchase criteria in the ordinary
course of its business from dealers that have met the Issuer's dealer criteria.
No Receivables have been identified for purchase as of the date of this
Prospectus.
Receivables Purchase Criteria--
The Issuer has designated certain criteria for the Receivables and the Financed
Vehicles to qualify for purchase by the Issuer. The Issuer believes that the
most significant of these criteria, in general, are as follows:
a) The purchase price for each Receivable must involve an initial payment to
the Dealer (i) of no more than 90% of principal plus accrued interest (pay-off
balance) of such Receivable at the time of purchase, and (ii) which does not
exceed the average trade-in price (wholesale value) for the related Financed
Vehicle plus tax, title, license and warranty.
b) The Receivables generally will have original terms that are 36 months or
less, although 48 month terms will be permitted where the Financed Vehicle is a
recent model, or where lower depreciation or stronger credit history justifies a
48 month term. The Receivables will equally amortize their principal balance
over their respective terms.
c) The age of each Financed Vehicle will generally be seven years or less for
automobiles or eight years or less for trucks, although the Issuer may purchase
Receivables secured by Financed Vehicles which are older, if in its judgement
the economics justify such a purchase.
d) The mileage of each Financed Vehicle may not generally exceed 100,000 miles
for automobiles or 125,000 miles for trucks, regardless of the year model. The
mileage limit will be less for later year models.
e) The obligors on the Receivables are generally required to make a down
payment in cash plus net trade-in allowance of at least approximately 10% of the
Dealers' costs (excluding sale preparation expenses) in the Financed Vehicles,
although there are no express minimum ratios of unpaid installments under the
Receivables at the time of their origination by the Dealers to the retail sale
price or the wholesale value of the Financed Vehicles.
f) The interest rate on the Receivables must not violate any applicable usury
laws.
g) The obligors on the Receivables must have supplied certain credit
information, and credit verification procedures must have been performed by the
Dealer in a manner commensurate with standard industry practice.
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<PAGE>
The Issuer's standards generally also require physical damage insurance to be
maintained by the obligor on each Financed Vehicle. Receivables may be purchased
which do not meet the criteria specified in (a) through (e) above if in the
Issuer's good faith judgment, purchasing such Receivables would be in the best
interests of the Issuer. Generally, the "creditworthiness grade" of the obligors
on the Receivables will be "C", meaning that the obligors generally could not
obtain financing from a local financial institution and may have had credit
problems in the past.
The Issuer may purchase Receivables from dealers subject to the requirement that
the selling Dealer repurchase any Receivables that become overdue more than 60
days, although the terms of any such requirement for any particular dealer or
group of Receivables purchased will be determined by the Issuer and such dealer.
Issuer's Dealer Criteria--
Receivables will generally be purchased from dealers who meet the following
criteria:
* A net worth, exclusive of goodwill or other intangible values, of at least
$100,000, or a parent, affiliate or predecessor which meets the net worth
criterion;
* A minimum of three years of successful operation as an automobile dealer, as
evidenced by financial statements or prior tax returns;
* A minimum of three years of experience as a servicer of automobile
receivables;
* Experienced contract loss rates during the immediately preceding year
acceptable to the Issuer; and
* Verifiable banking references.
The Issuer will not specifically limit the number of Receivables originated by
any one dealer that may be included in the Receivables inventory at any one
time.
The "AMOUNT FINANCED" with respect to a Receivable will equal the aggregate
amount advanced toward the purchase price of the Financed Vehicle, including
accessories, insurance premiums, service and warranty contracts and other items
customarily financed as part of retail automobile installment sale contracts and
related costs.
The "AGGREGATE PRINCIPAL BALANCE," as of any date, means the sum of the
Principal Balances of all outstanding Receivables (other than Liquidating
Receivables) held by the Issuer on such date. The "PRINCIPAL BALANCE," as of any
date with respect to any Receivable, is equal to the Amount Financed minus that
portion of all scheduled payments due on or prior to such date allocable to
principal, and any prepayment applied to reduce the Principal Balance of such
Receivable.
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The Issuer will purchase additional Receivables from time to time as it receives
proceeds from the Receivables owned by it in excess of amounts required to
service the Notes and for working capital.
USE OF PROCEEDS
Once the minimum amount of Notes has been sold, and escrow is released, the net
proceeds to be received by the Issuer from the sale of the Notes will be applied
as those proceeds are received from time to time as follows:
<TABLE>
Minimum Offering Maximum Offering
---------------- ----------------
<S> <C> <C>
Proceeds of Offering $100,000 $20,000,000
Organizational and Offering
Expenses, Administration
Expenses Reimbursed (a) -0- -0-
Commissions to Broker-Dealer (b) $ 6,000 $ 1,200,000
Amount available to Issuer for
Purchase of Receivables $ 94,000 $18,800,000
</TABLE>
_______________
(a) All fees and expenses relating to the organization of the Issuer, legal and
accounting fees and printing costs, will be paid by TFC prior to escrow being
released, which will in turn be reimbursed by the Issuer, up to a maximum amount
equal to 5% of the total amount of Notes sold, out of revenues only, and only
after current obligations on the Notes are met. See "Transfer and Servicing
Agreements" and "Plan of Distribution."
(b) The gross proceeds from the issuance and sale of the Notes will be subject
to commissions of up to 6.00% payable to Tamarack Financial, Inc., an affiliate
of the Issuer and TFC.
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<PAGE>
TAMARACK FUNDING
Tamarack Funding Corporation, or TFC, was incorporated in the State of Texas in
June 1995. TFC is organized for the limited purposes of purchasing receivables,
transferring such receivables to third parties, forming trusts and engaging in
related activities. TFC is not party to any litigation. The principal
executive offices of TFC are located at 801 East Campbell Road, Suite 310,
Richardson, Texas 75081 (telephone (972) 994-9363).
CAPITALIZATION
The Issuer has not commenced operations as of the date of this Prospectus.
The following table sets forth the capitalization of the Issuer as of December
31, 1997, as adjusted to reflect the sale of Notes offered hereby.
<TABLE>
As of December 31, 1997
As Adjusted
---------------------------
Minimum Maximum
-------- -----------
<S> <C> <C>
Liabilities $100,023 $20,000,023
Shareholders' Equity
Common Stock, $0.01 par value,
10,000 shares authorized, 1,000
shares outstanding 10 10
Additional paid-in capital 51,090 51,090
Retained Earnings 129 129
-------- -----------
Total Shareholders' Equity $ 51,229 $ 51,229
-------- -----------
Total Liabilities and Shareholders' Equity $151,252 $20,051,252
-------- -----------
-------- -----------
</TABLE>
The Issuer's only significant assets will be the Receivables and the proceeds
thereof. The costs of the Issuer's ongoing operations will be borne by TFC and
certain affiliates. They will be reimbursed (i) through TFC's equity interest
in the Issuer, to be realized if and after all of the Issuer's obligations under
the Notes have been satisfied, and (ii) for expenses incurred by them on behalf
of the Issuer, but any such reimbursement will be subordinate to the rights of
the Noteholders, and will only be payable by the Issuer to the extent that it
has cash flow in excess of the amounts required to service the Notes and to the
extent that it continues to hold Receivables with an Aggregate Principal Balance
at least equal to the then-outstanding principal amount of the Notes.
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<PAGE>
THE NOTES
General. Two classes of Notes will be issued pursuant to the terms of an
Indenture, a form of which has been filed as an exhibit to the Registration
Statement of which this Prospectus forms a part. The following discussion is a
summary of material provisions of the Notes; it does not purport to be complete
and is subject to, and is qualified in its entirety by reference to, all of the
provisions of the Notes and the Indenture. Where particular provisions or terms
used in the Indenture are referred to, the actual provisions (including
definitions of terms) are incorporated by reference as part of this summary.
The Notes will be available for purchase in denominations of $1,000 and
integral multiples thereof, with a minimum purchase of $10,000. The Notes are
general unsecured obligations of the Issuer and the holders of the Notes will
have recourse against the assets of the Issuer for payment of the Notes. The
Class A-1 Notes and Class A-2 Notes are equal to one another in all respects
other than interest rate and maturity. The Issuer is prohibited by the
Indenture from incurring debt in addition to the Notes except in the ordinary
course of business. Substantially all of the Issuer's assets will be the
Receivables. The Issuer has not sought, and is not required by the Indenture
or any other document to obtain a rating of the Notes by a rating agency. No
person or entity will guarantee payment of the Notes, and the holders of the
Notes will have no contractual recourse against TFC for payment of the Notes.
No provision has been made for any sinking fund.
PRINCIPAL AND INTEREST ON THE NOTES. Principal of each Note will be payable upon
maturity, but may be prepaid without penalty. Interest on each Note will be
distributed monthly to the Noteholders. The Class A-1 Notes will have a final
maturity date one year following issuance and will bear interest at 9 1/2% per
annum. The Class A-2 Notes will have a final maturity date five years following
issuance and will bear interest at 12% per annum. Interest will be payable
monthly on the 15th day of each month during the term of a Note, for interest
accruing through such date. Payments to Noteholders of all classes in respect of
principal and interest will have the same priority.
DISTRIBUTIONS; TRANSFERS. Distributions of principal of, and interest on, the
Notes will be made in accordance with the procedures set forth in the Indenture
directly to holders of Notes in whose names the Notes were registered at the
close of business on the last day of the preceding Monthly Period. Such
distributions will be made by check mailed to the address of such holder as it
appears on the register maintained by the Indenture Trustee. The final payment
on any Note, however, will be made only upon presentation and surrender of such
Note at the office or agency specified in the notice of final distribution to
the holders of such class.
The Notes will be transferable and exchangeable at the offices of the Indenture
Trustee or of a registrar named in a notice delivered to Noteholders. No
service charge will be imposed for any registration of transfer or exchange, but
the Indenture Trustee may require payment of a sum sufficient to cover any tax
or other governmental charge imposed in connection therewith.
REDEMPTION. On any interest payment date, the Issuer may exercise its right
to redeem the Notes, in whole or in part, in accordance with the Indenture.
Any redemption of a Note will be at 100% of the outstanding principal amount
thereof, together with interest accrued to the date of redemption, without
any premium or penalty. Notice will be given to the Noteholders by first
class mail, postage prepaid, mailed not less than 30 days prior to the
redemption date. The notice will set forth the redemption date, the
redemption price and the name and address of the paying agent and will state
that the Notes must be delivered to the paying agent and that interest on the
Notes ceases to accrue on and after the redemption date.
THE TRUST ACCOUNT. The Issuer has established, in the name of the Indenture
Trustee, a trust account at Sterling Trust Company into which it will deposit
interest and principal payments on the Notes. The trust account will relate
solely to the Notes. Withdrawals of any funds from the trust account will
be controlled by the Indenture Trustee. All payments of amounts due and
payable with respect to the Notes which are to be made from amounts withdrawn
from the trust account will be made on behalf of the Issuer by the Indenture
Trustee. The funds in the trust account will be employed by the Indenture
Trustee to pay interest on the Notes and to make principal payments on the
Notes on the maturity date of the Notes.
THE RECEIVABLES PROCEEDS AND OPERATING ACCOUNT. The Issuer has established a
lock-box account at a financial institution where all remittance checks,
drafts and other instruments for the Receivables will be deposited for
collection. All obligors under the Receivables will be requested, through
correspondence and/or delivery of payment books, to remit payments under
their Receivables directly to the lock box account. Each Servicer will be
required to deposit in the lock-box account any payment proceeds received
directly by the Servicer, including any proceeds from resales of returned or
repossessed Financed Vehicles and any recoveries from insurance claims on
Financed Vehicles. The Indenture requires the transfer of all of the
Issuer's funds from the lock-box account into the operating account, a
commercial bank account maintained by the Issuer for use in holding its funds
and in paying its expenditures.
On or before the business day immediately preceding each interest payment
date, the Issuer will cause to be transferred directly from the operating
account to the trust account an amount which, together with any funds in the
trust account, is sufficient to make all interest payments on the Notes
outstanding on such interest payment date. On or prior to the business day
immediately preceding the maturity date of the Notes, the Issuer shall cause
to be transferred from the operating account to the trust account an amount
which, together with any funds then held in the trust account, is sufficient
to pay the accrued interest due, and principal owing, on the Notes on such
maturity date.
REPORTS TO NOTE HOLDERS. The Issuer will furnish quarterly unaudited summary
information regarding the Receivables and annual reports containing audited
financial statements of the Issuer and information concerning the Receivables to
Noteholders. Within the prescribed period of time for tax reporting purposes
after the end of each calendar year during which any
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<PAGE>
Notes remain outstanding, the Indenture Trustee will mail to each holder of a
class of Notes who at any time during such calendar year has been a
Noteholder, and received any payment thereon, a statement containing certain
information for the purposes of such Noteholder's preparation of federal
income tax returns. See "Federal Income Tax Consequences."
THE INDENTURE
A form of Indenture has been filed as an exhibit to the Registration Statement
of which this Prospectus forms a part. TFC will provide a copy of the Indenture
(without exhibits) upon request of a Noteholder. The following discussion is a
summary of material provisions of the Indenture; it does not purport to be
complete and is subject to, and is qualified in its entirety by reference to,
all of the provisions of the Indenture. Where particular provisions or terms
used in the Indenture are referred to, the actual provisions (including
definitions of terms) are incorporated by reference as part of this summary.
MODIFICATION OF INDENTURE. With the consent of the holders of at least a
majority of the aggregate principal amount of the outstanding Notes, the Trustee
and the Issuer may amend or supplement the Indenture or the Notes, except as
provided below. Notice of any such amendment of the Indenture or the Notes will
be mailed to all holders of the Notes by the Issuer promptly after the
effectiveness thereof. Without the additional consent of the holder of each
Outstanding Note affected, however, no supplemental indenture will, among other
things, (a) reduce the amount of Notes whose holders must consent to an
amendment, supplement or waiver, (b) reduce the rate of or extend the time for
payment of interest on any Note, (c) reduce or extend the maturity of the
principal of any Note, or (d) make any Note payable in money other than that
stated in the Note. For the purpose of consents of Noteholders, the term
"Outstanding" excludes Notes held by the Issuer or its Affiliates.
The Issuer and the Trustee may also amend or supplement the Indenture or the
Notes, without obtaining the consent of Noteholders, to cure ambiguities or make
minor corrections and, among other things, to make any change that does not
materially adversely affect the interests of the Noteholders.
EVENTS OF DEFAULT. An event of default ("EVENT OF DEFAULT") with respect to the
Notes is defined in the Indenture as being:
(a) a failure by the Issuer to make any interest payment on the Notes within 30
days after it becomes due; (b) a failure by the Issuer to make any principal
payment on the Notes at maturity or otherwise within 30 days after it becomes
due; (c) the impairment of the validity or effectiveness of the Indenture, the
improper amendment or termination of the Indenture, or the failure of the Issuer
to comply with any of the covenants of the Issuer in the Indenture, and the
continuance of any such default for a period of 30 days after notice to the
Issuer by the Trustee or to the Issuer and the Trustee by the registered holders
of Notes representing at least 40% of the aggregate principal amount of the
outstanding Notes; (d) the incorrectness in any material
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<PAGE>
respect of a representation or warranty of the Issuer in the Indenture
(exclusive of representations and warranties as to individual Receivables
that the Servicer is obligated to, and does, repurchase from the Issuer) and
the failure to cure such circumstances or condition within 30 days of notice
thereof to the Issuer by the Trustee or the registered holders of Notes
representing at least 40% of the aggregate principal amount of the
outstanding Notes; or (e) certain events of bankruptcy of the Issuer.
RIGHTS UPON EVENT OF DEFAULT. In case an Event of Default should occur and be
continuing, the Trustee may, or at the direction of the registered holders of
Notes representing a majority of the principal amount of the outstanding Notes
will, declare the Notes due and payable. Upon such declaration, the Notes will
immediately become due and payable in an amount equal to their remaining
principal amount plus accrued interest at such time. Such declaration may under
certain circumstances be rescinded by the registered holders of a majority of
the aggregate principal amount of the outstanding Notes.
If, following an Event of Default, the Notes have been declared due and payable,
the Trustee may exercise one or more of its remedies including, in its
discretion, the right to make demand and institute judicial proceedings in
equity or law for the collection of all amounts then payable on the Notes, or
under the Indenture, whether by declaration or otherwise, enforce all judgments
obtained, and collect from the Issuer moneys adjudged due.
The registered holders of a majority of the aggregate principal amount of the
outstanding Notes will have the right to direct the time, method, and place of
conducting any proceedings for any remedy available to the Trustee or exercising
any trust or power conferred on the Trustee. The Trustee may refuse, however, to
follow any such direction that conflicts with law or the Indenture, that is
unduly prejudicial to the rights of Noteholders not joining in such direction or
that would involve the Trustee in personal liability. The registered holders of
a majority of the aggregate principal amount of the outstanding Notes may also
waive any default, except a default in respect of a covenant or provision of the
Indenture which cannot be modified without the waiver or consent of each holder
of Notes affected.
No holder of Notes will have the right to pursue any remedy with respect to the
Indenture or the Notes, unless (a) such holder gives to the Trustee written
notice of a continuing Event of Default, (b) the registered holders of a
majority of the aggregate principal amount of the outstanding Notes have made a
written request to the Trustee to pursue such remedy, and have offered the
Trustee indemnity satisfactory to the Trustee against loss, liability or
expense, (c) the Trustee does not comply with the request within 60 days, and
(d) the Trustee has received no contrary direction during such 60-day period
from the registered holders of Notes representing a majority of the principal
amount of the outstanding Notes.
RESTRICTIONS ON BUSINESS ACTIVITIES AND ADDITIONAL INDEBTEDNESS. The Issuer has
made certain covenants in the Indenture that restrict its business activities
and prohibit certain transactions by the Issuer. The Issuer has agreed, among
other things, that, without the consent of the registered holders of a majority
of the aggregate principal amount of the Notes
19
<PAGE>
it will not create, incur, assume or in any manner become liable in respect
of any indebtedness other than the Notes, any expenses in the ordinary course
and any other amounts incurred in the ordinary course of the Issuer's
business. The Issuer is prohibited from purchasing assets from TFC, selling
assets to TFC, commingling assets with TFC or engaging in transactions with
affiliates, except as described in this prospectus. In addition, the Issuer
has agreed not to dissolve or liquidate in whole or in part or to merge or to
consolidate with any corporation, partnership or other entity other than
another direct or indirect wholly-owned subsidiary of an affiliate of the
Issuer whose business is restricted in the same manner as the Issuer's
business.
COMPLIANCE STATEMENTS AND ANNUAL ACCOUNTANTS' REPORTS. The Issuer will be
required to file annually with the Trustee a report of a firm of independent
public accountants as to their examination of the financial statements of the
Issuer. The annual report will also be sent to Noteholders.
TRUSTEE'S ANNUAL REPORT. The Trust Indenture Act of 1939 requires the Trustee to
mail annually to all holders of Notes a brief report if any of certain events
occur. These events include any change in the Trustee's eligibility and
qualifications to continue as the Trustee under the Indenture, any amounts
advanced by it under the Indenture, the amount, interest rate and maturity date
of certain indebtedness, if any, owing by the Issuer to the Trustee in its
individual capacity, and any action taken by it which materially affects the
Notes and which has not been previously reported.
DUTIES OF TRUSTEE. If an Event of Default has occurred and is continuing, the
Trustee is obligated, under the Indenture, to exercise such of its rights and
powers and to use the same degree of care and skill in the exercise of such
rights and powers as a prudent man would exercise or use under the circumstances
in his own affairs. Except during an Event of Default known to the Trustee, the
Trustee may rely, in the absence of bad faith, on certificates and opinions
furnished to it. Generally, the Trustee is not relieved from liability for its
own negligence or willful misconduct except that it is not liable (i) if it
acted in good faith in accordance with a direction from the Holders of not less
than a majority in principal amount of the Notes, or (ii) for any error in
judgment made in good faith and without negligence in ascertaining the pertinent
facts. The Trustee may refuse to perform any duty or exercise any right or power
unless it receives indemnity satisfactory to it against any loss, liability or
expense. The Trustee may refuse to exercise any right or power at the request or
direction of the holders of Notes, unless such holders offer to the Trustee
reasonable security or indemnity against the costs, expenses or liabilities that
might be incurred by it in compliance with such request or direction.
SATISFACTION AND DISCHARGE OF INDENTURE. The Indenture will be discharged with
respect to the related Notes upon the delivery of all such Notes to the
Indenture Trustee for cancellation or, with certain limitations, upon deposit
with the Indenture Trustee of funds sufficient for the payment in full of all of
such Notes.
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THE PURCHASE AND SERVICING AGREEMENTS
The following summary describes the material terms of (i) the Purchase
Agreement pursuant to which TFC will acquire Receivables from Dealers on
behalf of the Issuer, and (ii) the Servicing Agreements pursuant to which
Dealers from whom the Receivables will be purchased will agree to service
such Receivables (collectively, the "PURCHASE AND SERVICING AGREEMENTS").
Forms of the Purchase and Servicing Agreements have been filed as exhibits to
the Registration Statement of which this Prospectus forms a part. The Issuer
will provide a copy of the Purchase and Servicing Agreements (without
exhibits) upon request to a holder of Notes. This summary does not purport
to be complete and is subject to, and qualified in its entirety by reference
to, all of the provisions of the Purchase and Servicing Agreements. Where
particular provisions or terms used in the Purchase and Servicing Agreements
are referred to, the actual provisions (including definitions of terms) are
incorporated by reference as part of such summary.
SALE AND ASSIGNMENT OF RECEIVABLES. Various auto dealerships will sell and
assign to the Issuer their entire interest in the related Receivables,
including security interests in the Financed Vehicles, pursuant to a transfer
agreement to be entered into between such dealers and Issuer. Each Receivable
will be identified in a schedule which will be on file at the locations set
forth in an exhibit to the such transfer agreement.
In each transfer agreement, the Issuer will require the applicable Dealer to
represent and warrant to the Issuer, among other things, that: (i) the
Receivable documents will represent a genuine obligation of the named obligor
thereon, will be valid and binding in accordance with their terms, will be
enforceable by the Issuer and its assigns, and will be subject to no legal or
equitable defenses, set-offs or counterclaims; (ii) the obligor of each of
the Receivables will be of legal age and capacity at the time of the
execution thereof; (iii) the Receivables will have arisen out of the sale or
lease of the property described in the Receivable documents on the terms
described therein; (iv) the Dealer will have complied with and the Receivable
documents will be in compliance with all applicable federal and state laws,
rules and regulations including, but not limited to, the Truth-In-Lending
Act, the Equal Credit Opportunity Act, and all Federal and State Laws
relating to consumer credit transactions; (v) the Receivables will not be
usurious under applicable laws; (vi) the Issuer, as owner of the Receivables,
will have a valid first priority lien and security interest in the collateral
described in the Receivable documents and will be entitled to enforce its
rights in such collateral as provided in the Receivable documents; (vii) the
Dealer is the sole owner of the Receivables and has the authority to sell,
transfer and assign the same; (viii) the Receivable documents will represent
the entire agreement between the Dealer and the obligor with respect thereto,
and the Receivable documents will not have been
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modified, superseded or waived by any act or omission of the Dealer; (ix) the
Dealer will receive appropriate documentation to evidence the existence of
all physical damage insurance (if any) pursuant to the Receivable documents
and furnish such documentation to the Issuer; and (x) the Dealer will not
accept side notes and/or post-dated checks as any part of the sale.
Following the discovery by the Issuer of a breach of any representation or
warranty of a Dealer that materially and adversely affects the interests of
the Noteholders in any Receivable, the Issuer, unless the breach is cured in
all material respects, will enforce the obligation of the applicable
dealership under the transfer agreement to repurchase such Receivable from
the Issuer at a price equal to the Amount Financed minus that portion of all
payments received on or prior to the last day of the prior month allocable to
principal. The applicable Dealer will also agree that the transfer of the
Receivable documents to the Issuer is a true sale of such documents.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES. Dealers, as Servicers, will
be entitled to a back-end fee on each Receivable when such Receivable has
been paid in full. Such fee (the "SERVICING FEE") will equal 5% of the
amount for which such Receivable was purchased by the Issuer.
The Servicing Fees are intended to compensate the Servicers for performing
the functions of a third-party servicer of Receivables as an agent for their
owner, including collecting and posting all payments, responding to inquiries
of obligors on the Receivables, investigating delinquencies, sending payment
coupons to obligors, reporting tax information to obligors and monitoring the
collateral.
SERVICING PROCEDURES. Under the Servicing Agreement, the Servicer is
obligated to exercise discretionary powers involved in the management,
administration and collection of the Receivables and to bear all costs and
expenses incurred in connection therewith, except as described above under
"Servicing Compensation and Payment of Expenses". The Servicer is obligated
to use the same care and apply the same policies that it would exercise if it
owned the Receivables.
The Servicer is obligated to instruct all obligors under the Receivables to
make all payments to the Issuer's lock-box account. Any material extensions,
modifications, or acceptances of partial payments by obligors, and any related
necessary Receivable amendments or default waivers by the Servicer, must be
approved by the chief credit officer or president of the Servicer. Under the
Servicing Agreement, the Servicer is required to pursue repossession, subject to
compliance with all state and federal laws relating thereto, of the Financed
Vehicle securing any Receivable whose obligor (i) is past due by at least three
scheduled installments in the case of bi-weekly or semi-monthly installments or
two scheduled installments in the case of monthly installments, and (ii) has
failed for 30 days, in the case of bi-weekly or semi-monthly installments, or 45
days, in the case of monthly installments, to remit any sums against the
obligations under the Receivable. The Servicer may commence repossession sooner
if it deems such activity to be prudent and in the best interests of the Issuer
and the Servicer. The Servicer is also required to document the reasons for
each chargeoff of any material unpaid amount from an obligor under any
Receivable. As indicated by the foregoing repossession requirements, to
maximize its return, the Issuer prefers to continue collecting installments on
the Receivable despite a missed installment by the obligor in lieu of
repossession of the vehicle.
If the Servicer fails to remit collections on the Receivables to the lock-box
account when due, and continues such failure for five business days, or to
service and collect amounts due from the obligors in accordance with the
servicing criteria established by the Servicing Agreement, or if certain
bankruptcy or insolvency proceedings occur, the Issuer has the right to
terminate all rights and obligations of the Servicer under the Servicing
Agreement and to transfer servicing rights to a successor servicer.
COLLECTIONS. Each Servicer will deposit all payments on the related
Receivables received from obligors and all proceeds of Receivables collected
into the Issuer's lock-box account, an account established in the Issuer's
name, immediately upon receipt. In the event checks are made payable to the
dealer, it will be required to endorse the check to the Issuer and deposit
the check
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in the lock-box account. Pending deposit into the operating account,
collections may not be used by the Servicer for its own benefit.
EVIDENCE AS TO COMPLIANCE. In the Purchase Agreement, TFC will agree to give
the Indenture Trustee and the Issuer notice of any event which with the
giving of notice or the lapse of time, or both, would become a default by a
Servicer under a Servicing Agreement. In the event a Dealer fails to fulfill
its servicing obligations and is terminated as a Servicer, either TFC will
act as the successor servicer for the same servicing fee or the Issuer will
engage the services of another servicing company (provided that such
successor servicer, other than TFC, has a minimum of three years of
experience as a servicer of automobile receivables), in which event there
would be no assurance that a qualified servicer could be located or what such
servicer would charge the Issuer for its services. In the event the Servicing
Agreement of a Servicer terminates either at the election of the Servicer, or
of the Issuer as permitted by the Servicing Agreement upon the occurrence of
an event of default by the Servicer (see "Servicing Procedures" above), prior
to the time the Receivable has been paid in full, the Servicer will not be
entitled to the Servicing Fee. Successor servicers will not be required to
receive the same amount of compensation as Servicers.
CERTAIN MATTERS REGARDING THE SERVICERS. The Servicing Agreement will provide
that the applicable dealership may not resign from its obligations and duties
as a Servicer thereunder, except upon determination that the applicable
dealership's performance of such duties is no longer permissible under
applicable law. No such resignation will become effective until TFC or a
successor Servicer has assumed the applicable dealership's servicing
obligations and duties under the related Purchase and Servicing Agreements.
CERTAIN MATTERS REGARDING TFC. The Purchase Agreement will further provide
that, except as specifically provided otherwise, neither TFC nor any of its
directors, officers, employees and agents will have any liability to the
Issuer or the related Noteholders for taking any action or for refraining
from taking any action pursuant to the related Purchase and Servicing
Agreements or the Indenture or for errors in judgment; except that neither
TFC nor any such person will be protected against any liability that would
otherwise be imposed by reason of wilful misfeasance, bad faith or negligence
(except errors in judgment) in the performance of TFC duties thereunder or by
reason of reckless disregard of its obligations and duties thereunder. TFC
may, however, undertake any reasonable action that it may deem necessary or
desirable in respect of the related Purchase and Servicing Agreements and the
rights and duties of the parties thereto and the interests of the Noteholders
thereunder. In such event, the legal expenses and costs of such action and
any liability resulting therefrom will be expenses, costs and liabilities of
the Issuer, and TFC will be entitled to be reimbursed therefor. Any such
indemnification or reimbursement will reduce the amount otherwise available
for distribution to the Noteholders.
TFC and its affiliates will be entitled to be reimbursed for expenses
incurred by them on behalf of the Issuer, up to a cumulative maximum of 5% of
the total amount of Notes sold, but any such reimbursement will only be
payable by the Issuer out of revenues, and only to the extent that current
obligations on the Notes have been met. Reimbursable expenses are: direct
costs of accounting for collections, making distributions to Noteholders,
furnishing statements to the Indenture Trustee with respect to distributions,
and generating federal income tax information for the Noteholders, and
advances of the fees of the Indenture Trustee, accounting fees, outside
auditor fees, data processing costs and other costs incurred in connection
with administering the Receivables owned by the Issuer.
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TERMINATION. The Issuer will be dissolved and its remaining assets, net of
liabilities, will be distributed to TFC as its sole shareholder, following
the final distributions by the Indenture Trustee and the Issuer of all monies
and other property of the Issuer in accordance with the terms of the
Indenture, the Purchase Agreement and the Administration Agreement. Upon
dissolution of the Issuer and payment of all amounts to be paid to the
related Noteholders, any remaining assets of the Issuer will be distributed
to TFC. In order to avoid excessive administrative expense, TFC, or its
successor, will have the option to purchase from the Issuer, if the then
outstanding Aggregate Principal Balance of the Receivables held by the Issuer
is 10% or less of the Aggregate Amount Financed, all remaining Receivables at
a price equal to the aggregate Purchase Payments for such Receivables plus
the appraised value of any other property held as part by the Issuer less
liquidation expenses. Any related outstanding Notes will be redeemed
concurrently therewith. The Indenture Trustee will give written notice of
redemption to each related Noteholder of record. The final distribution to
any Noteholder will be made only upon surrender and cancellation of such
Noteholder's Note at an office or agency of the Indenture Trustee specified
in the notice of redemption.
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
SECURITY INTEREST IN VEHICLES. In all states in which the Receivables are
originated, retail installment sale contracts such as the Receivables
evidence the credit sale of automobiles and light trucks by dealers to
purchasers. The Receivables also constitute personal property security
agreements and include grants of security interests in the vehicles under the
UCC. Perfection of security interests in the vehicles is generally governed
by the motor vehicle registration laws of the state in which the vehicle is
located. In all states in which the Receivables will be originated, a
security interest in a vehicle is perfected by notation of the secured
party's lien on the vehicle's certificate of title.
Pursuant to the transfer agreements to be entered into with each Dealer, the
applicable Dealers will assign their security interest in the Financed
Vehicles securing the related Receivables to the Issuer. The certificate of
title will be amended to identify the Issuer as the new secured party
relating to a Financed Vehicle. See "The Purchase and Servicing
Agreements-Sale and Assignment of Receivables."
In most states the notation of a particular lender's lien on the certificates
of title will be sufficient to protect the lender against the rights of
subsequent purchasers of a Financed Vehicle from an obligor or subsequent
lenders to an obligor who take a security interest in a Financed Vehicle. If
there are any Financed Vehicles as to which a particular dealership failed to
obtain a perfected security interest, its security interest (and therefore
the security interest of the Issuer, as transferee) would be subordinate to,
among others, subsequent purchasers of the Financed Vehicles and holders of
perfected security interests. Such a failure, however, would constitute a
breach of the warranties of a particular dealership under the related
transfer agreement and, if the interests of the Noteholders in the related
Receivable are materially and adversely affected, would create an obligation
of the dealership to repurchase such Receivable unless the breach is cured.
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Under the laws of most states, the perfected security interest in a vehicle
continues for four months after a vehicle is moved to a state other than the
state in which it is initially registered and thereafter until the vehicle
owner re-registers the vehicle in the new state. A majority of states
generally require surrender of a certificate of title to re-register a
vehicle. Accordingly, a secured party must surrender possession if it holds
the certificate of title to the vehicle or, in the case of vehicles
registered in states providing for the notation of a lien on the certificate
of title but not possession by the secured party, the secured party would
receive notice of surrender if the security interest is noted on the
certificate of title. Thus, the secured party would receive notice of
surrender if the security interest is noted on the certificate of title.
Thus, the secured party would have the opportunity to re-perfect its security
interest in the vehicles in the state of relocation. In states that do not
require surrender of a certificate of title for registration of a motor
vehicle, re-registration could defeat perfection. In the ordinary course of
servicing receivables, the Servicer takes steps to effect re-perfection upon
receipt of notice of re-registration or information from the obligors as to
relocation. Similarly, when an obligor sells a vehicle, the Servicer must
surrender possession of the certificate of title or will receive notice as a
result of its lien noted thereon and accordingly will have an opportunity to
require satisfaction of the related Receivables before release of the lien.
Under each Servicing Agreement, the Servicer is obligated to take appropriate
steps, at the Servicer's expense, to maintain perfection of security
interests in the Financed Vehicles.
Under the laws of most states, liens for repairs performed on a motor vehicle
and liens for unpaid taxes take priority over even a perfected security
interest in a financed vehicle. The UCC also grants priority to certain
federal tax liens over the lien of a secured party. The laws of certain
states and federal law permit the confiscation of motor vehicles by
governmental authorities under certain circumstances if used in unlawful
activities, which may result in the loss of a secured party's perfected
security interest in the confiscated motor vehicle.
REPOSSESSION. In the event of default by vehicle purchasers, the lienholder
of the retail installment sale contract has all the remedies of a secured
party under the UCC, as enacted in each particular state. Among the UCC
remedies, the secured party has the right to self-help repossession unless
such act would constitute a breach of the peace. Self-help is the method that
will be employed in most cases and is accomplished by retaking possession of
the financed vehicle. A secured party may be held responsible for damages
caused by a wrongful repossession of a vehicle.
NOTICE OF SALE; REDEMPTION RIGHTS. The UCC and other state laws require the
secured party to provide the obligor with reasonable notice of the date, time
and place of any public sale and/or the date after which any private sale of
the collateral may be held. The obligor has the right to redeem the
collateral prior to actual sale by paying the secured party the unpaid
principal balance of the obligation plus reasonable expenses for
repossessing, holding and preparing the collateral for disposition and
arranging for its sale, plus, in some jurisdictions, reasonable attorneys'
fees, or, in some states, by payment of delinquent installments or the unpaid
balance.
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DEFICIENCY JUDGMENTS AND EXCESS PROCEEDS. The proceeds of resale of the
Financed Vehicles generally will be applied first to the expenses of resale
and repossession and then to the satisfaction of the indebtedness. In many
instances, the remaining principal amount of such indebtedness will exceed
such proceeds. While some states impose prohibitions or limitations on
deficiency judgments if the net proceeds from resale do not cover the full
amount of the indebtedness, a deficiency judgment can be sought in those
states that do not prohibit or limit such judgments. However, the deficiency
judgment would be a personal judgment against the obligor for the shortfall,
and a defaulting obligor can be expected to have very little capital or
sources of income available following repossession. Therefore, in many cases,
it may not be useful to seek a deficiency judgment or, if one is obtained, it
may be settled at a significant discount.
Occasionally, after resale of a vehicle and payment of all expenses and all
indebtedness, there is a surplus of funds. In that case, the UCC requires the
creditor to remit the surplus to any holder of a lien with respect to the
vehicle or if no such lienholder exists or there are remaining funds, the UCC
requires the creditor to remit the surplus to the former owner of the vehicle.
CONSUMER PROTECTION LAWS. Numerous federal and state consumer protection
laws and related regulations impose substantial requirements upon lenders and
servicers involved in consumer finance. These laws include the
Truth-in-Lending Act, the Equal Credit Opportunity Act, the Federal Trade
Commission Act, the Fair Credit Reporting Act, the Fair Debt Collection
Procedures Act, the Magnuson-Moss Warranty Act, the Federal Reserve Board's
Regulations B and Z, the Soldiers' and Sailors' Civil Relief Act of 1940, the
Texas Consumer Credit Code, state adoptions of the National Consumer Act and
of the Uniform Consumer Credit Code (the "UCCC") and state sales finance and
other similar laws. Also, state laws impose finance charge ceilings and other
restrictions on consumer transactions and require contract disclosures in
addition to those required under federal law. These requirements impose
specific statutory liabilities upon creditors who fail to comply with their
provisions. In some cases, this liability could affect an assignee's ability
to enforce consumer finance contracts such as the Receivables.
The so-called "Holder-in-Due-Course" Rule of the Federal Trade Commission
(the "FTC RULE"), the provisions of which are generally duplicated by the
UCC, other state statutes or the common law, has the effect of subjecting a
seller in a consumer credit transaction (and certain related creditors and
their assignees) to all claims and defenses which the obligor in the
transaction could assert against the seller. Liability under the FTC Rule is
limited to the amounts paid by the obligor under the contract and the holder
of the contract may also be unable to collect any balance remaining due
thereunder from the obligor.
Most of the Receivables will be subject to the requirements of the FTC Rule.
Accordingly, the Issuer, as holder of the related Receivables, will be
subject to any claims or defenses that the purchaser of the Financed Vehicle
may assert against the seller of the Financed Vehicle. Such claims are
limited to a maximum liability equal to the amounts paid by the obligor on
the Receivable. If an obligor were successful in asserting any such claim or
defense, such claim or defense would constitute a breach of the dealership
warranties under the related Transfer
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Agreement and may create an obligation of the dealership to repurchase the
Receivable unless the breach is cured in all material respects. See "The
Purchase and Servicing Agreements-Sale and Assignment of Receivables."
Courts have imposed general equitable principles upon secured parties
pursuing repossession and litigation involving deficiency balances. These
equitable principles may have the effect of relieving an obligor from some or
all of the legal consequences of a default.
In several cases, consumers have asserted that the self-help remedies of
secured parties under the UCC and related laws violate the due process
protections provided under the 14th Amendment to the Constitution of the
United States. Courts have generally upheld the notice provisions of the UCC
and related laws as reasonable or have found that the repossession and resale
by the creditor do not involve sufficient state action to afford
constitutional protection to consumers.
Under each Transfer Agreement, the particular dealership will represent to
the Issuer that each Receivable complies with all requirements of law in all
material respects. Accordingly, if an obligor has a claim against the Issuer
for violation of any law and such claim materially and adversely affects the
Issuer's interest in a Receivable, such violation may create an obligation of
the dealership to repurchase the Receivable unless the breach is cured in all
material respects. See "The Purchase and Servicing Agreements-Sale and
Assignment of the Receivables."
OTHER LIMITATIONS. In addition to laws limiting or prohibiting deficiency
judgments, numerous other statutory provisions, including federal bankruptcy
laws and related state laws, may interfere with or affect the ability of a
secured party to realize upon collateral or to enforce a deficiency judgment.
For example, in a Chapter 13 proceeding under the federal bankruptcy law, a
court may prevent a creditor from repossessing the Financed Vehicle, and, as
part of the rehabilitation plan, reduce the amount of the secured
indebtedness to the market value of the Financed Vehicle at the time of
bankruptcy, leaving the creditor as a general unsecured creditor for the
remainder of the indebtedness. A bankruptcy court may also reduce the monthly
payments due under a contract or change the rate of finance charge and time
of repayment of the indebtedness.
TRANSFER OF VEHICLES. The Receivables prohibit the sale or transfer of a
Financed Vehicle without the Issuer's consent and permit the Issuer to
accelerate the maturity of the Receivable upon a sale or transfer without the
Issuer's consent. The Issuer will not consent to a sale or transfer and will
require prepayment of the Receivable.
SALE OF RECEIVABLES BY THE DEALERSHIPS. As described herein, the transactions
in which the Receivables are sold by the dealerships to the Issuer have been
structured as, and will be treated by the parties as, sales. The United
States Court of Appeals for the Tenth Circuit recently held that accounts
sold prior to a bankruptcy should be treated as property of the bankruptcy
estate. In the event that a dealership were a debtor in a bankruptcy
proceeding, and
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the bankruptcy court applied a similar analysis, delays or reductions in
receipt of collections on the Receivables to the Issuer and distributions on
the related Notes to Noteholders could occur.
MANAGEMENT
Each member of the management team of the Issuer has prior experience in
industries either the same as or similar to the business of the Issuer. The
following sets forth certain information concerning the Issuer's and TFC's
directors and executive officers. Each of the Issuer's and the TFC's
directors holds office for a one year term and until the annual meeting of
the stockholders. The Issuer does not have any audit, compensation or
nominating committees. The management team profiles are as follows:
NAME POSITION
---- --------
GARRY P. ISAACS President/Chief Executive Officer, Secretary, Director of
the Issuer and TFC
GREG MCBEE Vice President, General Manager/Chief Operations Officer
of the Issuer and TFC
MR. ISAACS, age 56, is the founder of Tamarack Funding Corporation. Since
1993, he has been a business consultant engaged in organizational planning,
start up, capital acquisition, market development, offshore transactions and
trust organization. Mr. Isaacs has developed and sold companies involved with
business and market development of chemical, mechanical, and thermodynamic
products and auto financing. From 1986 until December 1993 he was CEO of
Procom Environmental, Inc., Couer d'Alene, Idaho. He has operated companies
engaged in lumber manufacturing, well drilling, and international financial
counseling and trust management.
Mr. Isaacs has instructed professionals and businessmen in both domestic and
foreign related business organization and has created successful
corporations, trusts and trust companies. Although he no longer solicits
business in these areas, he has served, and still serves as trustee for the
management of trust funds for some clients.
Mr. Isaacs developed Greenline Corporation, a successful Dallas-based funding
company in 1994 which, somewhat like the business plan of the Issuer,
purchases car financing contracts. He performed dealer relations and contract
acquisitions for that company until May, 1995, at which time he sold his
interests to the other shareholders and left to develop the risk management
methods employed by TFC. Since that time he has been actively engaged in the
establishment of Tamarack Funding Corporation, including developing criteria
for relationships with auto dealers, acquiring auto finance receivables and
managing the servicing of those receivables.
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MR. MCBEE, age 33, is employed with TFC as the Operations Manager. Mr. McBee
holds a Bachelors Degree in Business from Tarleton State University. He has 9
years of experience in finance and credit management, with four years of
experience in the acquisition and management of auto receivables. His career in
the management of accounts receivable for three different companies has included
collections credit management in personal financing, real estate receivables and
automobile financing. From 1994 to 1995, Mr. McBee was a Branch Manager for
Western Funding, Inc., a large automobile contract funding firm, much like the
Company. His responsibilities were automobile dealer relations, with emphasis in
the purchase and management of automobile receivables. From 1993 to 1994, he was
employed by Security Pacific Finance, a subsidiary of Bank of America. From
1989 to 1993, he was employed by Allied Finance Company. Mr. McBee has hired
and managed staff and personnel required to support these activities. He has
worked closely with Mr. Isaacs in developing TFC's risk management program.
Remuneration. None of the executive officers of the Issuer will receive
compensation from the Issuer. The Issuer will have no paid employees.
Members of the Board of Directors of TFC at present receive no remuneration for
services as Directors or attendance at meetings of the Board and will receive no
remuneration from the Issuer. TFC may, however, reimburse the Directors for any
expenses incurred by them as directors or in connection with attendance at board
meetings.
SECURITY OWNERSHIP
TFC is the sole shareholder of the Issuer.
The following table sets forth information, as of _____________, 1998, relating
to the beneficial ownership of TFC's Common Stock by any person or "group", as
that term is used in Section 13(d)(3) of the Securities and Exchange Act of 1934
(the "Exchange Act"), known to TFC to own beneficially 5% or more of the
outstanding shares of Common Stock, and known to TFC to be owned by each
director of TFC and by all officers and directors of TFC as a group. Except as
otherwise indicated, each of the persons named below is believed by TFC to
possess sole voting and investment power with respect to the shares of Common
Stock beneficially owned by such person.
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<TABLE>
AMOUNT AND NATURE OF BENEFICIAL
OWNERSHIP(1)
NAME OF DIRECTOR OR NAME -------------------------------
AND ADDRESS OF BENEFICIAL NUMBER OF PERCENTAGE OF
OWNER SHARES CLASS OUTSTANDING
- ------------------------- --------- -----------------
<S> <C> <C>
Garry P. Isaacs 7,000,000 _________ %(2)
All officers and directors as a group 7,000,000 _________ %(2)
(2 persons)
</TABLE>
(1) The information as to beneficial ownership of Common Stock has been
furnished by the respective shareholders, directors and officers of TFC.
(2) Includes ______ shares of Common Stock issuable upon conversion of TFC's
Preferred Stock.
There are no family relationships among the directors and any of the executive
officers of TFC or the Issuer. None of the directors of the Issuer or TFC holds
any directorship in any company with a class of securities registered pursuant
to Section 12 of the Exchange Act or subject to the requirements of Section
15(d) of the Exchange Act or any company registered as an investment company
under the Investment Company Act of 1940.
The Issuer, TFC and Tamarack Financial, Inc. are affiliates, through their
common control by Mr. Isaacs. Mr. Isaacs and other management of TFC and its
affiliates will devote as much of their time to the business of these entities
as in their judgment is reasonably required.
The terms of the Purchase and Servicing Agreements were not negotiated at
arm's-length, but were determined unilaterally by TFC's management.
FEDERAL INCOME TAX CONSEQUENCES
GENERAL. Set forth below is a discussion of the anticipated material United
States federal income tax considerations relevant to the purchase, ownership and
disposition of the Notes. This discussion is based upon the legal opinion of
Donohoe, Jameson & Carroll, P.C., and current provisions of the Internal Revenue
Code of 1986, as amended (the "CODE"), existing and proposed Treasury
Regulations thereunder, current administrative rulings, judicial decisions and
other applicable authorities. Donohoe, Jameson & Carroll, P.C. has delivered
its opinion to the Company as to all material tax consequences of an
investment in the Notes. These material tax consequences are as follows:
(i) The Notes will be taxable obligations under the Code.
(ii) Interest paid or accrued will be taxable to non-exempt holders of the
Notes.
There can be no assurance that the Internal Revenue Service ("IRS") will not
challenge the conclusions reached herein, and no ruling from the IRS has been
or will be sought on any of the issues discussed below. Furthermore,
legislative, judicial or administrative changes may occur, perhaps with
retroactive effect, which could affect the accuracy of the statements and
conclusions set forth herein as well as the tax consequences to Noteholders.
This discussion does not purport to deal with all aspects of federal income
taxation that may be relevant to the Noteholders in light of their personal
investment circumstances nor, except for certain limited discussions of
particular topics, to certain types of holders subject to special
30
<PAGE>
treatment under the federal income tax laws (e.g., financial institutions,
broker-dealers, life insurance companies and tax-exempt organizations).
This information is directed to prospective purchasers who purchase Notes in
the initial distribution thereof, who are citizens or residents of the United
States, including domestic corporations and partnerships, and who hold the
Notes as "capital assets" within the meaning of Section 1221 of the Code.
Taxpayers and preparers of tax returns (including those filed by any
partnership or other issuer) should be aware that under applicable Treasury
Regulations a provider of advice on specific issues of law is not considered
an income tax return preparer unless the advice is (i) given with respect to
events that have occurred at the time the advice is rendered and is not given
with respect to the consequences of contemplated actions, and (ii) is
directly relevant to the determination of an entry on a tax return.
Accordingly, taxpayers should consult their own tax advisors and tax return
preparers regarding the preparation of any item on a tax return, even where
the anticipated tax treatment has been discussed herein. PROSPECTIVE
INVESTORS SHOULD CONSULT WITH THEIR TAX ADVISORS AS TO THE FEDERAL, STATE,
LOCAL, FOREIGN AND ANY OTHER TAX CONSEQUENCES TO THEM OF THE PURCHASE,
OWNERSHIP AND DISPOSITION OF THE NOTES.
The following discussion addresses the tax treatment of the Notes, which the
Issuer and the Noteholders will agree to treat as indebtedness. For purposes
of this discussion, references to a "Noteholder" are to the beneficial owner
of a Note.
CHARACTERIZATION AS DEBT. Although no specific authority exists with respect
to the characterization for federal income tax purposes of securities having
the same terms as the Notes, based on the terms of the Notes, the Notes will
be treated as debt for federal income tax purposes. The Issuer and each
Noteholder, by acquiring an interest in a Note, will agree to treat the Notes
as indebtedness for federal, state and local income and franchise tax purposes.
TREATMENT OF STATED INTEREST. The stated interest on the Notes will be taxable
to a Noteholder as ordinary income when received or accrued in accordance with
such Noteholder's method of tax accounting. No series of Notes will be issued
with OID.
31
<PAGE>
INFORMATION REPORTING AND BACKUP WITHHOLDING. The Issuer will be required to
report annually to the IRS, and to each related Noteholder of record, the amount
of interest paid on the Notes (and the amount of interest withheld for federal
income taxes, if any) for each calendar year, except as to exempt holders
(generally, corporations, tax-exempt organizations, qualified pension and
profit-sharing trusts, individual retirement accounts, or nonresident aliens who
provide certification as to their status). Each holder (other than holders who
are not subject to the reporting requirements) will be required to provide to
the Issuer under penalties of perjury, a certificate containing the holder's
name, address, correct federal taxpayer identification number and a statement
that the holder is not subject to backup withholding. Should a nonexempt
Noteholder fail to provide the required certification, the Issuer will be
required to withhold, from interest otherwise payable to the holder, 31% of such
interest and remit the withheld amount to the IRS as a credit against the
holder's federal income tax liability.
STATE AND LOCAL TAX CONSEQUENCES. The above discussion does not address the tax
treatment of the Issuer, the Notes or Noteholders under any state or local tax
laws. The activities to be undertaken by TFC in servicing and collecting the
Receivables will take place throughout the United States and, therefore, many
different tax regimes potentially apply to different portions of these
transactions. Prospective investors are urged to consult with their tax advisors
regarding the state and local tax treatment of the Issuer as well as any state
and local tax consequences to them of purchasing, holding and disposing of
Notes.
PLAN OF DISTRIBUTION
Tamarack Financial, Inc., an affiliate of the Issuer, will sell the Notes from
time to time on a best-efforts basis for 100% of their principal amounts.
Tamarack Financial, Inc., may be allocated commissions of up to 6.00% on such
sales. The commissions will be paid by the Issuer, and will reduce the amount
of working capital available for purchase of Receivables, but will not reduce
the principal amount of Notes issued to a Noteholder from the amount invested.
Investor funds will be held in a subscription escrow account with ____ Bank, as
escrow agent, until a minimum of $100,000 in principal amount of the Notes,
regardless of which class, are sold. In the event that the minimum amount of
Notes is not subscribed for before ________, 1998 (or any earlier termination of
the offering), the offering will be terminated and the escrowed funds, plus any
interest thereon, will be promptly returned to the subscribing investors by the
32
<PAGE>
escrow agent. Upon the subscription of the minimum amount of Notes, the
escrowed funds will be released to the Issuer. Interest on the Notes will not
accrue until the escrowed funds are released to the Issuer. Any subsequent
sales proceeds from the sale of additional Notes will be immediately available
for use by the Issuer to purchase additional Receivables. All subscriptions are
subject to the right of the Issuer to reject any subscription for any reason.
Subscriptions will be accepted or rejected within four business days from the
receipt of subscriptions by the Issuer. Purchasers of Notes should make their
subscription check payable to "___________, as Escrow Agent," for the
subscription amount. After the minimum offering amount has been achieved,
subscription checks should be made payable to "Tamarack Lenders Corporation".
Although the Notes are registered under federal securities laws, and are
transferable as described in this Prospectus, no person or entity intends to
make a market for the Notes, and no market is likely to develop.
Minimum investors suitability requirements have been established for purchase of
the Notes. Subscribers must represent that they have either (a) an annual gross
income of at least $45,000 and a net worth of at least $45,000 exclusive of the
subscriber's principal residence and its furnishings and personal use
automobiles; or (b) a net worth of at least $150,000, exclusive of the
subscriber's principal residence and its furnishings and personal use
automobiles. In the case of sales to a subscriber which is a fiduciary
account, the foregoing standards must be met by the beneficiary, the fiduciary
account, or by the donor or grantor who directly or indirectly supplies the
funds to purchase the securities if the donor or grantor is the fiduciary.
The offering will terminate on _________, 1999, unless sooner terminated by
the Company upon the failure to achieve the minimum subscription amount, upon
the sale of all of the Notes or if the Company believes that additional
selling efforts will be unsuccessful.
The Issuer intends to accept in the order received properly completed
subscriptions and payments for subscription amounts from qualified investors
meeting the applicable suitability standards. The Issuer may elect to treat as
accepted subscriptions from certain otherwise qualified investors (for example,
IRA's) whose subscription funds are being paid by a trustee or other institution
which has confirmed to the Issuer that the funds will be paid.
LEGAL MATTERS
Certain legal matters relating to the Notes will be passed upon for the Issuer
by Donohoe, Jameson & Carroll, P.C., Dallas, Texas, counsel to TFC, which has
also delivered its opinion to the Issuer as to the federal income tax matters
discussed under "Federal Income Tax Consequences."
EXPERTS
The balance sheet of Tamarack Lenders Corporation as of December 31, 1997 and
the related statements of operations, changes in stockholders' equity and cash
flows for the period ended December 31, 1997, have been included herein in
reliance on the report of Cheshier & Fuller, L.L.P., independent accountants,
given on the authority of that firm as experts in accounting and auditing.
33
<PAGE>
INDEX OF DEFINITIONS
<TABLE>
<S> <C>
AGGREGATE PRINCIPAL BALANCE. . . . . . . . . . . . . . . . . . . . . . . . . . 13
AMOUNT FINANCED. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Class A-1 Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Class A-2 Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
CODE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
COMMISSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
DEALERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
FINANCED VEHICLES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
FTC RULE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
INDENTURE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
INDENTURE TRUSTEE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
INTEREST RATE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
IRS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
ISSUER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
NOTES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Outstanding. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
PRINCIPAL BALANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
PURCHASE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
PURCHASE AND SERVICING AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . 19
RECEIVABLES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
REGISTRATION STATEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECURITIES ACT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SERVICERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SERVICING AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SERVICING FEE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
TRUSTEE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
TFC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
UCCC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
WARRANTY RECEIVABLE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
</TABLE>
34
<PAGE>
TAMARACK LENDERS CORPORATION
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Accountants. . . . . . . . . . . . . . . . . . . . . . . . A-1
Balance Sheet as of December 31, 1997. . . . . . . . . . . . . . . . . . . . . . A-2
Statement of Operations for the period from inception (July 17, 1997)
to December 31, 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-3
Statements of Changes in Stockholders' Equity for the period from
inception (July 17, 1997) to December 31, 1997 . . . . . . . . . . . . . . . . A-4
Statements of Cash Flows for the period from
inception (July 17, 1997) to December 31, 1997 . . . . . . . . . . . . . . . . A-5
Notes to Financial Statements for the period ended to December 31, 1997 . . . . A-6
</TABLE>
35
<PAGE>
[LETTERHEAD]
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholder of
Tamarack Lenders Corporation
We have audited the accompanying balance sheet of Tamarack Lenders Corporation
(a Texas corporation and a development stage company) as of December 31, 1997,
and the related statements of operations, changes in stockholder's equity and
cash flows for the period from inception (July 17, 1997) to December 31, 1997.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audits to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Tamarack Lenders Corporation as
of December 31, 1997, and the results of its operations and its cash flows for
the period then ended in conformity with generally accepted accounting
principles.
/s/ CHESHIER & FULLER, L.L.P.
----------------------------------
CHESHIER & FULLER, L.L.P.
Dallas, Texas
February 10, 1998
A-1
<PAGE>
TAMARACK LENDERS CORPORATION
(A Development Stage Company)
Balance Sheet
ASSETS
<TABLE>
December 31,
1997
------------
<S> <C>
Cash $ 51,252
----------
TOTAL ASSETS $ 51,252
----------
----------
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Income taxes payable - current $ 23
----------
Total liabilities 23
----------
Commitments and contingencies
Stockholder's equity:
Common stock, $.01 par value, 10,000 shares
authorized, 1,000 shares issued and outstanding 10
Additional paid-in capital 51,090
Retained Earnings 129
----------
Total stockholder's equity 51,229
----------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 51,252
----------
----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
A-2
<PAGE>
TAMARACK LENDERS CORPORATION
(a Development Stage Company)
Statement of Operations
<TABLE>
Period from
inception
(July 17, 1997)
through
December 31, 1997
-----------------
<S> <C>
Revenues
Interest income $ 420
-----------
420
-----------
Expenses
General and administrative 268
-----------
268
-----------
Net income before provision for income taxes 152
Provision for income taxes - current 23
-----------
Net income $ 129
-----------
-----------
Weighted average common shares outstanding 1,000
-----------
-----------
Net income per share $ .13
-----------
-----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
A-3
<PAGE>
TAMARACK LENDERS CORPORATION
(A Development Stage Company)
Statement of Changes in Stockholder's Equity
For the period from inception (July 17, 1997)
to December 31, 1997
<TABLE>
Common Stock Additional Total
------------------- Paid-In Retained Stockholder's
Shares Amount Capital Earnings Equity
------ ------ ---------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Common stock issued,
July 17, 1997 1,000 $ 10 $ 990 $ -0- $ 1,000
Contribution of additional
paid-in capital,
October 30, 1997 50,000 50,000
Contribution of additional
paid-in capital,
December 2, 1997 100 100
Net income 129 129
----- ---------- ---------- ---------- ----------
Balance,
December 31, 1997 1,000 $ 10 $ 51,090 $ 129 $ 51,229
----- ---------- ---------- ---------- ----------
----- ---------- ---------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
A-4
<PAGE>
TAMARACK LENDERS CORPORATION
(A Development Stage Company)
Statement of Cash Flows
<TABLE>
Period from
inception
(July 17, 1997)
through
December 31, 1997
-----------------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 129
Adjustments to reconcile net income to cash
provided by operating activities:
Changes in assets and liabilities:
Income taxes payable - current 23
----------
Net cash provided by operating activities 152
----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the issuance of common stock 1,000
Contributions of additional paid-in capital 50,100
----------
Net cash provided by financing activities 51,100
----------
Net increase in cash 51,252
Cash, beginning of period --
----------
Cash, end of period $ 51,252
----------
----------
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Cash paid during the year-
Income taxes $ -0-
----------
----------
Interest $ -0-
----------
----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
A-5
<PAGE>
TAMARACK LENDERS CORPORATION
(A Development Stage Company)
Notes to Financial Statements
December 31, 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
Tamarack Lenders Corporation (the "Issuer") was incorporated on July 17,
1997 as a single purpose Texas corporation. The Issuer is a wholly-owned
subsidiary of Tamarack Funding Corporation and is a development stage
company since it has not commenced operations as of December 31, 1997. The
future activities of the Issuer will primarily be (1) acquiring, managing
and holding receivables (retail installment contracts for used automobiles
and light trucks) and the proceeds therefrom and (2) issuing notes and
making payments and distributions thereon.
Tamarack Funding Corporation ("TFC"), an affiliate, will administer and
manage the ongoing operations of the Issuer, monitor the servicing of
originating auto dealers, and administer and manage the ongoing operations
of the Issuer. TFC will also arrange for purchase of receivables on behalf
of the Issuer. TFC will bear the cost of the ongoing operations of the
Issuer and will be reimbursed only through its equity interest after all of
the Issuer's note obligations have been satisfied.
TFC or an affiliated company, will maintain custody of the receivables and
will undertake certain administrative duties with respect to the Issuer.
TFC will be entitled to be reimbursed for organizational and offering costs
incurred by it on behalf of the Issuer prior to the minimum amount of notes
being sold, up to a cap of 5% of the total principal amount of the notes
sold. Any such reimbursements will be payable by the Issuer only out of
revenues, and only after current obligations of the notes are met.
USE OF ESTIMATES
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements
and accompanying notes. Actual results could differ from those estimates.
2. AUTO RECEIVABLES BACKED UNSECURED NOTE OFFERING
The Issuer plans to offer, on a best-efforts basis, a minimum of $100,000
up to a maximum of $20,000,000 in principal amount of unsecured notes
backed by retail installment contracts for used automobiles and light
trucks ("receivables"). Receivables will be originated by motor vehicle
dealers and purchased by TFC on behalf of the Issuer. The notes will
consist of two classes. Class A-1 will mature
A-6
<PAGE>
TAMARACK LENDERS CORPORATION
(A Development Stage Company)
Notes to Financial Statements
December 31, 1997
2. AUTO RECEIVABLES BACKED UNSECURED NOTE OFFERING, continued
one year from date of issuance and bear interest at 9.5% per annum. Class
A-2 will mature five years from date of issuance and bear interest at 12%
per annum. The notes will be offered through Tamarack Financial, Inc.
("TFI"), an affiliate. TFI, a licensed broker/dealer in securities, will
be entitled to a commission of up to 6% of gross proceeds from note sales.
The Issuer also intends to enter into an indenture agreement with a
trustee. The Indenture Trustee will monitor the assets of the Issuer on
behalf of the interests of the noteholders, as required pursuant to Federal
securities laws and as set forth in the Indenture.
3. COMMITMENTS AND CONTINGENCIES
TFC has incurred organization costs of $2,405 and offering costs of $88,511
on behalf of Issuer. To the extent that such costs are less than 5% of the
gross proceeds of notes sold and if other conditions are met, Issuer will
be required to reimburse TFC for such costs.
A-7
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Expenses in connection with the offering of the Securities being registered
hereby are estimated as follows:
<TABLE>
<S> <C>
Registration Fee $ 6,060.61
NASD Fee $ 2,500
Printing and Engraving $10,000 **
Trustees' Fees $ *
Accounting Fees $ *
Legal Fees and Expenses $60,000
Blue Sky Fees and Expenses $15,000
Miscellaneous Fees $ *
----------
TOTAL $ *
----------
----------
</TABLE>
----------------
* To be supplied by amendment.
** Estimate
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article 2.02-1.B of the Texas Business Corporations Act (the "TBCA") provides
that a corporation may indemnify any person who was or is a party or is
threatened to be made a party to any proceeding by reason of the fact that such
person is or was a director, officer or other agent of the corporation against
expenses, judgments, fines, settlements and other amounts actually incurred in
connection with such proceeding if the person: (1) acted in good faith, and (2)
(i) if acting in his official capacity, acted in a manner the person reasonably
believed to be in the best interest of the corporation or (ii) otherwise, acted
in a manner the person reasonably believed was not opposed to the corporation's
interests, and (3) and, in the case of a criminal proceeding, had no reasonable
cause to believe the conduct was unlawful.
II-1
<PAGE>
Article 2.02-1 of the TBCA requires that a director, officer or agent shall be
indemnified against expenses actually and reasonably incurred to the extent the
person has been successful, on the merits or otherwise, in the defense of a
proceeding in which he is named because he has or had such a role for the
corporation.
Indemnification under Article 2.02-1.B shall be made by the corporation only
upon a determination that indemnification is proper, by any of the following:
(i) a majority vote of a quorum consisting of directors who are not parties to
the proceeding, (ii) if such a quorum of directors is not obtainable, by a
majority vote of a committee of directors, designated to act by a majority of
the board of directors, consisting of two or more directors who are not parties
to the proceeding, (iii) special legal counsel selected by the board or a
committee of directors as set forth above, (iv) approval of the shareholders,
provided that any shares owned by the Agent may not vote thereon, or (v) the
court in which such proceeding is or was pending.
Pursuant to Article 2.02.1.K of the TBCA, the corporation may advance expenses
incurred in defending any proceeding upon receipt of a written affirmation of
the person's good faith belief that he has met the standard for indemnification
and a written undertaking by the person to repay such amount if it is ultimately
determined that he is not entitled to be indemnified.
The TBCA authorizes a corporation to purchase and maintain insurance on behalf
of a director, officer or agent for liabilities arising by reason of the
person's status, whether or not the corporation would have the power to
indemnify the person against such liability under the provisions of the TBCA.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Not applicable.
II-2
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
A. EXHIBITS
3.1 Articles of Incorporation of Tamarack Lenders Corporation (1)
3.2 Bylaws (1)
4.1 Form of Indenture
4.2 Form of Note (included as an exhibit to Exhibit 4.1)
5.1 Opinion of Donohoe, Jameson & Carroll, P.C.
8.1 Opinion of Donohoe, Jameson & Carroll, P.C. as to tax matters
(contained in Exhibit 5.1)
10.1 Form of Servicing Agreement
10.2 Form of Purchase Agreement (1)
10.3 Form of Subscription Agreement
10.4 Form of Subscription Escrow Agreement (1)
10.5 Form of Broker-Dealer Selling Agreement (1)
23.1 Consents of Donohoe, Jameson & Carroll, P.C. (included as
part of Exhibit 5.1)
23.2 Consent of Cheshier & Fuller, L.L.P.
25.1 Statement of Eligibility and Qualification of Trustee on Form T-1
(1)
- ---------------------------
(1) Previously filed.
B. FINANCIAL STATEMENT SCHEDULES
Not applicable.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes as follows:
(a) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is therefore unenforceable. In the event that a claim for
indemnification against such liabilities (other than payment by the Registrant
of expenses incurred or paid by a director, officer or controlling person of
such Registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
(b) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the Securities
Act of 1933;
II-3
<PAGE>
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration statement;
and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
(c) For purpose of determining any liability under the Act, each post-effective
amendment that contains a form of prospectus will be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time will be deemed to be the initial bona
fide offering thereof.
(d) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.
(e) To file an application for the purpose of determining the eligibility of
the trustee to act under subsection (a) of section 310 of the Trust Indenture
Act ("Act") in accordance with the rules and regulations prescribed by the
Commission under section 305(b)(2) of the Act.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Richardson and State of
Texas, on the 20th day of April, 1998.
TAMARACK LENDERS CORPORATION
By: Garry P. Isaacs
-------------------------
Garry P. Isaacs
President
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement on Form S-1 has been signed by the following persons in
the capacities and on the dates indicated.
SIGNATURE TITLE DATE
Garry P. Isaacs President, Chief Executive Officer, April 20, 1998
- -------------------- Director (Principal Executive Officer,
Garry P. Isaacs Principal Financial Officer, Principal
Accounting Officer)
II-4
<PAGE>
EXHIBIT INDEX
Exhibit Number Description Page
3.1 Articles of Incorporation of Tamarack Lenders
Corporation (1)
3.2 Bylaws (1)
4.1 Form of Indenture
4.2 Form of Note (included as an exhibit to Exhibit 4.1)
5.1 Opinion of Donohoe, Jameson & Carroll, P.C.
8.1 Opinion of Donohoe, Jameson & Carroll, P.C. as to
tax matters (contained in Exhibit 5.1)
10.1 Form of Servicing Agreement
10.2 Form of Purchase Agreement (1)
10.3 Form of Subscription Agreement
10.4 Form of Subscription Escrow Agreement (1)
10.5 Form of Broker-Dealer Selling Agreement (1)
23.1 Consents of Donohoe, Jameson & Carroll, P.C.
(included as part of Exhibit 5.1)
23.2 Consent of Cheshier & Fuller, L.L.P.
25.1 Statement of Eligibility and Qualification of Indenture
Trustee on Form T-1 (1)
- ---------------------------
(1) Previously filed.
II-5
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TAMARACK LENDERS CORPORATION
AND
STERLING TRUST COMPANY,
TRUSTEE
CLASS A-1 AND A-2 NOTES
----------------------
INDENTURE
----------------------
Dated as of , 1998
------------------
<PAGE>
CROSS-REFERENCE TABLE
Trust Indenture
Act Section Indenture Section
--------------- -----------------
310 (a)(1) 7.10
(a)(2) 7.10
(a)(3) N/A
(a)(4) N/A
(a)(5) 7.10
(b) 7.8; 7.10; 11.2
(c) N/A
311 (a) 7.11
(b) 7.11
(c) N/A
312 (a) 2.6
(b) 11.3
(c) 11.3
313 (a) 7.6
(b) 7.6
(c) 11.2
(d) 7.6
314 (a) 5.7; 11.2
(b) N/A
(c)(1) 11.4
(c)(2) 11.4
(c)(3) N/A
(d) N/A
(e) 11.4
(f) N/A
315 (a) 7.1(b)
(b) 7.5; 11.2
(c) 7.1(a)
(d) 7.1(c)
(e) 6.11
316 (a)(1)(A) 6.5
(a)(1)(B) 6.4
(a)(2) N/A
(a)(last sentence) 1.1(Defn. of
"Outstanding Notes")
(b) 6.7
(c) N/A
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317 (a)(1) 6.8
(a)(2) 6.9
(b) 5.2
318 (a) 11.1
________________________
"N/A" means Not Applicable
ii
<PAGE>
TABLE OF CONTENTS
HEADING
- -------
RECITALS OF THE COMPANY. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE . . . . . . . . . . . . . . . . . 4
Section 1.2 Incorporation by Reference of Trust Indenture Act.. . . . 10
Section 1.3 Rules of Construction.. . . . . . . . . . . . . . . . . . 11
ARTICLE TWO
THE SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 2.1 Issuance in Series. . . . . . . . . . . . . . . . . . . . 11
Section 2.2 Forms Generally.. . . . . . . . . . . . . . . . . . . . . 13
Section 2.3 Form of Note. . . . . . . . . . . . . . . . . . . . . . . 13
Section 2.4 Denominations.. . . . . . . . . . . . . . . . . . . . . . 17
Section 2.5 Execution and Authentication. . . . . . . . . . . . . . . 18
Section 2.6 Registrar and Paying Agent. . . . . . . . . . . . . . . . 18
Section 2.7 Holder Lists. . . . . . . . . . . . . . . . . . . . . . . 18
Section 2.8 Transfer and Exchange.. . . . . . . . . . . . . . . . . . 19
Section 2.9 Replacement Notes.. . . . . . . . . . . . . . . . . . . . 19
Section 2.10 Temporary Notes.. . . . . . . . . . . . . . . . . . . . . 19
Section 2.11 Cancellation. . . . . . . . . . . . . . . . . . . . . . . 19
Section 2.12 Defaulted Interest. . . . . . . . . . . . . . . . . . . . 20
Section 2.13 Persons Deemed Owners.. . . . . . . . . . . . . . . . . . 20
Section 2.14. Documents Required for Issuance of Series of Notes. . . 20
ARTICLE THREE
REDEMPTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 3.1 General.. . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 3.2 Notice of Redemption. . . . . . . . . . . . . . . . . . . 21
Section 3.3 Effect of Notice of Redemption. . . . . . . . . . . . . . 22
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ARTICLE FOUR
ACCOUNTS, DISBURSEMENTS AND RELEASES . . . . . . . . . . . . . . . . . . . . 22
Section 4.1 Trust Account; Operating Account. . . . . . . . . . . . . 22
Section 4.2 General Provisions Regarding Trust Account. . . . . . . . 25
Section 4.3 Reports by Trustee. . . . . . . . . . . . . . . . . . . . 26
ARTICLE FIVE
COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 5.1 Payment of Principal and Interest.. . . . . . . . . . . . 26
Section 5.2 Money for Note Payments to be Held in Trust.. . . . . . . 27
Section 5.3 Payment of Taxes and Other Claims.. . . . . . . . . . . . 28
Section 5.4 Limitation on Investment Activities.. . . . . . . . . . . 28
Section 5.5 Compliance Certificates.. . . . . . . . . . . . . . . . . 28
Section 5.6 Reporting.. . . . . . . . . . . . . . . . . . . . . . . . 29
Section 5.7 Performance of Obligations; Servicing Agreement.. . . . . 29
Section 5.8 Negative Covenants. . . . . . . . . . . . . . . . . . . . 30
ARTICLE SIX
DEFAULTS AND REMEDIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 6.1 Events of Default.. . . . . . . . . . . . . . . . . . . . 31
Section 6.2 Acceleration. . . . . . . . . . . . . . . . . . . . . . . 33
Section 6.3 Remedies. . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 6.4 Waiver of Past Defaults.. . . . . . . . . . . . . . . . . 33
Section 6.5 Control by Majority.. . . . . . . . . . . . . . . . . . . 33
Section 6.6 Limitation on Suits.. . . . . . . . . . . . . . . . . . . 34
Section 6.7 Rights of Holders to Receive Payment. . . . . . . . . . . 34
Section 6.8 Collection Suit by Trustee. . . . . . . . . . . . . . . . 34
Section 6.9 Trustee may File Proofs of Claim. . . . . . . . . . . . . 35
Section 6.10 Priorities. . . . . . . . . . . . . . . . . . . . . . . . 35
Section 6.11 Undertaking for Costs.. . . . . . . . . . . . . . . . . . 35
Section 6.12 Stay, Extension or Usury Laws.. . . . . . . . . . . . . . 35
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ARTICLE SEVEN
TRUSTEE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 7.1 Duties of Trustee.. . . . . . . . . . . . . . . . . . . . 36
Section 7.2 Rights of Trustee.. . . . . . . . . . . . . . . . . . . . 37
Section 7.3 Individual Rights of Trustee. . . . . . . . . . . . . . . 38
Section 7.5 Notice of Default.. . . . . . . . . . . . . . . . . . . . 38
Section 7.6 Reports by Trustee to Holders.. . . . . . . . . . . . . . 38
Section 7.7 Compensation and Indemnity. . . . . . . . . . . . . . . . 39
Section 7.8 Replacement of Trustee. . . . . . . . . . . . . . . . . . 39
Section 7.9 Successor Trustee by Merger, etc. . . . . . . . . . . . . 40
Section 7.10 Eligibility; Disqualification.. . . . . . . . . . . . . . 40
Section 7.11 Preferential Collection of Claims Against Company.. . . . 40
Section 7.12 Withholding Taxes.. . . . . . . . . . . . . . . . . . . . 41
ARTICLE EIGHT
DISCHARGE OF INDENTURE . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 8.1 Satisfaction and Discharge of Indenture.. . . . . . . . . 41
Section 8.2 Application of Trust Money. . . . . . . . . . . . . . . . 42
Section 8.3 Repayment to Company. . . . . . . . . . . . . . . . . . . 42
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS. . . . . . . . . . . . . . . . . . . . . 42
Section 9.1 Without Consent of Holders. . . . . . . . . . . . . . . . 42
Section 9.2 With Consent of Holders.. . . . . . . . . . . . . . . . . 43
Section 9.3 Compliance with Trust Indenture Act.. . . . . . . . . . . 43
Section 9.4 Revocation and Effect of Consents.. . . . . . . . . . . . 44
Section 9.5 Notation on or Exchange of Notes. . . . . . . . . . . . . 44
Section 9.6 Trustee to Sign Amendments, etc.. . . . . . . . . . . . . 44
ARTICLE TEN
MEETINGS AND HOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
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<PAGE>
Section 10.1 Purposes for Which Meetings may be Called.. . . . . . . . 44
Section 10.3 Call of Meetings by Company or Holders. . . . . . . . . . 45
Section 10.4 Who may Attend and Vote at Meetings.. . . . . . . . . . . 45
Section 10.6 Exercise of Rights of Trustee or Holders may not be
Hindered or Delayed by Call of Meeting. . . . . . . . . . 46
Section 10.7 Evidence of Actions by Holders. . . . . . . . . . . . . . 46
ARTICLE ELEVEN
MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 11.1 Trust Indenture Act Controls. . . . . . . . . . . . . . . 46
Section 11.2 Notices.. . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 11.3 Communication by Holders with Other Holders.. . . . . . . 47
Section 11.4 Certificate and Opinion as to Conditions Precedent. . . . 48
Section 11.5 Rules by Paying Agent and Registrar.. . . . . . . . . . . 48
Section 11.6 Legal Holidays. . . . . . . . . . . . . . . . . . . . . . 48
Section 11.7 Governing Law.. . . . . . . . . . . . . . . . . . . . . . 48
Section 11.8 No Adverse Interpretation of Other Agreements.. . . . . . 48
Section 11.9 No Recourse Against Others. . . . . . . . . . . . . . . . 49
Section 11.10 Successors. . . . . . . . . . . . . . . . . . . . . . . . 49
Section 11.11 Duplicate Originals . . . . . . . . . . . . . . . . . . . 49
vi
<PAGE>
THIS INDENTURE, dated as of __________________, 1998 is between TAMARACK
LENDERS CORPORATION, a Texas corporation (the "Company"), having its
principal office at 801 East Campbell Road, Suite 310, Richardson, Texas
75081 and Sterling Trust Company, as Trustee (the "Trustee"), a trust company
organized and existing under the laws of the State of Texas and having its
principal office at 7901 Fish Pond Road, Waco, Texas 76710.
RECITALS OF THE COMPANY
The Company has duly authorized the execution and delivery of this
Indenture and the issuance from time to time of its Notes in the maximum
aggregate principal amount of $20,000,000 (the "Notes"). The Notes may bear
such rates of interest, mature at such time or times, be issued in one or
more series and have such other provisions as may hereafter be established
under this Indenture.
All acts necessary to make the Notes, when executed by the Company,
authenticated and delivered hereunder and duly issued by the Company, the valid
obligations of the Company and to make this Indenture a valid agreement of the
Company, in accordance with their and its terms, have been accomplished.
Therefore, for and in consideration of the premises and the purchase or
acceptance of the Notes by the Holders (as herein defined) thereof, it is
mutually covenanted and agreed, for the equal and proportionate benefit of all
Holders, as follows:
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.1 Definitions.
"Accounts" means the Trust Account and the Operating Account established by
the Company under the provisions of Section 4.1.
"Affiliate" means, as to any Person, any other Person which directly or
indirectly controls, or is under common control with, or is controlled by,
such Person. As used in this definition "control" (including, with its
correlative meanings, "controlled by" and "under common control with") means
possession, directly or indirectly, of power to direct or cause the direction
of management or policies (whether through ownership of capital stock,
partnership interests, by contract or otherwise), provided that, in any
event, any Person which owns directly or indirectly 10% or more of the
securities having ordinary voting power for the election of directors or
other governing body of a corporation or 10% or more of the partnership or
other ownership interests of any other Person (other than as a limited
partner of such other Person)
1
<PAGE>
will be deemed to control such other Person for the purposes of this
definition; and provided further that no individual shall be an Affiliate of
a corporation or partnership solely by reason of his being an officer,
director or partner of such entity.
"Allowed Expenses" means any amounts due the Trustee under Section 7.7,
any Servicing Fees, any fees payable for the transfer of the lien reflected
in the Title Documents into and out of the Company's name, any federal, state
and local taxes and assessments incurred by the Company (including corporate
franchise taxes and any payments by the Company to any of its Affiliates as
reimbursements for tax payments made by such Affiliate for the Company's
benefit or the benefit obtained by the Company from use of tax losses
employed by such Affiliate to offset taxable income of the Company), any bank
service charges and account fees relating to the Accounts and the
subscription escrow account established for the receipt of the proceeds from
the offering and sale of the Notes, the lockbox fees, account fees and bank
service charges relating to the Collections Account, any legal and accounting
fees and printing expenses (excluding Offering Expenses, but including those
otherwise incurred to comply with reporting and other requirements under
Federal and state securities laws and for reports, compliance certificates
and opinions required by the Indenture), premiums for vehicle value
insurance, charges for vehicle warranty repair service contracts (including
fees paid to vehicle dealers), any Liquidation Expenses (as to each Financed
Vehicle, limited to the related Liquidation Proceeds), any Insurance Expenses
(as to each Financed Vehicle, limited to the related Insurance Proceeds), and
any other Allowed Expenses as described in or defined by the prospectus which
offers the Notes for sale.
"Assignment" means the original instrument of assignment of a Contract
and all other documents securing such Contract made by the Servicer to the
Company (or in the case of any Contract acquired by the Company from another
Person, from such other Person to the Company), which is in a form sufficient
under the laws of the jurisdiction under which the security interest in the
related Financed Vehicle arises to permit the assignee to exercise all rights
granted by the Obligor under such Contract and such other documents to the
obligee and to exercise all rights available under applicable law under such
Contract and which may, to the extent permitted by the laws of such
jurisdiction, be an assignment constituting a part of the form of the
Contract itself or a blanket instrument of assignment covering other
Contracts as well.
"Bankruptcy Law" shall have the meaning provided in Section 6.1.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a Legal Holiday.
"Collection Period" means with respect to any Payment Date or Report
Date, the calendar month immediately preceding the Payment Date or Report
Date.
"Collections Account" means the lock box account created and maintained
by a Servicer in the Company's name and designated as such pursuant to
the Servicing Agreement.
2
<PAGE>
"Company" means the Person named as the "Company" in the first paragraph of
this instrument until a successor Person replaces it pursuant to the applicable
provisions of this Indenture, and thereafter "Company" means such successor
Person.
"Company Order" or "Company Request" means a written order or request
signed in the name of the Company by its Chairman, President or a Vice
President, Treasurer, Assistant Treasurer, Controller, Assistant Controller,
Secretary or an Assistant Secretary, and delivered to the Trustee.
"Contract" means each retail installment sales or lease contract (or
other obligation) and security agreement which has been executed by an
Obligor and pursuant to which such Obligor purchased or leased the Financed
Vehicle described therein, agreed to pay the remaining unpaid portion of the
purchase price or the lease payments, as therein provided in connection with
such purchase or lease, granted a security interest in such Financed Vehicle,
and undertook to perform certain other obligations as specified in such
Contract and which is granted to the Trustee pursuant to this Indenture as
security for the Notes.
"Contract Documents" means with respect to each Contract, (i) the
original Contract; (ii) either the original Title Document for the related
Financed Vehicle showing the Obligor (or the originating dealer, in the case
of a lease) as the owner and the Servicer or the Company as first lienholder
or an official receipt from the responsible state or local governmental
authority showing that an application has been made (and the required fees
have been paid) for registration of the Title Documents for such Financed
Vehicle in the names of the Obligor (or the originating dealer, in the case
of a lease) as owner and the Servicer or the Company as first lienholder (or
such other evidence of perfection of the security interest in the related
Financed Vehicle granted by such Contract, as determined by the Company to be
permitted or required to perfect such security interest under the laws of the
applicable jurisdiction, or a guarantee from the dealer selling such Financed
Vehicle that the Title Document for such Financed Vehicle showing the
Servicer or the Company as first lienholder has been applied for); (iii) the
related Assignment; and (iv) any agreement(s) modifying the Contract
(including, without limitation, any extension agreement(s)).
"Defaulted Contract" means with respect to any Collection Period, a
Contract (a) whose Obligor, at the end of such Collection Period, (i) in the
case of Contracts requiring biweekly or semi-monthly installments, is past
due with respect to at least three consecutive scheduled installments and has
failed for 30 days to remit any sums against the obligations under the
Contract, or (ii) in the case of Contracts requiring monthly installments, is
past due with respect to two scheduled installments and has failed for 60
days to remit any sums against the obligations under the Contract, or (b)
with respect to which the related Financed Vehicle has been repossessed and,
in the case of either (a) or (b), in respect of which Liquidation Proceeds,
which, in the Servicer's judgment, would constitute the final amounts
recoverable in respect of such Contract, have not yet been collected as of
the end of such Collection Period.
3
<PAGE>
"Eligible Account" means an account that is either (i) maintained with a
depository institution subject to supervision or examination by federal or state
authority and having a combined capital and surplus of at least $15,000,000,
(ii) an account or accounts the deposits in which are fully insured by the
Federal Deposit Insurance Corporation, or (iii) maintained with the Trustee or
its successor.
"Eligible Contract" means a Contract hereafter acquired by the Company
that, as of the date of such acquisition, satisfies the representations and
warranties contained in the Servicing Agreement.
"Eligible Investments" means any one or more of the following obligations
or securities:
(i) United States Obligations;
(ii) demand and time deposits in, certificates of deposit of, banker's
acceptances issued by, or federal funds sold by any depository institution
or trust company (including the Trustee) incorporated under the laws of the
United States of America or any state thereof and subject to supervision
and examination by federal and/or state banking authorities, so long as
such institution or company has a combined capital and surplus of at least
$15,000,000;
(iii) repurchase obligations with respect to any security described in
clause (i) entered into with a depository institution or trust company
(including the Trustee), acting as principal, whose obligations having the
same maturity as that of the repurchase agreement and would be Eligible
Investments under clause(ii) above;
(iv) securities bearing interest or sold at a discount issued by any
corporation incorporated under the laws of the United States of America or
any state thereof which at the time of such investment have long-term,
unsecured debt rated by Standard & Poor's as "AA-" or better; provided,
however, that securities issued by any particular corporation will not be
Eligible Investments to the extent that investment therein will cause the
then outstanding principal amount of securities issued by such corporation
to exceed 10% of the aggregate outstanding balances and amounts of all
Contracts and Eligible Investments;
(v) commercial paper given the highest rating by Standard & Poor's at
the time of such investment; and
(vi) pooled or common trust funds of the Trustee or of any publicly
traded money market mutual fund that are invested in the above-mentioned
Eligible Investments.
4
<PAGE>
"Event of Default" shall have the meaning provided in Section 6.1.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Financed Vehicle" means as to any Contract, the automobile or light-duty
truck that constitutes security for the obligations of the Obligor thereunder.
"Holder" means a Person in whose name a Note is registered on the
Registrar's books.
"Indenture" means this instrument as originally executed or as it may from
time to time be supplemented or amended by one or more indentures supplemental
hereto entered into pursuant to the applicable provisions hereof.
"Insurance Expenses" means, with respect to a Financed Vehicle, any
expenses incurred by a Servicer and recoverable out of the Insurance Proceeds
from the related insurance policy and any portion of such Insurance Proceeds
applied to the repair of such Financed Vehicle or required to be released to the
related Obligor.
"Insurance Proceeds" means the proceeds paid by any insurer pursuant to any
Physical Damage Insurance Policy, any credit or life insurance policy covering
payments owing under any Contract, or any other insurance policy for damage or
repair of a Financed Vehicle or for liability for confiscated, converted or
"skipped" Financed Vehicles.
"Legal Holiday" shall have the meaning provided in Section 11.6.
5
<PAGE>
"Liquidation Expenses" means the reasonable out-of-pocket expenses incurred
by a Servicer in connection with the liquidation of any Contract (including
the attempted liquidation of a Contract which is brought current and is no
longer in default during such attempted liquidation), the repossession,
holding and repair of any Financed Vehicle related thereto and the sale of any
repossessed or returned Financed Vehicle related thereto, which expenses may
include Insurance Expenses.
"Liquidation Proceeds" means the amounts received by a Servicer (before
reimbursement for Liquidation Expenses) in connection with the liquidation of
any Defaulted Contract and the sale of any repossessed or returned Financed
Vehicle related thereto, whether through repurchase by the motor vehicle dealer
who originated the Contract, receipt of Insurance Proceeds, repossession, sale
or otherwise.
"Majority Holders" means the Holders of Notes representing more than 50% of
the aggregate principal amount of Notes which are then Outstanding Notes.
"Note Register" means the register for the Notes maintained by the
Registrar pursuant to Section 2.5.
"Notes" means up to $4,000,000 principal amount of the Class A-1 Notes of
the Company, with an interest rate of 9 1/2% and maturing one year from
issuance, and up to $16,000,000 principal amount of the Class A-2 of the
Company, with an interest rate of 12% and maturing five years from issuance,
as such Notes may be amended or supplemented from time to time, that are
issued under this Indenture. The Class A-1 Notes and Class A-2 Notes are
equal to one another in all respects other than interest rate and maturity.
6
<PAGE>
"Obligor" means each Person who is indebted under a Contract or who has
acquired or leased a Financed Vehicle subject to a Contract.
"Offering Amount" shall mean the $20,000,000 in aggregate principal amount
of the Notes that may be issued under this Indenture.
"Offering Expenses" shall mean the fees, commissions and expenses that the
Company will pay from the proceeds of the sale of the Notes, as disclosed in the
final prospectus relating to the offering of the Notes filed with the SEC
pursuant to which the Notes are offered and sold on behalf of the Company.
"Officer" means the Chairman of the Board, the President, any Vice
President, the Treasurer, the Secretary or the Controller of any Person.
"Officer's Certificate" when used with respect to any Person, means a
certificate signed by the Chairman of the Board, President, any Vice President,
the Treasurer, any Assistant Treasurer, the Secretary or any Assistant Secretary
of such Person, or any other officer of such Person customarily performing
functions similar to those performed by any of the above designated officers.
"Operating Account" means the commercial bank account created and
maintained by the Company and denominated as such pursuant to Section 4.1.
"Opinion of Counsel" means a written opinion from legal counsel who is
reasonably acceptable to the Trustee. The counsel may be an employee of or
counsel to the Company or the Trustee.
"Outstanding Notes" means, with respect to the Notes, as of the date of
determination, all the Notes theretofore authenticated and delivered under this
Indenture except:
(i) the Notes theretofore cancelled by the Trustee or delivered to
the Trustee for cancellation;
(ii) the Notes or portions thereof for whose payment or redemption
money in the necessary amount has been theretofore deposited with the
Trustee or any Paying Agent in trust for the Holders of such Notes;
provided that, if such Notes or portions thereof are to be redeemed, notice
of such redemption has been duly given pursuant to this Indenture or
provision therefor satisfactory to the Trustee has been made; and
7
<PAGE>
(iii) Notes in exchange for or in lieu of which other Notes have been
authenticated and delivered pursuant to this Indenture unless proof
satisfactory to the Trustee is presented that any such Notes are held by a
holder in due course;
PROVIDED, HOWEVER, that in determining whether the Holders of the requisite
principal amount of the Outstanding Notes have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Notes owned by
the Company or any Affiliates of the Company shall be disregarded and deemed not
to be Outstanding Notes, except that, in determining whether the Trustee shall
be protected in relying upon any such request, demand, authorization, direction,
notice, consent or waiver, only Notes with respect to which the Trustee has
received written notice of such ownership or otherwise has actual knowledge of
such ownership shall be so disregarded. Notes so owned which have been pledged
in good faith may be regarded as Outstanding Notes if the pledgee establishes to
the satisfaction of the Trustee the pledgee's right so to act with respect to
such Notes and that the pledgee is not the Company or any other obligor upon the
Notes or any Affiliates of the Company or such other obligor.
"Paying Agent" means the Trustee or any other Person that meets the
eligibility standards for the Trustee specified in Section 7.10 and is
authorized by the Company to pay the principal or any interest which may become
payable on any Notes on behalf of the Company.
"Payment Date", with respect to any Note, means the (i) 15th day of each
calendar month (unless such day is not a Business Day in which event the next
succeeding Business Day) commencing with the second calendar month following the
month in which the Note is issued, and (ii) the Stated Maturity for such Note.
"Person" means any individual, any corporation, partnership, joint venture,
trust or other entity, any unincorporated organization or any government or
agency or political subdivision thereof.
"Physical Damage Insurance Policy" means with respect to a Financed
Vehicle, any policy of physical damage, comprehensive or collision insurance
covering the Financed Vehicle pursuant to which a Servicer may obtain
recoveries for loss or damage to the Financed Vehicle.
"Purchasing Agreement" means the Master Contract Purchase Agreement,
dated as of the date hereof, by and between the Company and TFC as the
purchaser, providing among other things, for the purchasing of the Contracts,
as said agreement may be amended or supplemented from time to time as
permitted thereby.
"Record Date" for the interest and any principal payable on any Payment
Date means the first day (whether or not a Business Day) of the month in which
such Payment Date occurs.
8
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"Redemption Date" has the meaning set forth in Section 3.1(a).
"Redemption Price" has the meaning set forth in Section 3.1(a).
"Registrar" means the office or agency of the Company or its designee where
the Notes may be presented for registration of transfer or exchange, as
established under Section 2.5.
"Registrar of Titles" means the agency, department or office having the
responsibility for maintaining records of titles to motor vehicles and issuing
documents evidencing such titles in the jurisdiction in which a particular
Financed Vehicle is registered.
"Report Date" means the 20th day (or the Business Day next succeeding such
day if such day is not a Business Day) of each month during the existence of
this Indenture.
"Responsible Officer" when used with respect to the Trustee means the
Chairman or Vice Chairman of the Board of Directors or Trustees, the Chairman or
Vice Chairman of the Executive Committee of the Board of Directors or Trustees,
the President, any Vice President, any Assistant Vice President, any Trust
Officer or Assistant Trust Officer, the Secretary, any Assistant Secretary, the
Treasurer, any Assistant Treasurer, or any other officer of the Trustee
customarily performing functions similar to those performed by any of the above
designated officers and also means, with respect to a particular corporate trust
matter, any other officer to whom such matter is referred because of his or her
knowledge of an familiarity with the particular subject.
"SEC" means the Securities and Exchange Commission.
"Servicers" means the various servicers performing servicing and
collection functions with respect to the Company's Contracts under the
Servicing Agreements, and their permitted successors and assigns.
"Servicing Agreements" means the various Servicing Agreements by and
between the Company and the various Servicers, providing among other things,
for the collecting and servicing of the Contracts, as said agreements may be
amended or supplemented from time to time as permitted thereby. Such term
shall also include any servicing agreements entered into with successor
servicers for the servicing of Contracts.
"Servicing Fee" means the servicing fees payable by the Company to the
Servicer under the Servicing Agreeements.
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"Special Record Date" means the date determined pursuant to Section 2.11.
"Stated Maturity" means the stated maturity date of a Note or series of
Notes issued under the Indenture.
"TFC" means Tamarack Funding Corporation as purchaser under the
Purchasing Agreement, and its permitted successors and assigns.
"TIA" means the Trust Indenture Act of 1939, as amended.
"Title Document" means with respect to any Financed Vehicle, the
certificate of title for, or other evidence of ownership of, such Financed
Vehicle issued by the Registrar of Titles in the jurisdiction in which such
Financed Vehicle is registered.
"Trust Account" means the trust account controlled by the Trustee and
designated as such pursuant to Section 4.1, which account may be a sub-account
(for accounting purposes) of a general account maintained by the Trustee.
"Trust Officer" means any Responsible Officer assigned by the Trustee to
administer its corporate trust matters.
"Trustee" means the party named as such in this Indenture until a successor
replaces it and thereafter means the successor.
"UCC" means the Uniform Commercial Code as in effect in the relevant
jurisdiction.
"United States Obligations" means direct obligations of the United States
of America or any agency or instrumentality of the United States of America, or
other obligations the principal of and interest on which are unconditionally
guaranteed or insured by Unites States of America.
Section 1.2 Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, such provision is
incorporated by reference in and made a part of this Indenture. If this
Indenture is qualified under the TIA, any provision that is required by the TIA
to be incorporated herein shall be so incorporated and shall supersede any
conflicting provision hereof. The following TIA terms have the following
meanings in this Indenture:
"Commission" means the SEC.
"indenture securities" means the Notes.
"indenture security holder" means a Holder.
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"indenture to be qualified" means this Indenture.
"indenture trustee" or institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Company (or any other
obligor on the Notes).
All other TIA terms used in this Indenture that are defined by the TIA, defined
by TIA reference to another statute or defined by SEC rule have the meanings
assigned to them.
Section 1.3 Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned to
it in accordance with generally accepted accounting principals as of the date of
this Indenture;
(3) "or" is not exclusive; and
(4) words in the singular include the plural, and in the plural include
the singular.
ARTICLE TWO
THE SECURITIES
Section 2.1. Issuance in Series.
The aggregate principal amount of Notes which may be authenticated and
delivered under this Indenture is $20,000,000.
The Notes issued hereunder may be issued in one or more series. The Notes
of each series may bear such designations, which may or may not include the term
"Note", and may have such terms, respectively (including, without limitation,
additional covenants and changes in or eliminations of covenants set forth in
this Indenture), as shall be approved prior to the authentication thereof by or
pursuant to a Board Resolution; provided, however, that no Notes of any series
shall be senior in right of payment to any Notes of any other series.
With respect to any Notes to be authenticated and delivered hereunder,
there shall be established in or pursuant to a Board Resolution and, subject to
Section 2.14, set forth, or determined in the manner provided, in an Officers'
Certificate, or established in one or more indentures supplemental hereto, prior
to the issuance of Notes of any series,
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(1) the title of the Notes of the series (which shall distinguish the Notes
of the series from Notes of any other series);
(2) any limit upon the aggregate principal amount of the Notes of the
series which may be authenticated and delivered under this Indenture (except for
Notes authenticated and delivered upon registration or transfer of, or in
exchange for, or in lieu of, other Notes of such series and except for any Notes
which are deemed never to have been authenticated and delivered hereunder);
(3) the Person to whom any interest on a Note of the series shall be
payable, if other than the Person in whose name that Note (or one or more
predecessor Notes) is registered at the close of business on the Record Date for
such interest;
(4) the date or dates, or the method or methods, if any, by which such date
or dates shall be determined, on which the principal of such Notes is payable;
(5) the rate or rates at which any Notes of the series shall bear interest,
if any, or the method or methods, if any, by which such rate or rates are to be
determined, the date or dates, if any, from which such interest shall accrue or
the method or methods, if any, by which such date or dates are to be determined,
the Interest Payment Dates, if any, on which such interest shall be payable and
the Record Date, if any, for the interest payable on any Interest Payment Date,
and the basis upon which interest shall be calculated if other than that of a
360-day year of twelve 30-day months;
(6) the place or places where the principal of (and premium, if any) and
interest on Notes of the series shall be payable, any Notes of the series may be
surrendered for registration of transfer or exchange and notices and demands to
or upon the Company with respect to the Notes of the series and this Indenture
may be served;
(7) whether any of such Notes are to be redeemable at the option of the
Company and, if so, the period or periods within which, the price or prices at
which and the terms and conditions upon which any Notes of the series may be
redeemed, in whole or in part, at the option of the Company, and, if other than
by a Board Resolution, the manner in which any election by the Company to redeem
the Notes shall be evidenced;
(8) whether the Company is obligated to redeem, purchase or repay any Notes
of the series pursuant to any sinking fund or analogous provisions or at the
option of the Holder thereof and, if so, the period or periods within which, the
price or prices at which and the terms and conditions upon which any Notes of
the series shall be redeemed, purchased or repaid, in whole or in part, pursuant
to such obligation and any provisions for the remarketing of any Notes of the
series so redeemed or purchased;
(9) the denominations in which any Notes of the series shall be issuable if
other than denominations of $1,000 and any integral multiple thereof;
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(10) any deletions from, modifications of or additions to the Events of
Default or covenants of the Company with respect to any Notes of the series,
whether or not such Events of Default or covenants are consistent with the
Events of Default or covenants set forth herein; and
(11) any other terms of any Notes of the series which the Company may
establish in accordance with the terms of this Indenture.
All Notes of any one series shall be substantially identical except as to
the rate or rates of interest, if any, and Maturity, the date from which
interest, if any, shall accrue and except as may otherwise be provided by the
Company in or pursuant to the Board Resolution and set forth in the Officers'
Certificate or in any indenture or indentures supplemental hereto pertaining
to such series of Notes. All Notes of any one series need not be issued at
the same time and, unless otherwise so provided by the Company, a series may
be reopened for issuances of additional Notes of such series or to establish
additional terms of such series of Notes, provided that such additional terms
do not have a material adverse effect on the interests of the Holders of
Notes of such Series.
Section 2.2 Forms Generally.
Each series of the Notes and the Trustee's certificate of authentication
shall be in substantially the forms set forth in this Article, with such
appropriate insertions, omissions, substitutions and other variations as are
required by this Indenture, and may have such letters, numbers or other marks
of identification and such legends or endorsements placed thereon as may be
required to comply with the rules of any securities exchange on which the
Notes may be listed, or as may, consistently herewith, be determined by the
officers executing such Notes, as evidenced by their execution thereof. Any
portion of the text of any Note may be set forth on the reverse thereof, in
which case the following reference to the portion of the text appearing on
the reverse of the Notes shall be inserted on the face of the Notes,
immediately prior to the paragraph stating that the certificate of
authentication on the Note must be executed by manual signature of the
Trustee as a condition to the validity of such Note:
"Reference is hereby made to the further provisions of this Note set
forth on the reverse hereof which provisions shall for all purposes have
the same effect as if set forth at this place."
The definitive Notes shall be printed, lithographed or engraved or produced
by any commercially reasonable manner, all as determined by the officers
executing such Notes, as evidenced by their execution thereof.
Section 2.3 Form of Note.
(a) The form of Note is as follows:
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TAMARACK LENDERS CORPORATION
CLASS A-__ NOTE
$ No.
----------------- -----------------
Tamarack Lenders Corporation, a corporation duly organized and existing
under the laws of the State of Texas (herein referred to as the "Company"), for
value received, hereby promises to pay to _____________________________ or
registered assigns, the principal sum of _____________________________ dollars,
and to pay interest (computed on the basis of a 360-day year consisting of 12
months of 30 days each) on the unpaid portion of said principal sum outstanding
from time to time from the date of issue, until the principal amount of this
Note is paid in full, at the rate of ______ per annum, which interest shall
be due and payable upon the 15th day of each calendar month (for such
interest accruing through the last day of the prior calendar month) during
the term of this Note commencing with the second calendar month following the
calendar month in which this Note is issued (each a "Payment Date"). The
principal sum hereof shall be due and payable on _____________ (the "Stated
Maturity"), at which time all then unpaid principal and accrued interest
hereunder shall be due and payable.
The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the
Company with respect to this Note shall be applied first to interest due and
payable on this Note as provided above and then to the unpaid principal of
this Note. This Note represents a general obligation of the Company.
This Note is one of a duly authorized issue of Notes of the Company,
designated as its Class A-1 and Class A-2 Notes (herein called the "Notes"),
all issued and to be issued under an Indenture dated as of _____________,
1998 (herein called the "Indenture"), between the Company and Sterling Trust
Company (the "Trustee", which term includes any successor Trustee under the
Indenture), to which Indenture and all indentures supplemental thereto
reference is hereby made for a statement of the respective rights thereunder
of the Company, the Trustee and the Holders of the Notes, and the terms upon
which the Notes are, and are to be, authenticated and delivered. All
capitalized terms used in this Note which are defined in the Indenture shall
have the meanings assigned to them in the Indenture.
Payment of the outstanding principal of and accrued interest on this Note
at the Stated Maturity, or of the Redemption Price payable on any Redemption
Date as of which this Note has been called for redemption, shall be made upon
presentation of this Note to the Paying Agent appointed by the Company for
such purpose. Payments of all installments of interest and principal due and
payable on any Payment Date (other than the Stated Maturity) shall be made by
check mailed to the Person whose name appears as the Holder of this Note on
the Note
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Register as of the first day of the month in which such Payment Date occurs
(the "Record Date") without requiring that this Note be submitted for
notation of payment. Checks returned undelivered will be held for payment to
the Person entitled thereto, subject to the terms of the Indenture, at the
office or agency in the United States of America designated by the Company
for such purpose pursuant to the Indenture.
If an Event of Default shall occur and be continuing with respect to the
Notes, the Notes, and all principal and unpaid accrued interest, may be
declared due and payable in the manner and with the effect provided in the
Indenture.
The Notes are redeemable, at any time, at the option of the Company on any
Payment Date, in whole or in part, at 100% of the unpaid principal amount
thereof, together with accrued interest thereon; provided, however, that the
Paying Agent shall be required to redeem the Notes at such time only to the
extent that the Company has theretofore deposited with the Paying Agent money
sufficient to effect such redemption. At least ten days prior to the Redemption
Date, the Company is required to mail a notice of redemption to the registered
owner of this Note specifying the Redemption Date, the Redemption Price, the
name and address of the Paying Agent, that this Note must be delivered to the
Paying Agent and that interest on this Note ceases to accrue on and after the
Redemption Date.
If provision is made for the redemption and payment of this Note in
accordance with the Indenture, this Note shall thereupon cease to bear
interest from and after the Redemption Date.
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Note may be registered on the Note Register
of the Company, upon surrender of this Note for registration of transfer at
the office or agency designated by the Company pursuant to the Indenture,
duly endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Company and the Trustee duly executed by, the Holder
hereof or such Holder's attorney duly authorized in writing, and thereupon
one or more new Notes of authorized denominations and for the same aggregate
principal amount will be issued to the designated transferee or transferees.
The Company may charge a reasonable fee for the registration of such
transfer, or for any change of address of a Holder (or of any other Person to
whom the Holder directs that payments under this Note are to be made).
Prior to the due presentment for registration of transfer of this Note,
the Company, the Trustee and any agent of the Company or the Trustee may
treat the Person in whose name this Note is registered as the owner hereof
for all purposes, whether or not this Note be overdue, and neither the
Company, the Trustee nor any such agent shall be affected by notice to the
contrary.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Notes under the Indenture at any
time by the Company with the consent of the Majority Holders. The Indenture
also contains provisions permitting the Majority Holders, on
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behalf of the Holders of all the Notes, to waive compliance by the Company
with certain provisions of the Indenture and certain past defaults under the
Indenture and their consequences. Any such consent or waiver by the Holder
of this Note shall be conclusive and binding upon such Holder and upon all
future holders of this Note and of any Note issued upon the registration of
transfer hereof or in exchange hereof or in lieu hereof whether or not
notation of such consent or waiver is made upon this Note. The Indenture
also permits the Trustee to amend or waive certain terms and conditions set
forth in the Indenture without the consent of Holders of the Note issued
thereunder.
The Notes are issuable only in registered form in denominations as
provided in the Indenture and subject to certain limitations therein set
forth. The Notes are exchangeable for a like aggregate principal amount of a
different authorized denomination, as requested by the Holder surrendering
same. The Company may charge a reasonable fee for such exchange.
This Note and the Indenture shall be construed in accordance with, and
governed by, the laws of the State of Texas applicable to agreements made and
to be performed therein.
The Indenture and this Note are hereby expressly limited so that in no
contingency or event, whether by reason of acceleration of the maturity of
this Note or otherwise, shall the amount paid, or agreed to be paid by the
Company for the use, forbearance, or detention of the money loaned under this
Note or otherwise or for the payment or performance of any covenant or
obligation contained herein or the Indenture or in any other document
evidencing, securing or pertaining hereto, exceed the maximum amount
permissible under applicable law, as now or as hereafter amended. If from
any circumstances whatsoever fulfillment of any provision hereof or any of
such other documents, at the time performance of such provision shall be due,
shall involve transcending the limit of validity prescribed by law, then IPSO
FACTO, the obligation to be fulfilled shall be reduced to the limit of such
validity, and if from any such circumstances the Holder of this Note shall
ever receive interest or anything which might be deemed interest under
applicable law which should exceed the highest lawful rate, such amount which
would be excessive interest shall be applied to the reduction of the
principal of this Note and not to the payment of interest, or if such
excessive interest exceeds the unpaid balance of principal of this Note such
excess shall be refunded to the Company. All sums paid or agreed to be paid
to the Holder of this Note for the use, forbearance or detention of the
indebtedness of the Company to the Holder of this Note shall, to the extent
permitted by applicable law, be amortized, prorated, allocated and spread
throughout the full term of such indebtedness until payment in full so that
the actual rate of interest on account of such indebtedness is uniform, or
does not exceed the maximum rate permitted by applicable law as now or
hereafter amended, throughout the term thereof. The terms and provisions of
this paragraph shall control and supersede every other provision of this Note
and the Indenture. The Company hereby waives, to the extent permitted by
applicable law, all of its rights or projections afforded by any applicable
usury or interest limitation law.
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Unless the certificate of authentication hereon has been executed by the
Trustee by manual signature, this Note shall not be entitled to any benefit
under the Indenture, or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, Tamarack Lenders Corporation has caused this
instrument to be duly executed under its corporate seal.
Dated: , 1998
----------------
TAMARACK LENDERS CORPORATION
By:
-------------------------------
(Authorized Officer)
(SEAL)
Attest:
- -------------------------------
(Authorized Officer)
(b) The form of the Trustee's certificate of authentication is as follows:
This is one of the Notes referred to in the within mentioned Indenture.
STERLING TRUST COMPANY, as Trustee, Paying
Agent and Registrar
By:
-------------------------------
Authorized Signatory
Section 2.4 Denominations.
The Notes shall be issuable only in registered form. The Notes shall be
issuable in any denomination, with no minimum denomination.
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Section 2.5 Execution and Authentication.
(a) The Notes shall be executed on behalf of the Company by its Chairman
of the Board, President or any Vice President of the Company and attested to
by an Officer of the Company other than an Officer who has executed the
Notes. The signature of any of such individuals on the Notes may be manual
or facsimile.
(b) Notes bearing the manual or facsimile signatures of individuals who
at any time held one or more of the offices set forth in subsection (a) above
shall bind the Company, notwithstanding that such individuals or any of them
have ceased to be such prior to the authentication and delivery of such Notes.
(c) A Note shall not be valid until an authorized signatory of the
Trustee manually signs the certificate of authentication on the Note on
behalf of the Trustee. The signature shall be conclusive evidence that the
Note has been authenticated under this Indenture.
(d) The Trustee shall authenticate Notes from time to time for original
issue up to the aggregate Offering Amount upon a Company Order; provided,
however, Trustee shall not be required to so authenticate more often than
once in a calendar month.
Section 2.6 Registrar and Paying Agent.
(a) The Company shall maintain or cause to be maintained an office or
agency where Notes may be presented for registration of transfer or for
exchange (the "Registrar"). The Registrar shall keep a register of the Notes
and of their transfer and exchange (the "Note Register"). The Company may
have one or more co-registrars.
(b) Subject to the provisions of Section 5.2, the Company may designate
one or more Paying Agents, within the United States of America, at which
Notes may be presented or surrendered for payment or which may make payments
of accrued interest on the Notes on behalf of the Company.
(c) The Company shall notify the Trustee of the name and address of any
such Registrar or Paying Agent and may appoint successors thereof.
(d) The Company initially appoints the Trustee as Registrar and Paying
Agent.
Section 2.7 Holder Lists.
The Trustee shall preserve a list of the names and addresses of Holders
in as current a form as is reasonably practicable. If the Trustee is not the
Registrar, the Company shall cause the Registrar to furnish to the Trustee on
or before June 30 and December 31 of each year during the term of the Notes
and at such other times as the Trustee may request in writing a list
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in such form and as of such date as the Trustee may reasonably require of the
names and addresses of Holders.
Section 2.8 Transfer and Exchange.
Where a Note is presented to the Company or the Registrar with a request
to register a transfer of such Note, the Company shall cause the Registrar to
register the transfer as requested if the requirements for a transfer
pursuant to the Uniform Commercial Code, as enacted in the State of Texas,
are met. Where a Note is presented to the Company or the Registrar with a
request to exchange it for an equal principal amount of Notes of other
denominations, the Company shall cause the Registrar to make the exchange as
requested if the same requirements are met. To permit transfers and
exchanges, the Trustee shall authenticate Notes upon Company Request or upon
request of the Registrar. The Company may charge its expenses to the Holder
for any transfer or exchange other than an exchange pursuant to Section 2.9
or 9.5, and may charge a reasonable fee to the Holder for any change of
address.
Section 2.9 Replacement Notes.
If a Holder claims that a Note has been lost, destroyed or wrongfully
taken, the Company shall issue and the Trustee shall authenticate a
replacement Note if the requirements for the issuance of replacement
securities pursuant to the Uniform Commercial Code, as enacted in the State
of Texas, are met. An indemnity bond must be sufficient in the judgment of
the Company and the Trustee to protect the Company, the Trustee, the Paying
Agent and the Registrar from any loss which any of them may suffer if a Note
is replaced. The Company may charge for its expenses in replacing a Note.
Section 2.10 Temporary Notes.
Until definitive Notes are ready for delivery, the Company may prepare
and the Trustee shall authenticate temporary Notes. Temporary Notes shall be
substantially in the form of definitive Notes but may have variations that
the Company considers appropriate for temporary Notes. Without unreasonable
delay, the Company shall prepare and the Trustee shall authenticate
definitive Notes in exchange for temporary Notes.
Section 2.11 Cancellation.
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar, the Paying Agent and the Company shall forward
to the Trustee any Notes surrendered to them for transfer, exchange or
payment. The Trustee and no one else shall cancel all Notes surrendered for
transfer, exchange, payment or cancellation and shall dispose of cancelled
Notes as the Company directs. The Company may not issue new Notes to replace
Notes it has paid or delivered to the Trustee for cancellation.
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Section 2.12 Defaulted Interest.
If the Company defaults in a payment of interest on the Notes, it shall
pay the defaulted interest and, to the extent permitted by law, interest on
defaulted interest at the rate of 11% per annum. Such interest shall be paid
to Holders of record as of a subsequent date designated as a "Special Record
Date" for such payment. The Trustee shall establish the Special Record Date
if and when funds for the payment of such interest have been received by the
Paying Agent from the Company. At least 15 days before the Special Record
Date, the Trustee shall mail to each Holder a notice that states the Special
Record Date, the payment date for such interest, and the amount of such
interest (including any permitted interest thereon) to be paid.
Section 2.13 Persons Deemed Owners.
Prior to due presentment for registration of transfer of any Note, the
Company, the Trustee, and Paying Agent, the Registrar and any agent of the
Company or of the Trustee may treat the Person in whose name a Note is
registered on the Note Register as the owner of such Note for the purpose of
receiving payments of the principal of and interest on such Note and for all
other purposes whatsoever, whether or not such Note be in default, and
neither the Company, the Trustee, nor any agent of the Company shall be
affected by notice to the contrary.
Section 2.14. Documents Required for Issuance of Series of Notes.
At any time, or from time to time after the execution and delivery of
this Indenture, Notes may be executed by the Company and delivered to the
Trustee for authentication upon original issue, and shall be authenticated by
the Trustee and delivered by it as provided in the Company Order referred to
below, upon receipt by the Trustee of the following:
(a) a Company Order,
(b) a Board Resolution authorizing the execution, authentication and
delivery of Notes, and specifying the series, maturity or (if Notes of such
series are of serial maturities) maturities, and principal amount of such
Notes to be authenticated and delivered,
(c) in case the Notes to be authenticated and delivered are of a series
none of the Notes of which has been previously authenticated by the Trustee,
the Board Resolution by or pursuant to which the terms and the form of the
Notes of such series shall have been approved,
(d) either (i) a certificate or other official document evidencing the
due authorization, approval or consent of any governmental body or bodies at
the time having jurisdiction in the premises, if any, or (ii) an Officers'
Certificate that no authorization, approval or consent of any governmental
body is required, and
(e) an Officers' Certificate stating that the Company is not in default
under this Indenture and that the issuance of the additional Notes applied
for will not result in any breach of any of the terms, conditions or
provisions of, or constitute a default under, the Company's articles of
incorporation or by-laws or any indenture, mortgage, deed of trust or other
agreement or
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instrument to which the Company is a party or by which it is bound, or any
order of any court or administrative agency entered in any proceeding to
which the Company is a party or by which it may be bound or to which it may
be subject; and that all conditions precedent provided for in this Indenture
relating to the authentication and delivery of such Notes have been complied
with.
Any separate request by the Company that the Trustee authenticate Notes,
of a series previously designated, for original issue will be deemed to be a
certification by the Company that all conditions precedent provided for in
this Indenture relating to authentication and delivery of such Notes continue
to have been complied with.
The Trustee shall not be required to authenticate or to cause an
Authenticating Agent to authenticate any Notes if the issue of such Notes
pursuant to this Indenture will affect the Trustee's own rights, duties or
immunities under the Notes and this Indenture or otherwise in a manner which
is not reasonably acceptable to the Trustee or if the Trustee, being advised
by counsel, determines that such action may not lawfully be taken.
ARTICLE THREE
REDEMPTION
Section 3.1 General.
(a) On any Payment Date, the Notes may be called for redemption, in
whole or in part, at the option of the Company at a price equal to 100% of
the unpaid principal amount of such Notes together with accrued and unpaid
interest on the unpaid principal amount thereof to the applicable Redemption
Date (the "Redemption Price") for such Notes. If the Company elects to
redeem the Notes, it shall, not later than 30 days prior to the Payment Date
selected for redemption (the "Redemption Date"), deliver notice of such
election to the Trustee, together with a Company Order directing the Trustee
to effect such redemption. Any such redemption shall be without premium or
penalty.
(b) If the Company wishes to credit Notes it has not previously
delivered to the Trustee for cancellation against the principal amount of
Notes to be redeemed, it shall so notify the Trustee and it shall deliver the
Notes duly endorsed with the notice.
Section 3.2 Notice of Redemption.
(a) At least ten days but not more than 60 days before the Redemption
Date, the Company shall mail a notice of redemption by first-class mail to
each Holder of Notes, with a copy thereof to the Trustee.
(b) The notice shall identify the Notes to be redeemed and shall state:
(i) the Redemption Date;
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(ii) the Redemption Price;
(iii) the name and address of the Paying Agent;
(iv) that the Notes must be delivered to the Paying Agent at the
address stated in the notice for the Holder to receive the
Redemption Price; and
(v) that interest on the Notes ceases to accrue on and after the
Redemption Date.
(c) At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at the Company's expense. Failure to
give notice of redemption, or any defect therein, to any Holder shall not
impair or affect the validity of the redemption of any Note.
Section 3.3 Effect of Notice of Redemption.
Once notice of redemption has been given, the Notes shall be redeemed on
the designated Redemption Date. Upon surrender to the Paying Agent, such
Notes shall be paid at the Redemption Price. Unless the Company shall fail
to deposit the Redemption Price as provided in Section 3.4, no interest shall
accrue on the Notes for any period after the Redemption Date.
Section 3.4 Deposit of Redemption Amount.
Prior to the Redemption Date, the Company shall deposit with the Paying
Agent money sufficient to pay the Redemption Price on the Notes on that date.
Such moneys shall be segregated by the Paying Agent for the purpose of
application to such redemption on the Redemption Date. If such deposit shall
be made, the amount payable on the Notes shall be limited to the Redemption
Price therefor, without any premium or penalty, and no interest shall accrue
on the Notes to be redeemed or the Redemption Price thereof for any period
after the Redemption Date.
ARTICLE FOUR
ACCOUNTS, DISBURSEMENTS AND RELEASES
Section 4.1 Trust Account; Operating Account.
(a) Prior to the initial authentication and delivery of any Notes, the
Trustee shall open, at one or more depository institutions (which may be the
Trustee), a trust account which shall have a sub-account denominated "Trust
Account--Sterling Trust Company, as trustee in respect of Notes" (such sub-
account is hereinafter referred to as the "Trust Account"). The Trust Account
shall be an Eligible Account, and funds in the Trust
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Account shall not be commingled with any other moneys of the Company. The
Company shall also open, at one or more depository institutions, an account
in its own name for use in holding the Company's funds and in paying the
Company's expenditures (the "Operating Account"). The Trust Account and the
Operating Account are sometimes collectively referred to as the "Accounts" or
individually as an "Account". The Company shall give the Trustee at least
five Business Days' written notice of any change in the location of the
Operating Account and any related account identification information.
(b) The Company shall direct or cause to be directed all Obligors to
remit all collections and payments on the Contracts directly to the
Collections Account. The Company agrees that all cash, money orders, checks,
notes, drafts and other items which it otherwise receives and which are
attributable to the Contracts shall be promptly deposited into the
Collections Account. The Company shall likewise deposit or cause to be
deposited in the Collections Account within two Business Days of receipt all
Liquidation Proceeds and Insurance Proceeds.
(c) The Company shall cause the Servicers to transfer to the Operating
Account, at least weekly, all funds (except any minimum sum necessary to
avoid bank service charges) in the Collections Account that are attributable
to the Contracts.
(d) The Company agrees that it shall not draw any funds from the
Operating Account except for an investment, transfer or payment of such funds
in accordance with the provisions of this Section 4.1.
(e) Except as otherwise permitted by this Indenture with respect to
purchases of Contracts and payments of Allowed Expenses and Offering
Expenses, the Company may invest the funds in the Operating Account but only
in Eligible Investments and only if sufficient funds are available in the
Operating Account, through maturations of Eligible Investments or otherwise,
on the Business Day next preceding the next Payment Date to pay the interest
to be paid on such Payment Date on the Notes.
(f) Provided that the Notes have not been declared due and payable
pursuant to Section 6.2, the Company shall have the right to cause the funds
in the Operating Account to be withdrawn or applied, to the extent necessary
and in the amounts required, for the following purposes in the following
order of priority:
FIRST, to the transfer to the Trust Account of the amount that,
together with any amounts held in the Trust Account, is sufficient for the
payment, PRO RATA, of all interest due on the Outstanding Notes on each
Payment Date;
SECOND, to the payment to the Trustee of any unpaid amount due the
Trustee pursuant to Section 7.7;
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THIRD, to the transfer to the Trust Account for the PRO RATA payment
of principal owing on the Notes on any Payment Date occurring on or after
the Principal Repayment Commencement Date; and
FOURTH, except during the continuance of an Event of Default, to
general corporate funds, including for the purchase of Eligible Contracts.
All of the foregoing applications of the funds in the Operating Account that
have higher priority must be fully satisfied before any of the foregoing
applications having lower priority may be satisfied with such funds.
(g) On or prior to the Business Day next preceding each Payment Date
occurring prior to the Principal Repayment Commencement Date, the Company
shall cause to be transferred from the Operating Account to the Trust Account
in immediately available funds an amount which, together with any funds then
held in the Trust Account, is sufficient to pay the accrued interest due on
the Outstanding Notes on such Payment Date. Commencing on or prior to the
Business Day next preceding the Principal Repayment Commencement Date, and on
or prior to the Business Day next preceding each Payment Date occurring
thereafter, the Company shall cause to be transferred from the Operating
Account to the Trust Account an amount which, together with any funds then
held in the Trust Account, is sufficient to pay the accrued interest due, and
principal owing, on the Outstanding Notes on such Payment Date.
(h) During the continuance of an Event of Default, upon the written
request of a Trust Officer from time to time but in any event not less often
than the Business Day next preceding each Payment Date, the Company shall
cause to be transferred from the Operating Account to the Trust Account all
of the funds in the Operating Account, less any amounts due the Trustee under
Section 7.7.
(i) All payments of principal or accrued interest with respect to the
Notes shall be made from amounts held in the Trust Account. All payments to
be made from time to time to the Holders of Notes out of funds in the Trust
Account pursuant to this Indenture shall be made by the Trustee as the Paying
Agent of the Company or by any other Paying Agent appointed by the Company,
subject to Section 5.2. No amounts contained in the Trust Account shall be
paid over to or at the direction of the Company, except as otherwise provided
by the provisions of this Indenture.
(j) So long as no Event of Default shall have occurred and be
continuing, any funds in the Trust Account shall be invested and reinvested
by the Trustee at the Company's direction in one or more Eligible
Investments. All income or other gain from investment of moneys deposited in
the Trust Account shall be deposited therein immediately upon receipt, and
any loss resulting from such investment shall be charged to such Account.
(k) Notwithstanding any other provision of this Indenture, the Company
may elect, in its sole discretion, to deposit the proceeds from the sale of
Notes into the Operating Account.
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Section 4.2 General Provisions Regarding Trust Account
(a) The Company shall not direct the Trustee to make any investment of
any funds in the Trust Account or to sell any investment held in the Trust
Account except under the following terms and conditions: (i) (A) each such
investment shall be made in the name of the Trustee (in its capacity as such)
or its nominee (or, if applicable law provides for perfection of pledges of
an investment not evidenced by a certificate or other instrument through
registration of such pledge on books maintained by or on behalf of the issuer
of such investment, such pledge may be so registered), (B) the Trustee shall
have sole investment control over such investment, the income thereon and the
proceeds thereof, and (C) any instrument evidencing such investment shall be
delivered directly to the Trustee or its agent; and (ii) the proceeds of each
sale of such investment shall be remitted by the purchaser thereof directly
to the Trustee for deposit in the Trust Account.
(b) If any amounts are needed for disbursement from the Trust Account
and sufficient uninvested funds are not available to make such disbursement,
in the absence of a Company Order for the liquidation of investments in an
amount sufficient to provide the required funds, the Trustee may cause to be
sold or otherwise converted to cash a sufficient amount of the investments in
the Trust Account.
(c) The Trustee shall not in any way be held liable by reason of any
insufficiency in the Trust Account resulting from any loss on any Eligible
Investment included therein except that Trustee shall remain liable on
Eligible Investments which are obligations of the Trustee in its commercial
capacity.
(d) All investments of funds in the Trust Account and all sales of
Eligible Investments held in the Trust Account shall, except as otherwise
expressly provided in this Indenture, be made by the Trustee in accordance
with a Company Order. Such Company Order may specify actions (including,
without limitation, that such funds shall not be invested, in which case such
funds shall remain deposited in the Trust Account) or may be a general,
standing order authorizing the Trustee to act within certain general
parameters or to act on written, telegraphic or telephonic instructions of
specified personnel or agents of the Company. In order to insure that the
Trustee can invest funds in the Trust Account or sell any investment in the
Trust Account, the Company Order with respect thereto must be received by the
Trustee no later than 9:00 a.m. on the date specified in the Company Order
for effecting such transaction.
(e) In the event that the Company shall have failed to give investment
directions to the Trustee by 9:00 a.m. Dallas, Texas Time on any Business Day
authorizing the Trustee to invest the funds then in the Trust Account, the
Trustee may invest and reinvest the funds then in the Trust Account to the
fullest extent practicable, in such manner as the Trustee shall from time to
time determine, but only in one or more Eligible Investments. All
investments made pursuant to this subsection shall mature on the next
Business Day following the date of such investment.
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Section 4.3 Reports by Trustee.
The Trustee shall report and account to the Company with respect to the
Trust Account and the identity of the investments included therein on a
monthly basis and more frequently as the Company may from time to time
reasonably request, including accountings of deposits into and payments from
the Trust Account.
ARTICLE FIVE
COVENANTS
Section 5.1 Payment of Principal and Interest.
(a) Interest and any principal payable on any Note shall be paid to the
Person in whose name such Note (or one or more predecessor Notes) is
registered at the close of business on the Record Date for the applicable
Payment Date by check mailed to such Person's address as it appears in the
Note Register on such Record Date, except for the final payment of principal
of and interest on a Note, which shall be payable only upon presentation and
surrender as provided in subsection (b) of this Section 5.1. For payments
made on any Note prior to the final payment of principal and interest, such
Note need not be submitted for notation of payment. Checks returned
undelivered will be held by the Paying Agent for payment to the Person
entitled thereto, subject to the terms of Section 5.2. Payments made on any
Payment Date shall be binding upon all future Holders of such Notes and of
any Notes issued upon the registration of transfer thereof or in exchange
therefor or in lieu thereof, whether or not noted thereon.
(b) Each installment of interest on any series of the Notes is due and
payable as specified on the form of Note set forth in Section 2.2. Any
installment of interest which is not paid when and as due shall bear interest
at the rate of 11% per annum from the date due to the date of payment
thereof. Unless such Note becomes due and payable at an earlier date by
declaration of acceleration, call for redemption or otherwise, the principal
of each Note of any series shall be due and payable as provided in the Board
Resolution designating such series, and any remaining unpaid principal shall
be due and payable at the Stated Maturity for such series; provided, however,
the final payment of principal of and interest on each Note (or the
Redemption Price thereof if the Notes called for redemption) shall be payable
only upon presentation and surrender thereof to the Paying Agent. The
Trustee shall notify the Person in whose name a Note is registered at the
Record Date for the Payment Date next preceding the Payment Date on which the
Company expects that the final payment of principal and interest on such Note
will be paid. Such notice shall be mailed no earlier than the 60th day, and
no later than the 20th day, prior to such Payment Date and shall specify that
such final payment will be payable only upon presentation and surrender of
such Notes and shall specify the name and address of the Paying Agent where
such Notes may be presented and surrendered for payment of such final
payment. Notices in connection with redemptions of Notes shall be mailed to
Holders as provided in Section 3.2.
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(c) All computations of interest due with respect to any Notes shall be
based on a 360-day year consisting of 12 months of 30 days each and on the
amount of principal outstanding on the Notes from time to time.
(d) On or prior to each Report Date, the Company shall transmit to the
Trustee a monthly report which shall set forth, with respect to the next
three succeeding Payment Dates, the amount of interest and any principal
payable on such Payment Dates on each Outstanding Note. Computations of
interest by the Company shall be made in conformity with the requirements of
this Indenture. Notwithstanding the foregoing, the Trustee may rely on its
own calculations for purposes of paying interest on the Notes.
(e) The Company at any time may terminate, by written notice to the
Trustee, its obligation to pay an installment of interest if it deposits with
the Trustee, or the Trustee holds in the Trust Account as of the related
Payment Date, money sufficient to pay the installment when due.
(f) Subject to the foregoing provisions of this Section 5.1, each Note
delivered under this Indenture upon registration of transfer of or in
exchange for or in lieu of any other Note shall carry the rights to unpaid
principal and interest, if any, that were carried by such other Note.
Section 5.2 Money for Note Payments to be Held in Trust.
(a) Whenever the Company shall have a Paying Agent other than the
Trustee, it will, by Company Order delivered on or before the Business Day
next preceding each Payment Date, direct the Trustee to deposit with such
Paying Agent on or before such Payment Date a sum sufficient to pay the
amounts then becoming due, and the Trustee shall, to the extent it has
received such amount from the Company, deposit such amount with the Paying
Agent as directed. Such sum shall be held in trust for the benefit of the
Persons entitled to such payments.
(b) The Company will cause each Paying Agent other than the Trustee to
execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee, subject to the provisions of this Section, that
such Paying Agent, in acting as Paying Agent, will:
(i) hold all sums held by it for the payment of amounts due with
respect to the Notes in trust for the benefit of the Persons entitled
thereto until such sums shall be paid to such Persons or otherwise disposed
of as herein provided, and pay such sums to such Persons as herein
provided;
(ii) give the Trustee notice of any default by the Company (or any
other obligor upon the Notes) in the making of any payment required to be
made with respect to the Notes; and
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(iii) at any time during the continuance of any such default, upon
the written request of the Trustee, forthwith pay to the Trustee all sums
so held in trust by such Paying Agent.
(c) For the purpose of obtaining the satisfaction and discharge of this
Indenture or for any other purpose, the Company may at any time direct by
Company Order any Paying Agent to pay to the Trustee all sums held in trust
by such Paying Agent, such sums to be held by the Trustee upon the same
trusts as those upon which such sums were held by such Paying Agent; and,
upon such payment by any Paying Agent to the Trustee, such Paying Agent shall
be released from all further liability with respect to such money.
Section 5.3 Payment of Taxes and Other Claims.
The Company will pay or discharge or cause to be paid or discharged
before the same shall become delinquent (1) all taxes, assessments and
governmental charges levied or imposed upon the Company, and (2) all lawful
claims for labor, materials and supplies which, if unpaid, might by law
become a lien upon the property of the Company; provided, however, that the
Company shall not be required to pay or discharge or cause to be paid or
discharged any such tax, assessment, charge or claim whose amount,
applicability or validity is being contested in good faith by appropriate
proceedings; and provided further, that the Company shall not be required to
cause to be paid or discharged any such tax, assessment, charge or claim if
the Company shall determine such payment is not advantageous to the conduct
of the business of the Company and that the failure so to pay or discharge is
not disadvantageous in any material respect to the Holders.
Section 5.4 Limitation on Investment Activities.
The Company will not register as, or conduct its business or take any
action which shall cause it to become, or to be deemed to be, an "investment
company" as defined under the provisions of and subject to registration under
the Investment Company Act of 1940, as amended.
Section 5.5 Compliance Certificates.
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(a) The Company will deliver to the Trustee an Officer's Certificate
stating whether or not the signee knows of any default by the Company in
performing its covenants under this Indenture within 15 days of a written
request by the Trustee. The Company will perform, execute, acknowledge and
deliver all such further acts, instruments, and assurances in this regard as
may reasonably be requested by the Trustee. The certificates required under
this Section shall comply with Section 11.4(b).
(b) The Company will deliver to the Trustee within 15 days after the
occurrence thereof written notice of the occurrence of any Event of Default.
Section 5.6 Reporting.
(a) Commencing with fiscal year ending December 31, 1997, the Company
shall file with the Trustee copies of any annual reports and other
information, documents, and statements (or copies of such portions of any of
the foregoing as the SEC may by rules and regulations prescribe) which the
Company may be required to file with the SEC pursuant to Section 13 or 15(d)
of the Securities Exchange Act, which filing shall be made within 15 days
after the Company makes such filing with the SEC. The Company also shall
comply with the other provisions of TIA Section 314(a).
(b) If the Company is not subject to Section 13 or 15(d) of the Exchange
Act, then the Company shall file with the Trustee such of the supplementary
and periodic information, documents and reports which would be required under
Section 13 of the Exchange Act if the Notes were listed or registered on a
national securities exchange, which filing shall be made within 15 days after
the Company would otherwise have been required to make such filing with the
SEC.
(c) To the extent reasonably requested by the Trustee, the Company shall
provide to the Trustee information in the Company's possession to assist the
Trustee in complying with its reporting duties specified in Section 7.6.
(d) On or before 120 days after the end of each fiscal year of the
Company, the Company shall deliver to the Trustee a report, prepared by a
firm of independent accountants selected by the Company, that they have
examined the balance sheet of the Company as of the last day of said fiscal
year and the related statements of operations, retained earnings and changes
in financial position for such fiscal year and have issued an opinion
thereon, specifying the date thereof.
Section 5.7 Performance of Obligations; Servicing Agreement.
(a) The Company will punctually perform and observe all of its
obligations and agreements contained in the Servicing Agreement.
(b) The Company will not take any action or permit any action to be
taken by others which would release any Person from any of such Person's
covenants or obligations under any
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of the Contract Documents, or which would result in the amendment,
hypothecation, subordination, termination or discharge of, or impair the
validity or effectiveness of, any of the Contract Documents or any such
instrument, except as expressly provided in this Indenture, the Servicing
Agreement or such Contract Document or other instrument.
Section 5.8 Negative Covenants.
The Company will not:
(i) engage in any business or activity other than in connection with
the purchase, collection and servicing of retail installment sales or lease
contracts and consumer obligations secured by motor vehicles, the
repossession and resale of motor vehicles, the dealing in all respects with
such Contracts and obligations and their motor vehicle collateral, and the
raising of capital, both debt and equity, and any other incidental
businesses or activities;
(ii) create, incur, assume or in any manner become liable in
respect of any indebtedness other than (1) the Notes, (2) any Allowed
Expenses, and (3) any other amounts incurred in the ordinary course of
the Company's business;
(iii) dissolve or liquidate in whole or in part;
(iv) merge or consolidate with any corporation, partnership or other
entity other than an Affiliate of the Company. Any such merger or
consolidation with an Affiliate of the Company shall be subject to the
following conditions:
(1) the surviving or resulting entity shall be a corporation
organized under the laws of the United States or any state thereof
whose business and activities shall be limited as set forth in
paragraph (i) above,
(2) the surviving or resulting corporation (if other than the
Company) shall expressly assume by an indenture supplemental hereto
all of the Company's obligations hereunder,
(3) the surviving or resulting corporation shall have the same
fiscal year as the Company, and
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(4) immediately after consummation of the merger or
consolidation no Event of Default shall exist with respect the Notes;
(v) (to the extent that it may lawfully so covenant and to the extent
that such covenant is lawfully enforceable) institute any bankruptcy,
insolvency or receivership proceedings with respect to itself or its
properties; or
(vi) permit the validity or effectiveness of this Indenture to be
impaired, or permit any Person to be released from any covenants or
obligations under this Indenture, except as may be expressly permitted
hereby.
ARTICLE SIX
DEFAULTS AND REMEDIES
Section 6.1 Events of Default.
An "Event of Default" shall occur if:
(1) the Company defaults in the payment of interest on any Note when the
same becomes due and payable and the default continues for a period of
30 days;
(2) the Company defaults in the payment of the principal of any Note when
the same becomes due and payable and the default continues for a
period of 30 days;
(3) the Company fails to comply with any of its other agreements in the
Notes or this Indenture (other than a covenant or warranty, a default
in the observance of which is elsewhere in this section specifically
dealt with) and the default continues for a period of 30 days after
receipt by the Company of written notice of such default from the
Trustee specifying such default and requiring it to be remedied
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and stating that such notice is a "Notice of Default" hereunder or
after receipt by the Company and the Trustee of such notice from the
Holders of Notes representing at least 40% of the aggregate principal
amount of the Notes which are then Outstanding Notes;
(4) if any representation or warranty of the Company made in this
Indenture or in any certificate or other writing delivered pursuant
hereto or in connection herewith shall prove to be incorrect in any
material respect as of the time when the same shall have been made
and, within 30 days after receipt by the Company of written notice
from the Trustee specifying such inaccuracy and requiring it to be
remedied and stating that such notice is a "Notice of Default"
hereunder or after receipt by the Company and the Trustee of such
notice from the Holders of Notes representing at least 40% of the
aggregate principal amount of the Notes which are then Outstanding
Notes, the circumstance or condition in respect of which such
representation or warranty was incorrect shall not have been
eliminated or otherwise cured;
(5) if the validity or effectiveness of this Indenture shall be impaired,
or this Indenture shall be amended, hypothecated, subordinated,
terminated or discharged, or any Person shall be released from any
covenants or obligations under this Indenture or the Servicing
Agreement, in each case except as may be expressly permitted hereby
and thereby;
(6) the Company, pursuant to or within the meaning of title 11, U.S. Code
or any similar Federal or State law for the relief of debtors (the
"Bankruptcy Law"):
(A) commences a voluntary case;
(B) consents to the entry of an order for relief against it in an
involuntary case;
(C) consents to the appointment of a receiver, trustee, assignee,
liquidator or similar official of it or for all or substantially
all of its property; or
(D) makes a general assignment for the benefit of its creditors; or
(7) a court of competent jurisdiction enters an order or decree, which
remains unstayed and in effect for 60 days, under any Bankruptcy Law
against the Company:
(A) for relief in an involuntary case;
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(B) appointing a receiver, trustee, assignee, liquidator or similar
official for all or substantially all of its property; or
(C) ordering its liquidation.
Section 6.2 Acceleration.
If an Event of Default occurs and is continuing, the Trustee may, and at
the direction of the Holders of Notes representing at least 40% of the
aggregate principal amount of Notes which are then Outstanding Notes shall,
by written notice to the Company, declare the principal amount of all the
Notes together with accrued interest thereon to be due and payable
immediately. The Majority Holders may, by written notice to the Trustee,
rescind an acceleration and its consequences.
Section 6.3 Remedies.
(a) If an Event of Default shall have occurred and be continuing, the
Trustee may, subject to Section 6.2, make demand and institute judicial
proceedings in equity or law for the collection of all amounts then payable
on the Notes, or under this Indenture, whether by declaration or otherwise,
enforce all judgments obtained, and collect from the Company moneys adjudged
due.
(b) The Trustee may maintain a proceeding even if it does not possess
any of the Notes or does not produce any of them in the proceedings. A delay
or omission by the Trustee or any Holder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or an acquiescence in the Event of Default. No remedy
is exclusive of any other remedy. All available remedies are cumulative.
(c) Upon the institution of legal proceedings by the Trustee pursuant to
subsection (a) above, then, in addition to any and all other amounts due
hereunder, the Company shall be liable for any and all costs and expenses of
collection, including the reasonable expenses, disbursements and advances of
the Trustee, its agents and counsel.
Section 6.4 Waiver of Past Defaults.
Subject to Section 9.2, the Majority Holders may, by written notice to
the Trustee, waive a continuing Event of Default and its consequences. When
an Event of Default is waived in accordance herewith, it is cured and shall
no longer be considered continuing.
Section 6.5 Control by Majority.
The Majority Holders may direct the time, method and place of conducting
any proceeding for any remedy available to the Trustee or exercising any
trust or power conferred on it. However, the Trustee may refuse to follow
any direction that conflicts with law or this
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Indenture, that is unduly prejudicial to the rights of Holders not joining in
such direction, or that would involve the Trustee in personal liability.
Section 6.6 Limitation on Suits.
(a) A Holder may not pursue any remedy with respect to this Indenture or
the Notes unless:
(i) an Event of Default has occurred and is continuing, and the
Holder gives to the Trustee written notice of such continuing Event of
Default;
(ii) the Majority Holders have made a written request to the Trustee
to pursue the remedy;
(iii) such Holder or Holders offer to the Trustee indemnity
satisfactory to the Trustee against any loss, liability or expenses;
(iv) the Trustee does not comply with the request within 60 days after
receipt of the request;
(v) the Event of Default has not been waived or cured; and
(vi) the Trustee has received no contrary direction from the Majority
Holders during such 60-day period.
(b) A Holder may not use this Indenture to prejudice the rights of another
Holder or to obtain a preference or priority over another Holder.
Section 6.7 Rights of Holders to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of any
Holder of a Note to receive payment of principal and interest on the Note, on or
after the respective due dates, or to bring suit for the enforcement of any such
payment on or after such respective dates, shall not be impaired or affected
without the consent of the Holder.
Section 6.8 Collection Suit by Trustee.
If an Event of Default specified in Section 6.1(1) or (2) occurs and is
continuing, the Trustee may recover judgment in its own name and as trustee of
an express trust against the Company for the whole amount of principal and
interest remaining unpaid.
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Section 6.9 Trustee may File Proofs of Claim.
(a) The Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee and the Holders allowed in any judicial proceedings relative to the
Company, its creditors or its property.
(b) Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan
of reorganization, arrangement, adjustment or composition affecting the Notes
or the rights of any Holder thereof, or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding.
Section 6.10 Priorities.
If the Trustee collects any money pursuant to this Article, it shall pay
out the money in the following order:
FIRST, to the Trustee for the amounts due under Section 7.7;
SECOND, to Holders for amounts due and unpaid on the Notes for
principal and interest, ratably, without preference or priority of any
kind, according to the amounts due and payable on the Notes for principal
and interest, respectively;
THIRD, to TFC for any unpaid Allowed Expenses incurred by it with
respect to the Contracts or otherwise on behalf of the Company; and
FOURTH, to the Company.
The Trustee may fix a record date and payment date for any payment to Holders.
Section 6.11 Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted
by it as Trustee, a court in its discretion may require the filing by any
party litigant in the suit of an undertaking to pay the costs of the suit,
and the court in its discretion may assess reasonable costs, including
reasonable attorneys' fees, against any party litigant in the suit, having
due regard to the merits and good faith of the claims or defenses made by the
party litigant. This Section does not apply to a suit by the Trustee, or a
suit by the Majority Holders.
Section 6.12 Stay, Extension or Usury Laws.
The Company agrees (to the extent that it may lawfully do so) that it
will not at any time insist upon, or plead, or in any manner whatsoever
claim, and will resist any and all efforts to be compelled to take the
benefits or advantage of any stay or extension law or any usury or other
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law, wherever enacted, now or at any time hereafter in force, which would
prohibit or forgive the Company from paying all or any portion of the
principal of and/or interest on the Notes as contemplated herein, or which
may affect the covenants or performance of this Indenture, and the Company
(to the extent that it may lawfully do so) hereby expressly waives all
benefit or advantage of any such law and agrees that it will not hinder,
delay or impede the execution of any power herein granted to the Trustee, but
will suffer and permit the execution of any such power as though no such law
has been enacted.
ARTICLE SEVEN
TRUSTEE
Section 7.1 Duties of Trustee.
(a) If an Event of Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this Indenture
and use the same degree of care and skill in the exercise of such rights and
powers as a prudent man would exercise or use under the circumstances in the
conduct of his own affairs.
(b) Except during the continuance of an Event of Default known to the
Trustee:
(i) the Trustee need perform only those duties that are specifically
set forth in this Indenture and no implied covenants or obligations shall
be read into this Indenture against the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture. However,
the Trustee shall examine the certificates and opinions to determine
whether or not they conform to the requirements of this Indenture.
(c) The Trustee may not be relieved from liability for its own negligent
action, its own negligent failure to act, or its own willful misconduct,
except that:
(i) this paragraph does not limit the effect of paragraph (b) of this
Section;
(ii) the Trustee shall not be liable for any error of judgment made in
good faith by a Trust Officer, unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts;
(iii) the Trustee shall not be liable with respect to any action
it takes or omits to take in good faith in accordance with a written
direction received by it from the Majority Holders relating to the time,
method, and place of conducting any proceeding
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for any remedy available to the Trustee, or exercising any trust or power
conferred upon the Trustee, under this Indenture; and
(iv) the Trustee shall not be required to expend or risk its own funds
or otherwise incur any financial liability in the performance of any of its
duties hereunder, or in the exercise of any of its rights or powers, if it
shall have reasonable grounds for believing that repayment of such funds or
adequate indemnity against such risk or liability is not reasonably assured
to it.
(d) Each provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b) and (c) of this Section.
(e) The Trustee shall not be liable for interest on any money received
by it except as the Trustee may agree with the Company. Money held in trust
by the Trustee need not be segregated from other funds except to the extent
required by law.
(f) The Trustee shall not be liable for any action or omission taken by
or not taken by a Servicer or TFC of any kind or nature.
Section 7.2 Rights of Trustee.
(a) The Trustee may rely and shall be protected in acting or refraining
from acting upon any document reasonably believed by it to be genuine and to
have been signed or presented by the proper Person. The Trustee need not
investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require an
Officer's Certificate or an Opinion of Counsel or both. The Trustee shall
not be liable for any action it takes or omits to take in reliance on such
Certificate or Opinion, in the absence of bad faith on its part.
(c) The Trustee may act through agents and shall not be responsible for
the misconduct or negligence of any agent appointed with due care.
(d) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction
of any of the Holders of Notes, unless such Holders shall have offered to the
Trustee reasonable security or indemnity against the costs, expenses and
liabilities that might be incurred by it in compliance with such request or
direction.
(e) The Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or
document, but the Trustee, in its discretion, may make such further inquiry
or investigation into such facts or matters at it may see fit.
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(f) The permissive right of the Trustee to do things enumerated in this
Indenture shall not be construed as a duty.
Section 7.3 Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the owner
or pledgee of Notes and may otherwise deal with the Company or its Affiliates
with the same rights it would have if it were not Trustee. Any Paying Agent,
Registrar or co-registrar may do the same with like rights. However, the
Trustee must comply with Sections 7.10 and 7.11.
Section 7.4 Trustee's Disclaimer.
The Trustee shall not be responsible for and makes no representation as
to the validity or adequacy of this Indenture or the Notes. It shall not be
accountable for the Company's use of the proceeds from the sale of the Notes
and shall not be responsible for any statement (i) in the Notes, other than
its certificate of authentication, or (ii) in any prospectus used in the sale
of the Notes, other than statements provided in writing by the Trustee for
use in such prospectus.
Section 7.5 Notice of Default.
If an Event of Default occurs and is continuing and if it is known to the
Trustee, the Trustee shall mail to each Holder notice of the Event of Default
within 90 days after it obtains actual knowledge thereof. Except in the case
of an Event of Default resulting from the failure to pay principal or
interest on any Note, the Trustee may withhold the notice if and so long as
the Board of Directors, the executive committee or a trust committee of the
directors and/or Responsible Officers of the Trustee in good faith determines
that withholding notice is in the interests of Holders.
Section 7.6 Reports by Trustee to Holders.
(a) Within 60 days after each December 31 beginning with December 31,
1997, the Trustee shall, to the extent required by TIA Section 313(a), mail
to each Holder a brief report dated as of such December 31 that complies with
TIA Section 313(a). The Trustee shall also, to the extent required by TIA
Section 313(b), comply with TIA Section 313(b)(1) and (2).
(b) If this Indenture is qualified with the SEC under the TIA, a copy of
each report at the time of its mailing to the Holders shall be filed with the
SEC and each national securities exchange on which the Notes are listed, to the
extent required by the TIA. The Company shall notify the Trustee if and when
the Notes are listed on any national securities exchange (as defined in the
Exchange Act) or quoted on the National Association of Securities Dealers
Automated Quotation system.
(c) Within 60 days after each December 31 beginning with December 31,
1998, the Trustee shall provide a report to the Noteholders which indicates
whether the Trustee has fulfilled its obligations under this Indenture and
whether there have been any known uncured defaults hereunder.
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Section 7.7 Compensation and Indemnity.
(a) (i) The Company shall pay to the Trustee from time to time as
compensation for its services the amounts set forth on the Trustee's Fee
Schedule attached hereto as EXHIBIT B, as may be agreed upon from time to
time by the Trustee and the Company. In addition, the Company shall
reimburse the Trustee upon request for all reasonable out-of-pocket
expenses incurred by it, as set forth in EXHIBIT B. Such expenses may
include the reasonable compensation and expenses of the Trustee's agents
and counsel.
(ii) The Company shall indemnify and hold harmless the Trustee and
its successors and their respective officers, directors, employees, agents
and attorneys against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, claims, costs (including the
costs and expenses of defending itself), expenses and disbursements of any
kind or nature whatsoever which may be imposed on, incurred by or asserted
against the Trustee and such other Persons, in connection with the
performance by the Trustee of its duties hereunder. The Trustee and such
other Persons shall notify the Company promptly of any claim for which it
or they may seek indemnity, but failure to so notify the Company shall not
relieve the Company of their obligations hereunder. The Company shall not
be required to pay for any settlement made without its consent, such
consent not to be unreasonably withheld. The Company shall not be required
to reimburse any expense or indemnify against any loss or liability
incurred by the Trustee or any such other Person through the Trustee's or
such other Person's gross negligence, bad faith, breach of contract or
misconduct.
(b) The obligations set forth in this Section 7.7 shall survive the
satisfaction and discharge of this Indenture.
(c) When the Trustee incurs expenses or renders services after the
occurrence of an Event of Default specified in Section 6.1(6) or (7), the
expenses and the compensation for the services are intended to constitute
expenses of administration under any Bankruptcy Law.
Section 7.8 Replacement of Trustee.
(a) The Trustee may resign at any time upon 30 days prior written notice
to the Company. The Majority Holders may remove the Trustee at any time upon
30 days prior written notice to the removed Trustee and may appoint a
successor Trustee with the Company's consent. The Company shall remove the
Trustee if:
(i) the Trustee fails to comply with Section 7.10;
(ii) the Trustee is adjudged a bankrupt or an insolvent; or
(iii) a receiver or other public officer takes charge of the
Trustee or its property.
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(b) If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a
successor Trustee. The resignation or removal of the Trustee shall not be
effective until a successor Trustee has been appointed and has assumed the
responsibilities of Trustee hereunder.
(c) A successor Trustee shall deliver a written acceptance of this
appointment to the retiring Trustee and to the Company. Immediately
thereafter, the retiring Trustee shall transfer all property held by it as
Trustee to the successor Trustee. Upon delivery of such written acceptance,
the resignation or removal of the retiring Trustee shall become effective and
the retiring Trustee shall cease to be Trustee hereunder and shall be
discharged from any responsibility or obligations for actions taken by any
successor Trustee. The successor Trustee shall have all the rights, powers
and duties of the Trustee under this Indenture. A successor Trustee shall
mail notice of its succession to each Holder.
(d) If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or
the Majority Holders may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
(e) If the Trustee fails to comply with Section 7.10, any Holder who has
been a bona fide Holder for at least six months may petition any court of
competent jurisdiction for the removal of the Trustee and the appointment of
a successor Trustee.
Section 7.9 Successor Trustee by Merger, etc.
If the Trustee consolidates with, merges or converts into, or transfers
all or substantially all of its corporate trust assets to, another Person,
the resulting, surviving or transferee Person without any further act shall
be the successor Trustee.
Section 7.10 Eligibility; Disqualification.
This Indenture shall always have a Trustee who satisfies the requirements
of TIA Section 310(a)(1) and (5). The Trustee shall have a combined capital
and surplus of at least $1 million as set forth in its most recent published
annual report of condition. The Trustee shall comply with TIA Section 310(b).
Section 7.11 Preferential Collection of Claims Against Company.
The Trustee shall comply with TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b). A Trustee who has resigned or been
removed shall be subject to TIA Section 311(a) to the extent indicated.
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Section 7.12 Withholding Taxes.
Whenever it is acting as a Paying Agent for the Notes, the Trustee shall
comply with all requirements of the Internal Revenue Code of 1986, as amended
(or any successor or amendatory statutes), and all regulations thereunder,
with respect to the withholding from any payments made on such Notes of any
withholding taxes imposed thereon and with respect to any reporting
requirements in connection therewith.
ARTICLE EIGHT
DISCHARGE OF INDENTURE
Section 8.1 Satisfaction and Discharge of Indenture.
This Indenture shall cease to be of further effect, except as to
surviving rights of transfer or exchange of Notes herein expressly provided
for, and the Trustee, on demand of and at the expense of the Company, shall
execute proper instruments acknowledging satisfaction and discharge of this
Indenture, when
(1) either
(A) all Notes theretofore authenticated and delivered (other than
Notes which have been destroyed, lost or stolen and which have been
replaced or paid as provided in Section 2.9) have been delivered to the
Trustee for cancellation; or
(B) all such Notes not theretofore delivered to the Trustee for
cancellation
(i) have become due and payable, or
(ii) will become due and payable at their Stated Maturity within
one year, or
(iii) are to be called for redemption within one year under
arrangements satisfactory to the Trustee for the giving of notice of
redemption by the Trustee in the name, and at the expense, of the
Company,
and the Company, in the case of (i), (ii) or (iii) above, has deposited or
caused to be deposited with the Trustee as trust funds in trust for such
purpose an amount sufficient to pay and discharge the entire indebtedness
on such Notes not theretofore delivered to the Trustee for cancellation,
the principal at Stated Maturity of such Notes, or the applicable
Redemption Price with respect thereto upon redemption;
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(2) the Company has paid or caused to be paid all other sums payable
hereunder by the Company; and
(3) the Company has delivered to the Trustee an Officer's Certificate
and an Opinion of Counsel, each stating that all conditions precedent herein
provided for relating to the satisfaction and discharge of this Indenture
have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company under Sections 7.7 and 8.3 shall survive.
Section 8.2 Application of Trust Money.
All money deposited with the Trustee pursuant to Section 8.1 shall be
held in trust and applied by it, in accordance with the provisions of the
Notes and this Indenture, to the payment, either directly or through any
Paying Agent as the Trustee shall be directed by Company Order, to the
Persons entitled thereto, of the principal at Stated Maturity, or the
Redemption Price, of the Notes for whose payment such money has been
deposited with the Trustee; but such money need not be segregated from other
funds except to the extent required by law.
Section 8.3 Repayment to Company.
The Trustee and the Paying Agent shall promptly pay to the Company upon
request any money or securities held by them at any time in excess of the
amounts needed to pay and discharge the Notes in full. The Trustee and the
Paying Agent shall pay the Company upon request for any money or securities
held by them for the payment of principal or interest that remains unclaimed
for two years. After such payment to the Company, Holders entitled to such
funds must look to the Company for the payment of such unclaimed principal or
interest.
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
Section 9.1 Without Consent of Holders.
(a) The Company and the Trustee may amend or supplement this Indenture
or the Notes without notice to or consent of any Holder:
(i) to cure any ambiguity, defect or inconsistency in this Indenture
or the Notes;
(ii) to effect a merger or consolidation in conformance with Section
5.8(iii);
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(iii) to provide for uncertificated Notes in addition to or in
place of certificated Notes;
(iv) to make any change that does not materially adversely affect the
rights of any Holder; or
(v) to modify or add to the provisions of this Indenture to the
extent necessary to qualify it under the TIA or under any similar federal
statute hereafter enacted.
(b) The Trustee may waive compliance by the Company with any provisions
of this Indenture or the Notes without notice to or consent of any Holder if
the waiver does not materially adversely affect the rights of any Holder.
Section 9.2 With Consent of Holders.
(a) The Company and the Trustee may amend or supplement this Indenture
or the Notes without notice to any Holder but with the written consent of the
Majority Holders. The Majority Holders may waive compliance by the Company
with any provision of this Indenture or the Notes without notice to any
Holder. However, without the consent of each Holder adversely affected, an
amendment, supplement or waiver, including a waiver pursuant to Section 6.4,
may not:
(i) reduce the amount of Notes whose Holders must consent to an
amendment, supplement or waiver;
(ii) reduce the rate of or extend the time for payment of interest on
any Note;
(iii) reduce the principal of or extend the Stated Maturity of any
Note; or
(iv) make any Note payable in money other than that stated in the
Note.
(b) After an amendment under this Section becomes effective, the Company
shall mail to Holders a notice briefly describing the amendment. The Trustee
may in its discretion determine whether or not any Notes would be adversely
affected, materially or otherwise, by any supplemental indenture and any such
determination shall be conclusive upon the Holders of all Notes, whether
theretofore or thereafter authenticated and delivered hereunder. The Trustee
shall not be liable for any such determination made in good faith.
Section 9.3 Compliance with Trust Indenture Act.
Every amendment to or supplement of this Indenture or the Notes shall
comply with the TIA as then in effect so long as this Indenture shall then be
qualified under the TIA.
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Section 9.4 Revocation and Effect of Consents.
(a) A consent to an amendment, supplement or waiver by a Holder shall
bind the Holder and every subsequent Holder of a Note or portion of a Note
that evidences the same debt as the consenting Holder's Note, even if
notation of the consent is not made on any Note. However, any such Holder or
subsequent Holder may revoke the consent as to such Holder's Note or portion
of a Note. The Trustee must receive the notice of revocation before the date
the amendment, supplement or waiver becomes effective.
(b) After an amendment, supplement or waiver becomes effective, it shall
bind every Holder unless it makes a change described in clause (ii), (iii),
(iv) or (v) of Section 9.2(a). In that case the amendment, supplement or
waiver shall bind each Holder who has consented to it and every subsequent
Holder of a Note or portion of a Note that evidences the same debt as the
consenting Holder's Note.
Section 9.5 Notation on or Exchange of Notes.
If an amendment, supplement or waiver changes the terms of a Note, the
Trustee may require the Holder to deliver it to the Trustee. The Trustee may
place an appropriate notation on the Note concerning the changed terms and
return it to the Holder. Alternatively, if the Company or the Trustee so
determines, the Company in exchange for the Note shall issue, and the Trustee
shall authenticate, a new Note that reflects the changed terms.
Section 9.6 Trustee to Sign Amendments, etc.
The Trustee shall sign any amendment, supplement or waiver authorized
pursuant to this Article if the amendment, supplement or waiver does not
adversely affect the rights of the Trustee. If it does, the Trustee may but
need not sign it. The Company may not sign an amendment or supplement until
such amendment or supplement is approved by the Chairman of the Board,
President or any Vice President of the Company or any other officer of the
Company customarily performing functions similar to those performed by any of
the above designated officers, and such approval shall evidence the Company's
determination that such amendment, supplement or waiver is authorized
pursuant to this Article.
ARTICLE TEN
MEETINGS OF HOLDERS
Section 10.1 Purposes for Which Meetings may be Called.
A meeting of Holders may be called for the following purposes:
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(a) to give any notice to the Company or to the Trustee, or to give any
direction to the Trustee, or to waive or to consent to the waiving of any
Event of Default hereunder and its consequences;
(b) to remove the Trustee, appoint a successor Trustee or apply to a
court for a successor Trustee;
(c) to consent to the execution of a supplemental indenture; or
(d) to take any other action (i) authorized to be taken by or on behalf
of the Holders of any specified aggregate principal amount of the Notes under
this Indenture, or authorized or permitted by law, or (ii) which the Trustee
deems necessary or appropriate in connection with the administration of the
Indenture.
Section 10.2 Manner of Calling Meetings.
(a) The Trustee may call a meeting of Holders to take any action
specified in Section 10.1. Notice setting forth the time and place of, and
the action proposed to be taken at, such meeting shall be mailed by the
Trustee to the Company and to the Holders not less than ten or more than 60
days prior to the date fixed for the meeting.
(b) Any meeting shall be valid without notice if the Holders of all
Notes are present in person or by proxy, or if notice is waived before or
after the meeting by the Holders of all Notes, and if the Company and the
Trustee are either present and not objected to holding the meeting without
notice or have, before or after the meeting, waived notice.
Section 10.3 Call of Meetings by Company or Holders.
In case at any time the Company or the Holders of not less than 10% in
aggregate principal amount of the Outstanding Notes shall have requested in
writing that the Trustee call a meeting of Holders to take any action
specified in Section 10.1, and the Trustee shall not have mailed the notice
of such meeting within 20 days after receipt of such request, then the
Company or the Holders of Notes in the amount above specified may determine
the time and place for such meeting and may call such meeting by mailing
notice thereof.
Section 10.4 Who may Attend and Vote at Meetings.
To be entitled to vote at any meetings of Holders, a person shall (a) be
a Holder, or (b) be a person appointed by an instrument in writing as proxy
for a Holder. The only persons who shall be entitled to be present or to
speak at any meeting of Holders shall be the persons entitled to vote at such
meeting and their counsel and any representatives of the Trustee and the
Company and their counsel.
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Section 10.5 Regulations may be Made by Trustee; Conduct of the Meeting;
Voting Rights.
(a) The Trustee may make such reasonable regulations as it may deem
advisable for any meeting of Holders, to prove the registered holding of
Notes, the appointment of proxies, and other evidence of the right to vote,
to fix a record date and to provide for such other matters concerning the
conduct of the meeting as it shall deem appropriate.
(b) At any meeting each Holder or proxy thereof shall be entitled to one
vote for each $1,000 principal amount of Notes registered in such Holder's
name; provided, however, that the Company shall not be entitled to vote with
respect to any Notes held of record by it. At any meeting of Holders, the
presence of persons holding or representing any number of Notes shall be
sufficient for a quorum.
Section 10.6 Exercise of Rights of Trustee or Holders may not be Hindered or
Delayed by Call of Meeting.
Nothing in this Article shall be deemed or construed to authorize or
permit, by reason of any call of a meeting of Holders or any rights expressly
or impliedly conferred hereunder to make such call, any hindrance or delay in
the exercise of any rights conferred upon or reserved to the Trustee or to
the Holders by this Indenture or the Notes.
Section 10.7 Evidence of Actions by Holders.
Whenever the Holders of a specified percentage in aggregate principal
amount of the Notes may take any action, the fact that the Holders of such
percentage have acted may be evidenced by (a) instruments of similar tenor
executed by Holders in person or by attorney or written proxy, or (b) the
Holders voting in favor thereof at any meeting of Holders called and held in
accordance with the provisions of this Article, or (c) by a combination
thereof. The Trustee may require proof of any matter concerning the execution
of any instrument by a Holder or the Holder's attorney or proxy as it shall
deem necessary.
ARTICLE ELEVEN
MISCELLANEOUS
Section 11.1 Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies, or conflicts with
the duties imposed on any Person by Sections 310 through 317, inclusive, of
the TIA, the duties imposed under such Sections of the TIA shall control.
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Section 11.2 Notices.
(a) Any notice or communication shall be sufficiently given if in writing
and delivered in person or mailed by first class mail addressed as follows:
if to the Company: Tamarack Lenders Corporation
801 East Campbell Road, Suite 310
Richardson, Texas 75081
Attn: Garry Isaacs, President
if to the Trustee: Sterling Trust Company
7901 Fish Pond Road
Waco, Texas 76710
Attn: Paul E. Skretny, President
if to TFC: Tamarack Funding Corporation
801 East Campbell Road, Suite 310
Richardson, Texas 75081
Attn: Garry Isaacs, President
(b) The Company or the Trustee by notice to the other may designate
additional or different addresses for subsequent notices or communications.
(c) Any notice or communication mailed to a Holder shall be mailed first
class, postage prepaid to such Person at such Person's address as it appears on
the Note Register of the Registrar and shall be sufficiently given to such
Person if so mailed within the time prescribed. If the Company mails a notice
or communication to Holders, it shall mail a copy to the Trustee at the same
time.
(d) Failure to mail a notice or communication to a Holder or any defect in
it shall not affect its sufficiency with respect to other Holders. If a notice
or communication is mailed in the manner provided above, it is duly given,
whether or not the addressee receives it.
Section 11.3 Communication by Holders with Other Holders.
Holders may communicate pursuant to TIA Section 312(b) with other Holders
with respect to their rights under this Indenture or the Notes. The Company,
the Trustee, the Registrar and anyone else shall have the protection of TIA
Section 312(c).
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Section 11.4 Certificate and Opinion as to Conditions Precedent.
(a) Upon any request or application by the Company to the Trustee to take
any action under this Indenture, the Company shall furnish to the Trustee:
(i) an Officer's Certificate stating that, in the opinion of the
signers, all conditions precedent, if any, provided for in this Indenture
relating to the proposed action have been complied with; and
(ii) an Opinion of Counsel stating that, in the opinion of such
counsel, all such conditions precedent have been complied with.
(b) Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include (i) a
statement that the person making such certificate or opinion has read such
covenant or condition; (ii) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions contained in
such certificate or opinion are based; (iii) a statement that, in the opinion of
such person, he has made such examination or investigation as is necessary to
enable him to express an informed opinion as to whether or not such covenant or
condition has been complied with; and (iv) a statement as to whether or not, in
the opinion of such person, such condition or covenant has been complied with.
Section 11.5 Rules by Paying Agent and Registrar.
The Paying Agent or Registrar may make reasonable rules for its functions.
Section 11.6 Legal Holidays.
A "Legal Holiday" is a Saturday, a Sunday, or a day on which banking
institutions are not required to be open in the State of Texas. If a Payment
Date is a Legal Holiday at a place of payment, payment may be made at that place
on the next succeeding day that is not a Legal Holiday.
Section 11.7 Governing Law.
The laws of the State of Texas shall govern this Indenture and the Notes.
Section 11.8 No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture, loan or debt
agreement of the Company or an Affiliate of the Company. Any such indenture,
loan or debt agreement may not be used to interpret this Indenture.
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Section 11.9 No Recourse Against Others.
No recourse may be taken, directly or indirectly, against any
incorporator, subscriber to the capital stock, stockholder, officer,
director, agent or employee of the Company, TFC, or any Servicer or of any
predecessor or successor of the Company, TFC, or any Servicer with respect to
the obligations of the Company, TFC, or any Servicer with respect to the
Contracts, the Notes, or under this Indenture or any certificate or other
writing delivered in connection herewith or therewith, and all such liability
is waived and released by the Trustee and all Holders.
Section 11.10 Successors.
All agreements of the Company and TFC in this Indenture and the Notes
shall bind their respective successors. All agreements of the Trustee in
this Indenture shall bind its successor.
Section 11.11 Duplicate Originals.
The parties may sign any number of copies of this Indenture. Each signed
copy shall be an original, but all of them together represent the same
agreement.
Section 11.12 Severability.
If any provision of this Indenture is held to be illegal, invalid, or
unenforceable under the present or future laws effective during the term of this
Indenture, such provision shall be fully severable; this Indenture shall be
construed and enforced as if such illegal, invalid, or unenforceable provision
had never comprised a part of this Indenture; and the remaining provisions of
this Indenture shall remain in full force and effect and shall not be affected
by the illegal, invalid, or unenforceable provision or by its severance from
this Indenture. Furthermore, in lieu of such illegal, invalid, or unenforceable
provision, there shall be added automatically as a part of this Indenture a
provision as similar in terms to such illegal, invalid, or unenforceable
provision as may be possible and still be legal, valid, and enforceable.
Section 11.13 Headings.
The headings contained herein are for purposes of convenience only, and
shall not be deemed to constitute a part of this Indenture or to affect the
meaning or interpretation of this Indenture in any way.
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IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, as of the day and year first above written.
STERLING TRUST COMPANY,
as Trustee
By:
------------------------------------
, President
-------------------------
Attest:
- ---------------------------------
, Secretary
- ----------------------
TAMARACK LENDERS CORPORATION
By:
------------------------------------
Garry Isaacs, President
Attest:
- ---------------------------------
, Secretary
- ----------------------
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The undersigned Tamarack Funding Corporation joins in this Indenture for
the sole purpose of evidencing its agreement to the covenants,
representations and warranties pertaining to it that are set forth in this
Indenture and not for the purpose of guarantying or otherwise covenanting to
pay the Notes or to perform any of the Company's obligations.
TAMARACK FUNDING CORPORATION
By:
------------------------------------
Garry Isaacs, President
Attest:
- ------------------------------
, Secretary
- -------------------
STATE OF TEXAS )
) ss:
COUNTY OF MCLENNAN )
BEFORE ME, the undersigned authority, on this day personally appeared
_____________________, President of Sterling Trust Company, a Texas
corporation, known to me to be the person and officer whose name is
subscribed to the foregoing instrument, and acknowledged to me that he or she
executed the same for the purposes and consideration therein expressed, in
the capacity therein stated and as the act and deed of said corporation.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the ____ day of
______________, 1998.
[SEAL]
-----------------------------------
Notary Public in and for the
State of Texas
Print Name:
------------------------
My Commission Expires:
-------------
51
<PAGE>
STATE OF TEXAS )
) ss:
COUNTY OF MCLENNAN )
BEFORE ME, the undersigned authority, on this day personally appeared
Garry Isaacs, President of Tamarack Lenders Corporation, a Texas corporation,
known to me to be the person and officer whose name is subscribed to the
foregoing instrument, and acknowledged to me that he or she executed the same
for the purposes and consideration therein expressed, in the capacity therein
stated and as the act and deed of said corporation.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the ____ day of
______________, 1998.
[SEAL]
-----------------------------------
Notary Public in and for the
State of Texas
Print Name:
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My Commission Expires:
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STATE OF TEXAS )
) ss:
COUNTY OF MCLENNAN )
BEFORE ME, the undersigned authority, on this day personally appeared
Garry Isaacs, President of Tamarack Funding Corporation, a Texas corporation,
known to me to be the person and officer whose name is subscribed to the
foregoing instrument, and acknowledged to me that he or she executed the same
for the purposes and consideration therein expressed, in the capacity therein
stated and as the act and deed of said corporation.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the ____ day of
______________, 1998.
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EXHIBIT A
TRUSTEE'S FEES
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Tamarack Lenders Corporation
Acceptance Fee (payable upon execution
of Indenture) $
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Annual Administration Fee
(billed quarterly) $
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Paying Agent/Registrar Services $ per year per Note
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Interest Checks $ per month per Note
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Note Register Revisions, Transfers,
Exchanges and Replacement Notes $ each
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Expedited Deliveries (per delivery, in
addition to out-of-pocket) $ each
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All out-of-pocket expenses such as postage, overnight mail costs, etc. will
be billed at cost to the Company. The Trustee understands that the closing
of the Note issuance will be completed in Dallas and there will not be any
travel expenses charged to the Company. If Trustee's duties are modified
beyond a DE MINIMUS extent, Trustee reserves the right to reevaluate its fees.
A-1
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Exhibit 5.1
DONOHOE, JAMESON & CARROLL, P.C.
Attorneys and Counselors
3400 Renaissance Tower
Dallas, Texas 75270
April 20, 1998
Tamarack Lenders Corporation
801 East Campbell Road, Suite 310
Richardson, Texas 75081
Gentlemen:
We are acting as counsel for Tamarack Lenders Corporation, a Texas
corporation (the "Company'), in connection with the registration under the
Securities Act of 1933, as amended (the "Act") of up to $20,000,000 in
aggregate principal amount of the Company's Auto Receivables Backed Notes
(the "Notes"). A Registration Statement on Form S-1 covering the sale of the
Notes, Registration No. 333-36773 (the "Registration Statement"), was filed
under the Act with the Securities and Exchange Commission on September 30,
1997.
We have examined and are familiar with originals or copies, the
authenticity of which has been established to our satisfaction, of all
documents, corporate records and other instruments, and have made such
examination of applicable law as we have deemed necessary to express the
opinion hereinafter set forth.
We are admitted to practice law in the State of Texas and we do not
express any opinion herein concerning any law other than the federal laws of
the United States of America and the laws of the State of Texas.
Based upon the foregoing, it is our opinion that:
(i) the Notes have been duly and validly authorized by the Company,
and upon execution by the Company and authentication by the Trustee and
delivery of the Notes against receipt of payment of the consideration
therefore the Notes will be validly issued, fully paid and nonassessable and
will be valid and binding obligations of the Company entitled to the benefits
of the Indenture and enforceable in accordance with their terms, except as
may be limited by bankruptcy, insolvency or equitable principals affecting
creditors' rights generally and judicial limitations on the right of specific
performance.
(ii) We hereby confirm the opinions set forth in the Prospectus under
the heading "Federal Income Tax Consequences," to the extent they constitute
matters of law or legal conclusions with respect thereto.
We hereby consent to the use of this opinion as an Exhibit to the
Registration Statement and to the use of our name in the Registration
Statement and in the related prospectus under the captions "Federal Income
Tax Consequences" and "Legal Matters." In giving such consent, we do not
admit hereby that we come within the category of persons whose consent is
required under Section 7 of the Act or the Rules and Regulations of the
Commission thereunder.
Very truly yours,
Donohoe, Jameson & Carroll, P.C.
<PAGE>
Exhibit 10.1
SERVICING AGREEMENT
This Servicing Agreement (this "Agreement"), effective as of
_________________, 1998, is entered into by and between _______________
________________, a ____________ corporation (the "Servicer"), and Tamarack
Lenders Corporation, a Texas corporation ("Buyer").
BACKGROUND STATEMENT
This Agreement shall govern the collection and servicing responsibilities
with respect to any and all of the Receivables purchased by Buyer from Servicer
pursuant to that certain Transfer Agreement (herein so called) by and between
Buyer and Servicer of even date herewith.
STATEMENT OF AGREEMENT
In consideration of the mutual covenants contained herein and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Buyer and Servicer agree as follows:
1. APPOINTMENT OF AND ACCEPTANCE BY THE SERVICER OF SERVICING
OBLIGATIONS.
(a) The Servicer, on behalf of Buyer, shall during the term of this
Agreement manage, administer and collect each of the Receivables (as defined in
the Transfer Agreement), shall exercise discretionary powers involved in such
management, administration and collection, and shall bear all costs and expenses
incurred in connection therewith that may be necessary or advisable in carrying
out this Agreement. In the management, administration and collection of the
Receivables, the Servicer shall use at least the same care and apply the same
policies that it would exercise if it owned the Receivables, including but
not limited to the servicing criteria as set forth in EXHIBIT A attached
hereto.
(b) The Servicer shall have full power and authority to do those
things in connection with such servicing, administration and collection
activities which it may deem necessary or desirable in order to maximize
receipts collected from Obligors or foreclosure and sale of Financed Vehicles
underlying the Receivables subject to the provisions hereof. The Servicer is
authorized and empowered to execute and deliver, on behalf of Buyer, instruments
of satisfaction or cancellation, or of partial or full release or discharge, or
other comparable instruments, in order to evidence payments received with
respect to the Receivables and, after the delinquency of any Receivables and to
the extent permitted under and in compliance with applicable law and
regulations, to commence enforcement proceedings with respect to such
Receivables, or commence any legal action against an Obligor in the name of
Buyer without the prior written consent of the Buyer. Buyer shall, at its
discretion, furnish the Servicer with powers of attorney and other documents
necessary or appropriate to enable the Servicer to carry out its servicing and
administrative duties hereunder.
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2. TERM. This Agreement shall commence as of the date first written
above and shall continue until terminated upon 30 days written notice by either
party to the other.
3. COMPENSATION. The Servicer shall be reimbursed by Buyer with respect
to each Receivable only upon satisfaction in full of the particular obligor's
obligations with respect to such Receivable. Upon such satisfaction in full,
the Servicer shall be entitled to a Servicing Fee equal to 5% of the amount paid
by the Buyer under the Transfer Agreement for such Receivable. In the event
this Agreement terminates, either at the election of the Servicer as provided
herein, or of the Buyer as permitted hereunder upon the occurrence of an
event of default by the Servicer, prior to the time the Receivable has been
paid in full, the Servicer will not be entitled to the Servicing Fee.
4. REPRESENTATIONS AND WARRANTIES OF THE SERVICER. The Servicer
represents and warrants to Buyer as follows:
(a) ORGANIZATION AND GOOD STANDING. Servicer is a corporation duly
organized, validly existing and in good standing under the laws of its state of
incorporation, and has full corporate power, authority and legal right to own
its properties and conduct its business as such properties are presently owned
and such business is presently contemplated, and to execute, deliver and perform
its obligations under this Agreement.
(b) DUE QUALIFICATION. The Servicer is duly qualified and has
registered as a foreign corporation in each state where such qualification is
required in order to perform its obligations pursuant to this Agreement and has
obtained all necessary licenses, approvals or consents as are required under
applicable law to perform its duties hereunder.
(c) DUE AUTHORIZATION. The execution, delivery and performance of
this Agreement has been duly authorized by the Servicer by all necessary
corporate action on the part of the Servicer.
(d) BINDING OBLIGATION. This Agreement constitutes a legal, valid and
binding obligation of the Servicer, enforceable in accordance with its terms,
except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereinafter in effect
which affect the enforcement of creditors' rights in general, and except as such
enforceability may be limited by general principles of equity (whether
considered in a proceeding at law or in equity).
(e) NO VIOLATION. The execution and delivery of this Agreement by
the Servicer, and the performance of the transactions contemplated by this
Agreement and the fulfillment of the terms hereof applicable to the Servicer,
will not conflict with, violate, result in any breach of any of the material
terms and provisions of, or constitute (with or without notice or lapse of time
or both) a default under, any requirement of law applicable to the Servicer or
any indenture, contract, agreement, mortgage, deed of trust or other installment
to which the Servicer is a party or by which it is bound.
5. REPRESENTATIONS AND WARRANTIES OF THE BUYER. The Buyer represents and
warrants to Servicer as follows:
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(a) ORGANIZATION AND GOOD STANDING. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of Texas, and
has full corporate power, authority and legal right to own its properties and
conduct its business as such properties are presently owned and such business is
presently contemplated, and to execute, deliver and perform its obligations
under this Agreement.
(b) DUE QUALIFICATION. The Buyer is duly qualified and has
registered as a foreign corporation in each state where such qualification is
required in order to perform its obligations pursuant to this Agreement and has
obtained all necessary licenses, approvals or consents as are required under
applicable law to perform its duties hereunder.
(c) DUE AUTHORIZATION. The execution, delivery and performance of
this Agreement has been duly authorized by the Buyer by all necessary corporate
action on the part of the Buyer.
(d) BINDING OBLIGATION. This Agreement constitutes a legal, valid and
binding obligation of the Buyer, enforceable in accordance with its terms,
except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereinafter in effect
which affect the enforcement of creditors' rights in general, and except as such
enforceability may be limited by general principles of equity (whether
considered in a proceeding at law or in equity).
(e) NO VIOLATION. The execution and delivery of this Agreement by
the Buyer, and the performance of the transactions contemplated by this
Agreement and the fulfillment of the terms hereof applicable to the Buyer, will
not conflict with, violate, result in any breach of any of the material terms
and provisions of, or constitute (with or without notice or lapse of time or
both) a default under, any requirement of law applicable to the Buyer or any
indenture, contract, agreement, mortgage, deed of trust or other installment to
which the Buyer is a party or by which it is bound.
6. COVENANTS. The Servicer further warrants to and covenants with Buyer
as follows:
(a) LOCK-BOX ACCOUNT. From and after the date hereof until such
time as this Agreement terminates, Servicer shall instruct all obligors
under the Receivables to remit all payments directly to a Lock-Box Account
(herein so called) in the name of the Buyer. Servicer shall direct all
Obligors to utilize payment books or statements with remittance instructions
directing all payments to be remitted to the lock-box account. Servicer
agrees that all cash, checks, notes, drafts or other items which it receives
attributable to the Receivables, including proceeds from resale of
repossessed Financed Vehicles and recoveries on insurance claims, shall be
deposited in the Lock-Box Account within two business days of receipt. All
collections and payments attributable to the Receivables shall be transferred
from the lock-box account to the Buyer's operating account on at least a
weekly basis.
(b) OPERATIONS. The Servicer shall collect payments from the
Receivables in an orderly and efficient manner consistent with good business
practices and in accordance with all applicable federal, state and local laws
and regulations.
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(c) RECORDS. So long as Buyer has not given notice of termination
pursuant to Section 2, the Servicer shall, (i) keep such accounts and other
records as will enable Buyer to determine the status of the Receivables; (ii)
keep such books and records at its offices identified in Section 14 herein; and
(iii) permit Buyer and its representatives at any time to inspect, audit, check
and make abstracts from Servicer's accounts, records, correspondence and other
papers pertaining to the Receivables. Servicer shall maintain, or cause to be
maintained, its respective records with respect to the Receivables in a manner
such that the Servicer can produce a computer file containing a listing (by
Obligor) of all Receivables, together with the account balance of such accounts
and the payment history related thereto. The Servicer shall provide Buyer
with monthly reports updating the information relating to account balances
and activity and the amounts collected on the Receivables during the
proceeding month.
(d) CONTINUATION STATEMENTS. If Buyer so requests, the Servicer
shall execute and file documents which shall create a first priority security
interest in favor of Buyer in Financed Vehicles, including registration of the
Certificates of Title in the name of Buyer, and/or any other documents requested
by Buyer or which may be required by law to preserve and protect the interest of
Buyer in and to the Receivables.
(e) PRINCIPAL EXECUTIVE OFFICE. The Servicer shall not, without
providing 30 days' notice to Buyer, and without filing such amendments to any
previously filed financing statements as Buyer may require, (i) change the
county where its principal executive office, or the office where the records
relating to the Receivables are kept, is located, or (ii) change its name,
identity or corporate structure in any manner which would, could or might make
any financing statement or continuation statement filed by Buyer or the Servicer
or any provision hereof seriously misleading within the meaning of Section
9-402(g) of any applicable enactment of the Texas Uniform Commercial Code.
(f) NO IMPAIRMENT. The Servicer will duly fulfill all obligations
on its part to be fulfilled under or in connection with each Receivable and will
do nothing to materially impair the rights of Buyer in the Receivables.
(g) COMPLIANCE WITH LAW. The Servicer will comply in all material
respects with all acts, rules, regulations, orders, decrees and directions of
any governmental authority applicable to the Receivables or any part thereof.
The Servicer will comply, in all material respects, with any obligation of a
holder of a Receivable to the Obligor thereof arising under such Receivable or
under applicable law.
(h) SECURITY INTEREST. Except for the transfers of Receivables to
the Buyer under the Transfer Agreement, the Servicer will not sell, pledge,
assign or transfer to any other person, or grant, create, incur, assume or
suffer to exist any lien on any Receivables, or the books or records relating to
any Receivables, or any interest therein; the Servicer shall immediately notify
Buyer of the existence of any lien on any Receivables; the Servicer shall defend
the right, title and interest of Buyer in, to and under the Receivables, whether
now existing or hereafter transferred to Buyer, against all claims of third
parties claiming through or
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under the Servicer.
7. MAINTENANCE OF INTERNAL CONTROL AND PROCEDURES. Servicer shall, at
all times during the term of this Agreement, follow internal control procedures
consistent with loan servicing industry standards and, at the request of Buyer,
will supply same in written form for review purposes.
8. COMPUTER. Servicer shall, at all times during the term of this
Agreement, utilize in the operation of its business the industry standard
computer software and contract information maintenance system.
9. SERVICER EVENTS OF DEFAULT. The occurrence and continuation of any
one of the following events shall be a "Servicer Event of Default" under this
Agreement:
(a) Failure on the part of the Servicer to remit collections on the
Receivables to the Lock-Box Account when due in accordance with Section 6(a) and
continuance of such failure for five business days. For purposes of this
Agreement, "business day" shall mean any day other than a Saturday, Sunday or
legal holiday; or
(b) An involuntary case is commenced or filed against the Servicer
under the federal bankruptcy laws, as now or hereafter in effect, or any other
present or future federal or state bankruptcy, insolvency or similar law, or for
the appointment of a receiver, liquidator, assignee, trustee, custodian,
sequestrator or other similar official of the Servicer or of any substantial
part of its property, or for the winding up of the affairs of, liquidation,
dissolution, or reorganization of the Servicer and the continuance of such case
or filing unstayed for a period of 30 consecutive days; or
(c) An order for relief shall be entered in a case under title 11 of
the United States Code in which the Servicer is a debtor, or the commencement by
the Servicer of a voluntary case under the federal bankruptcy laws, as now or
hereafter in effect, or any other present or future federal or state bankruptcy,
insolvency or similar law, or the consent by the Servicer to the appointment of
or taking possession by a receiver, liquidator, assignee, trustee, custodian,
sequestrator or other similar official of the Servicer or of any substantial
part of its property or the making by the Servicer of an assignment for the
benefit of creditors.
(d) Failure by Servicer to service and collect amounts due from
Obligors under Receivables in accordance with normal business practices and the
continuance of such failure for 30 days after written notice by Buyer of such
failure.
10. REMEDIES. If a Servicer Event of Default shall have occurred and be
continuing, Buyer may, by notice given in writing to the Servicer, immediately
terminate all of the rights and obligations of the Servicer under this
Agreement. Notwithstanding any termination of the rights and obligations of the
Servicer, the Servicer shall remain responsible for any acts or
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omissions to act by it as Servicer prior to such termination. In the event
of such termination:
(a) Buyer is hereby authorized and empowered (upon the failure
of the Servicer to cooperate) to execute and deliver, on behalf of the Servicer
as attorney-in-fact or otherwise, all documents and other instruments upon the
failure of the Servicer to execute or deliver such documents or instruments, and
to do and accomplish all other acts or things necessary or appropriate to effect
the purposes of a transfer of servicing rights to a successor servicer;
(b) The Servicer agrees to cooperate with Buyer and any successor
servicer in effecting the termination of the responsibilities and rights of the
Servicer to conduct servicing hereunder, including, without limitation, the
transfer to such successor servicer of all authority of the Servicer to service
the Receivables provided for under this Agreement, including, without
limitation, all authority over all collections which shall on the date of
transfer be held by the Servicer for deposit or which shall thereafter be
received with respect to the Receivables; and
(c) The Servicer shall promptly transfer its records relating to the
Receivables to a successor servicer in such form as such successor servicer may
reasonably request and shall promptly transfer to such successor servicer all
other records, correspondence and documents necessary for the continued
servicing of the Receivables in the manner and at such times as the successor
servicer shall reasonably request. To the extent that compliance with this
Section shall require the Servicer to disclose to such successor servicer
information of any kind which the Servicer reasonably deems to be confidential,
such successor servicer shall be required to enter into such customary licensing
and confidentiality agreements as the Servicer shall deem necessary to protect
its interest.
11. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successor and
assigns. The Servicer may contract with others for the performance of any or
all of its obligations arising hereunder but no such contract shall relieve
Servicer from liability for its performance hereunder.
12. BUYER EVENT OF DEFAULT; SERVICER'S REMEDIES. In the event that Buyer
should fail to pay any fees or compensation due under this Agreement, within ten
business days of the date they are due or are submitted for payment, whichever
is less, or shall fail to perform any of its duties or to observe or perform any
other term, covenant, condition or agreement provided within this Agreement,
said failure shall constitute an event of default by the Buyer. In the event of
such default, Servicer shall have the option of immediately terminating this
Agreement by written notice to Buyer in addition to all remedies available in
equity or law.
13. MODIFICATIONS AND WAIVERS. No delay on the part of any party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any waiver of any right, power or privilege hereunder operate
as a waiver of any other right, power or privilege
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hereunder, nor shall any single or partial exercise of any right, power or
privilege hereunder preclude any other or further exercise thereof, or the
exercise of any other right, power or privilege hereunder. All rights and
remedies herein provided are cumulative and are not exclusive of any rights
or remedies which the parties hereto may otherwise have at law or in equity.
No waiver shall be valid in the absence of the written and signed consent of
the party against which enforcement of such is sought.
14. NOTICE. Except as otherwise specifically provided herein, any notice
hereunder shall be in writing (including telecopy communication) and, if mailed,
shall be deemed to be given when sent by registered or certified mail, postage
prepaid or if telecopied when transmitted, or otherwise when delivered in person
to the addressee and a receipt given therefor, in all such instances addressed
to the respective parties as follows:
To Servicer: As provided on signature page
To Buyer: Tamarack Lenders Corporation
801 East Campbell Road, Suite 310
Richardson, Texas 75018
Attn: Garry Isaacs, President
or at such other address as the addressee may, by written notice received by the
other party hereto, designate as the appropriate address for purposes of notice
hereunder.
15. AMENDMENT. This Agreement may be amended, supplemented or modified
only with the written consent of each of the parties hereto.
16. CHOICE OF LAW. THIS AGREEMENT AND THE VALIDITY AND ENFORCEMENT
HEREOF, SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE SUBSTANTIVE
LAWS OF THE STATE OF TEXAS.
17. SEVERABILITY. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under present or future laws effective during
the term of this Agreement, the legality, validity and enforceability of the
remaining provisions of this Agreement shall not be affected thereby, and in
lieu of each such illegal, invalid or unenforceable provision there shall be
added automatically as a part of this Agreement a provision as similar in terms
to such illegal, invalid or unenforceable provision as may be possible and be
legal, valid and enforceable.
18. ENTIRE AGREEMENT. This instrument embodies the entire agreement
between the parties relating to the subject matter hereof and supersedes all
prior agreement and understandings, if any, relating to the subject matter
hereof.
19. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which for all purposes is to be deemed an original.
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20. SURVIVAL. All covenants, agreements, undertakings, indemnities,
representations and warranties made herein shall survive both the execution and
the termination hereof and shall not be affected by any investigation made by
any party.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first hereinabove written.
BUYER:
TAMARACK LENDERS CORPORATION
By:
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Garry P. Isaacs
President
SERVICER:
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By:
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Name:
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Title:
----------------------------
Address
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Attention:
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SERVICING AGREEMENT
EXHIBIT A
SERVICING CRITERIA
At all times during the term of the Servicing Agreement as set forth in
Section 2 therein, Servicer shall, in addition to its other duties under the
Servicing Agreement, observe the following covenants and criteria (referred
to as the "servicing criteria"):
I. COLLECTION POLICY
1. All Obligors under related Receivables will be issued a preprinted
payment book or other remittance advice or instructions which will specifically
request that all payments be made to the Buyer's lock-box account.
2. Servicer shall contact any Obligor on a past due Receivable within ten
days after the payment due date for the purpose of pursuing collection and shall
adequately update all credit and collection file records with respect to such
activities.
3. Any material extensions or modifications of Receivables, or
acceptances of partial payments of Obligors, and any related necessary
Receivable amendments and/or default waivers by Servicer, shall be approved by
the chief credit officer or president of Servicer, and all necessary third party
charges and explanations relating thereto shall be documented in the collection
file records.
II. FORECLOSURE/REPOSSESSION POLICY
1. Servicer shall define as delinquent and pursue repossession action,
subject to compliance with all state and federal laws relating thereto, against
the Financed Vehicle underlying any Receivable whose Obligor (i) is three
payments past due in the case of Receivables requiring biweekly or semi-monthly
payments, and has failed for 30 days to remit any sums against payment
obligations under the respective Receivable, or (ii) is two payments past due in
the case of Receivables requiring monthly payments, and has failed for 60 days
to remit any sums against payment obligations under the respective Receivable.
Nothing contained in this Section shall be construed to limit Servicer from
pursuing repossession or any other collection technique, subject to related
state and federal laws, sooner than the time contemplated above if Servicer in
its discretion deems such activity to be prudent and in the best interests of
Servicer or Buyer.
2. For each charge off of any material unpaid amount from an Obligor
under any Receivable, Servicer shall document the reasons for such charge off
and shall maintain all third-party related documentation for such charge off.
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SUBSCRIPTION AGREEMENT
TAMARACK LENDERS CORPORATION
9 1/2% NOTES
12% NOTES
The investor signatory hereto ("Subscriber") represents, warrants,
acknowledges and agrees as follows:
1. Subscriber hereby subscribes for the principal amount of Notes (the
"Note") issued by Tamarack Lenders Corporation ("Issuer"), as specified on
page 3 hereof, encloses and hereby tenders the amount set forth on the
reverse side hereof ($10,000 minimum), as full payment for the Note for which
he is subscribing, and hereby agrees, subject to the Issuer's acceptance of
his subscription, to become a Noteholder in an amount equal to the amount
tendered. Subscriber agrees that he may not revoke, cancel, terminate or
withdraw his subscription or this Subscription Agreement without the prior
written consent of the Issuer, and acknowledges that the Issuer may reject
his subscription for any reason whatsoever.
2. Subscriber hereby acknowledges receipt of a copy of the current
prospectus for the offering and sale of the Notes ("Prospectus") and
understands that the Note being acquired will be governed by the terms of the
Indenture referenced in such Prospectus and such other documents as may be
referenced therein. Subscriber further understands and agrees that, following
Issuer's acceptance of his subscription, he shall receive a Note which shall
evidence his status as a Noteholder of Issuer, such Note to be in the form
specified in the Indenture. The information set forth in the remainder of
this document is true and accurate and Subscriber has proper authority to
execute this Subscription Agreement and make this investment.
3. Subscriber hereby represents that this purchase is made for the
Subscriber's own account and not with a view toward distribution. Subscriber
understands that it is not anticipated that an active market will ever
develop for the Notes, and that accordingly it may be impossible for
Subscriber to liquidate his investment in the Note, even in the event of an
emergency. Any transfer of the Note must comply with the requirements of the
Prospectus, the Note and with any additional requirements imposed by law or
by any governmental authorities.
4. TAX REPRESENTATIONS: Under penalties of perjury, I certify that (i) the
number shown on this form is my correct taxpayer identification number, and
(ii) that I am not subject to backup withholding because (A) I have not been
notified that I am subject to backup withholding as a result of a failure to
report all interest or dividends or (B) the Internal Revenue Service has
notified me that I am no longer subject to backup withholding. Under
penalties of perjury, I certify that I am not a resident alien individual, a
foreign partnership, a foreign corporation, or a foreign estate or trust,
which would be a foreign person within the meaning of Sections 1441, 1446 and
7701(a) of the Internal Revenue Code of 1986, as amended, and that I will
notify the Issuer before a change in my foreign status.
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5. SUITABILITY. The subscriber represents that he/she/it has either (a) an
annual gross income of at least $45,000 and a net worth of at least $45,000
exclusive of the subscriber's principal residence and its furnishings and
personal use automobiles; or (b) a net worth of at least $150,000, exclusive
of the subscriber's principal residence and its furnishings and personal use
automobiles. If a subscriber is a fiduciary account, the subscriber
represents that the foregoing standards are met by the beneficiary, the
fiduciary account, or by the donor or grantor who directly or indirectly
supplies the funds to purchase the securities if the donor or grantor is the
fiduciary.
The capitalized terms used have the meanings assigned to them in the
Prospectus unless the context otherwise requires.
SUBSCRIPTION INSTRUCTIONS
1. Complete all items and sign and date this Subscription Agreement in the
places indicated. Subscribers should use full names (not initials). If you
have previously subscribed for a Note in this offering and wish to subscribe
for an additional Note, please check the appropriate box and complete the
entire Subscription Agreement. NO SUBSCRIPTION AGREEMENT WILL BE PROCESSED
UNLESS FULLY COMPLETED AND ACCOMPANIED BY THE APPROPRIATE PAYMENT.
2. Make your subscription check payable to "_______________ Bank, as Escrow
Agent," for the amount entered under "Amount Enclosed" in the Subscription
Agreement. After the escrowed funds have been released, subscription checks
should be made payable to "Tamarack Lenders Corporation".
3. Mail or deliver your signed Subscription Agreement and your check to
your Registered Representative.
4. Registered Representatives: Please forward signed Subscription
Agreements and checks to Tamarack Lenders Corporation, 801 East Campbell
Road, Suite 310, Richardson, Texas 75081.
The following signature and other documentation requirements have been
established for the following forms of ownership of the Notes:
CORPORATION: The signature(s) of an officer(s) authorized to sign on
behalf of the corporation is(are ) required.
<PAGE>
PARTNERSHIP: Specify whether the subscriber is a general or limited
partnership. If it is a general partnership, the signatures of all partners are
required. If it is a limited partnership, the signatures of all general
partners are required.
TRUST: The Subscription Agreement must be signed by the trustee.
UNIFORM GIFTS TO MINORS ACT: The required signature is that of the
custodian, not of the parent (unless the parent has been designated as the
custodian). Only one child is permitted in each investment under the Uniform
Gifts to Minors Act. Different requirements may apply in your state. Please
consult your attorney for information regarding these requirements.
Amount Subscribed and Class of Notes Note Number: ________________
$10,000 Minimum R/R:_________________________
(issuer use only)
9-1/2 % notes, 1 year maturity _________ Check here if subscriber has previously
subscribed to THIS offering.
12 % notes, 5 year maturity _________ Yes ____ No ____
PLEASE PRINT OR TYPE EXCEPT FOR SIGNATURES
1. INVESTOR 2. SPOUSE
Full Name: ___________________________ ________________________________
Address: _____________________________ ________________________________
City: _____________________________ ________________________________
State/Zip:___ _______ Phone: _________ State/Zip:___ ______ Phone: _________
SS# _________ Date of Birth __________ SS# _________ Date of Birth __________
US Citizen? Y N Country: __________ US Citizen? Y N Country: __________
Persons who reside in foreign countries, including U.S. citizens and
non-resident aliens, are not permitted to invest in notes.
<PAGE>
ONLY PARTNERSHIPS AND CORPORATIONS NEED TO ANSWER QUESTION 7
7. If the investment will be in the name of a partnership or corporation,
answer the following:
Type of Entity:________________ Date of Formation:________________
IRS Employer Identification Number:________________
Number of Shareholders or Partners:______ Net Worth: $__________
Net Income For: Last fiscal year: $__________ Current fiscal year
(projected): $__________
NOTE: IF A CORPORATION, THE OFFICER OF THE CORPORATION WHO WILL BE
RESPONSIBLE FOR MAKING THE DECISION TO PURCHASE MUST COMPLETE THE SUBSCRIPTION
AGREEMENT.
NOTE: IF A PARTNERSHIP, THE PARTNER WHO WILL BE RESPONSIBLE FOR MAKING
THE DECISION TO PURCHASE MUST COMPLETE THE SUBSCRIPTION AGREEMENT.
ONLY TRUSTS, PENSION OR PROFIT SHARING PLANS, OR IRA OR KEOGH INVESTMENTS
NEED TO ANSWER QUESTION 8.
<PAGE>
8. (a) Are you a Trustee of the Trust, Pension or Profit Sharing Plan?
Yes ( ) No ( )
1) If YES, set forth the type of Plan or Trust proposing to invest:
__________________
2) If YES, set forth the state of residency of all Beneficiaries of
the Plan or Trust: _________________
3) If YES, set forth the state of residency of all Trustees of the
Plan or Trust: _________________
b) Please identify the person(s) with investment control over the Plan
or Trust assets, and such person's(s') state of residence: _____________________
c) Please identify the person(s) responsible for the ministerial or
custodial duties of administering the Plan or Trust and such person(s) state
of residence: _____________________
d) If your investment is intended to be placed in an IRA or KEOGH
account, please identify the person(s) with investment control over the
account's assets and such person(s) state of residence: ____________________
e) If the investment is intended to be placed in an IRA or KEOGH account,
please identify the person(s) with ministerial or custodial duties over the
account and such person(s) state of residence: _____________________
f) Number of Beneficiaries: ___________________
g) Net worth: $__________ Gross Income: $__________
9. Ownership - Check One: (Refer to the signature requirements and
instructions below)
_____ Individual _____Trust
_____ Joint Tenant with right of survivorship _____ IRA
_____ Tenants in common _____ Keogh Plan
_____ Custodian-UGMA _____ Pension or Profit
_____ Corporation _____ Other __________________
_____ Partnership: Gen__ Lim__
<PAGE>
REPRESENTATIONS AND WARRANTIES; COVENANTS; SIGNATURES
I understand that the Corporation will be relying on the accuracy and
completeness of my response to the foregoing questions, and I represent and
warrant to the Corporation that (i) the answers to the above questions are
complete and correct and may be relied upon by the Corporation in determining
compliance with the Act and (ii) I am able to bear the economic risk of the
investment, and at the present time and under reasonable foreseeable
circumstances, I could afford a complete loss of such investment. I agree to
provide further documentation and provide additional information to
supplement and explain the subject matter hereof as requested from time to
time by Corporation. Further, I agree to update the information provided by
me herein as requested from time to time by the Corporation.
10. REQUIRED SIGNATURES
Signature must be identical to subscriber name. Subscribers must sign the
Subscription Agreement; Purchaser Representatives and investment advisors
may not sign on behalf of subscriber.
INDIVIDUAL INVESTOR: Date: _______________
___________________________________ ___________________________________
Signature of Investor Printed Name of Investor
___________________________________ ___________________________________
Signature of Co-Investor Printed Name of Co-Investor
ENTITY INVESTOR: ___________________________ Date: _______________
Printed Name of Entity
___________________________________ _______________________________________
Signature of Authorized Person Printed Name and Title of
Authorized Person
<PAGE>
BROKER / DEALER: Date:____________
REGISTERED REPRESENTATIVE STATEMENT - I hereby represent on recommending the
purchase of Tamarack Lenders Corporation Notes that I, the Registered
Representative, have responsible grounds to believe that the investment is
suitable for the subscriber based upon the information available to me as
conveyed by the subscriber or his/her agent.
___________________________________ _____________________________________
Signature of Registered Print Name of Registered
Representative Representative
___________________________________ ______________________________________
Signature of Designated Officer Print Name of Designated Officer
<PAGE>
[LETTERHEAD]
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Tamarack Lenders
Corporation on Form S-1 of our report dated February 10, 1998 appearing in the
Prospectus, which is part of this Registration Statement. We also consent to
the reference to us under the heading "Experts" in such Prospectus.
/s/ Cheshier & Fuller, L.L.P.
--------------------------------------
CHESHIER & FULLER, L.L.P.
Dallas, Texas
April 20, 1998
